International and Comparative Human Resource Management Module leader and author of materials; Graham Hollinshead

Contents; Part 1- Introduction and the Global Context Unit 1- International HRM- growth and significance and Paauwe) 2 e-book chapter 3 (Scullion

Unit 2- Institutional and Cultural Perspectives 17 e-book chapters 5, 6 and 16 (Sorge/Romani/Hyman) Unit 3- The Global Environment and Multinational Corporations 33 e-book chapters 1,2 and 15 (Harzing/Harzing/Edwards)

Part 2- International Themes Unit 4- Staffing the Multinational Enterprise- Expatriation and Managing Across Borders 51 e-book chapters 10 and 4(Harzing/ Stahl,Pucik,Evans and Mendenhall) Unit 5- The Expatriation Cycle (1) Recruitment and Training 63 e-book chapters 11 and 14 (Tarique and Caligiuri/Harris) Unit 6- The Expatriation Cycle (2) Pay, Performance Management and Repatriation 73 e-book chapters 12 and 13 (Fenwick/Lazarova and Cagliuri)

Part 3- Comparative Themes and regional studies Unit 7- International Labour Relations and Employee Participation chapters 17 and 18( Sisson / Marginson) 83 e-book

Unit 8- The Americas- The United States of America and Mexico 112 e-book chapter 7 and 9 (Communal and Brewster/Jackson) Unit 9- HRM and Europe 125 e-book chapter 7(Communal and Brewster) e-book chapter 8(Zhu and Warner)

Unit 10- HRM and East Asia 139 Unit 11 – Synthesis and Conclusion

Set text- e-book A.W. Harzing and J. Van Ruysseveldt (eds) International Human Resource Management, second edition, London Sage Please use the following websites to look up or define unfamiliar words: 1

Part 1 Introduction and the Global Context Unit 1 International HRM- its growth and significance
Objectives; • • • • To understand why international awareness is significant for students and practitioners of HRM To distinguish between HRM and IHRM, and to explain the complexities of the latter To illustrate the strategic concerns of IHRM by use of an international case study To identify the benefits of engaging in study of international comparisons, and to highlight key methodological considerations and terminology

The internationalisation of HRM
Over the past few decades there has been growing recognition of the value of the committed ‘human resource’ to the achievement of business goals. The literature on ‘human resource management’, which has burgeoned over the past few decades, has rotated around the ‘enlightened’ organisational notion that employees represent ‘valued assets’ and that their deployment in a ‘smart’ and strategic fashion will pay not only corporate, but also national, dividends. (Beer et. al,1984) Thus, HRM has emphasised the pivotal themes of ‘strategic integration’ i.e. enmeshing policies for the recruitment, training, payment and severance of staff with overarching corporate strategies, ‘flexibility’, which refers to the need to finely-tune the staff resource base with an eye to business needs, and ‘quality’ which recognises the strength of the connection between employee competence and commitment and organisational outputs in terms of products and services (Guest,1988). New management thinking concerning HRM has frequently emanated from the U.S, (Hollinshead and Leat,1995) and is associated with the business drive to become ‘closer to the customer’ in an ever- intensifying competitive environment (ibid). Over the past decade or so, however, undoubtedly the climate for doing business, and for managing people, has changed. In all spheres of life it is clear that the forces of ‘globalisation’ are impacting upon human interactions, whether at work, education, sport, or more broadly in the field of arts and culture. As Briscoe and Schuler (2004) point out, a series of developments towards internationalisation has served to impact upon organisations and their management in a direct or indirect fashion; • • Rapid and extensive global communications; satellite television, the internet, CDs and DVDs serving to develop global tastes and demands, Rapid transfer of new technology making it possible to provide high quality products and services virtually anywhere in the world,


• •

The emigration of large numbers of people, exposing migrants to international standards of living, and placing pressure on internal national labour markets, Improved and internationalised education systems, encouraging cross fertilisation of ideas and raising expectations concerning product and service quality, The integration of cultures and values through international working, as well as international travel and the spread of common products such as music food and clothing. E-commerce; making firms global as soon as they have a web site and commence trading on this electronic platform.

More specifically, the following factors are necessitating the raising of corporate ‘antennae’ to capture an awareness of international developments; The Internationalisation of Business Virtually every company, as well as public or even voluntary organisation, is now touched by ‘globalisation’ in some way. The internationalisation of business activity undoubtedly has occurred against a wider global political and economic backcloth in which it appears that ‘free market’ ideology is becoming ever more pervasive. Of great significance was the Uruguay Round of GATT in 1994 (the General Agreement on Tariffs and Trade), which comprised government representatives from 117 (mainly western) countries, and which removed many of the barriers to international trade including import tariffs and quotas. As a result the volume of world trade rose by over 50% in the subsequent six years. At a regional level, apparently irreversible moves have occurred away from economic protectionism towards the breaking down of economic barriers within and between nations. Notable examples would include; the removal of trade barriers in NAFTA (the North American Free Trade Agreement) involving the US, Canada and Mexico, the inception of the Single European Market which has promoted the transferability of capital, services and people across an enlarging Europe, the transition to market economies in the former communist bloc and an increase in economic activity in Latin America. Globalisation may impact upon businesses in a number of ways, for example by tapping into international markets to match the activities of competitors, by taking over, or being taken over by, a foreign concern, or by gaining economies of production by setting up site or ‘outsourcing’ abroad. Although the internationalisation of product and service markets has been a much heralded facet of globalisation, it is the internationalisation of production that is likely to impact most considerably on the role of the human resource manager, as many household name products and services rely on employment on a type of global ‘production line’. A quotation derived from a documentary on Carlton television graphically illustrates this process;. ‘When one typical US car was analysed to see how ‘American’ it was, it turned out that nine countries were involved in some aspect of its production or sale. Roughly 3

for example the European Union (EU) and NAFTA. The deregulation of global capital flow means that HR managers are increasingly impacted by decisions made in foreign 4 . or indeed those operating outside Europe with responsibilities for European based subsidiaries.5% to Ireland and Barbados for data processing. HR practitioners across Europe. Freedom of movement of labour Although migration from country to country to enhance economic status has been a fact of life for centuries. Social Policy Areas A specific concern of corporate operations in the EU has been the minimum set of social and employment standards applying across member states. and 1.. (Dicken. multinational corporations locating across Europe are obliged to consult employee representatives about matters affecting their workforces at a pan-European level at regular intervals. Only 37% of the car’s marketing value was generated in the USA. are spawning in global regions which previously operated in highly protected economic environments. 17. health and safety.2003).30% of the car’s value went to South Korea for assembly. working time. employee consultation and other matters. Freedom of movement of capital A concomitant of the internationalisation of business referred to above is the possibility of the flow of capital from one global region to another. it has also been argued that migrants and their families place undue pressure on welfare states. In less dramatic circumstances. formed through foreign direct investment (FDI). the accession of the former socialist states in 2001 has facilitated the mobility of workers from eastern European countries (for example. as was the case in the sell off by German owned BMW of UK based Rover in 2000. While such labour has served to fill skills gaps in the developed economies. for marketing and advertising services. as embodied in a number of treaties. Although. HR managers are increasingly involved in managing parent/ subsidiary relations in international enterprises. As a result of the European Works Council Directive passed in 1994.5% to Germany for design for design. and that the flow of skills from poorer countries adversely affects their economic growth potential. In the case of the EU. 4% to Taiwan and Singapore for minor parts. equal opportunities. including the Amsterdam Treaty (1997). most notably in recruitment. the international flow of labour has been accentuated in recent years through the removal of protectionist barriers between member states of major trade blocs. the availability of migrant labour potentially shifts parameters for various areas of decision-making. are affected by a raft of measures affecting minimum pay.5% to the UK. 2. Switches of capital can have a devastating effect of jobs and regions. 7. individual countries may implement European regulative provisions with varying degrees of rigour.5% to Japan for components and advanced technology. Poland. for example China or Latin America. international joint ventures. From an HR perspective. although countries in the latter region differ in their openness to economic migrants. due to the principle of subsidiarity.’ As a consequence of the internationalisation of production. Hungary and the Czech Republic) into Western Europe.

and across subsidiary. by examining trends in retirement. Planning for management (and worker) mobility between parent and subsidiary. Mapping future staffing needs. expanding or contracting. recruiting potential expatriates. This function represents a conceptual lynchpin of HRM as it (ideally) forms the basis for decisions concerning recruitment. particularly in developing countries. a further layer of HR skills and competences is needed in the global era. including the flexible utilisation of human resources to respond to rapidly changing market requirements. but also to the acquisition of insight into contexts and HR systems in different countries. International recruitment. for example language skills. The following table indicates how HR functional activities are transmuted when organisational stakeholders need to ‘think internationally’.gaining familiarity with educational and training qualifications in the host country. primary concerns of HR remain apparent in a highly internationalised business environment. International HRM complexity International HR planning understanding labour market trends in the host (i. Obtaining and acting upon data concerning skill availability. operations in order to meet international business needs.territories. turnover etc. whether diversifying. but also that they are assume the responsibility of managing the complexities of cross-cultural integration within enterprises. 5 . If recruiting staff for overseas vacancies. Dealing with higher degrees of risk and less predictability in the political. HRM function Human resource planning. training and staff severance. Awareness of indigenous laws impacting upon recruitment or severance process which may constrain desired policy in these areas. therefore. demographics (age. While.e. Recruitment. cross cultural sensitivity and personal adaptability. New domains of knowledge relate not only to the management of ‘people aspects’ of overseas operations. and with varying international approaches to recruitment and selection.e. the former referring to the techniques used to screen and identify suitable candidates (for example interviews. in terms of quantity and quality of human resources. psychometric tests) and the latter the preliminary developmental action taken to ensure the new recruit is incorporated into the corporate ethos and is familiarised with job requirements. Recruitment will incorporate the processes of selection and induction or socialisation. racial mix) surrounding the subsidiary and market rates of pay. gender. i. testing for appropriate qualities and competences. subsidiary as opposed to home ‘parent’) country environments. economic and social environment.sourcing staff from local or national labour markets to fill vacancies or enhance the staffing complement.matching staff resources to the anticipated direction of business.

knowledge and competence base of the organisation either through in house training initiatives. group or corporate performance.enhancing the skills. or through supporting staff in attending educational/ professional development institutions. which 6 . Thus. Moreover.structuring pay relativities within the enterprise taking account of labour market rates. notions of ‘fairness’ in reward vary from region to region. effective communication etc. International pay and rewardunderstanding various national pay structures and philosophies in host national environments. this lessening corporate discretion in the determination of pay.Training and development. relate to the extent of active collaboration between educational and work establishments. a major policy issue confronting the international company is whether to pay the expatriate ‘home’ rates while undertaking an assignment overseas. a distinctive set of training needs is likely to emerge relating to competence in intercultural working and communication. with certain global regions (for example Scandinavia) leaning towards the case of expatriation. In recent years training and development emphasis has tended to shift from ‘harder’ technical skills towards ‘softer’ competences such as customer responsiveness. negotiating collective rates of pay with trade unions and other employee representatives. This may. while others (for example the US) tolerate significant differentiation. for example. leadership. As appropriate. gaining awareness of diverse institutional approaches to training and development in the national systems in question. complications arise as a result of physical distance of the international assignee from the parent. If preparing international managers for assignments overseas. Performance management. International training and development. or whether to adjust the pay package to take account of local conditions. in some European countries the state has a major role in pay determination.seeking to enhance employee motivation and formulating policies and practices to ensure that managers (and workers) are ‘adding value’ to corporate operations. Face to face communications between manager and subordinate are potentially rendered problematic.if a company is straddling international boundaries. If responsibility Pay. A growing trend in pay has been to link pay with individual. for example. In the area of international staffing and expatriation. International performance management. and more generally to the level of national or corporate investment into training and education. A frequently used mechanism for performance management is the performance appraisal interview.

recruitment. difficulties and risks (for example if a subsidiary is being established in a developing country). analysis of how familiar HRM policies are transformed in the context of international business has served to demonstrate the potential ambivalence and complexity of the domain of IHRM. for example managing expatriation. Accordingly managers are bound to gain the consent of worker representatives on policies affecting their working lives (e. in Germany. from multiple cultures. This brief. Facing more exposure to problems. Having to expand areas of expertise to include a broader perspective. but by no means exclusive. as a dominant structural feature is non. • • • Being responsible for a greater number (and greater complexity) of activities. or other employee. By way of contrast. International consultative obligationslegal and corporate obligations concerning employee involvement and participation vary quite considerably from country to country. including knowledge of foreign countries.unionism. Having to cope with more external influences. representatives. and many organisations regard the establishment of effective systems for collective employee involvement as a prerequisite to high employee commitment and corporate success. Employee consultation and involvement.g. job changes. • • • 7 . companies have considerable discretion concerning the principle and form of employee involvement.. Having to get more involved in employees’ lives (particularly in the case of expatriation where personal matters concerning expatriates and their families are of significance). employment laws etc.involving disclosure of information and potentially sharing of corporate decisions with trade union. layoffs) prior to their implementation. Employee consultation may be obliged by law on certain corporate issues. This point is reinforced by Briscoe and Schuler (ibid) who identify the following predominant HRM challenges. In the US for a periodic structured discussion between manager and subordinate focusing specifically on areas of strength and weakness in the interviewee’s performance and formulating corrective measures through proposed developmental activity. A concern of IHRM is therefore the possible need to adapt consultative procedures to the prevailing institutional circumstances affecting the subsidiary. for managing expatriate performance is delegated to a line manager in the host country difficulties may occur in defining accurate and objective criteria for success (or failure) across cultural boundaries. works councils are obliged by law at shop floor level. Being involved with a greater mix of employees.

the discipline will be referred to in a generic sense as IHRM. International HRM may be defined as the study of human resource policies and practices in multinational enterprises. As a third. A central focus of IHRM has been on expatriation. On the other hand.cultural awareness and sensitivity is becoming a vital organisational skill. Secondly.all’ category. insurance companies and educational establishments may be involved in recruiting migrant workers. for example the local facility of Hewlett Packard in Belgium. In such circumstances cross.A well defined occupational grouping of international human resource managers has yet to be established. following Briscoe and Schuler (ibid). policies and practices in specific national and regional domains. engaging in matters such as selecting and training expatiates. building contractors. and indeed other professional groupings. for example. For the purpose of this text. IHRM is a relatively new field of study. This might be referred to as the ‘National Geographic’ perspective as it concerns ‘terrains’ of management and employment practices as conditioned by surrounding social. are being required to manage internationalism as globalisation impacts upon all walks of everyday life. restaurants. So. As elaborated below. explaining why its operations are located in the regions identified. Report back to the class. IHRM activity may be located in the headquarters of the parent corporation. the concern of practitioners would be the integration of the philosophies and practices of the parent into indigenous operations. or being subject to a foreign takeover. Thus refers to strategic considerations in formulating policies (for example recruitment. Nevertheless. sourcing supplies from overseas. US expectations concerning corporate communications may need to be renegotiated to comply with Belgian employment regulations and prevailing norms and values. Firstly. Activity (seminar): Select a household name multinational corporation. it may be asserted that all managers. comparative HRM refers to the investigation of embedded contexts. Using web based and other sources establish the sites of its major productive facilities. determining expatriate pay and benefits packages and establishing HR policies and practices for foreign operations. ‘catch. comparative study facilitates the broadening of perspectives and acquisition of critical awareness. Scullion (2001) offering the following explanations for its emergence. managers with responsibility for IHRM may operate in the subsidiary operation. for example. it is clear that IHRM may be subject to two predominant functional configurations. Here. Accordingly. 8 . political and economic environments. training and reward) affecting the staffing of parent and subsidiaries in international enterprises. The academic discipline of IHRM At the outset it is worth drawing an explicit distinction between international and comparative perspectives on HRM in order to assist with interpretation of the disciplinary area. as is common practice.

international coordination.• • • • • • • The growth of internationalisation and global competition resulting in increased mobility of human resources. It is possible also that institutionally or culturally based factors (see unit 2) serve to constrain or modify the flow of knowledge from country to country in circumstances where ‘western’ based managerial knowledge is transposed into transitional or developing economic settings. transfer and integrate knowledge across borders. and the HRM strategies. but also across subsidiaries and from subsidiaries to parent. the links between IHRM and overall business strategy have been emphasised. technology and other managerial functions. Scullion (1995) referred to the embryonic discipline as ‘the HRM issues and problems arising from the internationalisation of business. global leadership development and the emerging cultural challenges of global knowledge management. the academic domain of IHRM has remained rather poorly defined. Shortages of international managers. To date. Recently. The move towards ‘network’ multinational organisations and horizontal communication channels. The growth of ‘micro-multinationals’ and need for management skills. Iles.of. Implementation problems of strategic alliances and cross-border mergers and acquisitions. Hendry (1994) has identified three major focal points for consideration as follows. 1995). The case below illustrates a form of ‘collision’ between western inspired HRM 9 .cultural management’ which potentially possess explanatory value in investigating the challenge of managing human resources across borders. Schuler et al (2002) bring to the fore of their analysis the challenge confronting MNCs in seeking to control and coordinate foreign subsidiaries while engendering adaptation to the host environment. Continued evidence of underperformance of systems in strategy. Welch. We should also note a growing body of literature on the subjects of ‘knowledge transfer’ and ‘cross. in the context of the burgeoning international alliances being fostered by multinational corporations (MNCs). (1) the management and development of expatriates (2) the internationalisation of management (3) the internationalisation of the entire organisation through the growing frequency of cross. Thus. production. A growing recognition that the source of advantage of MNEs is derived from their ability to create .the. recent definitions have been extended to cover localisation of management. industries and national boundaries. finance. Following Burton-Jones (1999) managerial knowledge may be regarded as a form of capital which transcends firms. marketing. Such knowledge may relate to state. particularly in culturally diverse regions. In a somewhat broader conception. which imply the need for learning across the MNC. As Scullion and Linehan (2005) assert. policies and practices which firms pursue in response to the internationalisation of business’. while other significant contributors have placed and emphasis on expatriation and related matters (Brewster and Harris. however.cultural interactions. Thus an international joint venture may be represented in terms of its potential for engendering transfer of knowledge primarily from parent to subsidiary. 1994. 1999. • The growing significance of ethical issues confronting MNEs particularly with regard to their employment policies. and we could add.

Romania and Moldova. and will contribute to relative positions of power.”Karlbrew” and “Starivo”. Historical background Pancevo is the oldest brewery in the Balkans. We will act with speed to fully leverage our advantage of being the first international brewer to enter into Serbia”. Since that time it has never stopped working and it has gradually developed its 10 . The fresh capital injected in Pancevo. including Kazakhstan. Pancevo operates with 3 brands “Weisser”. has increased to 6. Pancevo Press release to the public. Ukraine. Mr. having been established on 22nd May 1722. Eden has acquired a 63% stake in Pancevo through a cash contribution to the capital increase of the company and has become the first international brewer to invest in Serbia. Similarly.5 million. and considers the organisational and HRM challenges it has created. depending upon their internationally grounded positions. Setting the scene. in the growing number of cross. This case study focuses on the local and multinational parties to the joint venture. one of the major markets in Central Asia. The Serbian beer market. where the competition consists of local breweries. was to be used to improve the product quality and the technical infrastructure of the brewery. will provide scope for mutual learning as well as the possibility of misunderstanding. the possession of differing fields of knowledge by these groupings.concepts and practices. has said “We will integrate Pancevo’s 250 years of brewing heritage with Eden’s proven technological as well as marketing capabilities to be a leading brewer in Serbia.cultural encounters between groups of managers in various international settings. president and CEO of the Eden Beverage group. amounting to around $6. located on the outskirts of Belgrade. and embedded values and sentiments moulding the attitudes and behaviour of workers. Pancevo planned a capital investment program of approximately $10 million until 2005 to increase the capacity from the current level of 40 million litres. thus. August 15th 2003 “Eden Breweries has acquired the majority shares of the Pancevo Brewery (“Pancevo”) in Serbia. being asserted by a new group of Serbian managers.” Therefore Eden has added Serbia in its portfolio of European markets currently comprising of Russia.An East European Case Study THE EDEN BEVERAGE GROUP RAPIDLY EXPANDS IN EUROPE AND ENTERS SERBIA The case of Eden Weisser Brewery. Mahmed Kari. has an estimated total consumption exceeding 470 million litres and per capita consumption of around 58 litres as of 2002. The total number of markets that EBI operates.

The brewery’s international connections were useful in learning brewing techniques from abroad. the Serbian demand for beer remained buoyant throughout this time of crisis and domestic producers. In 1970 the brewery became a subsidiary entity within the Amish holding company which also possessed interests in agriculture and other sectors. which grew by 31% in 2003. The group is among the 10 largest European brewers by sales volume. particularly from Austria and Germany. serving markets in Serbia. Eden Beverage Group brands are enjoyed in over 35 countries worldwide. commenced production in two state of the art breweries in Rostov. such as Pancevo. It has an annual brewing capacity in excess of 1. As with other Yugoslav organisations during the 1990s. the Group’s primary brand. Pancevo was nationalized. In1991. as well as losing valuable markets as the former Yugoslavia disintegrated.lived. In addition to Pancevo. EBG acquired breweries in Chisinau. For one year Pancevo merged with Belgrade based BYP. A critical stage in its development occurred at the end of the nineteenth and beginning of the twentieth century when the German family Weisser took charge and developed the first steam brewery. conducted by EBG. Russia and Almaty. During the ‘Tito’ era. Bosnia and Croatia through the establishment of distribution centres in these regions. with shareholders acquiring 60% of socially owned capital.technological capacity. International beer operations.000 tonnes and Coca Cola bottling capacity of around 420 million unit cases per year. At the end of 2003.8 billion litres. Pancevo suffered as a result of war and sanctions. Including exported volumes. malting capacity of 150. sales volumes increased by 7%. 11 . malt and soft drinks across a territory ranging from the Adriatic to China. consisting of 14 breweries. 4 malteries and 9 Coca Cola bottling facilities in 10 countries. total sales volume of Turkish beer operations reached an all time high of 642 million litres. is one of Europe’s top ten brands worldwide. In June 1989.175 million litres. growing by 29% on 2002 levels. In the early 1980s the brewery enjoyed rapid development and increased capacity. Nevertheless. and Eden Pilsen. this representing the highest increase since 2000. Macedonia. Montenegro. Pancevo became a legal entity through the provisions of the first law on companies. Russia in 2003. Accordingly. Moldova and Ufa. the brewery was owned by the workers themselves and managed by their representatives. the brewery became one of the first privatising organisations in Serbia. but this was unsuccessful and evidently short. family ownership giving way to the socialistic organisational form of ‘social ownership’. possessed a stranglehold over the market. In Turkey. total beer sales volume reached 1. Kazakhstan. Eden Eden is a system of companies listed on the Istanbul Stock Exchange producing and marketing beer. Over this period the brewery was not in a position to attract new investment from government and it was unable to import technology and equipment.

Where compulsory redundancies have occurred. and in accordance with relevant law and collective agreement. At the time of the joint venture total headcount was 340 employees. The joint venture The joint venture was officially registered on 25th August. if rapidly gathering momentum. in addition to injection of capital. Organisational /HRM implications Throughout its recent history. as well as legal. severance pay has been used to create further job opportunities. Although wages were low. Firstly. This team included the former General Manager at Pancevo. ‘Eden Weisser (EW) became the new company name as the protocol for merging was formulated and a joint ‘transition team’ of senior managers from EBG and Pancevo appointed to steer the process of organisational integration. as well as efficient and committed. while the General Manager appointed in 2003. an egalitarian philosophy embraced all workers and management at the enterprise. legal. Understandably. The vast majority of the new management team (including sales. The immediate contribution of Eden. on a project by project basis. The newly established HR department has devoted considerable attention to communicating and explaining new policies to trade union representatives who have generally acted in a ‘partnership’ capacity and mediator in dealing with the workforce. the Weisser brand was relaunched followed by strong marketing support. workforce. Although the management team recognizes that the process of organisational transformation has only just started. there was concern about job security. for example 12 . Until recently. some of these being recently appointed. is a Belgian who previously worked for Interbrew. 2003 following the reaching of agreement the previous April. logistics and HR functions) possess Serbian nationality. as a legacy of the socialist era. at the time of the merger. purchasing. technical and finance managers. some important HR policy developments have already occurred or are in the pipeline. This objective was achieved in 2003. by temporary expatriate experts offering assistance and advice on matters such as information technology and quality control. It was joined. workers were used to virtually total job security as well as generous social benefits including sports and welfare facilities. In agreement with the trade unions. reshaping bottles and crates. and introducing new plastic bottles. product ‘rebranding’ through the use of a new logo.Eden group management had set itself a long term goal in 1999 to generate 50% of its beer volume through international sales by 2004. In December 2003. Changes in employment practice have been negotiated with the two unions represented at the brewery. one year ahead of target. a ‘technological surplus’ agreement has been implemented whereby the labour force has been ‘downsized’ to 235 employees. Pancevo has been concerned to maintain a relatively small. surplus staff have been redeployed or transferred where possible. was to engage in product quality enhancement measures including pasteurisation. sales.

not only in HR. whereby company. The form of payment is itself to be modernized. standard rates of pay across job categories and for managers are being modified in favour of a ‘performance related’ scheme. Industrial Relations and training and development. unit and individual performance will determine individual rates of pay. employment relations. it is worth considering how broadening perspectives to embrace diverse international systems for the management of employment can deepen and sharpen insights into the disciplinary areas of human resource management. Certain of these functions are ‘outsourced’. Can other organisations in learn from Pancevo’s experience. security and canteen. safety and protection.some ex. This significant HR policy initiative is being introduced slowly. Identify the key HR challenges for new HR department at Pancevo? What are the barriers to successful implementation of desired change and how may they be overcome? 5. However. including payroll and security. Secondly. both in terms of receiving foreign direct investment (FDI) and implementing subsequent organisational change? From a theoretical viewpoint. 1. but also in marketing. Thirdly. Questions (for individual analysis). accompanied by full consultation with trade unions and an ‘educational drive’ using appropriate examples of practice delivered by the HR department. organisational developments are occurring within the HR department. quality assurance and logistics. Should Pancevo management and workers welcome the purchase by Eden? What does Eden offer them? Should they have any reservations? 4. involving the establishment of entirely new departments. It is also the case that the new management team is earning approximately ten times average worker rates. to be made on a gross and annually basis. As Hollinshead and Leat (1995) point out. payroll. Such initiatives are integral to rapid organisational changes that have occurred over the past year or so. this serving 13 . a negative aspect of this development from the point of view of workers is that social benefits will be lost. As a concomitant of this scheme ‘performance appraisal’ is to be introduced this involving qualitative assessment of individual performance on a periodic basis by supervisory ‘line’ managers. organisational behaviour and related fields of study. Examine the strategic attractiveness of Pancevo as a partner for Eden? What does Pancevo bring to the alliance? 2. taking a cross. To what extent is HRM a relevant concept in the new joint venture? 3. with separate functions being established for personnel administration. as part of a wider programme of ‘culture change’.national perspective helps to throw domestic institutions. practices and processes into sharper relief.drivers have bought trucks and continue their relationship with the company on a self employed basis).

The tendency to idealise international practices. the US has frequently been regarded as an exemplar for managerial practice despite periods of indifferent economic performance at corporate and national levels. that engaging in international comparisons carries with it some potential methodological pitfalls. the Guardian. identifying various national ‘models’ available for exportation. An event seen from one point of view gives one impression. despite evidence of practices which fall outside of the norm. or sector to sector.) More generally. Taking a comparative perspective not only provides the opportunity to enrich and extend knowledge of organisational practices. Seen from another point of view it gives a quite different impression. or do management styles and structures need to be adapted to local cultural and institutional configurations? • • • We should also note. Japan was widely regarded as a ‘miracle economy’ despite evidence of high levels of workplace stress and excessive manifestations of alcoholism and suicide. National stereotyping also disregards variations in observed practice from enterprise to enterprise. Scandinavia and developing countries) Is high trade union membership. • By the time explanations of particular overseas phenomena have been studied. Following Nicholls (1994) the following ‘health warnings’ should apply to learning by comparison. Consider. • Is industrial competitiveness best gained through offering employees relatively high levels of employment security. pay and training (for example Scandinavia or Germany) or through encouraging a highly flexible and cost effective attachment of employees to their enterprises (for example the US and UK)? Is pay linked to individual or group performance an important motivator (for example the US and UK) or should pay be more egalitarian in nature. however. the following questions. 14 • • . For example during the 1980s. supporting social bonds at the workplace and group coherence? (for example Japan. The tendency to over-stereotype international practices. is a single ‘model’ of management transferable across national and regional promote critical evaluation of taken for granted aspects of organisational life. this inevitably leading to the airing of contradictory and competing prescription concerning ‘best practice’. China. and trade union involvement in corporate decisions (for example Scandinavia) reconcilable with innovation and competitiveness. the original situation could well have changed significantly. or should trade unions occupy a relatively marginalised position to allow the ‘right to manage’ to prevail (for example the US. but also demands the comparison of international ‘stories’ as to how to manage people at work. For example the US is widely regarded as the archetypal ‘free market’ economy despite protectionist policies recently enacted in financial and manufacturing sectors. has pointed out. As the British newspaper. Similarly. But it’s only when you get the whole picture you fully understand what’s going on. for example. popularised and given currency in the domestic system.

HRM References Beer. and that they are conditioned by prevailing institutional and cultural norms. In embarking upon the study of IHRM. This view implies that MNCs will require sensitivity to local circumstances when straddling national borders. development and reward differ across global regions and are a product of history and tradition.Lawrence. training.• • Difficulties in comparing ‘like with like’ in observed aspects of HR practice across national boundaries. there may be difficulties in comparing ‘like with like’ in international data sets. This is likely to be a particular problem in developing countries. The universalistic paradigm tends to assume that there is a ‘single best way’ or exemplary management form representing a benchmark for international practice. therefore. We have also considered how IHRM is different from... pay. but also international management and marketing. to guide reform in developing countries. This may be most obvious as ‘western’ organisational typologies are flagged as ideal reference points. P. with little adaptation. Once collected. Free Press. Present in bullet point form to other class members. and Walton.M. (1984) Managing Human Assets. not only in IHRM. Activity (optional/ alternative) : Imagine you are the HR team for a medium sized family owned hotel in a country of your choice.G.. Such an approach is evident in numerous texts. In contrast. and inextricably linked with subsequent processes of corporate socialisation and training. R. a starting proposition of this text is that HR practices tend to be embedded in distinctive national and regional settings.Spector.B.R. for example staff resourcing. It has explained why those with an interest in HRM increasingly need international awareness and has laid out the territory for the emergent study of IHRM. a universalistic perspective would hold that standard and ‘best’ HR practices may be transferred from nation to nation and between international enterprises. including recruitment. exiting staff. For example is recruitment policy in large Japanese enterprises. and may also be espoused by international managers and policy makers. and potentially more complex than. Summary This unit has highlighted the growing trend to the internationalisation of business which forms the context for the study and practice of IHRM. This particularistic view of the subject is predicated on the notion that HR systems. Identify key international factors that are likely to impact upon your day to day activity.D. Quinn-Mills. New York 15 . which is associated with a job for life for new university graduates. equivalent in kind to ‘hire and fire’ systems apparent in much of US industry? Data concerning employment and other practices may be incomplete or unreliable in various national settings.

second edition. Spring Issue.E. in C. Strategic Human Resource Management. M. and Linehan.J. ‘Human Resource Management. P. London. Routledge. Palgrave Macmillan UNDP Human Development Report 2000 New York pp206-209 Welch. Work and Employment. P. R. Work and Learning in the New Economy. H. fourth edition. A.C. Oxford.(2005) (eds. (1995) ‘International HRM’. Oxford University Press Dowling. H. 31(2): 139-64 16 . London. a critical text. Booklet prepared in conjunction with the World Development Movement World Investment Report 2000 (UNCTAD. (2000) ‘The Internationalisation of Human Resource Management’. June 1988. D.Brewster. P. Schuler. D. (1994) Human Resource Strategies for International Growth. (1994) ‘Determinants of International Human Resource Management Approaches and Activities: A Suggested Framework’. Journal of International Management. Basingstoke. Journal of Management Studies .G. Nicholls.E.).) Human Resource Management: A Critical Text.M. and Harris. (1995) ‘International Human Resource Management’. H. Thomson Guest. London. (2004) International Human Resource Management.Mabey and G. Business. London: Routledge Scullion. Routledge Burton-Jones. First annual Seear lecture at the London School of Economics and Political Science. in J.. London: Routledge Briscoe. ‘The New Rulers of the World’ A Carlton programme for ITV transmitted July 2001. R. C.) International Human Resource Management. Blackwell. Pitman Iles.Salaman( eds.D. and Welch. (eds) (1999) International HRM: Contemporary Issues in it worth taking seriously?’ Hendry. D. (1995) Human Resource Management. (1999) Knowledge Capitalism.S. and Leat. (2004) International Human Resource Management. and Schuler. Bristol Business School Pilger J. An International and Comparative Perspective. 6:239-60 Scullion. London.S. Storey (ed.R. New York and Geneva) pp72-74. Hollinshead. (1994) Learning by comparison. The search for new ideas.

Although a common set of institutions can be found in most societies. or the manner in which they interact.bound. public utilities. the latter could well re-iterate the proverb ’The nail that sticks out should be hammered down’. trade unions and government/ quasi. as the recent case of the highly contested closure of the Paris branch of UK. including industrial enterprises. French employees’ expectations of job security (and consultation in the case of job loss) are considerably higher than those of their British counterparts. the seasoned international business traveller will be acutely aware of differences in the ‘way of doing things’ from country to country and from region to region. 17 . particularly if a high performer. and to consider their bearing on diverse HR systems • Introduction Despite the all pervasive talk of globalisation. but also that systems and structures for ‘the management of people’ are uniquely determined by forces of tradition. financial establishments. Institutional perspectives According to the Oxford English Dictionary (2002) an institution may be defined as ‘an official organisation with an important role in a country’ or ‘an organisation founded for a religious. as can their overall configuration at a societal level.governmental agencies.Unit 2 Institutional and Cultural Perspectives Objectives • • To examine how national and regional institutional arrangements provide the bedrock for diversity in HR systems To expose three major institutional trajectories. which may be regarded as the ‘hardware’ of underlying systems for HRM. Dore (2000:45-47) refers to ‘institutional interlock’ as typifying national economies and the relationship between the economy and the broader society. educational institutions. continuing the metaphor. It is the purpose of this unit to assist understanding as to why observed manifestations of HR and employment practices demonstrate distinctiveness and ‘embeddedness’ within specific geographic territories. relate to the more intangible and psychological determinants of international diversity. Not only will this traveller be aware that conventions for doing business are culture. which. and the second concerning cultural stereotypes. owned retailer Marks and Spencer demonstrated. thus stressing the need for egalitarianism and group compliance. educational or social purpose’. Similarly. We will pursue two complementary lines of theoretical explanation. Such differences are seldom more apparent than in the field of organisation and management. Thus. relating to political ideology. business systems and factors contributing to the competitive advantage of nations To explore and criticise seminal theories of culture. the first relating to institutional arrangements. may well be peeved if his or her superior contribution to enterprise success is not individually recognised in financial terms. The counterpart of this worker in the US however. the relative strength of these institutions can vary. If the business traveller were to discuss the issue of fairness of pay with a Japanese worker.

a theme which will be taken up in unit 3. East Asia. there exists a greater ‘space’ between key institutions. to the way in which economic systems should be ordered. (Stiglitz.liberalist. Neo. Such plans. in recent years neo-liberalism has been the guiding economic philosophy for powerful international agencies such as the World Bank and the International Monetary Fund (I. neo. Neo-liberalism became a highly influential political force in the US and the UK. as a result of socio/ political traditions.F.M. and instigating ‘shock therapy’ economic treatment in transitional and developing economies (for example in Latin America. While neoliberalism has been in the ideological ascendancy over the past decade or so. are seeking to prescribe ideal forms of institutional states of existence to guide macro level reforms. academics. Secondly. Flowing from The doctrine is also consistent with the removal or reduction of state funded provision for social welfare. Moreover. mutually supportive fashion. while in others. in the 1980s and was associated with the wholesale privatisation of state owned and nationalized industries in the latter. institutions operate in an interlocking. which may emanate from politicians. management consultants and the like. broad policy prescriptions concerning the role of the state and related institutional arrangements will be explored. 18 . In essence.corporatist and socialist/ Marxist perspectives Current debates and controversies relating to globalisation and. Neo liberalism This doctrine has been substantially attributed to the late Nobel prize-winning economist Milton Friedman at the University of the Chicago School of Economics. Central and Eastern Europe and Africa). For our purposes three pervasive ideologies will be expounded. policy makers. insights will be provided into the ‘clustering’ of institutional factors to contribute to the competitive advantage of may be argued that in some societies. i. although its origins can be traced back to the work of Adam Smith and his treatise ‘The Wealth of Nations’ published in 1776. this invariably involving the rapid privatisation of formerly state owned enterprises and the ‘opening up’ of these economies to western capital. and that ‘freedom to manage’ can occur without constraint. Freedom of movement of capital and labour is assumed as is the ability of the individual economic actor to take responsibility for his or her own actions (Hollinshead and Leat. its tendency to create ‘winners’ and ‘losers’ at national and global levels has been the subject of protestation and controversy. are invariably based upon ideologies which present a general plan of action for structuring economic and social orders. For the purpose of this analysis various complementary institutional perspectives will be offered. that the state does not interfere into the behaviour of primary economic actors. 1995).2002) both operating from Washington. Firstly. a negative view is taken both of state owned industry and of trade unionism. Thus the essential concern of policy makers is to ensure that economic structures remain deregulated. more generally. both of which are regarded as possessing a monopolistic and collectivistic orientation which serves to impede the free flow of market forces. this perspective emphasises the potency and desirability of market forces in allocating resources and engendering economic efficiency and wealth. and an emphasis on institutional autonomy and self. variations in ‘business systems’ from region to region depending primarily on patterns of ownership will be examined Thirdly.

Consequently. ibid). Neo. as Hollinshead and Leat (ibid) point out alienated employees are systematically denied the fruits of their labour in terms of profit or production as these are unfairly appropriated by employers and other vested interests. This ‘stakeholder’ model of economic management is consistent with high levels of worker skill acquisition and commitment to corporate objectives. notably amongst labour movements in Southern Europe. and still hold sway in western Europe. enabling employers to promote intensification of work amongst those who fear redundancy. Moreover.corporatist ideology has been influential in continental Europe. employers and trade unions. A dominant institutional paradigm advocated by the neo. for full employment. neo-corporatist tendencies in the EU and its core economies have tended to give way to a powerful agenda of deregulation in the context of global competition and the associated needs for cost reduction and employment flexibility Socialist and Marxist perspectives Marxist perspectives are worth consideration as they have exerted profound influence in the former communist bloc. neocorporatism upholds that market orientation should be tempered by social awareness of market outcomes. 19 . and the like (Hollinshead and Leat. particularly those representing labour and capital. ibid). and is founded upon highly developed national infrastructures and systems for social welfare. access to healthcare and housing. Central to Marxist analysis is the conviction that that unequal power relations in industry do not exist in isolation. in contrast to neo-liberalism. Regarding institutional arrangements. this being instigated through consensus decision making involving major societal actors. envisages an active role for the state in seeking to mediate and integrate the interests of various powerful societal groupings.corporatist school is therefore ‘social partnership’ which engages representatives of labour and capital in decision making at various economic levels. but are buttressed by profound inequity in wider society. as manifested in educational systems.corporatist ideology. the Netherlands and Scandinavia. notably in Germany. In recent years.corporatist philosophy is that the unbridled flow of market forces potentially leads to unpredictable outcomes (Hollinshead and Leat. in Communist societies there has been little or no separation between the state.Neo Corporatism Neo. and for egalitarianism in wage systems. China and Latin America. Marxist commentators argue for workers’ control of industry. An underlying presumption of neo. however. and on limited trading between communist nations. this being detrimental to the public good and longer term economic competitiveness. and is associated with considerable material inequity within societies. It has guided the formulation of EU institutional and procedural arrangements as well as the rationale for numerous social and employment policy measures. National economic management has occurred on the basis of central planning for production and consumption. Marxist ideology holds that unemployment and insecurity is an integral feature of capitalist systems. the latter acting as ‘transmission belts’ for the party state.

According to Whitley. Streeck.American Stock market Shareholders Low Short term/ cost effectiveness/ minimisation Rhineland Institutional investors A wide variety of stakeholders. The following typologies manifest various configurations of business system characteristics in various global regions. means of ownership represents a key determinant of the form of business system. and are derived from Sorge (ibid) Fragmented • • • Small owner controlled firms engaged in adverse competition. 2004) For Whitley. a business system constitutes a collection of institutions serving to shape economic transactions. in the latter. 1997. Hong Kong 20 . tending to lead to ‘winners’ and ‘losers’.American’ and ‘Rhineland’ capitalism.Business Systems and Varieties of Capitalism Neo. normative imperatives. Short term results orientation Flexibility to convert the firm from one product or service to another Example. As Hyman (ibid.sustained by law.. al. Kitchelt et. This theme has been taken up various influential commentators.(Sorge. 2001. as well as degrees of competition or collaboration between industrial and commercial concerns and the quality of relationships between management and employees/ trade unions.which subject the decisions of economic actors to broader collective. market participants are more autonomous. The characteristics of each are presented in tabular form below. custom and moral values.140) states. including employee representatives High Long term/ investment Adapted from Hyman (2004) Similarly a number of authors (Hall and Soskice. Institutional analysis is integral to Whitley’s (2002) articulation of regional typologies of business systems. cooperation and control inside and between business organisations.liberal and neo. Table 1 indicates the primary characteristics of business systems. a dense network of institutions exists.corporatist perspectives outlined above would support the assertion that ‘varieties of capitalism’ serve to order political and economic milieu across global regions. In the former. 2001) distinguish between ‘liberal’ and ‘organised’ or ‘co-ordinated’ market economies. 1999. Source of finance Primary responsibility of management Restraints on take-overs Perspective Anglo. Albert (1993) draws a distinction between ‘Anglo. Hollingsworth and Boyer. and there is ‘asymmetry’ in market outcomes.

and former UK colonies State organised • • • More or less socialist. through financial markets and shareholding Example. commitment and flexibility emphasised in the sphere of work relations and management Economic cooperation not necessarily achieved via trade unions Example. support and governance Integration across and within production chains In capitalist systems may involve family ownership of firms Examples. Korea and France Collaborative • • • Substantial associative coordination (through industrial.Coordinated industrial district • • • • Links exhibited between competing firms and across sectors. Economic coordination geared to long-term perspectives Cooperation. in the industrial chain and through shareholdings Little cooperation between firms In commodity and labour markets. adversarial competition and confrontation occurs Owner control exercised at arm’s length. the UK. Italian industrial districts and other European regional districts Compartmentalised • • • • Large enterprises which integrate activities between sectors. employer and employee associations and quasi governmental agencies) Credit financing of enterprises and alliances of share ownership as opposed to dispersed ownership as in ‘compartmentalised’ systems above Emphasis on long term interests and development of high trust between major institutional actors Examples.German speaking and Scandinavian Highly coordinated • • • Alliance form of owner control Extensive alliances between large companies which are usually conglomerates Differentiated chain of suppliers 21 . Western continental Europe. but dependent on state coordination.

direct competition impels firms to increase productivity and to innovate. related industries and institutions that arise in particular locations. particular sources of capital and infrastructure. this serving to constrain the unbridled autonomy of management. labour management relations. and their mode of interaction. firms need to be appropriately structured.If domestic consumers are highly demanding.. the collaborative and coordinated characteristics specified above are useful in distinguishing between contrasting approaches towards corporate governance in Europe and beyond. In order to be competitive. financial structures which guarantee longer term credit or trust. Four advanced factors for competitive advantage (often represented as a ‘diamond’). 1996).• • High levels of employer. Insider systems. the outsider system is most evident in liberal economic settings in which dispersed networks of shareholdings. social norms and professional standards. this will engender the general raising of standards. which are evident in much of continental Europe. this being determined by factors such as attitudes towards authority. firms will be under constant pressure to enhance product or service quality and to innovate.employee interdependence A major part of workforce ‘incorporated’ into the enterprise Example. In highly successful economies these factors can be created rather than inherited. including employees. the shareholder (Marginson. 22 .In a globally competitive environment. through education systems etc. Indeed. which emphasises the mutual obligations of various stakeholder groups. Factor conditions. The Competitive advantage of nations According to Michael Porter (1990) national competitiveness is a product of interconnected firms. Related supporting industries. The outsider system is a familiar business model in the US and the UK. The collaborative or co-ordinated typology is closely associated with insider systems of corporate governance. ibid). are predicated upon a ‘stakeholder’ model of business. If these firms can compete at an international level. On the other hand. Japan Whitley’s analysis of business systems has significance for modes of corporate governance. norms of interpersonal interaction.. 2004). this relating to how corporate values are prioritised and to how the primary goals of the enterprise are formulated. strategy structure and rivalry. Firm. which are rooted in networks of corporate.A premium is placed on specialist factors such as highly skilled labour. (Marginson. including France and Germany. suppliers. where enterprises are largely discrete economic actors accountable to a single stakeholder. serve to explain the relative economic fortunes of nation states and indigenous companies as follows. or ‘clusters’. greater reliance on internal sources of finance. Demand conditions.The closeness/ proximity of upstream or downstream industries promotes the continuous exchange of ideas and innovation. and constraints on hostile takeover (Whitley. institutional or family shareholdings. competition for corporate control and highly developed stock markets are manifested.

employees are likely to be regarded as disposable resources. and other stakeholder (particularly trade union) agendas. Seemingly by way of contradiction. In such systems. On the other hand. frame of reference influence deliberations in IHRM? To some this may seem to be a redundant question following the collapse of the Berlin Wall in 1989 and the spread of market orientation to virtually all global regions. including employment laws and regulations imposed by government. In such systems managerial decision making is frequently constrained by extraneous influences. as a number of critics of globalisation have observed. Marginson (ibid) suggests that enterprises embedded in outsider systems of corporate governance (such as the US and UK) tend to place more emphasis on short run financial performance. which emphasise organisational autonomy. In contrast. it has left in its wake significant pauperisation and disenfranchisement at societal and enterprise level. To what extent may a radical. ibid). despite the apparent global ‘triumph’ of neo. Porter asserts that the role of government is to act as a catalyst to encourage companies to raise performance by focusing on specialist factor creation and stimulating local rivalry. In such systems employees tend to be regarded as enduring assets constituting a valuable resource for competitive advantage. enterprises embedded in insider systems of corporate governance (such as Germany and Scandinavia) are likely to prioritise longer –run performance and to pursue investment strategies involving product and process innovation and associated skill development (Marginson. an emphasis being placed on their training and development. low paid. general use factors are more readily available and include unskilled labour and raw materials.liberalism. or even liabilities. As Hoogvelt (2001) asserts. Related features of employment would include relatively high levels of job security and sophisticated arrangements for employee consultation and involvement in order to engender employee commitment. this conditioning an array of HR policies. the employer operating in the outsider system is likely to be orientated towards the ‘hiring and firing’ of staff and to closely managing individual performance. possibly through the use of financial incentives (and penalties). company management teams and line managers will be empowered to take control of all aspects of employment management and employee motivation. and adopt investment strategies which are driven by purely financial criteria. So.These factors involve heavy sustained investment and are difficult to duplicate. or Marxist. Porter’s analysis also stresses the significance of ‘high trust’ labour management relations in promoting exemplary corporate performance. Implications for HRM How then do institutional factors impact upon the policy and practice of HRM? Porter’s ‘diamond’ suggests a pivotal role for the human resource in the advanced economy. However. In such systems also. jobs or who have no access to 23 . for example. only around 20% of the world population are active participants in the new global economy. this elite straddling national boundaries and being surrounded by a majority who are either in very insecure. incorporating highly skilled labour in the institutional nexus of advanced economies that sustains their economic superiority.

of international joint ventures as internationally diverse teams may appear. therefore. It is symbolic. In this section we will explore three seminal theories of culture. engineering company in a country of your choice. Trompenaars and HampdenTurner (1997) and Spencer-Oatey (2000) asserts that there are various levels to culture (resembling the layers of an onion) ranging to the easily observable and changed outer layers (such as behavioural conventions. Culture has structure and is integrated. Dahl (2004) drawing upon the work of Hofstede (1991). Culture is not inherited or biologically based. It is shared. economic. It is patterned. passed down from one generation to the next. artefacts and conventions. while Hodgetts and Luthans (ibid) suggest that it possesses the following attributes. Geert Hofstede(1994). It is transgenerational. observable practices) to the more difficult to grasp inner layers (such as assumptions and values). • • • • • • It is learned. It is not specific to single individuals. organisation. a seminal writer on culture. and that MNCs potentially embrace ‘winners’ and ‘losers’ in the structuring of the world economic order. yet more rigorous interaction may become dysfunctional as a result of deeply held preconceptions and misconceptions of key actors. Hall and Hall. In the new global era. either as producers or consumers. This is a valuable insight in the context.the global system at all. at face value. or society share culture. Culture is cumulative. It is adaptive. People as members of a group. It is acquired by learning and experience. domestically owned. Formulate a PEST (political. A change in one part will bring changes in another. To what extent are they indicative of an ‘insider’ or ‘outsider’ system? The psychological ‘software’. to possess cultural opposed to the more genetically driven adaptive process of animals.cultural perspectives To what extent are differences in national practices in HRM attributable to cultural differences? This is a difficult question to answer. social and technical) analysis of the contextual factors impacting on your business. has referred to culture as the ‘software of the mind’. Culture is based on the human capacity to symbolise or use one thing to represent another. for example. not least because of the intangible nature of culture itself. High and Low Context Cultures 24 . Culture is based on the human capacity to change or adapt. Activity (seminar): Imagine you are the HR team for a medium sized. radical perspectives help to remind the commentator that globalisation is not a politically neutral phenomenon.

In such cultures activities may be carried out simultaneously. Northern Europe and the USA tend to have relatively low power distance. Tracing the anthropological roots of this cultural predisposition to the Islamic and Roman Empires. regulations or institutional arrangements tend to be put into place to mediate the threat of uncertainty and ambiguity. while those in Southern Europe. Asia. has provided influential insights into varying cultural predispositions across national barriers. Power Distance reflected the extent to which members of society are prepared to accept a hierarchical or unequal power structure. Italy and France tend towards risk aversion. Rule making and bureaucracy would be a common feature of organisational life in such environments. ‘Interestingly. Hofstede defines consequences for management behaviour.000 IBM employees across over 60 countries. face to face communication. This theoretical contribution would seem to have particular value as joint ventures between low and high context regions are becoming more commonplace. and a blurred division between work and domestic activities. word of mouth. but the management theories that tell us that risk taking is a good thing were made in the US or Great Britain’. Asia. Scandinavia and North America) interaction between individuals tends to be The study of Geert Hofstede. Uncertainty avoidance relates to the extent to which members of a society are prepared to tolerate ambiguity and risk. it is inextricably bound up with the meaning of that event’ In low context countries (including the former West Germany. An emphasis is placed on time management. In high context cultures (for example Japan. In risk-averse countries or organisations. potentially creating clashes in values norms and mutual expectations. there is less emphasis on time management. these security seeking countries seem to have been doing better economically…than the risk takers. while Britain and Sweden are relatively orientated towards risk. it is apparent that in some societies the relationship between superior and subordinate is adhered to with greater rigidity and reverence than in others. Africa.Hall and Hall (1990) contend that context refers to ‘the information that surrounds an event. Hofstede’s Study www. unambiguous and formal in tenor. In Europe. Switzerland. This dimension clearly has explanatory value concerning varying degrees of organisational hierarchy and propensity towards managerial consultation across cultures. For each dimension. the Middle East and Southern Europe) it is assumed that most information resides in the person and therefore greater emphasis is placed upon ‘interpersonal chemistry’ and ‘body language’ as manifested in informal. 25 . based on survey data obtained from two company attitude surveys conducted in 1968 and 1972 and involving 116. Japan and Latin American and Mediterranean countries also score highly on uncertainty avoidance. Hofstede notes. with subsequently a fifth being added. Germany. Latin America. Latin America and Africa are relatively comfortable with hierarchy and paternalism. Initially four dimensions were identified which possessed universal applicability across cultures. deadlines and punctuality.geert-hofstede. and work and home life are quire rigidly separated.

This dimension was added in 1987. such as stereotypical masculine and feminine values. employee wellbeing and satisfaction. while Scandinavian countries are strongly feminine in orientation. In collectivistic societies. which pre-dated much feminist thinking. the theory has been subject to criticism on a number of counts. to counter the potential western bias of the IBM questionnaire and to embrace Asian values. The empirical studies carried out in the late 1960s and early 1970s occurred before the intensification of globalisation and related developments (such as the invention of the internet) which has impacted upon values and attitudes on a global scale. this created new and eclectic cultural ‘hybrids’. Individualism is prevalent in those societies in which the primary concern of people is to ensure the well-being of themselves. have become increasingly apparent. personal recognition and a challenging career took precedence over ‘feminine’ preferences for good personal relations. nurturing and sharing. It is also postulated that countries become more individualistic as they become more economically advanced. Long term thinking. Highly masculine societies include Japan.Individualism versus collectivism. The concentration on the nation state as the primary cultural reference point might now be regarded as misguided as social and commercial interactions now frequently transcend national borders. prevalent in Eastern ‘Confucian’ orientated cultures stresses virtues such as persistence and perseverance and is consistent with organisations building strategic plans over an extended time frame. Austria and Latin countries. with the assistance of researcher Michael Bond. for example ethnic and religious minorities and economic migrants. Latin America. fragmenting its cultural unity. sought to make tangible and quantifiable the nebulous notion of culture. The study. Masculinity versus femininity. through its strong empirical orientation. short term. Social sub-groupings within the nation state. Hofstede asserts that modern management philosophies and techniques tend to emanate from more individualistic societies (for example. English speaking countries tend to be highly individualistic (notably the USA) while higher degrees of collectivism are to be found in continental Europe. Asia. This dimension represents the extent to which archetypal male values such as high earnings. thinking is associated with results ‘here and now’ and puts pressure on businesses and employees to demonstrate immediate achievements. • It is out of date. However. consensus orientation. the post. Hofstede’s study has been highly influential in academic and commercial circles as it has highlighted the significance of culture in international business engagements and in shaping managerial behaviours across national boundaries. performance related pay) and that they therefore possess limited applicability in collectivistic and developing countries. or their immediate kin.term versus short term orientation. Long. • • 26 .socialist bloc and other developing countries. while western. Similarly key concepts may be regarded as somewhat dated. wider groupings and networks share extended responsibilities and loyalties.

In embracing a wider range of nation states in a later era. on the other hand. according to Trompenaars. Latin and developing countries were more particularistic in orientation. Thus. Thus. particularism places a greater emphasis on the building and protection of relationships. It is argued that the US.Turner (ibid) serves to supplement Hofstede’s study by offering an alternative set of cultural dimensions. UK and western societies tend to be achievement orientated. Not only may one take issue with the notion that components culture can be dissected and scored. while Asian cultures and those in developing societies place greater value on ascribed characteristics.htm The work of Trompenaars (1997) and Trompenaars and Hampden. Mexico and the Czech Republic tend towards individualism.) or through who they are. Japan. while in reality it is clear that homogeneity in culture may not be assumed over time. family. age or He identified five ‘relationship orientations’ as follows.000 managers in 298 countries. Trompenaars interestingly unearths national cultural predispositions that would seem to contradict the thrust of Hofstede’s analysis. and by placing a focus upon meanings. such as the USA. It is methodologically flawed. Universalism versus particularism relates to the extent to which individuals are inclined to apply universal principles or rules to social situations or events or whether they are prepared to modify those principles according to each specific occurrence. in particularistic cultures witnesses to a road accident in which the driver was breaking the speed limit would feel obliged to testify in favour of that driver if he or she is a friend or relative. Trompenaars and Hampden Turner http://changingminds.e. what they have achieved through their own exertions (educational qualifications.• • It tends to present culture as a static phenomenon. gender. Western countries. Trompenaars’ empirical investigation occurred in the early 1990s and involved the distribution of questionnaires to over 15. i. While formal notions of fairness and truth are regarded as significant in universalistic cultures. 27 . Individualism versus communitarianism is reflective of Hofstede’s equivalent dimension and essentially refers to whether the individual’s primary orientation is towards the self or to common goals and objectives. or humans’ interpretations of the world around them. remains strongly collectivist in orientation. performance measurements etc. thus rendering it measurable. Australia and the UK ranked high on universalism. but also the exclusive sample of IBM employees may be regarded as excessively narrow. following the inception of market liberalism in these areas. this reflecting contemporary theory. while China. as a product of birth. Achievement versus ascription refers to the extent to which social status is achieved either by what people have done.

it may be asserted that. which assumes that time is linear and sequential.Neutral versus affective relates to the extent to which feelings and emotion. Personal networking has a high premium in outer directed societies. As with other dimensions. or whether external factors and luck play a decisive part. In inner directed societies it is believed that that strategic choices and planning are important in shaping organisations and their environment. are expressed in interpersonal encounters. present or future. this bringing to the fore profoundly contrasting mindsets. In the former. Implications for IHRM Clearly there are some powerfully intuitive connections between cultural dimensions and observed manifestations of HRM across regions. This dimension also relates to the extent societies are orientated towards the past. as with Hofstede. recruitment. According to Trompenaars. In a specific culture compartmentalisation occurs between work and private life. while in the latter individuals are inclined to undertake several activities at the same time. particularly as international companies increasingly straddle western and non western regions. Trompenaars use of the nation state as the primary cultural reference point may be questioned in the global era. consultative/authoritarian etc. as well as rationality. a broad separation is apparent between western societies and others. Although such connections are far from empirically proven. Sequential versus synchronic distinguishes cultures on the basis of their perceptions of time. the following examples of organisational practice might be regarded as being influenced by culture.flat/tall. Inner versus outer directedness reflects fundamental notions as to whether individuals and groups can control their own destiny. • preferred organisational structures. while in more diffuse societies various spheres of life are closely integrated. whether pay is individually determined (individualism versus collectivism). activities tend to be separated into sequences. childcare provisions etc. and the ‘whole person’ is involved in business relationships. maternity. where time is multiple and diffuse. while others are polychronic. Specificity versus Diffuseness relates to the distinction drawn between the individual’s private and public spaces. Japan has a highly neutral culture. while outer directedness emphasises the force of political conditions and ‘Acts of God’. while Mexico is strongly affective or emotional. the level of statutory regulation in employment (uncertainty avoidance). (masculinity versus femininity) 28 • • • • . with western countries tending towards specificity. Some nationalities and regions are most orientated towards monochrony. paternity. Trompenaars provides some finely nuanced insights in the new global era. By way of criticism. (power distance). whether based on merit or nepotism (achievement versus ascription).

cultural theory can provide a useful conceptual tool for understanding and judging comparative manifestations of HRM across borders. however.Briscoe and Schuler (2004) have identified the following managerial practices as being impacted by cultural problems in international team working between parent and subsidiary managers. welfare services. While these areas of theory may be subject to criticism. tools time horizon of plans degree to which organisation is bureaucratic and dominated by rules type of performance and control standards used degrees of centralisation and decentralisation spans of control grouping of activities and departmentalisation selection and promotion criteria. • • • • • • • • • • • • • • • • • • • • • planning methods. and other relevant materials. explore the potential cross. Summary This section has offered two complementary strands of analysis to comprehend diversity in international HR systems. Using Geert Hofstede’s website www. nature and extent of training programmes degree of participative rather than authoritarian management communication structure and techniques techniques for motivating personnel nature and extent of employee benefits. arguably its most telling contribution relates to the awareness it provides of the potential for cross. political and economic contexts. Make recommendations as to how these problems might be overcome. 29 . institutional and cultural.cultural ambiguity and misunderstanding in international team working.geerthofstede. they imply that manifestations of HR are strongly embedded in surrounding social. While. Activity(optional/alternative): Imagine you the management team of a US owned pharmaceuticals company entering into a joint venture with a partner in a Latin American country of your choice. facilities the ease or difficulty of motivating employees the degree to which individuals identify with their departments or firm the degree of cooperation or conflict among employees the degree of unproductive time spent in ‘restrictive practices’ or socialising. attitudes towards innovation and improvement attitudes towards customer service the degree to which ‘scientific method’ is used to deal with problems and utilised in decision making organisational flexibility in adapting to changing conditions.

and Boyer. Routledge Concise Oxford English Dictionary (2002) Oxford University Press Dahl. (1994) Cultures and Organisations: software of the mind. (2004) International Human Resource Management. London. G. Cambridge University Press Hoogvelt.M. London. London. second edition. Reshaping the Global Economic Map in the 21st Century. 26. Dicken. and Soskice. Mass. national industrial relations systems and transitional challenges’ in A. (2000) Stock. J. R. (2001) ‘An Introduction to Varieties of Capitalism’ in P. Oxford: Oxford University Press Hall. (1993) Capitalism against capitalism’ London. (2001) Globalisation and the Postcolonial world. (2004) ‘Varieties of capitalism.Boyer (eds. Basingstoke. Oxford.) Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. second edition. McGraw-Hill Hofstede.Van Ruysseveldt (eds.R.) Contemporary Capitalism. D. R.Both institutional and cultural frames of reference provide useful conceptual tools when embarking upon comparative analysis.) International Human Resource Management. D. (2003) International Management. Hall and D. P. Harzing and J.Intercultural Press Hall. A. New York. and Hall. References Albert. F. Culture.. The new political economy of development.Market Capitalism.R. G. (1997) ‘Co-ordination of Economic Actors and Social Systems of Production’ in J. London. Hollingsworth and R.A. Yarmouth. and Schuler. (fourth edition ). Strategy and Behaviour. (1991) Cultures and Organisations: software of the mind. R. Oxford University Press Hodgetts. P.W. Whurr Briscoe. and Luthans. (fifth edition) New York.S. (2004) Intercultural Research: The Current State of Knowledge. Soskice (eds. Sage 30 . The Embeddedness of Institutions.T. R. Sage Dore.A. (2003) Global Shift. McGraw-Hill Hollingsworth. Middlesex University Discussion Paper No. S. Palgrave Macmillan Hyman. (1990) Understanding Cultural Differences. M. London.R. Welfare Capitalism: Japan and Germany versus the Anglo-Saxons. HarperCollins Hofstede. E. M. R.R.

London. J.W. (1999) ‘Divergent Production Regimes: Coordinated and Uncoordinated Market Economies in the 1980s and 1990s’.) International Human Resource Management. G.) The Changing European Firm: Limits to Convergence. G. Thomson Learning Whitley. NY: Cornell University Press Stiglitz. Stephens (eds. Marks and J. F. Nicholas Brealey Trompenaars. London. P. (1993) Riding the waves of culture. London.) Continuity and Change in Contemporary Capitalism. (2004) ‘Cross. in in H. (2002) Globalisation and its Discontents. (2001) ‘Introduction: Explorations into the Origins of Nonliberal Capitalism in Germany and Japan’ in W. R.Streeck and K. (2004) ‘The Eurocompany and European Works Councils’ in A.D.) International Human Resource Management.Van Ruysseveldt (eds. H.D. H.Yamamura (eds. A. Kristensen (eds.Whitley and P. (second edition) London.Lange.Van Ruysseveldt (eds.D.. and Stephens. R. M. Harzing and J.E. and Hampden Turner. J. D.Kitschelt. Sage Porter. London and Basingstoke.W. Lange. Norton& Company Trompenaars. W. Routledge 31 . Ithaca.Kitchelt. New York.. (1997) Riding the waves of culture. second edition. understanding cultural diversity in business. Cambridge University Press Spencer-Oatey. (1990) The Competitive Advantage of Nations. in H. W. Stephens (eds.H. Macmillan Press Sorge. C.W. Harzing and J.) Organisation. P.) The Origins of Nonliberal Capitalism: Germany amd Japan in Comparison.National Differences in Human Resources and Organisation’ in A. P.E. (2000) Culturally speaking: managing rapport through talk across cultures.Kitchelt.. G. Continuum Streeck. Nicholas Brealey Whitley.Lange. second edition. London. (2002) ‘Business systems’. understanding cultural diversity in business. in A. Matks.) Continuity and Change in Contemporary Capitalism. F. (1999) ’Convergence and Divergence in Advanced Capitalist Economies’. Cambridge University Press Marginson. London. P. Sage Soskice. (1996) ‘The Social Construction of Economic Actors’ in R.Sorge (ed. London. Marks and J.

A distinctive feature of internationalisation of the production process in the global era. Krugman (1995) asserts that it is now possible to ‘slice-up’ the value chain. notably spices and other exotic goods.ibid) in which the peripheral (third world) economies provided raw materials and foodstuffs and provided a market for manufactured goods. as the above example demonstrates. and to consider how they are responding to ethical concerns. associated with the new era of globalisation. and highly paid. a type of international value added chain was apparent. this making the relationship between developed and developing countries more complex and ambiguous. Singapore. a type of global production line straddling the US itself.Unit 3 The Global environment and multinational corporations Objectives • to examine trends in the internationalisation of production as a basis for understanding the relationship between the developed and developing world to consider why companies become multinational in their operations to expose seminal theories relating to multinational structure. • • • Global trends and the international division of labour In Unit 1 we considered the production of a ‘typical US car’. while the core (developed) economies undertook more specialist productive activity. this involving the sourcing and shipping of raw materials and agricultural from ‘third world’ economies to the richer national powers which undertook product manufacturing. Similarly. (Hoogvelt. the apparently simple core/ peripheral system of international trade flow has been subject to fragmentation. certain products having been international in character for centuries. the international sourcing of products is not new. in the ‘preglobal’ system. Germany. Thus. but markets were also tapped in the third world countries (which had provided raw materials) in a fashion which maximised the profitability of capitalists in the colonial powers. 32 . a ‘core/ peripheral’ global dichotomy was apparent (Dicken. Following industrialisation in the eighteenth century.2001). and many other products and services are now provided on a similar basis. staff in the affluent consumer societies. Japan. with particular reference to the relationship between parent and subsidiary to critically examine the employment policies of multinationals. so as to locate labour intensive elements of relatively high technology processes in low wage international locations. is that it straddles both developed and developing economies. Over the past few decades. Dickens ( 2003 ) points out. with lower value. while higher value activities (for example design. Accordingly. As. the UK. assembly and retailing) involved the deployment of more highly skilled. Taiwan. colonial structures were apparent in the organisation of world trade. bulk or volume production invariably occurring in developing countries. This example is by no means exceptional in the motor industry. where labour was relatively unskilled and labour costs low. The fruits of such production were then enjoyed by consumers in the developed countries. Ireland and Barbados. but also South Korea.

Thirdly. waiters and waitresses) who are bound to stay close to customers. - - We should emphasise that the hierarchical division of labour as stated cuts across national and regional boundaries. India. Following. The ‘re-sorting of the global jigsaw puzzle’ (Dicken. whose skills are transferable across national and regional boundaries. A larger layer of between 20 and 30% of the world population labouring in insecure forms of employment subject to elimination of jobs by machines and the driving down of wages and conditions to the lowest common denominator.person services (such as salespeople. this means that capital is being disconnected from the social relationships in which it was previously embedded. and the ‘knowledge workers’. and are beyond the ambit of aid programmes. who are effectively excluded from the global system. China and South East Asia will bring over a billion workers in developing countries into global economic structures. This group perform neither a productive function nor present a potential consumer market. have given way to computer. so that the first two categories in particular may be found in both developed and developing countries. with their fixed. systems of mass production associated with heavy industry. ibid) 33 . The elites of all continents and nations. over the next two decades or so (Kennedy. Indonesia.Dicken (ibid) argues that a new kaleidoscopic picture of international production is apparent. and whose functions cannot be relocated (Reich. Reich (1991). Turning to emergent patterns in the global division of labour. however. enabling the instantaneous flow of capital across financial centres and into financial cyberspace. Firstly. it may be predicted that the growth of the second category will undermine the security of the first. and the workers within them. 1996). immobile. hairstylists. and with newly industrialised economies (such as India and China) offering centres of production. by their nature. susceptible to the volatilities of global financial markets. The ability to switch investment instantaneously from region to region not only serves to accentuate the interconnectedness of international economies. ibid) concerning the organisation of international production has occurred in the context of related shifts in the global economy. establish a form of instantaneous production and organisation across national borders. albeit more prevalent in developed countries. relative security attaching to in. Within this core exist the 20% of the world population which is bankable. with geographical relocation of production on a global scale in a way that intersects national boundaries. quality. such that the move of market orientated production to South America. It is likely that this development will exert a significant downward pressure on wages in developed countries. As Hoogvelt (ibid) points out. profound changes have occurred in global financial systems. but also makes all economies.based flexible forms of technology which may be reproduced at various global locations. the shift towards knowledge or information based society has been predicated on the basis of electronic and digital technologies which. Second. The remainder of the world population. earning less than $3 a day. This grouping tends to be tied to specific geographic areas. Hoogvelt (ibid) suggests that the core/ peripheral model associated with colonial and post-colonial eras has given way to a three tier structure of concentric circles as follows.

frequently. These include the ability to draw upon indigenous supplies of knowledge and skills (for example concerning tastes. physical location in foreign market places offers a number of strategic advantages over and above exportation. technology and employees in a country other in addition to its country of origin).asp?partid=12 New markets Undoubtedly a critical driving force towards the internationalisation of corporate forms and structures is the need to create and respond to new markets. laws and social networking).johnpilger. The Dutch economy.2000) have demonstrated that the largest have annual sales greater than the entire economic output of many medium sized countries. There are 63. for example. Yet initial moves to internationalise were the response to obvious limitations of national demographics and land space. Of the largest 100 economic actors in the world today. At the outset it is worth reflecting upon the precise nature of multinational corporations in order to distinguish them from primarily domestic concerns involved in exporting or importing. Russia and India Physical proximity to markets More generally. the avoidance of import restrictions and the ability to capitalise on local inducements or grants.e. General Motors is bigger than South Africa and Shell is twice as big as Nigeria.000 MNCs in the world and they are now responsible for two thirds of global trade and 80% of investment. in dairy products and in newspapers. in some sectors. This is the case. 51 are corporations and 49 are countries.Multinational Growth and Power It is in the context of global economic liberalism that the MNC has become a dominant organisational form as well as.(Pilger. What are the factors that drive companies to expand their operations across national borders? Some key explanatory factors are as follows. It should also be pointed out that. Ford.2000) and the UN Development Programme (UNDP. is reputed for its international orientation and as being a home base for such giants as Philips and Royal Dutch Shell. Recent international reports by the UN Conference on Trade and Development (UNCTAD.2001). Based upon this formulation. This definition therefore would therefore not merely embrace household names such as Shell. Furthermore. as markets become more volatile and contested. This is not a new phenomenon. An MNC is a company physically active in more than one country (i. the perishable nature of products renders exportation impossible. customs. it has plant. Mitsubishi or McDonalds. for example. an awesome economic power. but also much smaller companies in the services and well as manufacturing sector. Now there is broader recognition across business that. there is a need to spread sales and distribution networks beyond national boundaries. multinationals are anxious to gain a foothold in emerging markets in transforming regions such as China. 34 . where there is nothing much staler than yesterday’s headlines.

MNCs have argued that their overall effect upon work and employment has been positive. it is undeniably the case that governments and other primary stakeholders in the host country environment are aware of the economic benefits in offering a favourable climate for the receipt of FDI. Such a scenario has been evidenced at Ford’s plant in Halewood. or the natures of taxation’ such as branding. and particularly market requirements. with a level of integration that will promote corporate cohesiveness. during its chequered history. MNCs reserve the right to switch funds from one country to another if the financial and strategic rationale underlying operations in a particular region falters. Factors in the equation as to where to locate elements of the production process would include knowledge and skills of indigenous workers set against the cost of labour. MNCs have taken credit for the exportation of new technologies and managerial ‘know. image. as ‘cash rich’ economic actors. Bartlett and Ghoshal (1989) define four such typologies. Indeed. which are represented as dominant forms in 35 . Multinational Structures and Strategies A key issue for many multinationals is to combine being highly differentiated. Finally MNCs have contended that they are disposed to offer in excess of local labour market rates of pay. Liverpool. It has been argued that MNCs assist with the process of industrialisation or modernisation in host countries.effective and flexible context for business operations. so that there is sufficient flexibility to be able to respond to local conditions. performance management and total quality systems. availability and quality of local suppliers. We should note also that these job creation effects are magnified in developing regions of the world. but rather a set of typologies exist which are contingent upon the market and other circumstances in which the MNC finds itself. particularly in Asia.Internationalising production A clear strategic benefit possessed by MNCs. and economies of scale. or more generally offering a cost. Not only do they create jobs (approximately 50% of employment in the UK and Ireland is dependent on FDI. where threats of industrial unrest from local workers can be met with threats of closure from parent company management. In a seminal work. It has become clear that there is no single model multinational organisation.) but also there is an indirect boost on suppliers. services and infrastructures when an MNC subsidiary locates in a host locality. As conduits for the diffusion of the ‘state of the art’ ideas and practice. the state of advancement of local technology and the availability of raw materials. tax concessions. which is not available to the purely domestic concern. Inward investors may also be influenced by more general national political and economic factors such as the complexion of the government in power. Host country incentives While MNCs have been subject to robust criticism concerning employment and other matters in overseas subsidiaries. as well as the strategic intent of the MNC. is the ability to undertake a type of cost/ benefit analysis of physical and human resources on an international basis and to organise productive processes accordingly. This may relate to financial incentives. The capacity of MNCs to juggle investments on an international basis has particular significance in the field of labour relations.

It has been a dominant model in the telecommunications industry. products or services were differentiated to meet local demands. but nevertheless still possess explanatory value regarding various industrial sectors. In these circumstances. computers and automobiles and in Japanese and German MNCs. Multidomestic. Transnational-This became a dominant model in the late 1970s in which MNCs were seeking to tap into niche markets across national borders while seeking to maintain economies of scale in an increasingly competitive market environment. (Mintzberg. This form of MNC began to embody the notion of flexibility. using computer aided design and manufacturing.The typology was prevalent in the 1960s and 1970s in a period when tariff barriers were being reduced. This typology has been common in the food and drinks sector and in French and British MNCs International. This typology is associated with a retrenchment of organisational power to the (US) parent. the US management theorist Howard Perlmutter (1969). and products themselves were often produced locally. provided stereotypes to understand the ‘tortuous’ nature of the relationship between multinational parent and subsidiary. In a complementary and influential study. with subsidiaries being dependent on the centre for new products and ideas. At this time. combined with lower transport costs and homogenous consumer demand. Global. Personal and bureaucratic forms of control were apparent and dependent subsidiaries performed a ‘pipeline’ role for the parent. as international subsidiaries move from infantile dependency towards mature autonomy. Thus there was a need to respond simultaneously to the conflicting strategic needs of global efficiency and local responsiveness. Within MNCs. and formulating strategy in an incremental and adaptive fashion. Technological innovation was diffused from home to host in a sequential fashion and the corporate culture was based on professional management with limited delegation. which is also typical of US. at which time changing customer preferences were apparent and logistical barriers impeded international trade. This has been a common configuration in consumer electronics. and through establishing interactive networks encompassing parent and subsidiaries. with the US enjoying unrivalled productive capacity. MNCs integrated and rationalised production to deliver standard products in a cost-efficient manner. In these circumstances.This was a dominant form between the two world wars. • The ethnocentric concern bases its operations on the assumption that tried and tested approaches to management can be extended from the country of origin 36 . (1988) Pharmaceutical and food MNCs approximate to the transnational model. The typologies below depict the phases of development of multinational corporations. as price competition was vital. Dutch and Swiss corporations. organisational structures were decentralised with a low level of control from the centre. in which product demand was booming. while subsidiaries were ‘empowered’ with corporate responsibilities (such as research and development) .sequential historical eras.This represented a dominant organisational form in the post-war years. a high degree of parent control remained through socialising subsidiary managers (and workers) into the corporate ethos.

making authority to local managers. expatriates from the country of origin will be primarily responsible for the management of subsidiaries. taking it to the next stage of development. From the point of view of the host country population. the move towards polycentricity is beneficial as it removes many of the problems associated with expatriation and vests continuity of managerial approach with host country managers. moves towards empowerment of locals are based upon the strategic realisation of the value of indigenous knowledge as a vital organisational asset. following Perlmutter’s assertion that the move towards polycentricity is complex. It should be pointed out. While Perlmutter viewed this typology as a primary stage of multinational development. This approach therefore rests upon a preference for decentralisation and provision of autonomy for operating sites. the MNC is disposed to devolve areas of decision. most notably. the organisation may well take account of local arrangements for the expression of employee ‘voice’. For example a number of western owned international companies have now become established in the Moscow region. While the parent company may be prepared to delegate aspects of the HRM or marketing portfolio. Similarly training and development activity is focused upon such managerial and professional staff. and training and development activity will be dispersed more thoroughly throughout the organisation. viewed as the ‘brains’ of the organisation. as well as their commitment to organisational values. payment systems will be closely related to local structures and systems. as well as organisational re-entry on completion of the assignment. for example works councils in many European countries. problems for dual career couples. while host country labour will be recruited to carry out routine activity. In HRM terms. Nevertheless. that the divestment of decision-making authority to local level management teams is invariably partial. schooling for children. More detailed elements of HRM policy flow from the overall paradigm shift. In this respect HQ staffs need to be convinced that 37 . parent companies are scrupulously careful in screening the competence of host country management teams. however. ethnocentricity is problematic as local talent is confronted with a ‘glass ceiling’ impeding promotion to senior positions that remain the preserve of parent company nationals. • A polycentric company bases its operations on the assumption that local managers and employees are best placed to formulate policies that most realistically reflect local needs. This is reflected in the centralisation of managerial authority. Ethnocentric concerns are also likely to retain research and development and other ‘knowledge’ activity in the country of origin. while indigenous employees are treated as unskilled operatives. Underlying this is the preference to keep the reins of power in the country of origin. From an HRM operating sites in other countries. typically critical areas of financial management and research and development are retained at a central level. While local observers welcome the modernising potential of such firms there has been some consternation expressed about the sight of the ‘suitcase’ westerner in Red Square. it nevertheless retains explanatory value. The possible dysfunctions associated with expatriation include failure of assignees to adjust to the host country due to language and cultural difficulties. before delegating any authority to them. As a result of such strategic dysfunctions. In essence.

the devolution of responsibility to teams of staff. recently spawned clusters of global centres of excellence. managers will be able to take a global view of the organisation. being able not only to respond flexibly to local needs but also to transcend them in the pursuit of corporate goals and values. as opposed to hierarchical. This takes us to the final stage of Perlmutter’s evolutionary model. one possible case is Asea Brown Boveri. even if in a more indirect fashion. as well as retaining control over operations. the balancing of internal relativities in pay on an international basis and. secondly. cultures and strategic decisions determined by parent company which gives very little power to overseas subsidiaries Strategic concerns MNC not reaping the benefits of local knowledge or adapting to local environment Local managers and workers feel imposed upon by parent. A modern interpretation of geocentricity would highlight organisational characteristics such as flexible. The global organisation therefore seeks to facilitate the emergence of staff networks and teams. and semiautonomous. for example. and limited influence/ promotion prospects etc. especially at managerial level. Shell. the electrical engineering conglomerate. and the sharing of knowledge throughout the organisation. many using virtual networks Although it is not easy to find examples of truly global concerns. an integrated approach towards recruitment ignoring national demarcation. quite often appearing spontaneously and connected through virtual technologies. Its characteristics reportedly include horizontal networking through ad hoc task groups. However. thirdly. HR priorities for geocentric concerns would include. At senior corporate levels in particular. an emphasis on language and cross.cultural training. MNCs are invariably striving to strike an optimum balance between local responsiveness (differentiation) and international organisational coherence (integration). operating units Typology Ethnocentric Strategic characteristics Values. organisational structures. and combines local and international strengths. for locals Not fully adaptive to local HR policies Subsidiaries largely managed and controlled by expatriates or former HQ staff One way lines of communication Polycentric Each overseas subsidiary regarded HRM decisions may be devolved to 38 . • Geocentricity captures the status of the truly global concern. reflecting Bartlett and Ghoshal’s ‘transnational’ classification. These emerged as individuals with a strong interest in a certain area gathers like minded people around them.they can trust the managerial acumen of subsidiaries. which then transfer knowledge among decentralised. firstly.

Establishment of global centres of excellence Corporate values shared throughout the organisation Geocentric World orientation Acting locallythinking globallycombining responsiveness to local markets and environments with international coordination and integration Aiming for collaborative approach between parent and subsidiaries and between subsidiaries Difficult to arrive at desired ‘balancing act’ of integration and differentiation In a more recent study. and that many MNCs are still fundamentally ethnocentric in orientation. subsidiary As parent/ local managers are interacting there is a need for crosscultural training etc. Advantages of ethnocentricity Disadvantages • Efficient coordination • Adaptation of expatriates uncertain • Effective communication • Selection procedures prone to • Direct control of foreign errors operations 39 . which retains key positions ‘Tortuous’ devolution based on differential trust environment as areas of strategic control retained by parent Not fully gaining advantages of strategic integration/ economies of scale across MNC as a whole. Possible tensions between parent/ local managers Less reliance on expatriation Need to socialise local managers (and workers) into corporate values Multidirectional communication and mobility of managers/ staff Virtual team working across subsidiaries etc. Mayhrofer and Brewster (1996) suggest that ethnocentricity offers various advantages as well as disadvantages. controlled and managed by local managers Key decisions (for example financial investment and strategy) controlled by autonomous business unit.

The first phase prioritises the product. and indigenous cultures become highly important in entering into external relations (Scullion and Paauwe. this phase may only involve brief visits of parent country managers to the host environment on a project basis. This phase is associated with Perlmutter’s polycentric classification. while recognising that cycles of product development and marketing have dramatically shortened since Vernon’s theorisation in the mid 1960s. International: Here. while the third is most concerned with the lowering of prices and cost control in the face of intensive competitive pressures. MNCs may pass through the following ideal typical stages (note the usage of the same terms as Bartlett and Ghoshal. as a vital functional area. ibid) It may well be the case that production is transferred to the host environment. Adler and Ghadar (1990:242) exemplify this stage by the statement ‘We allow you to buy our products’. norms and beliefs throughout the organisation Broadening the view of expatriates and the chance of growth for expatriates Rapid substitution of expatriates possible No need for a well developed international internal labour market Appropriate for entry into international business • • • • • • • High costs Complicated personnel planning procedures Private life of expatriates severely affected Difficulties in mentoring during stay abroad Reduced career opportunities for locals Potential failure rate likely to be higher Government restrictions Source. Adler and Ghader draw upon Vernon’s life cycle theory (1966) which distinguishes three phases in the international product life cycle (Scullion and Paauwe. with technical skill being the most vital resource. Adler and Ghadar. and considerable strategic attention is given to obtaining and good match between the product and local market preferences. with little attention given to foreign cultures. and resultant HR policy formulations. ibid). Mayrhofer and Brewster (1996) The evolutionary tendencies of MNCs are also recognised by Adler and Ghadar (1990) who suggest that MNC strategies and structures accord to phases in the product life cycle. an emphasis is placed on home markets and exports. In this phase IHRM considerations become more manifest as parent country managers are expatriated to provide general management. the second is associated with the development and exploitation of markets at home and abroad. In HR terms. the significance of foreign culture in operational terms. and research and development. 2005). which are however varied in their application to corresponding developmental phases) • Domestic. (Scullion. the focus shifts to local responsiveness and the transfer of learning. nevertheless draw a connection between international marketing strategy. In the first phase. technical expertise and financial control (Scullion and Paauwe • 40 . According to Adler and Ghadar.• • • • • Diffusing central values. management operating from an ethnocentric perspective.

ibid. as an important component of HR you should consider the knowledge and skills of each party. Adler and Ghadar’s fourth typology is closely associated with Perlmutter’s global configuration. A climate for continuous learning will be a valued organisational asset. a focus is placed upon low cost and price competition. and related. despite being highly ‘ideal typical’ in nature. A key lesson to be drawn from these. ibid). contributions is that structures and strategies of MNCs are powerfully conditioned by factors in their economic and political environment. In HR terms. Activity (optional/alternative). MNCs. regardless of their country of origin. ibid) Global. although awareness of cultural diversity in the global concern is still required (Scullion and Paauwe. career counselling and international transfers within the enterprise. a premium is placed upon capitalising on cultural diversity within the organisation to generate creative and innovative responses to environmental challenges. and adaptability to local tastes. put yourself in the positions of (a) the parent (Eden) and the subsidiary (Weisser). with particular reference to HR factors. The sharing of a common organisational ethos across diverse managerial groupings will contribute to unity of purpose. (Scullion. this necessitating appropriate management development activity. The primary concern of IHRM is to recruit the most effective managers for international positions. (Scullion and Paauwe.cultural sensitivity. Note. 41 . provide useful insights into organisational dynamics and tensions within. Perlmutter and Adler and Ghadar.• • ibid). emphasising particular challenges in international competition and organisation in the global era. This typology places a focus on both local responsiveness and global integration in seeking to combine cost advantages and low prices with high quality products or services. Referring to the Eden/ Weisser case in Unit 2. Expatriates operating the fields of sales. For this typology. and that the relationship between parent and subsidiary may evolve over time.) The theories of Bartlett and Ghoshal. Accordingly. and provide a useful conceptual background for understanding staffing issues in MNCs. Multinational. as the international organisation needs to be highly responsive to its environment. Foreign based operations are significant as a means to obtain cost effectiveness on the basis of production factors differentials and economies of scale. Present in bullet point form the strategic rationale for each party to enter into the joint venture. although cross cultural sensitivity is less vital than is the case for typology 2 above. cultural sensitivity is vital both inside and outside the enterprise. marketing and HR are likely to require language skills and cross. In the third phase.

for example healthcare. which found its fiercest form of expression in street protests in cities such as Seattle and Genoa. the CEO of General Electric was paid more than 1. reconstruction activity following war and other crises (Klein. al. from environmental neglect to flagrant breaches of human rights in developing countries. The allegations levelled against MNCs are wide ranging. found that in 1997. transfer pricing offers the technical possibility not only of sidestepping unfavourable national financial regimes. • • The profits of the world’s ten largest firms is equal to the GDP of 29 African countries (Elliott and Denny. Sanchev (2006) provides the following statistics to demonstrate the economic might of MNCs.(Korten. and the economic agenda of western governments has generally been to assist them by removing remaining obstacles to the free flow of global capital. In other words. education and.a force for good? Employment and ethical concerns There has been much public controversy and debate generated in recent years by the apparently burgeoning and unbridled power of MNCs.571 times the average wage of Mexican industrial workers who made up an increasing percentage of the workforce as production moved over the border Turning to more detailed criticisms.) and conversely losses are also declared where this is financially convenient.400 times the average wage earned by his blue collar workers in the US. this reflecting unprecedented elevation in the power of international capital. 1998) The coffee trade is said to be dominated by four transnationals that account for 40% of worldwide retail sales (Fairtrade Foundation. A General Electric shareholder resolution (1998). This means that higher profits are declared in regions where it is most financially expedient to declare such profits (given varying national taxation systems etc. taking the form of ‘transfer pricing’. 1995). more recently. 42 . However his earnings were 9. it is evident that MNCs possess greater economic power than many of the countries they operate in. a persistent allegation levelled against MNCs has been an apparent propensity towards creative accounting.. but also assertive trade unionism. such as textiles and the media. Secondly. 2002) • As Sanchev (ibid) asserts. 2007) has frequently been filled by MNCs and associated subcontractors. First. it has been observed that the onset of the ‘global village’ is clearly associated with a growing dichotomy between rich and poor.Multinationals. the ‘vacuum’ left by the withdrawal of the state from various domains of economic and social activity. are each more than 40% controlled by five or fewer corporations (MckIntosh et. both within national systems and between ‘northern’ and ‘southern’ hemispheres. At the centre of these expressions of protest are perhaps two overriding concerns. for example. This alleged practice is significant in the field of labour relations as well organised trade union movements will typically justify substantial wage claims by referring to high levels of profitability. 2003) The 12 most important global industries.

corporal punishment and fines for becoming pregnant. The matter is of particular concern in the UK where a series of ‘business flights’ in sectors ranging from motor components to textiles to low cost economies have been witnessed. Consequently. Sri Lanka and China. Motorola. according to Klein. www. A recent case that alarmed British observers was that of James Dyson. students and members of the public in developed and developing regions. Carlsberg and Kodak. and as a result of the enlightened self awareness that adverse publicity affects sales. Phillips. Despite crediting Britain as a ‘powerful manufacturing nation’ in 2002 he announced the plan to shift production from Malmesbury to Malaysia entailing the loss of 800 jobs in the Wiltshire town.5 per hour. Some prominent commentators are now drawing attention to a new order of globalisation in keeping with a ‘brand’ new world which proselytises the ‘meaning’ of commodities rather than the ‘stuff’ they are made of. defending the company’s withdrawal from Burma in 1996 stated ‘Public opinion and issues surrounding this market have changed to a degree that could have an adverse effect on our brand and corporate reputation’.naomiklein. the Philippines. Threatened boycotts have directly impacted the operations of companies such as PepsiCo.424). Such companies have decided to ‘take flight’ if a seductive set of economic and employment inducements appear in another region. journalist Naomi Klein (2000) draws attention to modern manifestations of corporate and consumerist cultures in which the true value of a product relates to the ‘lifestyle’ or ‘attitude’ it evokes. where employers need to satisfy a series of legal and consultative provisions prior to securing closure. This contrasts with. This process has entailed subcontracting production to ‘Export Processing Zones’ in developing countries such as The response of MNCs Multinational corporations are increasingly recognising the need to adhere to ethical standards and to observe notions of Corporate Social Responsibility (CSR). In her best selling and provocative book ‘No Logo’. (Sanchev. the colourful home grown entrepreneur who invented the ‘bagless’ vacuum cleaner.In a climate of unrelenting global competition. There were also examples of child labour being recruited. there have been a number of wellpublicised examples of MNCs demonstrating an instrumental attachment to employees and other stakeholders in their host country. cited in Klein (2000. C&A. Klein finds that the predominantly young female workers are subject to conditions such as 12 hour shifts over seven days a week. The CEO of Heineken. western corporations such as Nike and the Gap have channelled hugely disproportionate resources into product branding and distribution while reducing costs of production to lowest possible levels. Undoubtedly a critical factor in the decision was the significantly lower cost of employment in Asia. The attempt of MNCs to ‘clean up their act’ has occurred in the wake of high profile scandals. being fined for not working overtime. active campaigning by public opinion leaders. Average rates of pay in the utilities surveyed were less than $2. the state of affairs in Germany. for example. ibid) while the Internet has been employed to radically enhance the potency of global 43 . In a survey of ‘sweatshops’ in China. for example Enron. these reflecting the relative ease of business closure in the deregulated business environment. Ralph Lauren.

in 1997 known as ‘SA 8000’.org 44 . • • • • Employment: creating and promoting jobs. forced labour. Reebok.) has been active in establishing minimum standards to apply across national borders (World Link. 2001).4 Similarly the Council on Economic Priorities Accreditation Agency (CEPAA) formulated a set of international standards for ‘social accountability. 2002). including non-discrimination. and job safety and health Industrial Sachdev (ibid) reports that the Gap now employs more than 80 people whose sole responsibility is to ensure that factories comply with ethical sourcing criteria.ilo.O. These principles were endorsed by a variety of organisations including The Body Shop. 1995. have been highly visible in promoting their codes of ethical standards. (Briscoe and Schuler.jsp will require companies exposed to supply chain risks to demonstrate policies of labour standards. In response to public Those with an interest in exposing and regulating the ethical breaches of MNCs have recognised that it is clearly inadequate to allow MNCs to monitor their own affairs. the FTSE4Good Index http://www. right to collective industrial dispute resolution Ethical guidelines for multinationals to take to the forefront’ World Link.cepaa. SeptemberOctober.1995) these relating to. The International Textile. job security. freedom of association.html http://nikebiz. child labour and worker representation. Garment and Leather Workers’ Federation and Amnesty International.mallenbaker. and have sought to bring a set of international standards to bear on the operations of www.unctad.campaigning against MNCs (Carmichael. eliminating discrimination in the workplace Vocational training Conditions of work and life.shtml www. and Nike has quadrupled the number of employees dealing with labour practices (Murray. www.2004). particularly those operating in the clothes and apparel sector. www. As Sanchev (ibid) points out. gaining endorsements from world renowned celebrities. over a period of decades the International Labour Organisation (I. http://www. -pp1. The University of Texas. a number of household name MNCs.

union membership or political affiliation. their effectiveness has been hampered by their primarily voluntary status. mental/physical coercion. sexual orientation. Management systems. Joseph. An ILO review of 215 codes. 45 . provide access for verification of compliance. employers must provide benefits. The company must abide by laws governing minimum age. The company respects the right of all personnel to form and join trade unions of their choice and to bargain collectively. ensure management review: assign company representatives to oversee compliance. Compensation. there is widespread concern that the adoption of these codes may constitute little more than ‘greenwashing’ or ‘corporate gloss’. Health and Safety. Forced labor. gender. health and safety training. Working hours. This is borne out by various commentators (Hutton. working hours and safe areas of work. The company must not permit discrimination on the basis of race. The company must provide a healthy and safe working environment. found ‘significant discrepancies’ in content and operation between them (Sanchev. Freedom of association and the right to collective bargaining. school attendance. Indeed. clean and sanitary support facilities and access to portable water. As Sanchev (ibid) asserts. caste. establish a means to correct concerns and provide corrective actions. where multinationals subcontract operations to developing countries. 2002) who reveal that actual investment into CSR matters has increased little over the past decade. plan and implement controls. Wages must be legal/industry minimum and must cover basic needs plus discretionary income. disability. and verbal abuse are not permitted. and show supporting documentation and records. At an operational level. The company must not engage in or support the use of forced labor or hiring with bribes or deposits required: it must allow employees to leave at the end of the shift and allow employees to quit. ibid). religion. The company must be in accordance with applicable laws: employees must not work more than sixty hours per week: overtime (over forty-eight hours) must be voluntary: and employees must be given at least one day off in seven. 2000. national origin. communicate openly with auditors. The company must agree to: create a publicly available policy committed to compliance with applicable laws and other requirements. handle deductions and not avoid labour laws through false apprenticeship schemes. select suppliers based on compliance. Discrimination. Child labor. young workers. Disciplinary practices. it is sometimes difficult for western MNCs to control employment and ethical practice as chains of command are diffuse and subject to contractor changes at local level.SA 8000 minimum requirements are as follows. Corporal punishment. examining coverage of labour practices. Source: CEPAA Despite the benign intention underlying these and similar provisions passed by other interested agencies. the necessary international regulative mechanisms do not exist to compel factory inspection and to ensure compliance to minimum employment standards. prevention of accidents and injury.

which is now starting to get its act together. as overseas ‘component’ contributors demonstrate the acquisition of appropriate expertise regarding their activity. Big Blue sold its personal computer business to a Chinese multinational. Indian firms. they are likely to win greater autonomy as an operating unit. there is some evidence that this international paradigm is subject to change. Brazilian and Russian multinationals are also starting to make their mark. this rationale is mitigated by the need to employ skilful and loyal workers in this demanding and specialist commercial sector.New Multinational orientations While the above analysis tends to assume a somewhat ‘traditional’ configuration in multinational organisation. ‘traditional’ relations between ‘parent’ and ‘subsidiary’ are subject to fragmentation and possible re-ordering. It is apparent that multinational form and organisation may vary considerably from sector to sector and that western ‘ethnocentricity’ is now rivalled by unfamiliar ethnic alternatives in the international corporate landscape. Although these developments remain relatively exceptional. ‘ Indian and Chinese firms are now starting to give their rich world rivals a run for their money. While a major strategic reason for international ‘componentisation’ is to take advantage of relatively low labour costs. Tata Consultancy Services and Wipro are putting the fear of God into the old guard.4 billion abroad and are now in the running to buy Alitalia. in overseas host destinations. or disaggregated into separate but interconnected productive activities. and various strategic options are available to determine the relationship between headquarters and the management of ‘components’.7. i. splashing $11. The Russians have outdone the Indians this year. Thus elements of the financial services operation are being ‘componentised’. some international parts of the business remain under ‘captive’ or close control of the headquarters. Sudan. So far this year. Indian companies such as Infosys. PetroChina has become a force in Africa. Indeed. with even the parent/subsidiary terminology. In a study of the finance sector. including.autonomous basis. Firstly. Gupta (2006) reveals that some leading international finance concerns are following the lead of manufacturing enterprises and establishing ‘finance factories’ to straddle national boundaries. and other favourable conditions.e. these being the most valued or complex operations. being open to question. and its hierarchical and highly structured connotations. Secondly. and others may be organised by overseas partners in an autonomous or semi. a (frequently western owned ‘parent’ exerting strategic control over a ‘subsidiary’ in a western or non western locality). including Accenture and even mighty IBM. and located in the most suitable national location. they imply a rethinking of familiar strategic concepts in international business. Two key developments are notable.western sources. In general. 46 . led by Hindalco and Tata Steel have bought some 34 foreign companies for a combined $10. controversially. Italy’s state airline. Lenovo. including ‘offshoring’ and ‘outsourcing’. Information technology has facilitated this flexible form of international business structuring. The following quotation from the Economist (ibid) is instructive. according to the Economist (2007) the world is becoming ‘more bumpy’ and a growing number of powerful MNCs is owned by non.

with particular reference to developing countries. L. (2004) International Human Resource Management. 8 September Fairtrade Foundation (2002) Spilling the beans on the Coffee Trade. F. and the growing significance of ethical and employment concerns for MNCs.fairtrade.Activity (seminar) Access the labour behind the label website ( www. It has identified the power of MNCs. (1990) ‘Strategic Human Resource Management: A Global Perspective’ in R. (2001) ‘Accounting For Ethical Business’ in T. Ghoshal. N. Adler. London.R. Routledge Carmichael. and Denny. (2003) Global General. Berlin. New York. Using corporate examples. Capco 47 . Winter.) The Moral Universe. C. Sixth Annual Compensation Survey: United for a Fair Economy/ Institute for Policy Studies Gupta.A. C. and Ghadar. second edition. Guardian.S. London: Sage Elliott. S. Pieper (ed. References. (1989) Managing across Borders. (2006) ‘The Financial Services Factory’. MA: Harvard Business School Press Briscoe. Reshaping the Global Economic Map in the 21st Century. D. London at http://www.Electric Shareholder resolution (1998) reprinted in A Decade of Excess: The 1990s.) Human Resource Management: An International Comparison. Boston. ).org.J. Journal of Financial Transformation. present in bullet point form the major criticisms alleged against MNCs in the clothing industry relating to their employment and ethical practices. S. Summary This section has examined the strategy and structure of MNCs against a global economic and political backcloth. Demos Dicken. The Transnational Solution. London. and Schuler.. (2003) ‘New Issues’.Bentley and D.Stedman Jones (eds. complexities in organising the relationship between parent and subsidiary. R. S. De Gruyter Bartlett.labourbehindthelabel.

D. R. M. C. Culture. (fifth edition) New York.M. (2001) Globalisation and the Postcolonial World. ‘Opening Up the Definition of Strategy’ in Quinn.(1988) H. Klein. Flamingo Korten. Coleman. (2003) ‘Corning-Vitro’ in R. Harlow. Luthans F. Hodgetts R. ‘The New Rulers of the World’ A Carlton programme for ITV transmitted July 2001. International Executive. International Management. The Strategy Process. 28-9. Englewood Cliffs.C. S. J. Alfred A Knopf 48 . 121-23 Okleshen. G.. 1 Mayrhofer. London. W.9-18 Pilger J.M.. 11 June Perlmutter. McGraw-Hill Hoogvelt. New Statesman/Society. 4(1). FT Prentice Hall Mintzberg. The Industrial Society Joseph. The Work of Nations. The New Political Economy of Development. Strategy and Behaviour. N. New York. H. London. (1998) Living Corporate Citizenship.Delivering the New Agenda’ New Economy.. NJ. Booklet prepared in conjunction with the World Development Movement Reich (1991) R. Palgrave Macmillan Hutton. A. Mintzberg. Columbus Journal of World Business.B.M. (2007) The Shock Doctrine. 8 (2). R. and Brewster. London. D. (1996) ‘In praise of ethnocentricity: expatriate policies in European multinationals’.B. fourth edition. (1969)‘The tortuous evolution of the multi-national corporation’. E. (2000) Society Bites Back: The Good Enterprise.M. (2002) ‘The Rapid Rise of New Responsibility’ Financial Times. 38(6) McIntosh. Boston. Prentice Hall Murray. Irwin McGraw-Hill Kennedy. J. Penguin Klein.Hodgetts.Culture. and F. P (1996). Earthscan Krugman (1995) ‘Growing World Trade. 3 May. W. F. and Luthans. Basingstoke. H. (2003) International Management. the Purposeful Consumer and the Just Workplace. Strategy and Behaviour. H. James. C. Jones. (1995) When Corporations Rule the World. second edition. ‘The Global Gales Ahead’. (2001) ‘Corporate Social Responsibility. N (2000) ‘No Logo’ London. Preparing Ourselves for 21st Century Capitalism. Leipziger. The Rise of Disaster Capitalism. Causes and Consequences’ in Brookings Papers on Economic Activity.

and Luthans F. New York. Block 3 Sachdev. Human Resource Strategies. 2007) Globalisation’s offspring. pp72-74. How the new multinationals are remaking the old.13th. A Critical Text.4 49 . Linehan (eds. and Paauwe. Irwin McGraw-Hill Open Business School.October. (2006) ‘International corporate social responsibility and employment relations’ in T. (1966) ‘International Investment and International Trade in the Product Cycle’ Quarterly Journal of Economics. National Systems and Multinational Companies. fourth edition. (2000) International Management. London UNCTAD (2000) World Investment Report. Boston. FT Pearson Scullion. S. Basingstoke. May:190-207 World Link (1995) Ethical guidelines for multinationals to take to the forefront’ September. (1991) B884. R.) International Human Resource Management.Okleshen C. Strategy and Behaviour. Palgrace Macmillan The Economist (April 7th. -pp1. New York and Geneva.. Scullion and M.) International Human Resource Management.G.Rees (eds. H. pp206-209 Vernon.Edwards and provided for Hodgetts R. J. (2005) ‘Strategic HRM in multinational companies’ in H. Harlow.Culture. UNDP (2000) Human Development Report. Globalisation.

but rather on a complex and variable set of interrelationships between human agents in home and host environments which are conditioned by the overall strategic orientation of the MNC. multinational or global configuration. therefore. According to Harzing (2004) an expatriate may typically be defined as a parent country national (PCN) working in foreign subsidiaries of the MNC for a predefined period. and 50 . However. when the subsidiary becomes a critical player in the realisation of international corporate goals. including information technology. A recent survey by GMAC ( 2007). phase of development. In Unit 3 we described the complexity of the parent-subsidiary relationship. Objectives. in subsequent poly and geocentric phases. usually 2-5 years. construction. Expatriation has occupied a pivotal position in the IHRM literature in representing the most direct form of human resource intervention by the parent into the operations of subsidiaries. real cross cultural engagement between home and host country staff develops in strategic importance and IHRM issues are closer to the forefront of corporate deliberations. chemicals and finance.overview and the rationale for expatriation In this section we turn our attention more fully to international HRM. suggesting that the MNC configures and reconfigures its organisational form over time in a manner that enhances its international competitiveness across national boundaries. with little need for meaningful interaction between parent and host country managers and other interested stakeholders. covering 180 small. • • • • • To consider the strategic rationale for expatriation with reference to MNC strategies To investigate the concept of expatriate failure To consider alternatives to expatriation. or in Adler and Ghadar’s (1990) international. for considering international staffing we should note that it is not founded on a linear managerial notion of direct parental control over subsidiaries via expatriation. medium and large scale organisations from a variety of sectors. ethnocentric. pharmaceuticals. notably ‘localising’ management authority to the host environment To identity problems and issues associated with working across cultures To explore the concept of ‘expatriate adjustment’ Introduction.expatriation and managing across borders. Returning to the seminal contribution of Perlmuttter (1969) in the first. multinational operations would typically be run by the parent in a centralised fashion. which is concerned with the strategic considerations in formulating policies affecting the staffing of parent and subsidiaries in international enterprises.Part 2 International Themes Unit 4 Staffing the Multinational enterprise. As a starting point.

Such expatriates tend to ‘fly from plant to plant and create cross-pollination between the various offshoots (ibid. Deploying expatriates as agents for the transfer of knowledge may be particularly significant for subsidiaries in developing countries. but are most concerned with weaving informal communication networks between subsidiaries and 51 . UK. perform a similar role to bumble.265). The observations of Edström and Galbraith are borne out in the most recent GMAC survey. bumble bee expatriates are most concerned with realising control based upon socialisation and the creation of communication networks. expatriation may occur for management development purposes. A final category. referred to as spiders. sheds light on the current state of expatriation. This may be illustrated by the following facts. a high percentage of respondents (56%) deployed over 100 expatriates 69% of respondents reported the number of expatriates to have increased in 2006 20% of expatriates were female 48% of expatriates were 20 to 39 years old 60 % of expatriates were married and 54% had children accompanying them Spouses/ partners accompanied 82% of expatriates. experience accumulated through international transfer will equip the expatriate for career progression within the organisation. international companies may despatch expatriates in order to fill positions where indigenous knowledge and skills are not available. The expatriate profile in referred to the bear as it associated with a high degree of domination (Harzing. expatriates may replace or complement the centralisation of decision making by the parent company. Harzing (2001) asserts that the coordination and control function of international transfers may take three forms. MNCs continue to recognise the strategic benefits of expatriation.bees. which finds that the most common assignment objective was to fill a skills gap (27% of respondents) followed by building management expertise (23%) and technology transfer (18%). In one of the few in depth investigations into the corporate rationale for expatriation. Firstly. Thirdly. expatriation can assist with organisation development through establishing personal channels of communication between parent and subsidiary and through facilitating the diffusion of corporate norms and values throughout the international organisation. undertaking surveillance and related activities on its behalf.managing a worldwide employee population of more than 8. Alternatively. 14% were new hires and 86% were employed by the company at the time of the international assignment 58% were relocated to or from the headquarters country The therefore.html Undoubtedly. China and Germany were the most frequently cited destinations http://www. • • • • • • • • • 34% of responding companies deployed 50 or fewer expatriates. Secondly.4 million. 59% of spouses were employed before an assignment and 8% during an assignment 10% had previous international experience. Examining Edström and Galbraith’s third explanation for expatriation in greater depth. and drawing upon her own empirical study into the area. 2004).gmacglobalrelocation. thus promoting a common corporate culture. Firstly. Edström and Galbraith (1977) identify three main company motives for international transfer. In this instance.

a theme to which we shall return in the next unit. while a more ‘invisible’ cost is continuing underperformance in the subsidiary as each new expatriate embarks upon the lower end of a ‘learning curve’. the estimates at the middle to higher end of this spectrum being disputed by Harzing (1995. major explanations for this being partner dissatisfaction. early return does not always signify failure. These authors identify the following alternatives to traditional expatriation. inability to adapt to the host environment. the significant costs associated with expatriate recruitment and training are forfeited. The GMAC survey (ibid) finds that 10% of expatriates returned prematurely. family concerns and poor candidate selection.2002). both to the company and to the transferee him or herself. and there may also be detrimental effects on partner and children if they are accompanying the expatriate. the US and Japan were the locations with the highest rate of assignment failure.215). financial loss. From the company’s point of view. it is undoubtedly the case that expatriation carries with it significant risks. Strategic alternatives to expatriation In order to avert the risk of failure. lowering of morale. the UK. it is not always the case that a ‘traditional’ expatriate is needed. Expatriate failure is normally defined as the premature return of the expatriate to the home base prior to completion of the agreed term. while bears are quite commonly found in international operations (although we might expect that they proliferate in ethnocentric concerns) bumble bees and spiders may be most commonly witnessed where subsidiaries are operating quite independently of the parent. A subject of considerable debate by researchers has been the risk of failure. Despite disagreement over the precise extent of expatriate failure. innovation and new talent no longer emanate from headquarters. it is undoubtedly the case that it is a problem worth taking seriously. As Harzing points out there are widely varying estimates as to the proportion of failed expatriate assignments in developing countries (ranging from 16-50%). and 23% returned to take up a new position in the parent company. as 14% of prematurely returning respondents successfully completed their assignment early. following from our previous analysis of various multinational strategic and structural formulations. tending to make the expatriate model obsolete (ibid. as a corporate device to diffuse a common corporate culture across international operations. 52 . However. and therefore it makes sense for the international company to consider alternative methods of international staffing.parent. As Briscoe and Schuler (2004) assert. but are now internationally available. new markets. the need to prepare the expatriate for cross cultural engagement through training and development programmes is increasingly being recognised. The risk of expatriation and international staffing alternatives Expatriate failure Despite its apparently continuing popularity as a method of international staffing. As the GMAC survey points out however. According to Harzing (ibid). The survey found also that China. From the expatriate’s point of view. new technologies. failure may be associated with reduced career prospects in the company.

traditional expatriation is frequently also expensive as companies need to provide incentives for staff to undertake overseas assignments. this complying with Perlmutter’s (ibid) notion of polycentricity. and to retain a coherent package which reflects home payment criteria in the host environment. this relating to Short term foreign postings. these assignments involve the relocation of managing directors or equivalent staffs to manage overseas operations. or staffing senior positions in the subsidiary with host country nationals. short trips to foreign locales. political and legal circumstances as well as business practices in the host country. Permanent. these assignments typically last for less than one year and are normally used for technology transfer or to establish new operations. pharmaceutical. As Harzing (2004) suggests. for example establishing a sub contract. As we shall investigate in unit 6. For those companies endeavouring to move away from traditional expatriation. Increasingly the term ‘extended business traveller’ (EBT) is being used for this type of international employee. permanence. The most recent GMAC survey report (2007) finds that 55% of companies were seeking alternatives to long term assignments. both the options of shorter term assignments (in which home country rates are paid with few extras) and permanence or localisation (in which host country rates may be paid) offer attractive alternatives to traditional expatriation. Shorter international assignments also carry the quite considerable benefit that relocation will not be necessary for the partner or spouse of the expatriate and children. individuals whose trips occur on an ad hoc basis and which last a few weeks or months at a time.• • • • • • • Domestic internationalists. Employees on long term business trips. remaining in the foreign locale for the rest of their career with the firm. Devolving to the subsidiary However. therefore. 14% localised expatriates and 13% relied on business travel. This form of assignment has been common in high. but who make regular. domestic employees who spend most of their time in their home country. Regarding cost. Long term assignees. the local knowledge possessed by the Serbian management team served as a vital strategic complement to the international financial 53 . Referring back to the ‘Eden Weisser’ case in Unit 1. Permanent transferees. who spend their careers moving from one overseas assignment to another. host country managers can contribute invaluable resources of locally based knowledge to international companies. International commuters. the major reason for this being cost. 36% used short term assignments. typically occurring in Japanese or European owned MNCs. as well as being a risky business. or similar employees. domestic employees who interact frequently with people in other countries (by conventional and virtual communications) from the home base. this category consists of high calibre ‘knowledge workers’. the model of traditional expatriation in perhaps most under threat from a realisation of the strategic benefits associated with international devolution. diagnostic and healthcare sectors SHRM Global perspectives. or ‘localisation’ occurs where long term assignees converts to local status. (2001).

Working across cultures As the strategic configuration of the MNC develops to embrace the subsidiary as a vital contributor to its international operations. as well as being able to establish informal communication networks between subsidiaries and parent (Harzing. and provides a motivational stimulus to local managers who perceive opportunities for promotion and advancement. ibid). a US manager has lived and worked in an environment in which ‘freedom to manage’ has been paramount. while this manager’s French counterpart is used to numerous aspects of managerial activity being subject to statutory regulation. a critical challenge confronting not only expatriates. From a cultural perspective. but all those involved in international managerial engagement (Brewster et al 2007). ibid). A further category of international staff. this category of international staff typically comprising Japanese knowledge workers who have migrated to western countries. according to Hofstede (1994) has been profoundly conditioned by an individualistic organisational mindset. which constituted neither home or host country nationals can fill corporate deficits in skills or knowledge which are not available within the existing reservoir of human resources.2003). Furthermore. Thus Japanese high technology MNCs have seen the benefits of employing ‘boomerangs’ (Pacific Bridge International Asian HR . It is therefore apparent that management across cultures carries with it greater potential for complexity and ambiguity than managerial interaction within cultures. ibid). as they are able to combine such knowledge with local awareness. as it provided domestically focused ‘savvy’ in a volatile business environment. and general attitudes towards ‘doing business’ may be grounded in highly diverse national or regional traditions.and ideological capital injected by the parent. So. Similarly. while valuing individualism. the US manager. but are tempted to return home as they possess the necessary language and cultural skills to navigate the complex local business environment (Briscoe and Schuler. providing MNCs with an alternative to traditional expatriation may be referred to as third country nationals (Harzing. as Harzing points out (ibid) devolution of managerial authority to host country managers can respond effectively to the host government’s demand for localisation of subsidiary operations. As a concomitant of international devolution. Subsidiary managers may gain from this experience by actual exposure to norms. while his or her French equivalent. according to Briscoe and Schuler (ibid) host country nationals who have been exposed to international state of the art knowledge represent a scarce resource for MNCs. MNCs have become aware of the advantages of inpatriation as a strategic alternative to expatriation. 54 . taking an institutional perspective. is the need to operate effectively in diverse international teams. so the need for interaction between home and host country managers at an interpersonal level is likely to increase. it can be appreciated that organisational mindsets. and may be in an optimal position to combine technical proficiency with cross-cultural sensitivity. This grouping. Consequently. Referring back to institutional and cultural perspectives explored in Unit 1. Hodgetts and Luthans ( 2003) suggest the following potential problems with diversity. Inpatriation involves the organisation of secondments for subsidiary managers in the parent’s headquarters for a particular period of time. for example. is most strongly orientated towards the avoidance of uncertainty. values and ‘state of the art’ knowledge in the parent.

(2002) suggest that multicultural teams may be either very high performing or low performing. and to discredit ideas which run against conventional discourse. however contrary evidence exists of highly individualistic tendencies (Hollinshead and Michailova (2001)) Inaccurate communication. it has been acknowledged that internationally diverse teams potentially offer considerable strategic benefits. ibid). Difficulties may also arise from the misinterpretation of ‘body language’ for example westerners confusion the Bulgarian tendency to nod their heads when they mean ‘no’. or the Japanese tendency to exhibit the same gesture when they are merely being attentive (Hodgetts and Luthans. al. Where there is a need to avoid ‘groupthink’. As group members come from a host of different cultures. resulting not from business difficulties as such. Different perceptions of hierarchy. For example the term ‘Human Resource Management’ has no literal equivalent in many East European countries. 55 . and to the scheduling of agreed tasks resulting from an international business encounter. Shapiro et. Different uses of time. but from cross-cultural misunderstandings between partners. Indeed. while Adler (1997) argues that the productivity of diverse teams depends upon how they manage such diversity. preparedness to commit to an agreed course of action during a meeting. An example might be the western perception that post-socialist managers are collectivist in orientation. • Where innovative or creative ideas or solutions are required.This refers not only to potential problems of translation. there have been some spectacular failures in international joint ventures/ strategic alliances. Despite the considerable marketing appeal of this venture.This may refer to punctuality in attending meetings. Again. recorded by Cara Okleshen at the University of Nebraska. following Hodgetts and Luthans (ibid) multicultural or diverse teams offer advantages over homogenous managerial groupings in the following scenarios. the arrangement foundered on apparently irreconcilable mind-sets of US versus Mexican managerial teams.Culturally rooted preconceptions and prejudices concerning international colleagues. On the other hand.• • • • Mistrust. One example was the recent unsuccessful ‘NAFTA’ region alliance between US glass manufacturer Corning and a Mexican counterpart Vitro. for example between high power distance orientated French managers and low power distance Scandinavian managers may also confuse deliberations between managerial groupings from these nations (Hollinshead and Leat. but also because of etymological problems in establishing the meaning of words and terminology. ibid) Stereotyping. (2003). • Despite the strategic benefits associated with multinational organisation. This relates to the tendency of an homogenous ‘in group’ to conform to established patterns of consensus and group norms.Difficulties in understanding ‘alien’ modes of interaction and business customs (for example US managers’ bewilderment at Japanese managers ‘huddling together’ and discussing a problem in their own language in an international business meeting. they are often able to create a greater number of unique suggestions.

at a superficial level of appearance and interaction (for example concerning dress. the Russian participants in the survey confided that working in the market economy constituted a new experience. tolerance. While policy decisions in the Mexican concern were made in a deliberate and hierarchical fashion.building workshops and participated in a ten day outdoor development exercise. conflict and intercultural relationships (Open Business School. interpersonal interest. Hollinshead and Camiah (2003) demonstrate considerable potential for mistrust and misunderstanding between the two groups of international managers. interpersonal harmony. This case illustrates the pressing need for cross-cultural awareness on the part of international management teams. the expatriate would then begin to be accepted by Russian colleagues. the US executives were used to a quick. motivation and spouse/family communication. As a result it was not clear to see what the appropriate ‘code of behaviour’ should be. In the area of recruitment. 56 . patience. who. the subservient attitude form the past. At Hong Kong and Shanghai Bank international managers attended two day cultural awareness and team. BP and Finance Europe have used multicultural team-working activities to examine cultural differences. and empowered approach. Expatriate adjustment In a study of cross.confidence and initiative.Having existed in a previously planned economy. dietary preferences. self. openmindedness. and become a more relaxed international manager. One manager observed that the new generation were torn between ‘two worlds’ one inhabited by their parents and one by themselves. the Mexican approach to sales was slower and less aggressive than the US style. preferred status symbols. According to one westerner. On the other hand. 1991).cultural working between western expatriates and ‘new’ Russian managers working in the Moscow area. the need to attract young adaptable ‘knowledge’ workers is being stressed. flexibility. a subsidiary of Grand Metropolitan. respect for others’ beliefs. musical tastes. or a more proactive and ‘westernised’ disposition. adaptability. Turning to training and development. assesses candidates by a series of scales relating to expectations. team roles and effective communication. It is also recognised by MNCs that specific competences are required for successfully mobile international mangers and that these should be considered in selection procedures. Yet. small talk) exhibited many common characteristics. reflecting the metaphorical ‘onion’ symbolising the layers of culture referred to in Unit 2. The westerners in the study referred to a type of ‘cultural wall’ to be penetrated both at work and home. sense of humour.houses and cars. A number of MNCs are now taking this problem seriously and are formulating HR policies accordingly. In these circumstances both groups of managers felt the need to adjust behaviours and expectations in order to survive in this distinctive international climate for doing business. it was recognised that if one survived an initial testing and traumatic period of around 18 months. highlighting such as areas as trust. personal control. trust in people. deeper exposure and probing of the mindsets of each international management grouping revealed a chasm in social consciousness and implicit world views.

self generated. Inevitably work itself will contribute to successful expatriation.backs as learning experiences. and the level and appropriateness of technical and cross-cultural training provision in advance of the assignment. also stressed the significance of inclusion of the spouse in training and support programmes and language fluency as a selection criterion. i. (1999). it has tended to refer to the developmental requirements on the part of the expatriate (as opposed to others engaged in international team working.including host country managers) to effectively adjust to overseas assignments. the level of discretion enjoyed. According to these authors. Turning to in. a key attribute is ‘self.e. Black. transport. It is suggested by the authors of the model that the organisation can assist in providing logistical and other support to assist with non work factors. interaction with host country nationals and coping with living conditions in general. According to the model. although. thus corroborating a view that certain destinations are more challenging than others for western expatriates. This may relate to housing.e. represent significant contributors to success. learning in an unfamiliar environment. De Cieri variables. the newness of portfolio of tasks and the degree to which conflict is experienced in the job role. in which the conduciveness of the organisational culture and the ability of the expatriate to draw upon social support. significant anticipatory variables relate to the accumulation of previous experience by the expatriate in foreign assignments. and is conducive to the acquisition of meaningful. Mendenhall and Oddou (1991) distinguish between anticipatory adjustment.These authors. The model also incorporates the notion that ease of adjustment is determined by the degree of cultural proximity or distance between home and host environments. medical care. the selection criteria and mechanisms adopted by the organisation in identifying a suitable expatriate. factors relating to work. including the ability to develop relationships. food. In terms of personal orientation. in an empirical testing of the model. Finally. 57 .al. the job is located within a broader organisational setting. the model is usefully premised on the notion that effective adjustment will depend not just upon job related factors. Such an attribute will be helpful when an individual is experiencing ‘culture shock’ in the first stages of an assignment. psychological reactions to an assignment occur in three main phases as follows. mapping the phases of adjustment over time. but also is influenced by behavioural characteristics of the expatriate him or herself. non work factors relate to the ability of the expatriate. however. Anticipatory adjustment is concerned with the determination of accurate expectations on the part of expatriate. and his or her spouse and family.The concept of adjustment has been theorised by researchers. Shaffer et. which has significant implications for the selection and training of expatriates. ibid). and the availability of employment for the ‘trailing’ partner. that will determine success following arrival in the host environment. and is critically determined by non work factors. In an influential model. to date. important variables relating to the clarity of the job role. (1991) have provided insight into the subjective experience of expatriation.efficacy’ which is associated with the ability to learn from mistakes. re-affirm the importance of job design and organisational support systems. thus minimising the risk of culture shock (Harzing. cultural amenities. and to regard inevitable set. those factors that will facilitate effective expatriation prior to departure and in country adjustment. schooling. to relate to the practicalities of life in the new environment. Of course.

As Dowling and Welch (2004) assert.pdf • • • • How does cultural theory (Hofstede and others) help us understand the problems in cross. as the realities of everyday life in the new location become apparent a downswing in mood may occur. this is a time of recovery and emotional stabilisation.represents a healthy recovery and integration into the new environment.pulling up. 38(3) 245-261 and consider the following questions. (2003) ‘Assessing the potential for effective cross-cultural working between ‘new’ Russian managers and western expatriates’ Journal of World Business. Thirdly. and Hollinshead.curve should be accompanied by a number of provisos. (Dowling and Welch. it is not normative. Firstly. As Dowling and Welch note. anxiety and sense of adventure.cultural working between the two international management groupings forming the subject of the study? What should be the essential features of an expatriate training programme designed to assist the western expatriates adjusting to life and work in Russia? How do you interpret the motivation of the Russian managers? How might this be improved? Are there any useful lessons from this study for international joint ventures in general? 58 . the time period involved for transitory phases may differ from individual to individual.assuming the individual successfully weathers phase 2. Phase 4.may determine the success or failure of the assignment.• • • • Phase 1. the U. including excitement.crisis. Second. this being referred to as the ‘honeymoon’ period. however. N.efficacy’ is a vital attribute during this stage. However. It is likely that ‘self. promoting a feeling of crisis. depending upon how the individual copes with the realities of living and working in a new environment. Individuals will differ according to their reactions to foreign locales. Activity (seminar): Read the article by Camiah. return home after experiencing this phase may require further adjustment on the part of the expatriate. the expatriate demonstrating an ability to learn from adverse experiences and to formulate positive coping mechanisms.knowledgeboard. www. On arrival in the host country. fear of the unknown. there may be a short term experience of enchantment and unreality.tourist. 92) Phase 2. Phase 3. there may be other critical points in the assignment beyond phase 4.adjustment. associated with mixed however.

F. M. London. suggesting that multicultural management may be hampered by mistrust and miscommunication. (1991) ‘Towards a comprehensive model of international adjustment: an integration of multiple theoretical perspectives’. Woodridge. Harzing and J. Competitive Frontiers: Women Managing across Borders.F. Sage 59 . G. It has suggested that.) International Human Resource Management.) Human Resource Management: An International Comparison. (2004) International Human Resource Management. Van Ruysseveldt (eds. South Western Publishing Adler. 2(3) 377-414 Dowling. London.E. (2003) ‘Assessing the potential for effective crosscultural working between ‘new’ Russian managers and western expatriates’ Journal of World Business. an adjustment model forming the basis for recruitment and training approaches to international staffing. but also offers the possibility of creativity and innovation. N. Finally we have considered the factors contributing successful expatriate adjustment in the host environment.. 13(2): 24-41 Adler. Journal of Management Development. K. Berlin. N. 16:291-317 Brewster. 2nd edition. fourth edition. (1997) International dimensions of Organisational Behavior. and Welch. (1990) ‘Strategic Human Resource Management: A Global Perspective’ in R.J. including the devolution of decision making authority to local managers.J. 3rd edition. Thomson GMAC Global Relocation Services (2007) ‘Global Relocation Trends. G. and Vernon. and Ghadar. Academy of Management Review. Adler. A.Summary This unit has explored the staffing implications of organising across national boundaries.W. 2006 Survey. H..J. and Hollinshead. (2004) ‘Composing and international staff’ in A.S.W. (2007) International Human Resource Management.J. 2nd edition. while expatriation remains a common HR mechanism for the exertion of parental influence on the subsidiary. and Oddou.J.J. Dowling. D. N.. N. (1994). Sparrow. De Gruyter Black. C. P. London. We have also investigated the organisational complexities of international team working. G. (1991) ‘The Psychological Impact of Expatriate Relocation on Partners’ International Journal of Human Resource Management. Pieper (ed. CIPD *Camiah. Cincinatto. Taylor. 38(3) 245-261 De Cieri. Mendenhall. P. P. IL Harzing. Report. various cost effective and less risky strategic alternatives exist.

HarperCollins Michailova. 30(3) 557-581 SHRM Global perspectives. (2002) ‘Transnational teams in the electronic age: are team and high performance at risk? Journal of Organisational Bahavior. Spreitzer. McGraw-Hill Hollinshead. (fifth edition) New York. (2001) ‘Blockbusters or bridge-builders? The role of western trainers in developing new entrepreneurialism in Eastern Europe’ Management Learning.9-18 Shapiro. Contrasts in Culture: Russian and Western perspectives on organisational change. 1. G. F. and Luthans.. Culture..L. (2003) International Management. and McEvoy.M.(1993). D. G. Strategy and Behaviour.A. S. Determinants and Differences in the Expatriate Adjustment Process’ Journal of International Business Studies. (1994) Cultures and Organisations: software of the mind. Pacific Bridge International Asian HR e-newsletter (2003) 2(12):2) ‘Japanese boomerangs’ Parker. 32(3) 419-436 Hofstede.M.M. M. B. and the SHRM Global Forum 60 . Columbus Journal of World Business. Harrison. International Journal of Intercultural Relations.379. G..A. (1969)‘The tortuous evolution of the multi-national corporation’. Initial Examination of a Model of Intercultural Adjustment. S.A. Academy of Management Executive. (1999) ‘Dimensions.A. Furst. and Von Glinow.Hodgetts.1 (2001) ‘Secrets of success’ (article on results of 2000 Global Relocation Trends Survey by GMAC Global Relocation Services/Windham International. D. S. 4(1).M. 455-67 Shaffer. (2000). Perlmutter. and Michailova. 14(4): 99-112.. the National Foreign Trade Council. 23. M. London. 17:355. Gilley. R. H. K. G.

Recruitment and training Objectives: • • To consider criteria and methods for recruiting expatriates To highlight issues in the under-representation of women (and ethic minorities) in the expatriate population and to consider how this might be alleviated To examine the strategic issues involved in formulating a training programme for expatriates • Introduction In unit 4 we took issue with the notion that a single model of expatriation exists. In this unit. short term postings. 61 . in particular. we continue to recognise that expatriation and the HR policies associated with it are contingent in nature.Unit 5 The expatriation cycle (1). This is a factor we shall bear in mind as we proceed. and various forms of international assignment were identified. Sparrow and Vernon (2007) suggest. training and development. Cultural adaptability. a tendency for authors and practitioners to delineate somewhat idealised ‘best practice’ with scant regard for its empirical reality ‘on the ground’. embracing the selection of international transferees. Expatriate selection According to Briscoe and Schuler (2004) international companies take the following criteria into account in filling expatriate positions. including international commuters. As Brewster. this typically involving a foreign assignment for around a three year period. managing pay and performance and repatriation.relating to the technical expertise of the potential expatriate and his or her ability to perform job requirements. being determined by the broader strategic goals of the international company and. in other words. the nature of the relationship between parent and subsidiary. permanent international staff. or. • • Job suitability.there is a growing recognition that employees must be able to adjust to new and alien job environments while delivering their technical and managerial expertise. while placing an emphasis on ‘traditional’ expatriation. as well as the possibility of devolving responsibility for management of the subsidiary to local managers. In this unit we turn our attention to the human resource policies impinging upon expatriation and follow through the broad cycle of international placement. there is a considerable gap between espoused intention and practice in international HR policy making.

multicountry and multi.product.the willingness of the potential expatriate to make the necessary effort to adjust needs to be assessed during the candidate review. religions. signs of flexibility. Such profiles typically include the following factors. multi-company. Core skills Multidimensional perspective Managerial implications Extensive multi. Profiles of successful international assignees. These authors. education.individual with as much cultural mix.industry. multi. Companies and consultancies have established profiles of successful international assignees which are used for screening purposes.environmental experience Track record in successfully operating a strategic business unit and a series of major overseas projects Competence and proven track record in making the right strategic decisions Skilful in getting him/herself known and accepted in the country’s political hierarchy Quick and easy adaptability into then foreign culture. Also sensitive to cultural differences Adept in bringing a culturally diverse working group together to accomplish the major mission and objective of the organisation Endurance for the rigorous demands of an overseas assignment Managerial implications Comfortable exchanging strategic information electronically Proven track record in conducting successful strategic business negotiations in a multicultural environment Proven track record in successfully initiating and implementing strategic organisational changes Proficiency in line management Prudent decision making skills Resourcefulness Cultural adaptability Cultural sensitivity Ability as a team builder Physical fitness and mental maturity Augmented skills Computer literacy Prudent negotiating skills Ability as a change agent 62 . genders. nationalities. multifunctional. experience. adapting an article by Howard (1992) for HR Magazine cite a number of generic skills which have gained corporate acceptance in providing a profile of the twenty first century expatriate manager as follows. family situation and desire for the assignment. diversity and experience as possible Effective people skills in dealing with a variety of cultures. personal interests and activities. races.• • Desire for foreign assignment (candidate and family).

Visionary skills

Effective delegatory skills

Quick to recognise and respond to strategic business opportunities and potential political and economic upheavals in the host country Proven track record in participative management style and ability to delegate

While undoubtedly specifying vital skills and competences for expatriate success, this form of prescriptive listing runs the risk of defining ‘supermen or superwomen’ (Brewster et. al. (ibid) )and manifests a ‘universalistic’ view of international staffing (see Unit 1). Indeed, Dowling and Welch (2004) seek to explode certain ‘myths’ concerning international staffing, their view perhaps offering a more realistic starting point for considering expatriate selection, training and pay. In particular, these authors take issue with the notion that there is a universal approach to management, suggesting instead that evidence from cross cultural studies points to variations in managerial ethos and style from country to country. Dowling and Welch (ibid) also dispute the assumption of the body of literature on expatriate selection that there are common characteristics shared by successful international managers. Such an approach, which identifies predictors of success, holds that an individual with certain characteristics, traits and experiences is likely to perform most effectively in the international environment. These authors suggest that such predictors are difficult to measure and that factors associated with subsequent expatriate adjustment, which may not be accounted for in the selection process, can impact upon the individual’s performance in the foreign environment. In an early, yet telling contribution, to the discourse of IHRM, Tung (1981) suggests that there has been over-reliance on technical factors in the selection and training of expatriates, with inadequate emphasis having been placed on cross-cultural competence. In order to rectify this shortcoming, she identifies four types of factors which are potentially vital to success in foreign assignments: technical competence on the job; relational abilities (social skills); ability to deal with environmental constraints (government, labour issues etc.) and the family situation. Tung (ibid) advocates a contingency approach to the recruitment and training of expatriates, this holding that no single criterion or set of criteria is applicable to international assignments. Instead she argues that, for each assignment, the selection of the appropriate individual to fill the position should be made after careful analysis of the task (in terms of interaction with the social community) and the country of assignment (in terms of the degree to which it is similar/dissimilar to that of the home country), and the personality characteristics of the candidate (in terms of the candidate’s and spouse’s ability to live and work in a different cultural environment) (Tung, ibid, Kyriakidou, 2005). A discrepancy between prescribed ‘best practice’ approaches and empirical reality is also apparent in the methods used to select expatriates. According to Briscoe and Schuler (ibid) the following are appropriate selection mechanisms for international assignments;


• •

• • •

• • •

Interviews- ideally carried out with management representatives of home and host offices, and with an intercultural expert. Formal assessment- including psychometric tests which measure inter-cultural competences, such as adaptability, flexibility, desire for new experiences and interpersonal skills. Committee decision- comprising representatives from corporate HR, country HR, country manager, director of development, and functional manager. Career planning- the international assignment may have been established as an integral component of the individual’s career plan. Self- selection- Following a combination of the above procedures the company may ultimately lie on the individual ‘opting-in’ to the assignment. This may involve the use of a formal self assessment instrument to examine the issues involved in detail. Internal job posting and individual bid, this usually combined with interviews and other assessment methods. Recommendations- from senior or line managers with foreign staffing needs. Assessment centres- provide the opportunity to simulate actual cross- cultural challenges and encounters, possibly using role play and similar techniques, under the scrutiny of experts.

In practice, however, research suggests a predominance of informal selection methods in selecting international assignees. Mendenhall and Oddou, 1986, Dowling et. al. 1994). Brewster (1991) elaborates this notion by suggesting that the outcome of selection interviews is frequently predetermined following recommendations by specialist personnel staff or line managers. Perhaps more provocatively, Harris and Brewster (1999) assert that expatriate recruitment decisions are made in a closed/informal system surrounding the office coffee machine or water cooler, such decisions subsequently ratified through formal organisational processes. This approach to selection of international assignees undoubtedly has negative implications for equal opportunities and, in particular, expatriation opportunities for women. Equal Opportunities issues in expatriate selection To date much of the research into equal opportunities in the expatriate selection process has focused on the issue of gender, with relatively little light to date onto ethnicity, age, disability or sexual orientation. As the most recent GMAC survey reveals, only around one fifth of expatriates are women, although this number is growing. As Harris (2004) asserts, the under-representation of females in expatriate positions represents a fundamental equal opportunities challenge for those global enterprises in which undertaking an international assignment is a prerequisite for progression to senior management. Harris also argues that the absence of female expatriates represents an opportunity cost to organisations operating in an increasingly knowledge based economy in which it is necessary to utilise and develop all human resource potential. Indeed a number of authors have argued (Barham and Devine, 1991; Mendenhall and Oddou, ibid; Wills and Barham, 1994) that women possess particular skills that are highly conducive to effective performance in international roles, including interpersonal, intuitive and co- operative management styles. The reasons for poor representation of women in international management groupings are inextricably related to broader patterns of discrimination as work, which are 64

manifested in the failure of women to reach the highest management positions (‘the glass ceiling’) or the confinement of women to lower status occupations (‘the glass wall’). However, in the field of expatriation, there are specific factors at work which serve to hamper the progress of women. Organisational preconceptions According to Adler (1984) a myth which is commonly subscribed to in international enterprises is that women do not wish to undertake international assignment. This author undertook an extensive survey of over 1000 new MBA graduates in Canada, the USA and Europe to examine whether such a preconception could be upheld in practice, and found that new women college graduate demonstrated as much interest in pursuing international careers as their male counterparts. In a more recent study by Lowe et. al (1999), it was suggested, however, that women may be less prepared than men to accept assignments to regions that are perceived as ‘culturally tough’. A second organisational myth investigated by Adler (1987) was that host-national men would be reluctant to deal with female expatriates. Adler’s study into this topic however revealed that American female assignees were just as successful as their male counterparts overseas, even in patriarchal societies such as Japan and Korea. As Adler (1987) and Linehan (2005) argue, senior female expatriates tended to command respect in the host environment as they has overcome serious obstacles to achieve their positions. Dual career and family concerns Expatriation has been associated with particular problems in managing child care and also possibly carries with it the emotional and economic detriment of the ‘trailing’ partner or spouse. Indeed, the most recent GMAC (2007) survey revealed that the top reasons for assignment refusal were family concerns and spouse’s career. As it remains the case that international companies leave decisions in this area to the family concerned and offer little assistance (Linehan, ibid), it is most likely that women will be deterred from undertaking international assignments on personal grounds. Gender related conventions concerning child care responsibilities, both in home and host environments, may reinforce the above notion that married women with children do not wish to pursue international careers, which are most amenable to young, married or single, males. Organisational policies Following from Harris and Brewster’ s (ibid) depiction of the ‘coffee machine’ approach to expatriate recruitment, women may be excluded from applying for international assignments either due to informal organisational processes (not being at the right place at the right time) or as a result of formal procedures which tend to reproduce the staffing status quo. The current proliferation of males in fields of business activity that lend themselves to internationalisation tends to possess a characteristic of self perpetuation, particularly when the dominant selection approach is promotion from within (Rothwell 1984). Furthermore as Harris and Brewster (ibid)


suggest, the tendency to have unrefined and universalistic selection criteria for expatriate selection, rather than those which are finely tuned to meet precise job requirements, tends, in practice, to arbitrarily reproduce the dominant paradigm concerning suitable expatriate candidates. According to Linehan (ibid), the tendency towards patriarchy in expatriation may be reinforced by the prevalence of male mentors and through organisational stereotypes which are prone to exemplify the ideal international transferee in ’masculine’ terms. In order to counter discriminatory tendencies in the selection of international managers, Harris (ibid) suggests the following actions should be taken. Although this section has referred particularly to equal opportunities on the basis of gender, the recommendations may also have applicability concerning other forms of discrimination. Organisations should: • Become more strategic in their planning for international assignments in order to prevent ad- hoc and informal placements which may replicate an existing expatriate profile and prevent the adoption of alternative approaches. Adopted a sophisticated approach to the determination of criteria for effective international managers. Competences should be developed and debated in as wide and diverse a forum as possible. Monitor their selection processes for international management assignments to ensure access is not unfairly restricted to specific sections of employees. This includes auditing career development systems leading up to international assignments for potential unintended bias. Run selection skills training for all employees involved in selection for international assignments. This training should include raising awareness of the advantages of using diverse groups of employees on international assignments and challenging existing stereotypes relating to women and other non- traditional groups. Avoid assumptions as to the likely motivation of women to accept overseas assignments and the likely success rates of women expatriates. Provide flexible benefits packages which will cater for single employee and dual-career couples as well as the traditional ‘married male with family’ expatriate. Define the international assignment in such as way that the chances of success are high: that is, establishing full status, permanent assignments. Provide full support for alternative arrangements for the domestic aspect of international assignments which might influence women’s perceptions of accessibility. Work with relocation companies to ensure the female expatriate’s residence will facilitate the possibility for social interaction.

• •

• •

In order to alleviate problems of expatriation concerning dual career couples, we would suggest also that organisations (1) fully consider shorter alternatives to ‘traditional’ expatriation (2) consider anticipatory and in country adjustment problems, and courses of action to support, partner and spouse (3) implement ‘family friendly’ policies- for example helping the partner to find employment in the host country.


transition problems. 1991). • • Training should be provided both prior to departure and on arrival in the host environment. determinant factors including the grade of employee and the national destination.cultural training tools available. Drawing upon the model.cultural proficiency (relating to general adjustment to the host environment) should accompany more job specific. and the overwhelmingly positive evaluation of the quality of programmes.cultural training may be a product of the lack of influence of HR professionals at an operational level. the following observations may be made concerning the desired orientation of expatriate training programmes.cultural preparation indicated that training was mandatory. The training/ adjustment needs of spouse/ partner (and children) should be accommodated.(GMAC. One expatriate is cited as follows. actual participation in cross cultural training programmes by expatriates and their families is. Training was made available to the employee and spouse in 34% of cases. premature returns from assignments. 67 . considered in the previous unit. Furthermore. only 34% of companies provided this training on all assignments.Activity: Form a mixed group (in terms of gender). Mendenhall and Oddou. ibid. The authors of the survey suggest that this is perplexing. technically orientated material. • • According to the latest GMAC survey (ibid).cultural tools (particularly web based material). provides a useful basis for the identification of expatriate training needs and developmental priorities. why is participation so low? It is hard to reconcile why managers of human resource programmes continues to be challenged by family. given the growing sophistication of available cross. As the survey report states ‘ ‘With effective cross.8) The authors of the report indicate that the continuing corporate underestimation of the significance of cross.cross cultural preparation. although 80% of expatriates reported that their companies offered formal cross. Fluency in the host country language is likely to be a useful attribute. and assignment failure when it appears a solution lies with increasing the mandatory participation in these training programmes’. As the survey points out. Training in cross. in practice. likely to be low. only 21% of respondents offering cross. ‘Brainstorm’ the obstacles to female expatriation to two selected global regions of you choice and consider how they might be overcome (a) by the company (b) by the women themselves Training and Development The model of expatriate adjustment (Black.

In a more recent contribution. critical incidents. there is considerable emphasis on factual forms of knowledge and one way modes of dissemination. the degree and form of requisite cross. At the lowest level. Highest level of rigour. at the highest level of rigour. role-playing. culture novelty. Turning more specifically to areas of knowledge required for international assignees.. how to deal with different shopping and transportation systems and the different availability of familiar foods and entertainment) 68 . cultural briefings.Information giving. but line management doesn’t always view it the same. by stressing the significance of the following varaibles. cases. elaborating Tung’s approach. sensitivity training. they concentrate on getting the job done only…’ While it is the case that global companies tend to neglect cross-cultural training provision in a general sense. required degree of interaction with host nationals.human resources sees the importance quite well. identify three levels of training rigour as follows. not only is the knowledge to be assimilated most challenging.‘.g. Mendenhall et. Medium level of rigour. but also methods of delivery are highly interactive. relating to the anticipated degree of integration into the host environment. language training. research in this field has also suggested that the form and method of such training should be ‘fit for purpose’ and finely tuned according to specific expatriate training needs. use of interpreters. The medium level of intervention is exemplified by the method of cultural assimilator training.g. Briscoe and Schuler (ibid) identify the following topics as a minimum to facilitate adjustment.cultural preparation may vary from assignment to assignment. although these will clearly vary from assignment to assignment.Immersion approach. • As the above spectrum of training intervention suggests. frequently containing multiple choice responses. • • • Intercultural business skills (e. which refers to a paper or web based exercise in questionnaire format. In other words. In an early contribution to the subject.Affective approach. Using this format. • • Lowest level of rigour.g. moderate language training. Tung (ibid) provides a two dimensional framework for selecting cross cultural training methods. job novelty and training rigour. Mendenhall and Oddou (ibid). and the similarity between the expatriates’ home culture and the host culture. extensive language training. stress reduction training. what to expect and how to deal with the stress of adaptation) Lifestyle adjustment (e. ‘survival’ level language training. drawing upon social learning theory. field experiences. al.assessment centre.cultural assimilator training. negotiating styles in different countries and cultures) Culture shock management (e. simulations. (1995) assimilate and develop previous contributions to the field of expatriate training. the designated expatriate is presented with various international scenarios or quandaries relating to day to day living or working issues which need to be resolved.area briefings. films/ books. the degree of interaction required in the host culture.

new orthodoxies in management learning. how to stay in touch with the home office and how to identify an appropriate assignment prior to repatriating back home) Language learning strategies. Referring to Black. a critical challenge confronting international assignees is to respond positively and creatively to learning experiences in the foreign environment in an unguided fashion.g. arriving from a ‘parent’ in a country of your choice. 1982). 2006). may be particularly applicable to those seeking to adjust and perform in unfamiliar territories. and referring to Black. in the above section. (Where possible) form an internationally diverse group. double loop learning demands exploration and the taking of calculated risks. Drawing on experience of group of ‘insiders’ from a particular country represented in the group.g. any unfamiliar problems with water or electricity) Local customs and etiquette (e. both before leaving for the new assignment as well as after arrival. Mendenhall and Oddou’s ‘adjustment’ model in Unit 3.g. Activity(seminar): Either. which emphasise the significance of action learning (Revans. identify the key (a) ‘lifestyle’ and (b) work. How should such information be conveyed to the assignees? Or. what to wear and different behaviour patterns and gestures for men and women) Area studies (e. therefore. we have tended to present expatriate training as primarily a corporate responsibility there has been growing recognition in the field of management learning of the need for individuals to generate and resolve their own learning needs in a proactive fashion. identify the key (a) ‘lifestyle’ and (b) work. 1983). and that tried and tested manners of business and social engagement cannot be transferred in an unproblematic and complacent fashion from culture to culture. Accordingly. 1990.ibid). For the international assignee.related factors expatriates would need to know about 69 .• • • • • Host. and which recognise that individual learning styles vary (Kolb. double loop learning demands that mental maps in new environments should be ‘reframed’ in a rapid fashion. In keeping with the notion of self efficacy referred to in the model of adjustment (Black et. daily living issues ( which calls upon managers to question and confront the way in which problems are defined.related factors expatriates would need to know about in order to adjust effectively to the selected destination. Imagine a group of expatriates is coming to work in your country for a period of three years. Of particular significance to expatriates is likely to be ‘double loop leaning’ (Argyris. ibid). the political and religious environment and the local geography) Repatriation planning (e. Mendenhall and Oddou’s ‘adjustment’ model in unit 3.g. In contrast to ‘single loop’ loop learning in which ‘defensive routines’ are adopted and uncomfortable environmental challenges are ignored (Woodall. and to query the assumptions upon which behavioural routines are based (Woodall.

(1990) Overcoming Organisational Defences: Facilitating Organisational Learning. 2nd edition.S.S. and Oddou. M. R.) International Human Resource Management. Harzing and J. H. second edition. Van Ruysseveldt (eds. M. order to adjust effectively. C. (2007) International Human Resource Management. Schuler. Boston: Allyn and Bacon Barham. London. (2004) International Human Resource Management. and Devine.J. 2nd edition. Belmont. R. London. and a more ‘finely. Economist Intelligence Unit Black. (1991) ‘Towards a comprehensive model of international adjustment: an integration of multiple theoretical perspectives’. Oxford. (1994) International Dimensions of Human Resource Management.J. Blackwell Argyris. (1984) ‘Women Do not want International Careers and Other Myths about International Management’ California Management Review. (1991) The Management of Expatriates. (1991) ‘The Quest for the International Manager: a Survey of Global Human Resource Strategies’ London: Ashridge Management Guide. D. Sparrow. Welch.. How should such information be conveyed to the assignees? Summary In this unit. (1994) On Organisational Learning. (2004) ‘Women’s role in international management’ in A. methods for recruiting and training expatriates have been related to the broader strategic orientation of the MNC in the host environment. and Schuler.. Routledge Dowling. C. Ca. 26(4): 78-89 Argyris..R. Sage 70 . G. London. G. 16:291-317 Brewster.. Notions of ‘best practice’ have been critically evaluated. Wadsworth Harris. particularly in relation to equal opportunities considerations. References Adler.J. C. P. Kogan Page Brewster. C. P.S. Academy of Management Review. 2nd edition. London.W. CIPD Briscoe. N. and Vernon.tuned’ approach has been advocated to the resourcing of expatriation. K. Mendenhall.

London. Cambridge. K. M. and Oddou. Winter.Scullion and M. in C. NJ: Prentice Hall Kyriakidou. Englewood Cliffs. M. Davidson (eds. S. Women in Management: Career Development for Managerial Success. Palgrave Macmillan Linehan. (2005) ‘Women in international management’ in H. June Kolb. (2005) ‘Operational Aspects of International Human Resource Management’ in M.J. (1992) ‘Profile of the 21st. (1982) The Origins and Growth of Action Learning. 12(1): 49-58 71 . Cooper and M. and Brewster.E.. (1995) Global Management. Downes. and Ricks. M.. Basingstoke. (1999) ‘The Impact of Gender and Location on the Willingness to Accept Overseas Assignments’ International Journal of Human Resource Management.Linehan (eds.) International Human Resource Management. C.. Heinemann Tung (1981) ‘Selection and training of personnel for overseas assignments’ Columbia Journal of World Business 16(1): 57-71 Wills.S. B. Kroef. A Critical Text Basingstoke. 73-9 Revans. K.R. (1983) Experiential Learning: Experience as the Source of Learning and Development. Chartwell Bratt Rothwell. O. D. H. M. Blackwell Mendenhall. C.). and Barham. (1986) ‘Acculturation profiles of expatriate managers: implications for cross.. D.G. (1984) ‘Positive Action on Women’s Career Development: An Overview of the Issues for Individuals and Organisations’.Harris.cultural training programmes’ Columbia Journal of World Business.) International Human Resource Management.Century Expatriate Manager’ HR Magazine. Palgrave Macmillan Lowe. G. (1994) ‘Being an International Manager’ European Management Journal. Theory and Practice.L. Punnett.J. Özbilgin (ed. MA. K. Bromley. 10(2): 223-234 Mendenhall. (1999) ‘The Coffee-Machine System: How International Selection Really Works’ International Journal of Human Resource Management. 10(3) 488-500 Howard.

2003).(Camiah and Hollinshead.Pay. • On one hand. to high rates of inflation in developing countries. 60% of respondents required a clear statement of assignment objectives before funding and 43% required a cost. In the recent GMAC survey.benefit analysis to justify the relocation assignment. The needs of partner/ spouse and children are also likely to come into the reckoning in the formulation of international reward packages Various international relationships will be placed under the microscope in seeking to establishing fairness and equity in payment structures. and to promote optimal adjustment and performance during the course of the assignment. Not only will groupings of expatriates compare their packages when transferring to various destinations. 2006). On the other.Unit 6 The Expatriation Cycle (2). as well as facilitating return to the home environment. and the need to upgrade payroll systems and software to account for extra components and variables in international reward packages. relating. there is a need to provide sufficient financial incentive to recruit capable international transferees. varying taxation systems. and inevitably involves the reconciliation of strategic tensions (Dowling and Welch. international companies are increasingly seeking to ensure that expatriation is justified in terms of cost. 72 . for example. • Complexities may also arise in the administration of international reward. 2004). currency conversion and realisation of legal tender. but also the relative remuneration of home and host country counterparts is subject to scrutiny. Performance Management and Repatriation Objectives: • • • • To consider the significance of expatriate pay and strategic tensions in formulating pay policies To investigate the utility of major approaches towards expatriate reward‘balance sheet’ and ‘going rate’ To consider the value of international performance management and problems in its implementation To examine problems and issues in repatriation and to highlight why the returning assignee represents a valuable resource to the organisation International reward packages The management of expatriate compensation constitutes a critical function in the IHR portfolio (Bonache. general difficulties of obtaining financial and related information in the host country.

transcending organisational or national market rates and instead being established with comparison to equivalent internationally prestigious occupational groupings. Secondly comparisons can be sustained in respect of expatriates from the same parent in various subsidiary destinations. normally consisting of high status professionals and ‘knowledge workers’ moving from subsidiary to subsidiary may expect to receive a desirable benefits package that is ‘global’ in its reference points. shorter term expatriates. undertaking a foreign assignment for approximately a three year period. As an alternative to counter the perceived drawbacks of the balance sheet approach. ibid). the return of the expatriate to the home environment will be facilitated. or localised approach may offer not only a cost effective alternative. following Briscoe and Schuler (ibid). will expect to retain at least the home country standard of living in the host country. may vary according to the type of international engagement. The establishment of going rates is founded upon local market rate information. and to provide incentives to offset variations in the quality of life between assignment locations (Reynolds. the going rate (Dowling and Welch. a comparable rate will be maintained for the international assignee transferring from subsidiary to subsidiary in different countries. and survey comparisons of both home and 73 . including categories such as international commuters. might appropriately be rewarded according to market rates in the local (host) environment. and so are likely to expect little variation in their pattern of remuneration. and also an inducement to undertake the assignment.e. This grouping is also likely to desire provision for partner/ spouse and children. Dowling and Welch (ibid). as with other aspects of international HR policies. Accordingly. Thus.The formulation of international reward packages. 200). a disadvantage of the balance sheet approach is the material and symbolic separation it serves to reinforce between expatriates and host country managers and employees. which is designed to equalise the purchasing power of employees living overseas and in the home country. Finally. i. with the logic of the payment structure connecting home and host remaining intact. those who convert from long term assignee to local status. ‘traditional’ expatriates. but also a re. permanent transferees. Thirdly. ibid). The fairness and equity of this approach may be argued on a number of grounds (Dowling and Welch. Firstly. • • • • The basis objective is maintenance of home-country living standard plus financial inducement Home country pay and benefits are the foundations of this approach Adjustments are made to the home package to balance additional expenditure in the host country Financial incentives (expatriate/hardship premium) are added to make the package attractive. On the other hand. are experiencing little dislocation from their home environment. Approaches to rewarding international managers The most widely used method of expatriate compensation is the balance sheet approach. The ‘Permanent’ cadre of international staff. summaries the key features of the balance sheet approach as follows. On the other hand.orientation of the international reward structure to comply with local conditions.

country managers operating in the region (Dowling and Welch, ibid). Upward adjustments are likely to be made in the case of transfer to low pay countries, while the expatriate stands to benefit from transfer to a destination with relatively favourable conditions of employment. As Dowling and Welch (ibid) assert, the adoption of the going rate approach may be hampered by difficulties in obtaining information pertaining to the host environment. While the going rate approach promotes identification on the basis of similar status with local managers, it tends to disrupt relativities with expatriate counterparts on the basis of variations in standards of living in their destinations, and difficulties may occur in reconstructing pay progression on re-entering the parent environment. In a related development, the 2007 GMAC survey (ibid) reports a number of international enterprises transitioning away from their expatriates’ original benefits structure to local standards, primarily on grounds of cost. Such a move is perhaps significant in signalling the strategic desirability of localisation on the part of international company, and the loosening of parent company control over the terms and conditions of employment of international management groupings. While balance sheet and going rate approaches may be regarded as the primary strategic alternatives in international reward, other, perhaps more straightforward, options are being recognised by MNCs, including the following; • Lump sum: The firm determines a total salary for the expatriate, frequently at the commencement of the assignment, covering all incentives and adjustment. This avoids unnecessary intrusion into the expatriates privacy and lifestyle as he or she can decide how much to spend on housing, transportation, education etc. (Briscoe and Schuler, ibid) (Littlewood, 1995) Cafeteria: Primarily designed for senior executives, this approach allows expatriates to choose from a range of benefits up to a predetermined monetary value (possibly including company car, company provided housing, health care, child-care)

Activity (optional/alternative): Using published and web based sources compare rates of pay for either (a) senior finance managers or (b) senior marketing managers (c) senior HR mangers in the US, the UK, India and Russia. What problems are associated with (a) acquiring this information and (b) making realistic comparisons?

Performance Management Given the aforementioned concern with the cost- effectiveness and the ‘added-value’ of expatriation it might be expected that MNCs would devote considerable attention to monitoring the contribution of the international assignee to corporate objectives. The 2007 GMAC survey, however, reveals that only 42% of respondents used hostcountry performance reviews, while 34% used home and host country reviews. Such evidence that assessment of expatriate performance is far from universal has been corroborated by various authors, including Brewster (1991) and Fenwick (1999). The under-utilisation of performance management for expatriates is perhaps perplexing, as systems for managing individual contribution have become widely


utilised in many sectors of commercial activity. A major performance management tool has been the performance appraisal interview, typically between first line manager and subordinate, despite some scepticism having been expressed concerning the reliability and validity of this method (Pym, 1973). As Briscoe and Schuler (ibid) assert, the transposition of performance management into the international arena offers particular utility as follows; • • • • Performance feedback- assisting with cross cultural adjustment as well as technical and professional matters Identification of training needs- systematic identification of deficits in, for example, language proficiency and cross- cultural skills Development planning- considering scope for international career development, possible moves to other subsidiaries Pay and motivation-potentially a tool to assist with offering incentives to high performers and identifying and managing poor performers.

Perhaps an over-riding benefit of performance management for expatriates is that offers an effective channel for interpersonal communication, thus avoiding the ‘out of sight- out of mind’ syndrome, and provides a tangible system of mentoring in unfamiliar and ambiguous circumstances, potentially alleviating the risk of expatriate failure. Despite the potential benefits associated with expatriate performance management, its adoption ‘on the ground’ has been hampered by a variety of factors (Briscoe and Schuler, ibid); • • • • • Choice of evaluator- should the appraiser be the home or host country line manager? Communication difficulties between host country appraiser and expatriate Difficulties in long distance communication with headquarters Parent company ethocentricism/ indifference to international business issues and lack of understanding of the foreign environment Inadequate establishment of performance objectives of the foreign operations and means of recording individual and organisational performance.

Perhaps the over-riding difficulties serving to jeopardise effective performance management of expatriates are, firstly, that a distinctive set of challenges confront expatriates in adjusting to the host environment, this implying an extended ‘learning curve’ and, secondly, that culturally specific factors in the host environment may impede individual performance in an unanticipated fashion. Thus, it may be the case that an international transferee to Latin America spends months successfully averting a strike, this, however, gaining little recognition by a US headquarters unsympathetic to trade unionism. In these circumstances, effective performance management of expatriates appears to demand adaptation of systems by the MNC. The following are likely to be pertinent considerations in enhancing practice; • Review the criteria for expatriate success with reference to the realities of doing business in the host environment


• • • •

Include cross- cultural and related factors as necessary competences for many occupations, (as well as technical factors) Combine parent and local company standards as appropriate Involve returning expatriates from the country in question in the design and operation of performance management systems Maximise sources of information (people and materials) relating to the individual expatriate in arriving at judgements concerning his or her performance.

Repatriation The final stage of the expatriation cycle is returning to the home environment, or repatriation. While re-entry into the parent location offers potential benefits both to the employing organisation and to the expatriate him or herself, in practice there have been difficulties realising these benefits. From the point of view of the international enterprise, the returning expatriate represents a potentially invaluable knowledge resource, possessing first hand insight into the realities of doing business in the host environment. Fink (2005) identify five categories of repatriate knowledge as follows; • • • • • Market specific knowledge. The local political, social and economic system, language and customs. Personal skills. Inter-cultural knowledge, self confidence, flexibility, tolerance. Job- related management skills. Communication, project management, problem- solving. Network knowledge. Clients, suppliers, subsidiary personnel and other expatriates. General management capacity. An enlarged job description, broader job responsibilities, exposure to other parts of the organisation.

Such knowledge encompasses not only the formal domain of business activity in the host environment (concerning job-related and contextual facts, procedures, regulative mechanisms etc.) but also the vital informal dimension (concerning useful contacts both inside and outside organisations, customs and practices ‘on the ground, methods of by-passing unnecessary bureaucracy etc.). Thus, the possibility exists for the ‘recycling’ of this knowledge into the international organisation, this both lowering the risk of subsequent expatriate failure in the same locality, and generally broadening the organisation’s international awareness, this broadening marketing and operational potential. The returning expatriate may disseminate acquired international knowledge into the organisation in a number of capacities, for example, by engaging in training programmes for new expatriates or by providing specialist advice to colleagues with an operational interest in the subsidiary. As Dowling (2008) assert, however, drawing upon the 2002 GMAC GRS survey, international enterprises are prone to neglect the potential utility of acquired expatriate knowledge, adopting instead a single- dimensional paradigm of knowledge transfer, from the parent to the host. Accordingly predominant assumptions are that expatriates’ sole function is to develop


Accordingly Brewster et. From the perspective of the individual expatriate. “I came back with so many stories to share. these implying redundancy in expatriate knowledge on assignment completion. The principles of adjustment referred to in Unit 4 (Black. call for more pro-active management of the expatriation cycle. The tribulations confronting returning expatriates are well captured in the following quotations reported by Adler (2002) • • • “My colleagues react indifferently to my global assignment… they view me as doing a job I did in the past”.local talent. incorporating the following activities. 2002. • • • The ‘out of sight. there is likely to be an expectation that positive international experience will be instrumental in future career progression. • • Pre.immersion in the home (ibid).out of mind’ syndrome was common Organisational changes made during the period abroad may make the position redundant or peripheral Technical advances in the parent may make skills and knowledge obsolete. MNCs would be advised to focus on the nature of the job role confronting the international returnee. Tung (1988) uncovered the following issues which are detrimental to expatriate reintegration at organisational level. as well as general lifestyle factors. counterproductively from the perspective of the employing organisation. al. It is therefore of considerable strategic significance that MNCs should attend to the problem of effective repatriation in order to harness the vital knowledge possessed by expatriates and to manage their career aspirations. Work habits. many exiting expatriates do not radically change their careers. (ibid) find that. but my friends and family couldn’t understand them. but instead move to close competitors. It was as if my years overseas were unshareable”. Accordingly. norms and procedures have changed and I’ve lost touch with all that… I’m a beginner again”. 2006). or that work is merely project orientated. ibid) may also be applied to the process of repatriation in order to guide ‘good practice’. recognising the likelihood of a new learning curve being entered on re. 2004. as a series of GMAC surveys have demonstrated (GMAC/GRS. and the significance of family related factors. with an ultimate eye for effective repatriation. At the organisational level.departure career discussions A named contact person at the home country organisation 77 . • • • A majority of organisations do not provide post-assignment guarantees Returnees with international experience are most likely to leave the company Expatriates anticipate a lack of attractive positions within the employing organisation and seek out better opportunities elsewhere Brewster et. The organisation has changed. Mendenhall and Oddou. However.

.big intercultural gap. Illustrative materials. The main difficulties in managing expatriate performance have been considered.difficulty living in a vastly different environment from the home location… Australia: usually the wrong person for the position…spouse was unable to settle…family not settled… Brazil: unable to adapt culturally and the medical facilities. How would you expect the experience you acquire to assist in your future career development? Specify the main competences/ areas of expertise and knowledge you would envisage acquiring and share with the rest of the group. climate.. not only did the employee need to adapt to the culture but also handle many issues relating to the business… China: lifestyle. safety… unable to adapt culturally and the medical facilities…hardship location takes a toll on the families: families were unable to communicate with locals. candidates not selected carefully…far away.expatriate voices from locations with high expatriation failure (source.. inability to adapt to local culture…political and family reasons…. Finally. difficult cultural not settled…family health issues… 78 .... difficulty in closely controlling expatriate success there… standard of living. and they either don’t meet expectations or go off and do unproductive things…environment…employees are being hired by competitors in the host location. generally performance issues…usually the wrong person for the position….Expatriation in action. GMAC 2007) Angola: difficult living conditions…. and suggestions made for enhancing the utility of international performance appraisal processes. Summary In this unit the complexities of determining expatriate payment methods have been discussed with particular reference to the strategic dilemma of whether to adhere to home or host market rates. highlighting the value of the returning assignee as a source of international knowledge.• • • • • A mentor at the host location Re-entry counselling Family repatriation programmes Employee debriefings Succession planning Activity (seminar): In your first managerial role after graduating you are to be expatriated to China for a three year period in a general management capacity to facilitate the ‘start-up’ of a European owned food and drinks subsidiary.. the somewhat neglected field of repatriation has been briefly explored.poor infrastructure to do business… Chile: the business in that country is new. the root cause would be uncompetitive remuneration.difficulties associated with the host site and family…expectations too high.China is so far from headquarters that expats are left on their own without adequate supervision.

cost of living. career opportunity at the headquarters location. isolation. lack of cultural understanding… Puerto faced economic problems… Japan. difficult living conditions… Nigeria. South Korea. low quality of life.. climate. climate. Ethiopia. living conditions…cultural issues…. lack of infrastructure. isolation. the culture… adaptation to the local organisation environment and everyday living in the local environment… Italy. . single status assignment policy…security and weather conditions Singapore. political instability… Dubai. desire for family (to be) based in the home location after a certain time abroad.. cross-cultural differences and lack of planning with the head office…generally performance issues… inability to find new positions for repatriating expatriates…adjustment difficulties…. crimes etc. significant cultural differences. lack of infrastructure. security.. safety…living conditions…difficulties associated with the host site and family…standard of living. inability to adapt to local culture… did not fit in culturally…family not settled… Indonesia.. crimes etc. cross-cultural difficulties and lack of planning from the head office…security concerns.Côte d’Ivoire. difficulties living in a vastly different environment from the home location…political instability…assignees lose professionalism and dedication seen in the home office… Poland. lack of cultural understanding…usually the wrong person for the position… expectations of the employee and lack of realisation of the importance of cultural differences at work and in personal life…inability to find new positions for repatriating expatriates… cost of living and ability of spouse/partner to easily convert their education and experience to a similar role in the UK. safety… Martinique. lifestyle.cultural adjustment challenges…did not support the cultural transition enough Kuwait. intercultural differences Germany. competition regarding compensation. Equatorial Guinea. 79 . schooling…generally performance issues. Saudi Arabia.). security concerns. lifestyle. family issues South Africa. competition regarding compensation United Kingdom.adjustment difficulties Trinidad. difficulty living in a vastly different environment from the host location… France. remoteness form family. low quality of life. cost of living and culture… family desire to return to the home selection Switzerland. demands of work and the lifestyle change….. adjustment to the location.. expectations….) …cross-cultural differences and lack of planning from the head office…living conditions…poor selection. career opportunity at the headquarters location. harsh weather and conditions (disease. political instability… Ireland. harsh weather and conditions (disease. difficult living conditions…adjustment to the location United Arab Emirates. integration of family. cost of living. family desire to return to the home country. expectations of the employee and lack of realisation of the importance of cultural differences at work and in personal life… Russia... remoteness from family. demands of work and the lifestyle change India. political and family reasons… Iran. significant cultural differences.

United States. CIPD Briscoe. and Rohr. D. Cheltenham. Managing people in a multinational context. London.J. Edward Elgar Brewster. H. IL 80 . C. Human Resource Planning.J. Thomson Learning Black. 16:291-317 Bonache... (2005) ‘The use of Repatriate Knowledge in Organisations’. G.R. Sparrow. Woodridge. demands of work and the lifestyle change…. 2nd edition. London. P. London. P. London. (2004) International Human Resource Management. References Adler N. U.E. Mendenhall. (2003) ‘Assessing the potential for effective crosscultural working between ‘new’ Russian managers and western expatriates’ Journal of World Business. Meierewert. C. D. fifth edition. 39(3) 107-24 Fink. De Cieri. (1991) The Management of Expatriates. J.E. Report. intercultural differences are underestimated. very rural locations…sheer volume…. (2004) International Human Resource Management. M. and Schuler. S. Björkman (eds. M. (2007) International Human Resource Management. Woodridge. second edition.adjustment difficulties…problems adapting to a new environment…. Thomson Fenwick. (1991) ‘Towards a comprehensive model of international adjustment: an integration of multiple theoretical perspectives’..J. D. G. Report. and Hollinshead. 22 (4) 30-6 GMAC Global Relocation Services (2007) ‘Global Relocation Trends. and Welch.) Handbook of Research in International Human Resource Management. 2004 Survey.S. 2006 Survey. and Oddou. Kogan Page Brewster. (2006) ‘The compensation of expatriates: a review and a future research agends’ in G. (2002) International Dimensions of Organisational Behavior’ 4th edition.trying to renew a visa…job did not live up to expectations and cost of living…family desire to return to home country. G. South Western. IL GMAC Global Relocation Services (2004) ‘Global Relocation Trends. 38(3) 245-261 Dowling. and Vernon.S. (1999)’Cultural and bureaucratic control in MNEs: the role of expatriate performance management’ Management International Review.. Academy of Management Review. Routledge Camiah. N..improper cultural fit.S. G.Stahl and I. R. and Welch.

San Diego. M. fall Pym. 231-5 Reynolds.GMAC-Global Relocation Services. Harcourt Professional Publishing Tung (1988) ‘Career Issues in International Assignments’ Academy of Management Executive. IL Littlewood. International Human Resource Journal. C.(2002) ‘Global Relocation Trends Survey Report 2002’. (1973) ‘The Politics and Ritual of Appraisal’. US National Foreign Trade Council and SHRM Global Forum. (2000) 2000 Guide to Global Compensation and Benefits. Woodridge. Occupational Psychology 47. (1995) ‘Total Compensation: A new way of doing things’. August 81 . D. CA.

Such an analysis provides an appropriate point of departure for study of international labour relations which is concerned with the modes of interaction between trade unions. over eighty five percent of the workforce is non. educational institutions. Following O’Hagen et. the European Works Council Directive To appreciate the significance and functions of the International Labour Organisation (ILO) and the Organisation for Economic Co-operation and Development (OECD) Introduction In Unit 2 the institutional ‘bedrock’ for national variations in observed HRM policies and practices was explored. Australia and New Zealand also manifest labour relations characteristics associated with ‘neo-liberalism. It was argued. including industrial enterprises. following Whitley (1996) and others. continental European countries including 82 .liberal’ and ‘neo.corporatist’ perspectives delineated in Unit 2 possess considerable value in comprehending broad variations in the conduct of labour relations across regions. that proximity between such institutions. the UK. and effect of. trade unions and government/ quasi governmental agencies vary in the extent to which they ‘interlock’ from society to society. By way of contrast. the USA and Japan To examine the role and significance of Employers Organisations in these global regions To consider variations in the structure of collective bargaining across these global regions The comprehend contrasting international philosophies and practices in employee involvement and participation To gain insight into the rationale for. In the minority unionised sector. al. Using the analogy of systems ‘hardware’ it was asserted that primary institutions. Canada. (2004) in the US. public utilities. 1998). employers and government and its representatives in various national and regional settings. membership and objectives between the EU. engendering a climate of mutual supportiveness. was consistent with ‘investment orientated’ approaches towards the management of the human resource. relations between management and organised workers have traditionally been adversarial and low trust in nature (Poole and Warner. which may be regarded as an exemplar of neo. while ‘space’ between institutions tended to perpetuate a climate of competition and a ‘resource’ orientated view of the potential of human capital.Unit 7 International Labour Relations and Employee Participation Objectives • • • • • • • To appreciate institutional explanations for regional variations in labour relations structures To gain insight into variations in trade union structure. Indeed ‘neo.liberal ideology. financial establishments.unionised with broad management discretion determining terms and conditions of employment for this substantial grouping.

will therefore need to take account of variations in the ‘contours’ of labour relations from region to region. the actors and procedures of industrial relations are significantly influenced by legislation. a US owned MNC establishing a subsidiary in Germany would technically be obliged to establish a works council. an industrial relations system which is not subject to detailed statutory regulation. in straddling international territories. ibid). trade unions into national economic planning. for example.) is subject to significant legal regulation. but which is coordinated by collective organisation of employers and trade unions (and facilitated by the state). employers and national administrators seek to gain competitiveness through quality production. The extent to which international companies will adapt to local institutional arrangements or assert labour relations policies and practices emanating from the home country environment is subject to some debate (see. the Netherlands and Scandinavia exemplify neo-corporatist tendencies in the conduct of their labour relations (O’Hagen et. competitiveness is gained through flexible sub-standard employment contracts and the absence of robust systems of employee representation and participation. in which economic governance is largely private but subject to strong collective institutions. Hyman (2004. flexible working practices reinforce a ‘low road’ strategy by attracting foreign direct investment on the basis of flexible and lower cost features. However. in which economic governance is also largely private but modified by an extensive. and is related to the extent to which an MNC is adopting an ethnocentric or polycentric orientation (see unit 3).al. egalitarian welfare system. variations in labour relations structures across regions are likely to impact most profoundly upon the obligation of the MNC to consult its workforce on important matters affecting its employment. In a similar vein. • A ‘Germanic’ model. Edwards. 422) identifies three main ‘models’ of labour relations in western Europe. balancing employment flexibility with the nurturing of internal labour markets. an emphasis is placed upon the integration of centralised. for example. significant legal regulation of employment contacts. working hours etc.Germany. A ‘Nordic’ model. and in many cases the substance of the employment relationship (pay. ‘neocorporatist’ influenced continental European bloc is marked by some notable internal diversity. in terms of actual policy considerations. national-level. In the core. Here. A ‘Mediterranean’ model. but drawing a broader global map. Lipietz (1997) asserts that the industrial world may be divided into core and peripheral zones of industrial regulation. In the latter. So. the more highly regulated. While the above typologies serve to distinguish regional employment structures at a broad level of generalisation. closer scrutiny of global regions reveals variations within institutional ‘clusters’. 2004). with (until recently) an extensive nationalised sector and significant state intervention in economic development. comprising 83 . and institutional incorporation of employers and trade unions into statutory welfare provision. In particular. • • MNCs. and gaining consensus at enterprise level through well established mechanisms for employee participation. In the periphery. founded upon robust structures to engender employee involvement (which would involve consensual arrangements with trade unions) and complemented by a strong labour law base.

industries and sectors.level procedures for employee information and consultation on trans-national matters. recruiting workers in particular industries). Structure refers to the ‘architecture’ of union organisation across enterprises. a form of ‘micro-corporatism’ distinguishing it from ‘insider’ and ‘outsider’ capitalist typologies (see Unit 2). primary comparisons will be made in labour relations institutional arrangements between Europe (including the new EU accession countries). the European Works Council Directive.e.E. Drawing upon available data. the European Trade Union Confederation (ETUC)www.e. Trade Unions The most well known definition of trade unions was coined by Sidney and Beatrice Webb (1920) as ‘a continuous association of wage earners for the purpose of maintaining and improving the conditions of their working lives’ In advanced capitalist economies trade unions enjoy the status of free and independent associations which are established by workers in order to defend their interests at the workplace and at a broader political and economic level.specific basis).European consultative and other employment obligations emanating from the ‘social agenda’ of the European Union.). requires all ‘Community scale’ companies operating across European boundaries to establish European. recruiting workers across industries) or occupational (recruiting workers in a particular occupation). 84 . the US and Japan are as follows. http//www. which is commonly found in Japan. recruiting workers on a company. employee involvement and participation). In particular. In general. adopted by the EU in acts on behalf of trade union confederations at a pan-European level.emf-fem. training within the enterprise and recruitment methods. which would be legally empowered to take decisions on matters such as changes in working and employee Predominant structural configurations across Europe. Whitley (2002) describing the latter as a ‘highly co-ordinated’ business system. membership and orientation. general (i. US corporations operating in Europe would be bound by pan. Also in Europe. is enterprise based unionism (i.etuc.M. international variations in the orientation of principal labour relations actors will be considered (notably employers and trade unions) as well as the dynamics of labour relations processes (including collective bargaining. From an international perspective. Moreover. while there is an increasing incidence of trade union organisation across European states in particular sectors (notably the European Metalworkers Federation.e. union structures may be classified as industrial (i. beyond the national perspective.F. trade unions may vary according to structure. A significant variant. In this unit. the US and Japan. The unit will also attend to global and panEuropean regulations in the field of labour relations which are likely to impact upon MNCs. Unions may affiliate to ‘umbrella’ confederations at national level which is typical in Europe.

CIO) http//www. Such ‘umbrella’ federations may incorporate numerous constituent sectoral federations. Rengo acts as the umbrella for enterprise based unions which are organised into sectoral federations. In the UK and in Ireland there is also a single confederation at national level. general and occupational unions.comprising industrial and occupational unions). Portugal and Spain. in Germany. France. Luxembourg. Japan and the USA has been towards the merging and rationalisation of trade union organisations. Multiple trade union confederations.unionism’ has however been subject to rationalisation and reform in recent years. For example. with a significant number of member unions constituting a mixture of industrial. In the UK.aflcio. divided mainly on political and religious lines have been typical in Belgium. white collar and professional/ academic. Italy. the United 85 . The United StatesA single confederation.based upon a ‘bottom. A common trend across the EU. a number of trade unions operate outside the organisational ambit of the national confederations. In Nordic countries. forms the national umbrella organisation for sixty five industrial and occupational unions. the American Federation of Labor and Congress of Industrial Organisations (AFL. the National Confederation of Trade Unions (Zenroren). In France and Italy. separate confederations exist for different occupational groups (typically blue-collar. A smaller confederation. ‘Multi. Japan The major confederation is the Japanese Trade Union Confederation (Rengo)http//www. In Germany and Austria there is a single dominant confederation made up of a relatively small numbers of predominantly industrial unions. represents around 7% of unionised workers.orgwhich organises over 60% of unionised workers. the architecture of union organisation has historically been referred to as ‘multi-union’.Trade Union Structure Europe.A complex pattern of trade union organisation is found in the EU including the new accession countries.up’ form of development in which a number of unions might co-exist in a single workplace. the Netherlands.jtuc-rengo.

CFE-CGC+UNSA and G10-SUD Political Occupation Political/religious/ occupational(status) Hungary MSZOSZ. the number of AFL-CIO affiliates has fallen from 96 in 1985 to approximately 65.ADEDY Occupation Macro-sector/ status/ profession Public/private Occupation and sector Sector Greece Occupation and sector Sector Sector Sector Rural workers in a separate small federation Public and private unions merging Spain Finland France CC.europa. 2001 http://www.di) was created in 2001 comprising approximately 2.FTF.UGT SAK.KOK Political Political factions significant ACV-CSV Christian trade union is largest Cyprus Czech Republic Political Political/ religious/ regional/occupational Germany DGB. In Japan a slow process of consolidation has occurred amongst Rengo affiliates.htm Table 1 Trade union structures in the twenty five European Union countries Confederations Main divisions between confederations Main division affiliates Sector and status Sector and status Sector Sector CMKOS is the dominant confederationeration CGB and DBB are small. AKAVA CGT.Industrial Relations in the EU. ABVV-FGTB.Service Sector Union (Vereinigte Dienstleistungsgewerkschaft. Eurofound. Japan and USA. Verdi and IG Metall are important Remarks Austria Belgium ÖGB AVC-CSC. CGT-FO. ver.STTK. KUK. Source.LH. In the USA. ASZSZ Macrosector/political Sector/branch/ profession Ireland ICTU Occupation Five ‘representative’ confederations and two new ones pushing for national recognition SZEF-ESZF unió (started on 2002) is only a cooperation framework but not a formal merger Trade unions 86 .TALO.ASO. POAS CMKOS.AC EAKI.SEK.5 million members.DEOK.CMS.CFDT.eurofound. SZEF/ESZT unió.DBB Macro-sector/ Religious Sector Denmark Estonia LIGA.CGB. ACLVB-CGSLB PEO. ETMAKI GSEE.00.MOSZ.

KNSS. FZZ Political Sector. 2006 87 .CMTU FNV.UGT Political Sector and region Sweden Slovenia LO. small independent union sector Source.and sector Italy CGIL.TCO.UIL and other smaller main organisations LPSK. local branch Portugal CGTP. Pergam. EIRO country profiles.LCBG. CGFP Political/religious Sector Lithuania Political/religious Sector Luxembourg Political/religious/ Status/macro-sector Sector Latvia Malta Netherlands LBAS GWU. LDF OGB-L. Konfederacija’ 90 Occupational (status) Macro-sector (mainly private/public and industry/services) Sector and occupation Slovakia KOZ Sector United Kingdom TUC Occupation And sector with members in Northern Ireland and affiliation with UK unions Autonomous unions and regional unions active Independent trade unions active Strong autonomous unions in services sector.SACO ZSSS.CNV.Soldarumas.CISL. CGFP important confederation in public sector Restructuring Weak confederations FNVBondgenoten as ‘super union’ in the private sector New third confederation which wants to be politically neutral 28 sector confederations and 39 regional branches Several mergers occurring Two new main unions established recently (Alternativa and Solidarity) in the railway sector but not represented in national tripartite social dialogue Small Christian trade union confederation General unions as TUC affiliates.MHP To some extent Private/public Political/religious/ occupational status Sector Sector Sector Poland OPZZ:NSZZ Solidarnosc.

Privatisation of state owned industries also typically has an adverse effect on trade union membership (d) Employer policies. although levels of union membership and rates of decline are by no means common across national boundaries.0 29.5 9. Also decentralisation of mechanisms for determining pay and other conditions closer to workplace level (see section on collective bargaining below) tends to be at the expense of union organisation. These include.the US and the UK provide examples of employers seeking to engage with employees directly (not via third parties).5 30. the US and Japan.0 20.1 Source. Sinclair (2003) suggests a number of factors to explain dwindling participation in trade unions over recent decades. Union membership is typically calibrated through ‘density’ statistics. 2001 88 . Table 2.2 50. EIRO and national figures.Union density in Europe. epitomised by the three leading economies reviewed in this unit.0 69. (b) Compositional changes in employment.7 29.0 44.0 13.which relate to the proportion of those in employment who are union members.5 39.0 27. is a general decline in trade union membership.4 32.5 79.the UK provides an example of diminishing legal support for trade union organisation and industrial action. the US and Japan Country Denmark Finland Sweden Belgium Luxembourg Ireland Austria Italy Greece Portugal Germany UK Netherlands Japan Spain USA France Union Density (%) 87.7 15.Trade Union Membership A global trend. (a) The business cycle.including rates of unemployment and inflation.8 35.0 79. The following table compares union density across western European countries.including the decline of male manual workers (and increased participation of female workers) and growth in part time work (c) Legal reforms and state policy.

europa. union membership in the new EU accession countries is generally lower than for western Europe. the ‘insider’ status of Japanese trade unions promotes company loyalty and dissuades collective labour from assertive and thoroughgoing action against employer interests. working hours and job security (evident in Germany and the UK) to a more overt political (particularly communist) or religious (catholic or Christian) predisposition (for example France and Italy).Industrial Relations in the EU. the Netherlands and the UK). enterprise based unions are closely integrated into the management structures of their companies.htm Trade Union Objectives As table 1 above suggests. This refers to an implicit acquiescence with the social and political status quo and a concentration of union leaderships on the improvement of members’ pay and welfare benefits (Bennett. despite the origins of the labour movement in socialism and classconsciousness in the latter part of the nineteenth century. • • The average trade union density in the EU is approximately double that in Japan and more than three times the US. ‘bread and butter’ approach. (Bennett. Considerable variation is evident across EU countries. Eurofound.The following observations relate to the above table. the unionised minority of the workforce have accepted an emphasis on ‘business unionism’. that agreements made between employers and unions are extended to non. female participation rates in trade unions are higher than those for men. 2001 http://www. While a high level of collusion with enterprise management teams has provided them with access to vital corporate information.union members). in the French case. Although not shown in the above table. the objectives and orientations of trade unions vary within Europe. Japan and USA. • • ibid) 89 . 1997) In Japan.eurofound. Unionisation is higher among men in the US and in many EU countries with low to medium overall unionisation rates (including Austria.from nearly 90% in Denmark to just over 9% in France (although it should be noted. placing greatest concern on matters such as pay. and contrasts in trade union character are more widely evident at a global level. Germany. However in the highly unionised Scandinavian countries. In the USA. In Europe trade union orientation varies from a relatively instrumental.Eironline.

France. and as a trade/ industry association. engaging in negotiations with the ETUC. Commerce. maritime transport.Employers Organisations In Europe.e. this leading to the formulation of joint texts or approaches. at least for the private sector. Belgium. railways. Luxembourg and the UK in which collective bargaining occurs predominantly at company level (although overlaid with intersectoral bargaining in Ireland). Denmark. Regular national intersectoral bargaining with trade unions is part of the remit of central employers’ associations in Belgium. In the UK. Italy. France.state) and national sectoral (i. national intersectoral (i.e. European sectoral (i. Employers associations engage in intersectoral bargaining over specific issues or procedural matters in Denmark. there is a division between the representation of employer and business/ trade interests. public services. Italy.businesseurope. combining industry specific interests across Europe). the Netherlands. Spain. Minority business interests in Europe are represented by the European Association of Craft and Small and Medium –sized enterprises (UEAPME) and the European Centre of Enterprises with Public Participation and of General Economic Interest (CEEP). At industry level. associations of employers have played a significant role in the conduct of labour relations. Ireland. postal services. Portugal. footwear. Sweden and the UK there is essentially a single umbrella organisation. sea fishing. Employer ‘voice’ is expressed at various levels. electricity. however. employers’ associations engage in collective bargaining with trade union counterparts over pay and other substantive employment conditions in most EU countries.e. Employers’ interests are therefore voiced at a European level in sectors such as agriculture. telecommunications. banking. the Netherlands. In Germany. sugar. including Austria. France. private security. At national level employers’ organisation varies considerably between member states. cleaning. construction. Greece. textiles and clothing. tobacco and woodworking. representing the interests of a single industry). road transport. leather. European Union. and are regarded as social partners alongside trade union representatives. In Austria and Germany employers’ confederations have close collaboration with trade unions in various forums. hotels and catering. inland navigation. personal services (hairdressing). Exceptional countries are Ireland. At European sectoral level. Ireland and Portugal. • At European Union level ‘BusinessEurope’ www. Spain and Sweden. 90 • • • • . Strong and representative employers associations are uncommon in the new accession countries. seeking to influence EU decision making in areas of relevance. Denmark. Finland. civil aviation. Finland. twenty six dialogue committees involving European level representatives of trade unions and employers. In Belgium. Spain and Sweden. Germany. across industries in a single nation. Greece. insurance. It acts as an employers’ organisation. the CBI (Confederation of British Industry) has a minimal bargaining approach or direct engagement with the TUC. formerly known as the Union of Industrial and Employers Confederations of Europe (UNICE) represents almost all main national intersectoral confederations of private sector employers and business in EU member states.

In the USA. Japan and USA. 2001 Table 3 Main features of employer organisation structure in the twenty five European Union countries General Austria WKO Industry VOI Construction Services SMEs Social Economy Agriculture Remarks Compulsory membershipprovincial level important Regional organisations involved in tri-partite dialogue. Nippon Keidanren does not participate in collective bargaining with trade unions. KZPS SPS AMSP BDA DA ETTK SEB CEOE ESEE GSEBEE Mixed association of sectoral and territorial organisations and a SME organisation associated FA SALA DA reorganising 91 . CCCI Czech Republic Germany Denmark Estonia Greece Spain SPCR. Eurofound. a single Business Federation (Nippon Keidanren) was formed in 2002 following the merger of two constituent associations. The association also seeks to influence the annual ‘spring offensive’ (Shunto) bargaining round. provides an employer voice on international business matters.uscib. As collective bargaining and pay determination takes place primarily at enterprise level. in which enterprise unions combine to push for a common wage increase. The United States Council for International Business (USCIP). but is involved with formal tripartite dialogue with government and trade unions.Industrial Relations in the EU. FEB/VBO most important in industrial relations Other important organisations at sectoral level Sectoral organisations in charge of bargining Belgium FEB/VBO UCM Unizo Cyprus OEB. there is no national intersectoral body with a labour relations role. few employers’ bodies have an active involvement in labour relations matters. by issuing guidelines to employers.Eironline.In Japan.LINK www.

and now the leading employer organisation. VOSZ. LDDK Is a recognised actor in social dialogue No umbrella Ireland Italy IBEC Confindustria Confapi Lithuania LPK LVDK Luxembourg UEL Latvia LDDK Malta MEA. confederations exist and are structured by political divisions (left and right) Cooperative agreement between LPK and LVDK for representation in national and international social dialogue Chamber system with obligatory membership plays a role in tri-partite dialogue Several other smaller associations exist. STRATOSZ OKISZ. CEHIC act as the umbrella organisation for international representation In services sector. STRATOSZ KISOSZ IPOSZ Usgeres Hungary MGYOSZ AFEOSZ AMSZ.Finland EK France MEDEE CGPME. artisan and agricultural sector. UPA OKISZ. VOSZ. EK is a merger of TT and PT and mainly involved in the bargaining system MEDEF is much more important than others MGYOSZ is a merger of MMSZ and GYOSZ. FOI MHRA GRTU 92 . MOSZ Important employer organisation in public sector.

but this system is under debate Split up in 2004 Source EIRO country profiles 2006 93 . federations are based mainly on individual membership Small organisation in the agricultural sector. KFO Slovenia GZS.NCW and MKB KPP is the oldest group with roots in the Chamber of Commerce and formerly state-owned enterprises CIP and CCP are leading federations for industrial relations. BCC ZRP Portugal AEP-AIP CIP CIP CCP.COC Netherlands VNONCW MKB LTO Poland KPP. ZDODS Slovakia United Kingdom RUZ. alliance announced between VN0. AZZZ CBI organisation existsattempts in the 1980s failed. AIP and AEP recently created a federation to boost their influence SN is the former SAF. SKL is an important local employer confederation in the public sector Compulsory membership of chambers dominates. CTP CAP Sweden SN SFO. PKPP. ZDS OZS.

In regions with neo. This permits individual company management to relate pay closely to local market circumstances.corporatist traditions. employers and their organisations. Thus. EU. collective bargaining occurs at a relatively centralised level. Japan and USA Intersectoral level Austria Belgium Denmark Finland France Germany Greece Ireland Italy Japan Luxembourg Netherlands Portugal Spain Sweden UK USA XXX XX XXX Sectoral level XXX X XX X X XXX XXX X XXX XX XXX XXX XXX XXX X X Company level X X X X XXX X X X X XXX XX X X X X XXX XXX X XXX X= existing level of wage bargaining XX = important. in countries where collective bargaining is well established. for example in the US and the UK. and governmental agencies.Collective Bargaining The International Labour Organisation (ILO). Japan and the USA. Decentralisation of collective bargaining is also likely to lessen the influence of trade unions on pay determination. the pronounced tendency is for bargaining over pay to be decentralised to company level. including a number of continental European countries. The following table indicates predominant levels for wage bargaining in the EU. and to use pay as a mechanism to stimulate the performance of each profit centre. A critical strategic issue in the organisation of collective bargaining is the level at which it occurs. Table 4 Wage bargaining levels. Where neo.liberalism holds sway. in its Right to Organise and Collective Bargaining Convention. it provides joint institutional machinery for the determination of pay. but not dominant level of wage bargaining XXX= dominant level of wage bargaining Source Eiro (2001) 94 . this permitting the orchestration of pay structures by trade unions and their confederations. defines collective bargaining as ‘Voluntary negotiation between employers or employer organisations and worker organisations with a view to the regulation of terms and conditions of employment by collective agreements’.

2007a) For the new accession countries. although wage increases agreed in the unionised sector influence general wage levels (see table 5) • • • It should also be noted that the subject matter for collective negotiations varies from country to country. Collective bargaining coverage (i. • EU member states have widely different systems of collective bargaining. Denmark. the close relations between enterprise unions and company management and provided union exposure to a wider range of strategic issues. Table 6 below denotes primary levels of bargaining for the twelve relative newcomers to the EU In Japan and the USA. the USA and Japan. the company is the dominant bargaining level with continuing sectoral influence in certain cases. the ‘bargaining sector’ relates to around 21% of the labour force. Italy and the Netherlands. to around one third of employees in the UK. pensions (Ireland and Norway) and age discrimination and diversity/ discrimination issues (France) and job security (Cyprus) (European Foundation for the Improvement of Living and Working Conditions. with pay and conditions for the majority non. but. Deviations from multi. the predominant bargaining level for pay and other issues is the individual company (with some exceptions at industry level in the US). although ranges from nearly 100% of private sector employees in Austria.Eurofound/ EIRO ( 2001) identify the following key characteristics of bargaining structures in the EU. There is considerable variation in the bargaining agenda matters in Europe. decentralisation has been organised within the framework of sectoral agreements as ‘opening clauses’ for locally agreed deviations from sectoral standards under specified conditions. ‘local pacts’ or ‘area contracts’ have also occurred in Spain. 2007b) Table 5 Collective bargaining coverage Europe.e the proportion of workers having their pay and conditions wholly or partially set by collective agreements) is generally high in the EU. yet a distinctive feature is relatively centralisation systems. In Japan there is co-ordination on both trade union and employer sides during the annual ‘Shunto’ bargaining in springtime. health and safety at work (Poland). working time (France). this being pronounced in the UK. the following matters tend to have gained significance.employer agreements (taking various forms such as hardship or opt out clauses.union sector being determined by management. In Japan. while in Japan. In the US collective bargaining covers around 15% of the workforce. In the USA trade unions conduct ‘pattern bargaining’ whereby an agreement is struck in a particular company and then extended to other firms in the sector. In the US. Major manufacturers in leading industries such as electrical goods or cars take the lead in bargaining and are then followed by other larger companies and then small and medium sized enterprises (SMEs). Japan and USA 95 . In France. decentralisation has been stimulated by legislation on working time and a new law on collective bargaining (European Foundation for the Improvement of Living and Working Conditions. France and Germany. ‘business unionism’ has placed a major focus on pay and related matters. training (Germany). in addition to pay. a significant trend is towards decentralisation. Nevertheless. In Germany.

though with some multi-employer bargaining. JIL and BIS Table 6 Bargaining levels in new EU member states Bulgaria Cyprus Czech Republic Estonia Hungary A combination of whole-sector.Austria France Belgium Sweden Finland Italy Netherlands Portugal Denmark Spain Germany Luxembourg UK Japan USA 98% 90-95% 90%+ 90%+ 90% 90% 88% 87% 83% 81% 67% 58% 36% 21% 15% Sources EIRO (2001). mainly in larger enterprises. Central agreement provides for basis increases and minimum wages. through with sectoral agreements in some important industries At both enterprise and multi-employer level Mainly at enterprise level Private sector bargaining predominantly at enterprise level and mainly in larger firms. with collective agreements covering a single employer predominating and sectoral agreements rare National collective agreement which provides minimum framework for employment conditions. Also sectoral agreements and a groeth in company level agreements Around 40-50% of workforce covered and sector key level Reduction of tri-partite centralised agreements and growth of sectoral agreements Latvia Lithuania Malta Poland Romania Slovakia Slovenia 96 . state and local government enterprises and in former state-owned entities Almost exclusively at company level Almost exclusively at company level About one third of workforce covered. Collective bargaining has limited coverage and occurs mainly at company level (especially in larger enterprises. branch and company agreements. with a strong emphasis on the latter Largely at enterprise level.

in neo-corporatist influenced economies (notably in continental Europe). In order to understand the rationale underlying a range of international systems for employee involvement and participation it is instructive to relate these to ‘neo. Ramsay (1992) also distinguishes participation schemes which are managerial approaches for seeking employee involvement from those which are labour orientated and predicated on industrial democratic principles. The linking of participation with enhanced co-operation and reduced levels of conflict. Consistent with the ‘stakeholder’ or ‘social partnership’ model of corporate governance. In the following section key employee involvement and participation mechanisms are considered in Europe. By way of contrast. In those countries where neo-liberalism influences management thinking (notably the US and the UK) unfettered corporate responsiveness to ‘the market’ is likely to be of paramount significance. (1992) summarise four different perspectives or models of participation as follows.liberal’ and ‘neocorporatist’ ideologies. the rationale for change. • • • • The recognised relationship between employee involvement and job satisfaction. Marchington et. involvement seeking to engender employee commitment to the objectives of the organisation. The gaining of high levels of employee commitment and enhanced performance through employee involvement. management may recognise the strategic sense in engaging employees with corporate goals and values.Source EIR0 (2006) Employee Involvement and Participation Across national borders. the USA and Japan. The actual transfer of control from management to labour. Salamon (2001) suggests that ‘involvement’ schemes can be distinguished from participation on the dimension of purpose. and involve the ceding of strategic authority from management to employee representatives. corporations have engaged in a variety of methods to actively engage employees in decisions which affect their working lives. In consequence. The existence of a ‘spectrum’ of approaches towards employee involvement and participation is recognised by a number of authors. Using the terminology adopted by Salamon (ibid) European approaches are perhaps most appropriately referred to as ‘participative’ while mechanisms in the US and Japan may be typified as engendering employee ‘involvement’. 97 . and related while ‘participation’ schemes seek to provide employees with the opportunities to take part in organisational decision making. systems for employee participation in continental Europe are predicated on the notion that ‘consensus’ based forms of management will enhance employee commitment and productivity. and formulating mechanisms to put them in the picture about the competitive position of their enterprise. systems for employee participation tend to be ingrained into prevailing institutional arrangements and are underwritten by the state.

appraisal and grievance procedures. physical investments and divestments Working practices and the introduction of new technology Proposed incentive systems and wage payment systems Company sales. Source. profits and prices Personnel policies (including recruitment methods) Health and safety at work.Employee Participation in Europe Works Councils Frequently as an adjunct to collective bargaining involving trade union representatives. Bennett (ibid) 98 . 1997). • • • • • • • Financial plans and company structures Acquisitions. Councils are normally legally obliged to discuss particular specified matters. works councils are a fact of industrial life and upheld by law in a number of European Union counties (although this form of consultative forum has been rare in the UK). Examples of issues that are subject to decision-making by works councils are. division or corporate) although they are most commonly found at the level of the establishment or site. and entitled to take decisions (effectively giving employees the right of veto) on others (Bennett. These consultative forums may be convened at various corporate levels (site. but are more commonly councils of employee representatives only. recruitment and disciplinary procedures (Germany) Changes in working hours. works councils may exert a powerful countervailing influence on management decisions. Following Hollinshead and Leat (1995). training agreements. for example being able to delay company mergers in the Netherlands and Germany. As Bennett (ibid) suggests.employee bodies. working hours (the Netherlands) Examples of matters that are subject to discussion by works councils in various EU countries include. recruitment and disciplinary procedures (Germany) Operation of job evaluation schemes. • • • • • Criteria for hiring temporary staff and for selecting workers for redundancy (Belgium) Profit sharing agreements (France) Changes in working hours. works councils (or committees) can be joint management. training agreements. Works councils may include or exclude external union officials.

the drive towards the ‘high performance workplaces’ in manufacturing has been endorsed by management and labour with emphasis being placed upon the importance of training and the devolution of responsibility to ‘frontline’ workers. More generally. there have been some notable examples of management and union representatives collaborating through partnership in order to facilitate change in work practices and bring about increased productivity. the Service Employees Union. the Netherlands and Denmark there are legal requirements for large companies to establish a two.cfm. In a non.) Matters concerning mergers and takeovers and how the company is to be financed. markets. at the GM/ Toyota joint venture at the NUMMI (New United Motor Manufacturing Inc. Belgium. major new investments etc. In this way. In the unionised sector. e-based and audio-visual systems). human resource and welfare considerations are incorporated into systems of corporate governance. include formal management.union environment. As Bennett (ibid) states. enterprises have experimented with a range of involvement mechanisms. United Steel Workers. More recent departures in employee communications have been based on high technology platforms (internet.) plant in Fremont California ‘Japanese’ flexible style working practices were introduced with the active involvement of the United Auto Workers (UAW) http//www. Joint union. 2001) 99 . For example. • • • The appointment and dismissal of executive management and the determination of their remuneration Deciding the overall direction of the enterprise (products. the mechanisms to involve employees in corporate decisions in the US are solely led by management and are not supported by statute. US corporations have adopted methods such as self. Executive boards.labour commitments to upgrade the skills of workers to enhance productivity and job security (Eurofound/Eironline. constituting company managers. some of which have been highly sophisticated. Employee Involvement in the USA In contrast to participation initiatives in Europe. to which a proportion of worker directors are appointed. these being instrumental to the dissemination of corporate culture and values. the functions of supervisory boards include. Large multinational companies in the information technology sector have been renowned for flat and open management structures. the Building and Construction Trade Unions.Worker Directors and Supervisory Boards In permitting direct and informal communications between groups of ‘knowledge workers’. assume responsibility for day to day operational matters. while supervisory boards.tier board of directors. Over the past few decades. oversee the strategic direction of the training agreements involving the United Auto Workers. problem solving groups and quality circles (Hollinshead and Leat.managing teams. ibid).uaw.

and to recognise trade unions. From the perspective of the MNC. where labour relations were highly regulated and codified. Germany and Sweden. however. US firms were less likely to adapt. communications are on an equal basis. These authors also imply that localisation of employment practices is potentially a highly political process within the MNC. although in core Japanese industries it may be argued that worker interests will be accounted for at board level as directors have traditionally been lifetime employees of the enterprise (Hollinshead and Leat. from this study of three leading global regions that institutional structures for labour relations vary profoundly on a geographical basis. Identify the strategic benefits and drawbacks associated with establishing a works council in the subsidiary. Imagine you are the board of directors of a US owned MNC in the retail sector establishing a subsidiary in Germany. Labour Relations Structures and MNCs It is therefore clear. If. for example. Activity (optional/alternative).. Team-based work organisation has also become widespread in manufacturing. Managers spend considerable time on the shop floor and there is an emphasis on open planning in offices. or whether there is scope to circumvent local obligations and to assert home country customs and practices. There is no legal regulation of employee involvement mechanisms. Gunnigle et. MNCs decide to localise. However.unionism. varying labour relations structures across national barriers may be regarded as imposing a series of strategic constraints or dilemmas including the following. It was found that. Edwards and Ferner (2002) point to the significance of institutional and cultural aspects of national business systems in shaping and constraining transfer of employment practices from the home environment. (2002) investigated whether US MNCs are less likely to adopt local HR practices than European companies. a critical strategic question is the extent to which it should seek to adapt to labour relations systems in the host environment. Quality circles represent a ‘bottom-up’ form of employee involvement which encourage front –line workers to generate ideas for product and production enhancement through periodic ‘brain-storming’ activities with immediate co-workers. aiming to engender work flexibility and team ownership of production planning and quality. or consensus decision making. as international and local managers may seek to facilitate or impede this process according to their vested interests and positions of power. 100 . Participation in these problem solving groups is technically ibid). This finding would suggest that US MNCs are likely to establish subsidiaries in less regulated regions which are amenable to non. or statutory provision for employee interests to be represented at board level. although undoubtedly workers are strongly encouraged to participate by their employing organisations. US firms were more likely to localise practices in. where domestic HR and labour relations practices were less codified. Group suggestions are then passed to more senior management for scrutiny and possible implementation. In theory.Employee Involvement in Japan There is a high incidence of face-to. in countries such as the UK and Ireland.face communications and an absence of visible hierarchy. The quality circle is commonly thought to have originated in Japan and is consistent with notions of ring-sei.

many of these are larger. requires ‘Community Scale’ companies (i. multinational firms. now applying to all EU members. some 772 (355) have European Works Councils (EWCs) in operation.national matters. those with 1000 or more employees in the EU. a process triggered by a request from representatives of employees in more than one country. but ceased to exist following mergers. for some time. The Directive. should the company establish a works council? In surveying labour relations structures across global regions it becomes clear that the obligation of companies to consult workers on matters affecting their working lives assumes a high priority in the European region. According to Leat (2003:250) the Directive addresses concerns of the European Commission about ‘the power of the multinational to take decisions in one member state that affects employees in others without the employees being involved in the decision.etuc. so that the proportion of employees represented by EWCs is much higher. and it also concerned the ability of MNC to divert capital investment from one state to another without due consultative process. and employing 150 or more in at least two EU states) to establish European level procedures for employee information and consultation on trans. An additional 125 EWCs have been set up. such European-wide consultative initiatives were given a boost by the adoption of the European Works Council Directive by the EU Council of Ministers in September 1994. reviewing progress relating to the Directive some twelve years after its implementation.’ According to this author the Directive was in part a response to the increase in MNC activity following the inception of the Single European Market. or 14 million workers across Europe. European Works Councils While various European based companies have.e.e.making process. more then 60%. Superimposed across national consultative systems is a European-wide Directive impacting on MNC operations. However. If operating in continental Europe. • Of the estimated 2. a meetings chaired by management at European level and inviting the participation of worker delegates from across European regions). takeovers and bankruptcies. 101 .org/a/125 . recognised the benefits of establishing pan-European consultative forums (i. Should the MNC (if in Europe) associate with employers organisations for the purpose of bargaining with trade unions? At what level does collective bargaining occur? If at a sectoral or intersectoral level this may impose restraints on the company’s ability to formulate pay policies on an autonomous basis. which is the subject of the next section. reports the following.• • • • Should a trade union/ trade unions be recognised for bargaining purposes? It should be borne in mind that trade union structures and characteristics vary widely. A report by the European Trade Union Confederation (2008)– http://www.204 companies covered by the legislation.

for example by helping reach a satisfactory solution to a restructuring crisis. information and consultation structures. it consulted local employees and.000 people or more.The Impact of European Works Councils Success Stories EWCs could be accounted "success stories" for a number of reasons. though the evidence is patchy. or their operation might have proved particularly satisfactory . Among multinationals employing 10. who would have been excluded under the strict terms of the Directive. The Aer Lingus EWC is based on a voluntary agreement concluded just before the 22 September 1996 deadline. The agreement on which they are based might be particularly innovatory or influential. A consequence of this is that there are dense participatory structures underpinning the EWC and the people involved also have prior experience of works council-type institutions. National reports suggest a number of such success stories. The European Works Council (or. the Netherlands seems to be a particularly rich source of examples. there has been a "demerger" operation over the past two years and two international business units KNP Leykam and KNP BT Packaging. Unilever agreed to take measures to find alternative employment for the employees involved.• • The majority of companies covered by the Directive employ less than 5000 workers. in line with their wishes. its coordinating committee) at the Anglo-Dutch Unilever group has been consulted and intervened in two cases of transnational restructuring.each with its own EWC have been sold. In the case of another closure (relocation of production from the Netherlands to Belgium). the central management of KNP BT Holding consulted the EWC on the selection of the purchaser (its market position and strategy in relation to guaranteeing 102 . With respect to the closure of a Danish subsidiary. Subsequently. In both cases. more accurately. Furthermore. a novel feature of the agreement itself was that the company included employees in the UK. the Dutch-owned paper and chemicals group. 61% have EWCs Councils. In terms of operational success stories. At KNP BT. Feature. USA and Switzerland. It could be said that the pioneering pre-Directive agreements of the 1980s in French MNCs such as BSN-Danone were success stories in the sense that they helped to demonstrate that EWCs are not harmful to the economic competitiveness of MNCs. subsequently advised Unilever management to prolong the period set for closure from a few weeks to several months. Unilever did indeed prolong the term so as to grant the employees involved more time to find a good job elsewhere. the Irish airline. At the level of the EWCs fit into existing structures. a notable example of a success story is Aer Lingus. The EWC was built on to the existing participation.

The Dutch central works council had to advise on the sale and the disinvestment and. apparently led to a change in the approach of the whole EWC. According to observers. which has already been able to register a number of successes. the first to be sold. Non-German employees were more strongly drawn into the EWC's work. as continued employment was guaranteed by the chosen purchaser. Failures EWCs could be accounted failures where they have proved to be ineffective in some way . Other Dutch success stories cited include: the role of the EWC and Dutch works council at DAF Trucks during its sale to the US multinational. a decision by group management to relocate some production from Germany to Italy was partially reversed following intervention by the EWC. during a restructuring process. A change in the occupancy of the chair of the German group works council. has been held up as a German success story. in particular between German and Dutch employee representatives. the Leykam EWC became the European information and consultation structure in the new concern. who is also president of the EWC.for example. a subsidiary of the German-owned Continental. The EWC at Schmalbach-Lubeca. A 1996 agreement which put the existing EWC on a formal footing went beyond the Directive in many respects. it is reported that the EWC played no role in conflicts over the relocation of production during 1997 and in fact more or less "disintegrated" in the conflict. the national works councils involved and the Dutch central works council of KNP BT Holding. to a new vision for the development of Shell Europe Oil Products. The initial phase of the EWC?s operation was reportedly marked by some tensions. The EWC has reportedly become less focused on the joint meeting with management and has developed into an independent body. with advantages for both the Italian and the German employees (fewer job losses for the latter. it insisted on the continuance of the EWC. a metalworking concern. Paccar Inc. the EWC is seen to have had a real dialogue with central management and according to management the consultation process showed an effective cooperation between the EWC. 103 . the granting to the Hoogovens EWC of a role in the development of an international human resources strategy. and the reported contribution of the Shell European Forum. and the avoidance of worse working conditions for the former). the EWC had practically existed only on paper and it remains unable today to mediate in the competition management has allegedly been able to foster between its European subsidiaries by threatening them with closure of the least efficient plant. In the case of KNP Leykam. allowing for an improvement in relations between members. For example.employment at KNP). When KNP Leykam was sold to the South African multinational Sappi. the involvement of and cooperation between the EWC and the central works council in the case of the takeover of Banque Brussel Lambert by ING Group. Among the relatively few negative experiences reported by EIRO national centres is one from Austria. At the Semperit tyre company. such as granting the EWC information rights vis-à-vis national management outside formal meetings. by failing to influence events or decision-making or by becoming split.

From a managerial perspective. in a way that the initial decision might eventually be modified. the Renault-Vilvoorde case presents interesting aspects and can be interpreted as a negative experience with mixed results.The ruling issued by the Versailles appeals court quoted the terms of the Community Charter of Fundamental Social Rights of Workers. Changing the earlier first instance ruling of the Nanterre court.In France.unsurprisingly. to which the Directive makes an explicit reference. The transposition process has remained close to existing French provisions . The Renault EWC brought a court case claiming that the management's announcement in early 1997 of the planned closure of the Renault plant in Vilvoorde (Belgium) without prior information and consultation of the EWC was unlawful . the Versailles court stipulated that this consultation need not necessarily be prior to the decision. in that management did not consult the EWC on the closure of their Belgian plant.going so far as to make the statutory EWC a joint management-employee body (rather than the employee-only body outlined in the Directive's subsidiary requirements). This view is confirmed by Royle (2000) who examines the operation of the fast food chain McDonald’s EWC. but must at least have "useful effects". this suggesting that consultative procedures at pan. the nationalisation of major industrial companies helped to create a management milieu in favour of EWCs. the court considered that any decision "having a significant effect on the interests of employees" must lead to information and consultation of the EWC. Streeck (1997) asserts that ‘country of origin’ effect has significant bearing on the form and functions of EWCs. which means that consultation must leave scope for "observations. with a track record of stakeholder involvement. and a "success story" because the EWC coordinated a pioneering Euro-strike. Renault and the signatory trade unions introduced a right of consultation "in the event of a planned exceptional decision which has transnational consequences and is of a nature such as to affect significantly employees' interests". In the first phase of voluntary EWCs. in a March 1998 amendment to the existing 1995 EWC agreement. the EWC Directive has raised concerns about cost and use of time. won two court cases and obtained a modification of the agreement. they are quite ineffectual ‘talking shops’. form the employee point of view. In this case. Following these facts. contention and criticism".European level will be more meaningful in a German owned MNC. Table 7 Impact of EWCs on selected national industrial relations Country Impact France The Directive fits rather well into the French system . On this basis. which states that information must be provided in "due time". there is also evidence that. so that "the elements of the discussion can still be taken into account in the decision-making process" Renault can thus be seen as both a "failure". the EWC is consulted "in due time". than would be the case in a US or UK owned counterpart. as it was largely inspired by the early practice of EWCs in French-based MNCs. 104 . which were themselves inspired by the 1982 French legislation on national group-level works council structures (group committees or comités de groupe). Source Eiro 1998 As well as the rate of uptake of EWCs being relatively slow.

because there are no provisions for works council structures at national. Where the parent company is in Germany. This presupposes that the unions are taking a major step forward in the direction of Europeanisation. the German representatives on SNBs and statutory EWCs are appointed by existing works council structures. because 105 . There is no specific research on the impact of EWCs in Italy. Ireland differs from many other European countries. Ireland is a very interesting case. The model is the same as used for the French group committee. being largely confined to tripartite negotiation and consultation at a national level. However. Employers' sources have stated that. In the past. giving them strategic direction and integrating them with other fields of trade union activity. EWCs have an important potential in the process of diffusing social partnership from national to local level. Germany The impact of EWCs on industrial relations has so far been marginal. since EWCs seem to be quite an important innovation in the national industrial relations systems. though they apply to quite a small number of companies. They must be chosen from among elected works council members or union delegates (with direct elections as a fall-back method). and few EWCs seem to regard it as their task to anchor the EWC in these structures and seek to win the acceptance and interest of ordinary employees. Ireland Italy Netherlands As in Germany. which could make the EWC less of a supranational body. while the Irish model of "partnership" is rather narrow. this may also lead to a clear leadership of German representatives. but their limited spread together with the existing widespread presence of information and consultation rights have resulted in no evident effects on the Italian industrial relations system.Table 7 Impact of EWCs on selected national industrial relations Country Impact French employee representatives in the SNB (Special Negotiating Body) and statutory EWC are appointed by trade unions. Therefore. EWCs have been introduced in a context where codetermination rights are quite highly developed . Linkages between EWCs and national representation structures and workforces are still in their infancy. In legislative terms.and include group works council structures. with the distribution in line with the results of the most recent works council elections. regional or local level. it also true that Germany's highly developed system of co-determination and "trustful cooperation" might reduce the status of EWCs and limit their independence. Existing works council structures appoint employee representatives on SNBs and statutory EWCs (with direct elections as a fall-back). trade unions have tended to concentrate on establishing as many EWCs as possible they are only now being increasingly faced with the task of advising and training established EWCs. EWCs are linked to the existing system of representation via the procedure of appointing employee representatives on SNBs and statutory EWCs: these are appointed by works council-type "unitary union representative bodies"(Rsu s) and nationally representative trade unions. then.

Table 7 Impact of EWCs on selected national industrial relations Country Impact EWCs have an essentially different role from that of national works councils. Sweden UK 106 . mirroring quite closely the legal position of Spanish works councils. facilitating the creation of communication channels between workers in the different plants across the country. EWCs are seemingly having two main effects on Spanish industrial relations. attributed to works councils. as non-union representatives have supplemented trade union-based representation within EWCs. In the appointment of members of SNB and statutory EWCs. and indeed global. as in the case of Belgium. assigned to trade unions. the EWC should not be seen as a natural extension of existing consultation structures. is seen as fitting very easily and "naturally" into the Spanish industrial relations system. Another reason for the lack of evident major effects of EWCs is that EU rules are not as far-reaching as the national ones.a provision which harmonises well with the way that the Swedish system is constructed. field of operations. both as a legal institution and as a representative body. First. making it the European country with the second-largest number of Article 13 EWCs (after Germany). Third. Second. there is a significant change in industrial relations culture in that trade unions more fully recognise the importance of the European. Even if the UK was not covered by the Directive until 1997 it is arguably the country where the impact on the national industrial relations system is greatest. the key level of industrial relations being at site or establishment level. more commonly. Spain The EWC. Given the strict traditional separations between bargaining. as they provide the right to information and consultation only. the setting up of group-level union committees in companies where previously these did not exist. the move to create EWCs is stimulating. Existing union delegations play the key role in appointing members of SNBs and statutory EWCs. based on trade union representatives. and not the right to negotiations and influence. UK relies traditionally on a "single-channel" system of industrial relations. the fact that negotiations for the creation of EWCs are carried out by employee representatives and that trade union officials might sit in the SNB could be considered minor innovations. and codetermination. since in many large UK-based organisations there are no group-wide industrial relations structures. the establishment of EWCs is likely to encourage greater group-wide liaison between employee representatives in such companies. however see employee-side-only EWCs (but not joint bodies) as a natural extension of the national works council structure to the European level. First. priority is given to local trade unions which have signed agreements in force in the company . and are increasingly taking steps to improve their skills in this new area. EWCs have introduced a form of "dual-channel" representation. at least 58 Article 13 agreements were reached in UK-based MNCs. or. Union sources. Second.

MNCs. employers and labour organisations to establish minimum employment standards. Inevitably.ilo. The International Labour Organisation (ILO) The ILO was founded in 1919 and is a tri-partite United Nations (UN) agency bringing together’ for pay and benefits is intended to prevent unfair competition between nation states on the basis of unacceptably poor labour – and Organisation for Economic Co-operation and Development (OECD) http//oecd. a significant constraint confronting the ILO is that governments may not be compelled to accept its standards or adopt its recommendations. the argument against the existence of international standards is that they can inhibit free markets. The existence of an international ‘safety.Source Eironline (1998) International Labour Standards At a global level attempts have been made by important agencies to establish a set of internationally agreed norms and standards for the conduct of employee relations. and seeks to counteract the worst excesses in flights of international capital and business to developing As Bennett (ibid) asserts. some countries will fail to adhere to standards. As Bennett (ibid) points out. inhibit competition and create unemployment. • • • There be freedom of association in all member countries Workers should have the right to strike Specific trade unions should have the right to conduct activities on employers’ premises. 107 . The ILO’s constitution requires the organisation to. in formulating ethical standards and practicing corporate social responsibility are likely to heed the recommendations of the International Labour Organisation (ILO) http//www. Examples of ILO resolutions are as follows. • • • • • Encourage the improvement of the conditions of workers Discourage particular countries from failing to adopt humane conditions of labour Promote the principle that labour should not be regarded as a mere ’commodity or article of commerce’ Support the view that the price of labour be determined by human need and that workers are entitled to a reasonable standard of living. therefore.

China and Russia to the least developed economies in identify good practice and co-ordinate domestic and international policies.htm which provides an authentic overview of current labour relations issues in the European Steel Industry Consider the following question. seek answers to common problems. It provides a setting in which governments may compare policy experiences. or business systems.eurofound. The Organisation has also been one of the largest providers of comparable statistics as well as economic and social data. India and South Africa. Activity (seminar): Industrial Relations in the Steel Industry Access the website http://www. How do labour relations in the steel industry vary from country to country? Explain how industrial changes are being implemented by ‘social dialogue’/ Would you agree that ‘social dialogue’ is an appropriate method to modernise the industry? Why/ why not? Summary This unit has investigated variations in labour relations structures (including major actors and processes) in the three leading global regions. Indonesia.The Organisation for Economic Cooperation and Development (OECD) The OECD was established in 1961 and represents thirty countries. Heterogeneity in the pattern of global labour relations structures may be attributed to continuing diversity in the institutional hardware. Russia and Slovenia to open discussions for membership and to offer enhanced engagement. China. The OECD also shares expertise and exchanges with more than 100 countries from Brazil. Estonia. Such variations in labour relations structures pose a 108 . In May 2007. The organisation brings together the governments of countries committed to democracy and the market economy from around the world to. Israel. to Brazil. • • • • • • Support sustainable employment growth Boost employment Raise living standards Maintain financial stability Assist with national economic development Contribute to growth in world trade. • • • • Identify the major challenges confronting the European steel industry. OECD countries agreed to invite Chile. lying across international ‘fault lines’.

.R.2. References Bennett. (2007) Industrial Relations in EU Member States 2000-2004. and Ferner. Brussels Gunnigle. Murphy. 33. London. second edition.. and Leat.challenge to MNCs. Dublin European Foundation for the Improvement of Living and Working Conditions (2007a) Industrial relations in EU Member States. and other labour relations matters. 14. Japan and USA. An International and Comparative Perspective. K. 2000-2004. R. (1997) Employee Relations. FT Prentice Hall Edwards. which may have to modify their approaches to involving employees in corporate decisions. A. Van Ruysseveldt (eds. M. and Morley. Dublin European Trade Union Confederation (2008) European Works Councils. according to their locus of operation. 2006. 94-111 Eurofound.The Impact of European Works Councils. G.) International Human Resource Management. 1998 European Foundation for the Improvement of Living and Working Conditions..W. T. (2002) ‘The Renewed ‘American Challenge’: A Review of Employment Practices in US Multinationals’ Industrial Relations Journal. (1995) Human Resource Management. (2004) ‘The transfer of employment practices across borders in multinational companies’ in A. Dublin European Foundation for the Improvement of Living and Working Conditions (2007b) Industrial Relations Developments in Europe.Eironline (European Industrial Relations Observatory) . 2001 Eurofound.Industrial Relations in the EU. Heraty. M. N. Cleveland. P. N. London.J. Harzing and J. Sage Edwards. (2002) ‘Localisation in Human Resource Management: Comparing American and European Multinational Corporations’ Advances in International Management.259-84 Hollinshead.Eironline (European Industrial Relations Observatory) . T. Harlow. Pitman Publishing 109 .

London. (2003) ‘The European Union’ in G. M. E. Wilkinson.Hyman. 4(1): 1-41 Marchington.Tailby (eds. second edition. R. FT Prentice Hall Sinclair. A. Blackwell Royle. A Critical Text.W.Sorge (ed.) International Human Resource Management. (1998) ‘The IEBM Handbook of Human Resource Management’.) Employee Relations.. and Warner.) International Human Resource Management. (2000) Working for Mcdonalds in Europe.) The Changing European Firm: Limits to Convergence. The Unequal Struggle. (2004) ‘Varieties of Capitalism. Gunnigle. Thomson Learning Whitley. M. Oxford. T.H. Routledge 110 .. Linehan (eds.Hollinshead. Routledge Salamon.Nicholls and S. A. P.Nicholls and S.m Goodman. Employment Department Research Series. M. National Industrial Relations Systems and Transnational Challenges’ in A. Harlow. Harlow. Harzing and J. J.M. in A. (2002) ‘Business systems’. R. Basingstoke. London HMSO O’Hagen.Towers (Ed. International Hierarchy and Global Ecology’ Review of International Political Economy. FT Prentice Hall Whitley. P. Ackers. (1996) ‘The Social Construction of Economic Actors’ in R. (2004) ’Issues in the management of industrial relations in international firms’ in H. Palgrave Macmillan Poole. fourth edition.2. London. M. Morley.) Organisation.Hollinshead. (2001) Industrial Relations Theory and Practice. P. R. (1997) ‘The Post-Fordist World: Labour Relations.Whitley and P. London and New York.Tailby (eds. M. International Thomson Business Press Ramsay. (2003) ‘Employee representation: trade unions’ in G. No. London. London. FT Prentice Hall Lipietz.Scullion and M. Van Ruysseveldt (eds..) Employee Relations. (1992) ‘Commitment and Involvement’ in B. P.) The Handbook of Human Resource Management. J. Harlow. (1992) New Developments in Employee Involvement.. Sage Leat. Kristensen (eds. H.

firstly. While the economic and managerial ‘freedom’ has represented the ideological catalyst driving the US economy to world-leading status.unionised enterprises. it has been prone to recession in recent years. both within and across companies. and apparently in contradiction of its own advocacy of international market liberalism. price control. a strong orientation towards private. the gap between ‘winners’ and ‘losers’ is evident both at societal and corporate levels. Features of neo-liberalism which tend to be upheld in the US context are. and a more serious financial crisis in the later part of the decade related to trade deficit and consumer borrowing. 111 . Latin Americans and Asians. The Federal government owns the postal system. In the US. counteracting monopolies through anti-trust law. While the US economy has been vaunted as leading the world. managerial freedom and corporate competitiveness. and towards small businesses.Unit 8 The Americas. The historic growth and success of the US economy has been built not only on a wealth of natural resources. Somewhat controversially. an orientation towards mobility of labour. low levels of government regulation (or ‘small’ government) and low rates of taxation. The US labour force is characterised by ethnic diversity. African Americans. ‘a shallow’ economic downturn occurring in the early 2000s. the US government does maintain an important role in national economic management. and particularly minerals. the Amtrak Railway system and the Nuclear Regulatory Commission. fourthly. it is clear also that the pervasive influence of ‘the market’ has carried with it detrimental social effects. the Bush administration acted to protect the US steel industry from global competitive forces in the 1990s. but also on an expanding and highly productive workforce. secondly. political and cultural contexts for HRM in the US and in Mexico To explore key features of HRM practices (relating to recruitment. ownership of business. a history of anti-union sentiment across much of industry and a current prevalence of non.The United States of America and Mexico Objectives • • • To consider the North American Free Trade Agreement (NAFTA) and its economic effects in the region To gain insight into the economic. manifesting a business system which places highest premium on shareholder values. thirdly. embodying immigrant populations including (East and West) Europeans. as opposed to public. Examples of governmental intervention into economic and social matters include. and. training and pay) in the US and Mexico The United States Introduction The US may be regarded as the global exemplar of ‘neo-liberal’ economic and employment policy. monetary and fiscal policy and social regulations to improve public safety and welfare. Despite the apparent prevalence of neo-liberalist thinking.

ibid). The key developments associated with NAFTA( www. As relatively low cost producers.M. with a combined purchasing power of around $11 trillion (Hodgetts and Luthans. In the era of globalisation and rapid technological change. with the largest gains being between the US and Mexico.nafta-sec-alena. ibid). the richest 10% in the country earning approximately sixteen times more than the poorest ) have been. ibid). These authors assert that the US now exports more to Mexico than it does to Britain. Germany and France combined. Wild and Han (2006) report that. The US economy is strongly international in orientation. In consequence US owned companies including Hewlett Packard and I. 2008). trade between the three nations has increased markedly. While NAFTA has provided a powerful stimulant to trade in the North American regions. the Middle East and beyond. for example commanding dominant market positions in Europe. The North American Free Trade Agreement (NAFTA) While the US and Canada have been major trading partners for many years.skilled employees (Yellen. in 1997. but also now affecting more highly educated and semi. auto parts and energy goods. Mexico joined NAFTA in 1994 following an economic growth spurt in the early 1990s. and enjoying close geographic proximity to the US and therefore beneficial transportation costs. Eastern Europe. 112 . job displacement has become commonplace in the US. As Hodgetts and Luthans (2003) point out. Mexico became the second largest export market for the US for the first time ever. • • • • • The elimination of tariffs as well as import and export quotas The opening of government procurement markets to all three national members An increase in the ability to make investments in each others country An increase in the ease of travel between the countries The removal of restrictions on agricultural products. US MNCs are dispersed widely throughout the world.B. it has also prompted ambivalent responses amongst critical commentators. and that. General Motors and Ford. 2006). Mexican businesses are now able to take advantage of US markets by replacing goods previously imported from Asia (Hodgetts and Luthans. The US also possesses a large international market share in the high technology. and Delphi Automotive Systems have established productive utilities in Mexico. Nissan and Daimler Chrysler have established operations to take advantage of this market location (Hodgets and Luthans. including Volkswagen. US owned corporations expanding their interests into Asia. Wild. this having the most detrimental effect on unskilled workers as their activities are shifted to lower cost global regions. It has been estimated that the salaries of Chief Executive Officers is now around 300 times the earnings of the average American worker (Berliner. petroleum and consumer goods sectors. telecommunications. as a provider and recipient of Foreign Direct Investment.The United Nations Development Programme Report (2006) on income equality ranks the US as tied for 73rd out of 126 countries. while MNCs from overseas. since NAFTA took effect. North America now constitutes one of the three largest trading blocks in the world.

(Wild. On the other hand. imposing long hours of work and breaching acceptable health and safety standards. It has also been claimed that the ). this reflecting self reliance. and impatience towards rules and bureaucracy is reflected in a low uncertainty avoidance score. Cultural orientation and the US In Hofstedian terms. the A related concern has been the alleged displacement of unskilled jobs from the US to Mexico. however. Since the inception of NAFTA in 1994 there is some evidence that employment and environmental standards have been enhanced in Mexico.ustr. Tayeb (2005) suggests that North American employees may indeed display solidarity and express collective sentiment at times of national crises. yet can be collectivist in the face of a common threat Small power distance: egalitarian.9 million US jobs ( www. www. without its maquiladoras operations it would have relocated production from North America to South East Asia (Hodgetts and Over one million Mexicans work in over 3000 manufacturing plants.pbs.Considerable attention has been given to the Maquiladoras in Northern Mexico. the most notable cultural predisposition in the US is its strong orientation towards individualism. and it has been asserted that some of these have offended international labour standards by employing mainly young women on low rates of pay. such as in the recent traumas following the terrorist attacks of September 11th. ibid).000 jobs and job opportunities have been forfeited by the US by NAFTA. and a preference towards equality and democratic organisational principles implicit in a low power distance score. Jackson (2002) suggests. competitiveness. preference to act as individuals rather than as members of a group . 2007) According to Hofstede (1994) the US also scores relatively highly on masculinity. and in respect of which the Mexican government has all but waived taxes and customs fees. and other low cost production sites in Mexico have caused environmental damage by polluting air and water. while Packard Electric has suggested that. Wild and Han. this rather resembling the tactics in American football games. which romanticises individual possibilities of rising from the ‘log cabin to the Whitehouse’ on the basis of personal endeavour and force of personality.CIO confederation suggesting that 750. the US Trade Representative Office claims that exports to Mexico and Canada support 2. ibid). The notion of individualism is clearly manifested in the American Dream. tend not to treat people differently even when there are great differences in age or social standing 113 .shtml Major American national cultural characteristics and management practices National Culture • • Highly individualistic. that powerful individualistic tendencies are sometimes tempered by the requirement for people to ‘huddle’ into groupings for projects of mutual interest. which is a zone of export assembly plants for the United States. www. Hochwater and Matherly. 2001 and Hurricane Katrina (Ferris. looking after family members and loose bonds with others. self focused.

driven: conviction that all problems can be solved. 2004). hierarchy or gender live more easily with uncertainty. seminal contributions to theory and practice in the 114 . informal ethnocentric.• • • • • • • • Masculine. sceptical about rules and regulations value punctuality and keep appointments and calendars much more concerned with their own careers and personal success than about the welfare of the organisation or the group value success and profit acceptance of conflict system. direct. tend to say exactly what they mean Open. aim high. do not talk around things. try new things. informal. Tayeb (2005) ibid HRM in the USA It is widely accepted that the current conception of HRM was ‘born in the USA’ (Communal and Brewster. believe their culture and values are superior to all others future orientated. a predisposition to believe that new is good ‘can do’ attitude HRM and other employee related values and practices • • • • • • • • • • • • • • • • • • • • • • • prefer participative leadership style superiors are approachable subordinates are willing to question authority status based on how well people perform their functions performance-orientated promotion and reward based upon merits as opposed to status. educated and well trained strong devotion to managerial prerogative hire and fire policies communications skills. goal orientated. achievers Low uncertainty avoidance. ‘go for it’ result. risk. ambitious.orientated professional. expressive in communication. directness. strong belief that present ways of doing things inevitably are replaced by even better ways readiness to change. often aggressive emphasis on entrepreneurship and innovation legalist approach to contracts informality yet a preference for written rules and procedures dislike of trade unions preference for HRM over unionisation Source.takers. explicit. competitive. entrepreneurial Low context. friendly. system and energy will overcome any obstacle proactive: take initiative.

or affirmative action. in protection against sexual harassment. human relations and human capital theory. the widespread use of computerised technology and credibility problems confronting ‘traditional’ personnel management. 1994) and at the Universities of Michigan and Columbia (Fombrun et. these preconditions not necessarily being transferable to other global business environments. ‘partnership’ based approaches to collective bargaining. and compels employers to ensure reliability and validity in procedures for hiring. legislation on grounds including sex. Consideration of prevalent practices in HRM is therefore founded on the notion that US management teams have discretion in formulation and experimentation with HR strategies. internal corporate relativities and the need for performance orientation. Beaumont (1982) and others point out the ‘birth’ of HRM in the early 1980s was not accidental. Accordingly employers have considerable latitude to formulate payment strategies. firing. ethnic orientation. Despite the general milieu of non intervention by the state in employment matters an important and perhaps contradictory force is the powerful anti discriminatory.collar’ service sector of employment.discipline being made by management theorists at Harvard Business School (Beer et. who state that underlying the philosophy of HRM are assumptions of managerial freedom and enterprise autonomy. As Hollinshead and Leat (1995). age. this permitting two way communication and interaction between the potential applicant and the company. and offers little job tenure to new recruits. promotion and training. this being argued persuasively by Communal and Brewster (ibid). but was stimulated by the onset of an important set of environmental and product market conditions. as manifested. more recently. it may be argued that HRM policies and practices are strongly ‘embedded’ in the US business system. In the unionised and striking is prohibited during the lifetime of a collective agreement. the relative growth of the ‘white. health care and pensions. ‘positive lessons’ in people management learnt from Japan. race. Formative conceptions of HRM undoubtedly drew upon previous influential contributions to management thinking emanating form the US. Increasingly non wage benefits are included in the payment package. Turning to remuneration and pay. declining trade union membership and power. This lends a litigious and contractual orientation to work relations. and employers contribute towards social security. This implies a considerable reliance on external labour markets for filling vacancies.. interviews. and are minimally constrained by statutory influence. Generally collective agreements have the force of law. 1964). increasing employment of women and the growth of part time work. including increasing international competition. around eighty. 115 . sexual orientation and disability. Thus. While there has been an emphasis on ‘traditional’ methods for recruitment purposes (including job descriptions. notably scientific management. Indeed individual (as opposed to collective) rights are subject to vehement protection throughout US employment. most notably the more highly regulated terrain of continental Europe.eight percent of the US workforce belongs to non union enterprises. Indeed variable pay according to performance management measures applying to individual employees is common in the US. taking into account labour market rates. for example. Thus the field of recruitment and staffing remains conditioned by the ‘employment at will’ doctrine upheld by the courts in 1908. pay. psychometric tests and assessment centres) an increasing emphasis in being placed upon internet based sourcing of new recruits. there is a tradition of antagonistic as well

) agriculture(0.000 (2007 est. services (78. services (16. food processing. chemicals. motor vehicles. forestry and fishing (0.8%). defence US Dollar NAFTA.5%) are called to work only as needed. or ‘on the road’.5%) 4. and crafts (24%). mining. consumer goods. steel. farming.) $46. sales and administrative support (24.84 trillion (2007 est.6%) excludes unemployed (0. with an emphasis on job related factors in a high technology environment and with a need for customer focussed behaviours. there is a strong psychological underpinning in much development activity. and managing employee trauma resulting from ‘environmental’ occurrences (Ferris et. Indeed it has been estimated (Eiro. technical.6% (2007) petroleum. OECD and others Unemployment Main industries 116 . mining. telecommunications. A further two million workers (1. At managerial level.9%). a growing emphasis is being placed on health and safety matters at work. that around 28 million workers (or one fifth of the US workforce) are engaged from home. critical competences relating to leadership and team working as well as dealing with high levels of change and stress. and Hurricane Katrina. but practices such as teleworking and telecommuting.5%).6%). there has been a significant increase in ‘flexible’ forms of employment in the US. al. at telework centres. involving not only part time work. In the wake of the attacks on the World Trade Center on 9th September. WTO. transportation. manufacturing. More generally.4% (Feb 2007 to Feb 2008) 12% 153. aerospace.Training is viewed as a high priority area by many US companies.. The US Economy Currency Trade Organisations Statistics GDP GDP growth GDP per capita GDP by sector Inflation Population below poverty line Labour force Labour force by occupation $13. electronics.5%).) 1st 2. managerial and professional (35.6%) (excludes unemployed) (2007) 4. 2001. 2001).2% (2007 est. drawing on statistics produced by the International Telework Association and Council. lumber.1 million (includes unemployed) 2007 est. industry (20. ibid) .

The predominant religion is Catholicism (embracing 89% of the population). toys) (2003) China 19%. furniture. capital goods (transistors. motor vehicle parts. computers.Galicia. allegedly through the ‘careful management’ of elections (Fowler. medicines. motor vehicles parts. Mexico was ruled by Spain. the Senate and the Lower House. 2005). with 6% subscribing to Protestantism and 5% other faiths. lead.7%.External Exports Export goods Main export partners Imports Import goods Main import partners Gross external debt $1.25 trillion (30 June. corn) 9%.owned industries and the liberalisation of energy. Since July 2000. Japan (6%). electric power machinery). industrial supplies 33% (crude oil 8%).14 trillion (2007 est) agricultural products (soybeans. clothing. consumer goods 32% (automobiles. natural gas and timber. medicines) 15% (2003) Canada (22%). Canada 16&. zinc. 117 . aircraft. The country’s political structure embodies thirty one states and one Federal District (Mexico City). being governed by the National Action Party (PAN) until 1929. Mexico. In 1826 the country became independent was transformed into a republic. it is argued that Mexico has moved significantly towards democracy through the election of Vicente Fox of the National Action Party (Arias. although central government has demonstrated political ineffectiveness in recent years. fruit. Mexico’s natural resources are petroleum. The political system comprises two legislative houses. United Kingdom (5%) $1. telecommunications equipment. each state retaining a degree of self government. silver. Japan 8%. telecommunications equipment) 49% consumer goods (automobiles.987 trillion (2007 est) agricultural products 5%. China (10%). The population is over 100 million with a growth rate of 1. 2007) Mexico Introduction The ‘United States of Mexico’ covers a total area of approximately two million square kilometres and borders in the north on the US. gold. Germany (5%). from 1526. copper. 11%. capital goods 30% (computers. For three centuries. industrial supplies (organic chemicals) 27%. having failed to implement economic reforms concerning privatisation of state. office machines. Although the Mexican constitution stipulates that presidential elections are to be held every six years the Communist orientated Institutional Revolutionary Party (PRI) maintained power from 1928 to 2000. Germany 5% $12. Mexico (12%).2002).

high technology and the like.8 million barrels per day. with employment prospects in banking.html Cultural orientation and Mexico Aria-Galicia. Mexico’s GDP per capita is $10. General Motors and Chrysler have operated in Mexico since the 1930s. There is evidence that parts of the Mexican economy are now burgeoning as firms such as the glass maker Vitro gain international strength and reach (Taylor and Napier. The Mexican economy is strongly orientated towards importing and exporting.The Mexican economy is highly diverse. (2005). However. these two countries providing also around 55% of its imports. Argentina. The country’s Gross National Income and income per capita are the highest in Latin America at $754 billion and $7. Honduras 420% and Costa Rica 528%. The country is the fifth largest producer of oil in the world.600.theodora. with around 90% of trade occurring under free trade agreements. Honda. while the equivalent trading statistic with Chile was 285%. with agricultural activity dominating employment. with Volkswagen. as much of the growth and prosperity has occurred in the northern part of the country bordering on the US Here. 118 . despite economic improvement in the new millennium.310 respectively. http://www. well developed cities are in evidence and a modern economic infrastructure is in place. a poverty rate of around 30% is still apparent. Other notable trading partners include around 90% of Mexico’s exports are to the US and Canada. drawing upon Kras (1988). Switzerland and Bolivia. It is the eighth most visited country in the world.html http://www. Mexico has gained global competitive strength through its three main industries of oil. From 1993 to 2002. tourism and automobile technologies. in the Central and Southern regions. BMW and Mercedes. while more arid regions in the Centre and South possess the characteristics of developing economies. Under the free trade umbrella of NAFTA.theodora.Benz locating more recently on Mexican soil.F. http://www. 2005). L. bordering a super-power in the North and the relatively weak economies in the South Uruguay and Paraguay. Ford. makes the following observations concerning Mexican cultural features.html By way of contrast. It is bordered by two grand oceans for exporting and importing to the West and East. these statistics may be regarded as somewhat misleading. Nissan. a regional trade agreement between Brazil. producing 3. trade between Mexico and the US increased by Mexico’s contribution to automobile manufacture differs from its Latin American neighbours as there is significant concentration upon the ‘higher end ‘functions of research and development and production of complex components rather than routine assembly of parts.redmercosur. bringing in over 20 million visitors each year. Trade is also increasing within the Latin American bloc. making Mexico an upper middle income economy. Mexico having expressed an interest in joining Mercosur.

Family ties are strong 2. following the assertion of Hofstede (see unit 2) identifies a general shift towards individualism in a number of economically advancing countries. has found significant shifts in the values of young Mexicans over the period of one decade. Loyalty to the group is a prevailing value. truth is tempered by diplomacy. and subsequently a sliding scale of holiday entitlements according to length of service Twelve weeks maternity leave 119 .‘family is the first priority. Mexicans follow the superior’s orders because s/he is entitled to be obeyed.managed work teams are gaining in popularity in many industries. planning is aimed at shortterm vision instead of the long term.eight hour working week. Power distance. there is basically a theoretical mindset instead of a practical one. employee benefits and trade union activity. fear of losing face is paramount. Inglehart (1997). which values warm interpersonal relations. referring to Hofstede (ibid). Diaz. Mexico scores highly on the feminine approach. autocracy is often exercised in firms. • • • A forty. promotions are based on loyalty to superiors. 3. and interest in others’ matters. title and position are more important than money. Individualism-collectivism. labour laws being based upon the Mexican Constitution (1917) and the Mexican Federal Labour Law. which regulates labour contracts. leisure is considered essential for a full life. which means that many firms are family companies. however. deadlines are flexible. In many firms. confrontation is to be avoided. 1. Self.Guerrero (1995). identifies the following primary cultural predispositions. The following constitute key legally prescribed benefits (Arias-Galicia. to whose authority the worker is subordinate in all matters referring to work’. dress and grooming are status symbols.2005) The same author. Other significant legal provisions impacting upon employment are contained in the Social Security Law and the Worker Housing Institute Law. quality of life. These views are reinforced by the existing labour law which states ‘Perform work under the Patrón’s orders (or his/her representative). ibid). HRM in Mexico Employment is subject to a relatively high degree of legal regulation in Mexico. minimum wages. empowerment programmes have been very successful. Femininity-masculinity. including Mexico. Workers should have at least one paid day off work each week A six day paid vacation after one year of work. and competition is avoided since harmony is most valued’ (183. profiting from the collectivistic orientation of Mexican workers. Mexicans prefer to work in an environment characterized by close social relations in which group members care for and support each other. which may be subject to enhancement at individual company level. however.

as many Latin American companies have strong family traditions (Davila and Elvira. with illiteracy remaining a serious social problem. ibid). Despite. Two specific training schemes have been developed by the Ministry of Labour in coordination with employers’ organisation and the public employment services. A number of major companies have a preemployment school.2003). training at work is considered to be a social benefit in Mexico and the labour law stipulates training as an employment right. In the field of recruitment and selection. An extension of this programme has been targeted at literacy skills and providing adult vocational education to various groups (particularly migrant workers in the informal sector) as a first step towards elementary vocational training. Regarding the second category. Although anti-discriminatory laws exist there is still evidence of a ‘glass ceiling’ confronting women in employment (AriasGalicia. personality characteristics such as potential for co-operative and courteous behaviour and organisational loyalty are given a high priority. various methods may be used. including posters on factory doors. the proportion of the population obtaining ‘for the job’ training remains small. age of retirement and years worked. the aforementioned Federal Labour Law regulates many aspects of pay. a distinction may be drawn between ‘for the job’ and ‘on the job’ training. The Comprehensive Quality and Modernisation Programme (CIMO) is devoted to providing technical and financial support for short-term training in micro. mass media.Galicia. based upon slary earned. ibid). ibid). the efforts of training agencies in the state and private sector. offering ‘scholarships’ to promising potential recruits to attend. the National College for Professional and Technical Education (CONALEP) has played a major role in technical and professional training over the past twenty years (Galindo. Turning to training and development. small and medium sized enterprises. In respect of the first category.• • • • 5% of salaries (including fringe benefits and overtime) should be paid by companies to an institute (INFONAVIT) to provide workers with loans to buy houses or renew housing The legal age for working is normally 16 years An annual bonus equivalent to at least 15 working days is payable to workers Retirement wages are provided by the social security system. The Training Scholarship Programme for Unemployed Workers (PROBECAT). results of training are not systematically evaluated or subject to cost/ benefit analysis. Collective 120 . ibid). ibid). ‘word of mouth’ ‘head-hunters’ and employment fairs organised by employers (Arias-Galicia. although this is subject to change Hoshino (2004). At Higher level.Galicia. evidence remains that around 10% of the population has not attended school. The Labor Ministry (Secretaria del Trabajo y Previsión Social) provides a service to put unemployed people in contact with employers (AriasGarcia. in keeping with the ‘theoretical’ Mexican cultural predisposition. In selecting candidates for employment. distributes short term grants combined with training courses to unemployed and displaced workers (Galindo. In general. depending on the size of the organisation. ibid). training is provided by the educational system. In the field of pay and remuneration. however. Unfortunately. from basic schooling to higher education. In seeking to attract applicants. there has been a strong tendency to recruit family members and close relatives. particularly in the technical area (Arias. employment conditions and fringe benefits. common selection methods including interviews and psychometric tests (Arias. 2005).

It is not customary in Mexico to distinguish between wages and salaries. with unions being legally entitled to demand a wage increase every year and new working conditions every two years. (2008) ‘Haves and Have-Nots... and Walton. P. Macmillan Berliner.). D.Galicia. Sage. Elvira and A.a review’ in Salamon. it is evident that Mexico continues to manifest a contrasting ‘Latin American’ approach to HRM.bargaining between management and trade unions is customary in large organisations. London Beer. Routledge Beaumont. L. (1984) Managing Human Assets. Using available evidence..E. B..Galicia. in a broader context of national fragmentation between developed and developing internal regions.F.) Managing Human Resources in Latin America.M. New York. consider the potential benefits and drawbacks associated with this with particular reference to Mexican institutional and cultural factors. (2005) ‘Human Resource Management in Mexico’ in M.Galicia. M.R.Davila (eds. exploring how HRM concepts and practices are predicated on the notion of managerial freedom and organisational autonomy. P. Human Resource Strategies. An Agenda for International Leaders’ London and New York.Income Inequality in America’ N. Quinn Mills. Activity (seminar): You are the management team of a US owned MNC in the glass manufacturing sector planning to establish a joint venture with a Mexican partner.. all types of remuneration being referred to a ‘Salarios’ or ‘Sueldos’ (Arias. U. While the economic relationship between the US and Mexico has recently intensified as a result of NAFTA. A significant issue in employment remains the safety of workers. the maintenance of safe and clean conditions in small shops and similar premises has also been a cause for concern (Arias.R. (ed. Summary This unit has explored the archetypal ‘neo-liberal’ economic and political system in evidence in the US. Similarly.(1982) ‘The US human resource management literature. ibid). with the culture of ‘machismo’ militating against the wearing of safety helmets and the taking of other protective measures despite employer insistence. G. Spector. Lawrence. R. Washington 121 . ibid). References Arias.P.

T. Trillas Elvira. second edition. Sage Kras.M. 2001 Ferris. Hochwater. M. New York Hofstede. Culture. London Galindo. (2004) ‘HRM in Europe’ in A. Warner (ed. (2003) ‘Mexico’ in M. Edward Elgar Hodgetts. Wiley Fowler. C.) Managing Human Resources in North America. An International and Comparative Perspective. and Davila. R.(2004) ‘Family Business in Mexixo.Industrial Relations in the EU.A. London and New York. and Matherley. Princeton. London. G. C.Hill. (1984) Strategic Human Resource Management.(2007) ’HRM after 9/11 and Katrina’ in S.2000. F. (1988) Management in two cultures. Strategy and Behavior. Fifth edition. (2005) Managing Human Resources in Latin America. G. M. Princeton University Press Jackson.V. (1994) Cultures and Organisations.W. (1997) Modernisation and postmodernisation. HarperCollins Hollinshead.Eironline. Institute of Developing Economies. Japan External Trade Oragnisation Inglehart. Northamptopn.S.. (2002) International Human Resource Management.) International Human Resource Management. Tichy. Ruysseveledt (eds.R. Canad. and Luthans. M. Arnold. Intercultural Press 122 . and Devanna. London. W. Modern History for Modern Languages. N.Zamko and M. R. W. and Leat. T. Harzing and J.. Routledge Eurofound. Yarmouth. USA. London. (1995) Human Resource Management. (2002) Latin America 1800.M. and Brewster.A. G. Software of the Mind.Communal. R.A. A. London. Bridging the gap between US and Mexican managers.M. A Cross-cultural approach.. Responses to Human Resource and Management Succession. Pitman Hoshino.Ngui (eds. NJ. economic and political change in 43 societies. C. Japan and USA. Sage Diaz-Guerrero. Cultural.I. McGraw. E. Mexico. (2003) International Management. ME. L. T. (1995) Psicologia del Mexicano (Psychology of the Mexican). Routledge Fombrun. London and New York..) The Handbook of Human Resource Policies and Practice sin Asia-Pacific Economies (Volume 2).

H. New Jersey. (2006) ‘Income Inequality in the United States’ President’s Speech to the Center for the Study of Democracy. The Challenges of Globalisation. Wild. A critical text. J. Oxford University Press Taylor..L. Basingstoke and New York Wild. J. N. (2005) International Human Resource Management. and Han. New York. Human Development Report. Scullion and M. Pearson Prentice Hall Yellen. S. and Napier.K. Basingstoke.) International Human Resource Management. The Federal Reserve Bank of San Francisco 123 . K.W.C.Linehan (eds. Palgrave Macmillan. A Multinational Company Perspective.Y. third edition. Palgrave Macmillan United Nations Development Programme (2006).L. (2005) ‘International HRM in the twenty-first century: crossing boundaries.Tayeb. M. building connections’ in H. (2006) International Business. J.

Scandinavia and the ‘Latin countries). Yet. retraining. Germany. job transition support. and current HR challenges Introduction The continent of Europe undoubtedly embodies considerable diversity in the policy and practice of HRM. the Netherlands. and HR practices associated with . for those ‘western’ nations occupying continental European territory (including France.European level as a result of EU policy making A relatively high degree of public ownership (by international standards) and ‘interlocking’ / family orientated patterns of corporate governance High levels of trade union membership and collective bargaining over pay and other employment conditions • • • • The following feature summarises EU policies having a direct or indirect effect on employment. 124 . dismissal and employment contracts Legislative requirements on pay Public funding of labour market programmes (including training.Unit 9 HRM and Europe Objectives • • • • • To understand the institutional context for HRM in Europe To consider the distinctive features of a European ‘model’ of HRM To investigate the context for. this being magnified by the accession of the post-socialist states in May nature of industrial relations. co-determination (worker participation) arrangements in some countries and works councils at shop floor level (see unit 7) Social security provisions Regulation of minimum social and employment standards at a pan. • • • • The regulation of recruitment. job creation for youth and long term unemployed Quasi. ‘insider’ or ‘co-ordinated’ institutional arrangements (see unit 2). based upon notions of ‘social partnership’ have powerfully conditioned modes of managing the employment relationship. the ‘Rhineland model’ of social partnership. as manifested in Germany To consider the trend towards deregulation of employment in Germany To explore the process of socio/economic transition in East European countries. Communal and Brewster (2004) identify the following predominant structural factors impinging upon HRM in Europe. including the right to trade union representation.

a continuous and balanced expansion. Spain. Finland and Sweden. and a situation where process move downwards toward production cost under the pressure of more competitive markets. Slovakia. Poland. France. Slovenia. Ireland. real comparative advantages play the determining role in market success. Italy. Malta. • • 125 . Norway and Sweden) (subsequently Austria. Portugal plus European Free Trade Association (EFTA). an accelerated saving in standard of living and a closer relation between the states belonging to it’ The Single European Market (January 1993) Objectives. New patterns of competition between entire industries and re-allocation of resources as. an increase in stability. Latvia. Jan 2007) Cecchini Report 1992 • • Significant reduction in costs. Cyprus. Finland. to remove all remaining physical. • • • • The removal of physical barriers The removal of technical barriers The removal of fiscal barriers The liberalisation of internal competition through strict competition policies Size of the single market 370 million customers compared to US population of 252 million (the above plus UK. Germany. Hungary.Austria. Lithuania. Jan 1995) (subsequently Czech Republic. to promote throughout the Community a harmonious development of economic activities. thanks to improved exploitation by companies of economies of scale in production and business organisation. • • • • Free movement of goods Free movement of people Free movement of services Free movement of capital To abolish systematic controls at the borders between the member states through. Greece.Feature European Union Factsheet The Treaty of Rome (March 1957) six founding European states. in home market conditions. Improved efficiency within companies . Estonia. new business processes and products generated by the dynamics of the internal market. widespread industrial reorganisation. Luxembourg and the Netherlands ‘The community shall have as its task. Increased innovation. Belgium. Denmark. by establishing a common market and progressively approximating the economic policies of member states. technical and fiscal barriers between the member states in order to achieve the four freedoms of movement. May 2004) (subsequently Bulgaria and Romania.

The Maastricht Treaty (in force November 1993) Aims and objectives • To promote economic and social progress which is balanced and sustainable.htm 126 . through the strengthening of economic and social cohesion and through the establishment of economic and monetary union. in particular through the implementation of a common foreign and security policy. To develop close co-operation on justice and home affairs. To maintain the acquis communautaire and build on it with a view to considering to what extent the policies and forms of co-operation introduced by the Treaty may need to be revised with the aim of ensuring the effectiveness of the mechanisms and the institutions of the ml http://europa. • • • • The Community Charter of Fundamental Rights forWorkers (the Social Charter) (Social policy formed a separate protocol to Maastricht Treaty as UK rejected provisions until 1997) Aims. including the eventual framing of a common defence policy which might in time lead to a common defence. ultimately including a single currency. • • • • • • • • • • • • Freedom of movement Employment and remuneration Improvement of living and working conditions Social protection Freedom of association Vocational training Equal treatment of men and women Information. in particular through the creation of an area without internal http://ec.europa. To strengthen the protection of the rights and interests of the nationals of member states through the introduction of a citizenship of the Union. consultation and participation of workers Health. • • • • Set of rights. and to reject all forms of discrimination or exclusion To promote improvements in living and working conditions To increase the economic and social cohesion of member states. protection and safety in the workplace Protection of children and adolescents Elderly persons Disabled persons To combat unemployment and reduce the inequality of its impact To ensure growth and greater job opportunities. To assert the European identity on the international scene.

In other employers’ organisation and trade union influence over these policies (see unit 7). • In the first part of this unit. commentators have argued (Gooderham et. the strategic implications of a management decision in Germany or the Netherlands will be subject to the involvement or scrutiny of powerful Works Council representatives or the worker directors on the supervisory board’ (Dodderham et. Throughout Europe. In the face of global competition the ‘Rhineland’ model is now subject to reform and de-regulative tendencies. Illustrative practices would relate to flexibility in employment practices. “The evidence from Europe is not only that the strategy process is more complicated than is often assumed in the textbooks. the need to ‘deregulate’ in order to match global competition from.. This observation would apply particularly to the UK and the new accession countries (see unit 7). for example from India and China. is serving to modify ‘insider’ or ‘co-ordinated’ institutional systems through engendering greater employment and labour market flexibility. 15) • While the ‘European model’ of HRM can be viewed as distinct from US conceptions. the contexts and practices relating to HRM in Germany will be explored. and the challenges they are confronting. 2004) that a distinctive ‘model’ of HRM may be in evidence in Europe. This is well captured by the following quotation. In the second part if the unit. • Constraints upon management ‘freedom’ to formulate and implement HR policies due to statutory. but that it may well work in different ways and through different systems involving different people. in contrast to the US. • Within Europe. certain national systems vary from ‘the norm’ and are asserting ‘neo-liberal’ tendencies in employment/ HR practice. In other words. HR considerations may be accommodated through the ‘stakeholder’ or ‘social partnership’ approach to economic and enterprise decision making rather than exclusively through a specialist and dedicated HR department. the ‘Rhineland’ model of social partnership perhaps typifying the distinctive European approach to the management of people. ibid. contingent upon the following features. even in the more regulated countries. it is clear also that patterns of convergence in observed manifestations of employment policy and practice are occurring. The following are significant explanatory factors.Accordingly. non-unionism and variability/ individualisation of pay. which ‘incorporate’ human resource considerations into the institutional dynamics of corporate decision making. the focus will be placed upon the transitional economies in Central and Eastern Europe. European HR managers’ ability to use HR policies and practices in a strategic fashion is mediated by ‘external’ institutional groupings. 127 . ‘insider’ patterns of corporate governance (see unit 2)..

A Closer Look at HRM In describing HRM in Germany it is necessary to commence with the important caveat that it has been difficult to find a precise and accurate translation of this term originating in the US. Key areas of concern are Kundigungsschutz (protection against dismissal) and Einstufung (allocation of workers to jobs). Consequently personnel practitioners need to adopt a consultative style and much time will be spent fine. Instead. pre-emptively. appraisal and lay offs normally need to be formally presented to works councils for their agreement. Following from the above.American cultures has already been delivered through the close institutional ties in Germany and the entrenched employment philosophy of nurturing internal markets and harnessing the skills of workers. This is not an isolated example. working hours. the (limited) movement of labour from enterprise to enterprise. warding off the threat of revolutionary socialism. This means that. we should note that much of the benign intent of HRM in Anglo. important aspects of pay. Such linguistic difficulties reflect German scepticism surrounding the term and the distinctive roots of the equivalent function in Germany. and the exchange of know.The company needed not only to reduce costs but also to increase productivity. As Wachter and Stengelhofen describe “Cartels. The commitment to internal labour markets flows from a long established German tradition of all ‘sitting in one boat’.how between firms have always been a dominant feature of German capitalism”. VW reduced working time by 20% for all employees while cutting wages by the same amount and introducing a new system of teamworking. legislation on Codetermination permits employee representation at a supervisory board level in major enterprises. This has been coupled with social legislation pioneered in the late 19th century to integrate all elements of society while. As will be described below. throughout its history. Yet. the ‘New Germany’ has faced some stern economic tests over its limited period of existence.tuning policy areas so that are acceptable to 128 .ranging employment legislation as well as corporate regulation. Undoubtedly. there is a legalistic feel to the personnel function with attention being given to the administration of wide. By virtue of the Betriebsverfassungsgesetz (Works Constitution Act) important decisions on matters such as pay. close ties between banks and industry. This may be illustrated by the transformation of Volkswagen in the early 1990s. These shifts in conditions of employment occurred with the full and active consent of employee representatives. many of these caused by the need to catalyse economic reform in the former GDR and to subsidise high levels of unemployment. personnel practitioners in Germany do not have direct access to the ‘HR policy levers’.Germany The Context for HRM Despite a relative downturn in economic fortunes over the past decade it is now clear that Germany is ‘back in business’. Additionally. Adopting the slogan “Costs instead of heads”. in contrast to practice in many concerns in the US and the UK. the country has demonstrated resilience in the face of economic adversity and considerable capability to mobilise its human resources through the gaining of social consensus. and it demonstrates the German predisposition to protect jobs wherever possible. and the organisation of training are typically determined outside companies.

recruitment and selection decisions require the agreement of works councils in companies employing more than twenty staff. The function itself tends to be occupied by lawyers.employer collective bargaining. The country suffers disproportionately from the ‘demographic time bomb’ with ‘greying’ of the labour force being evident while birth rates decline. Secondly. free dental treatment and visits to health spas. Staffing. Representatives need to consent to each new appointment and are permitted to see all relevant documentation such as job descriptions and application forms. Below the major features of employment practice in Germany are considered briefly. and many companies allow unpaid breaks of up to seven years. as Arkin describes. including application forms. a significant trend in recent trend in recent years has been the centralisation of pay determination arrangements towards company level. Methods of selection are similar to those widely practised in the UK. The emphasis placed on nurturing of internal labour markets is associated with distinctive priority areas for German personnel specialists. Unlike its British counterpart (the CIPD). works councils are frequently involved in the application of industrywide rates. economists and social scientists and the professional association for personnel management (DGFP) comprises 1300 members. Individual employers have greater discretion in the setting of managerial salaries and the provision of incentive payments. The State retains a monopoly on the placement of labour through the Federal Department of Employment and a placement service operates in larger firms. identifying training needs and administering training programmes. overtime rates. psychological tests and assessment centres. • Pay. but also such attractive fringe benefits as subsidised meals. bonuses. publicise job vacancies in appropriate media. the DGFP does not collaborate extensively with educational providers to deliver a professional programme. legislation exists to promote equal pay between men and women. succession planning.Agreements between the representatives of employers and employees at industry level continue to determine basic pay and merit increases as well as terms and conditions such as the duration of the working week. however. Around 85% of the German work force is still covered by multi. this providing for greater management discretion in the context of industrial/ sectoral framework agreements. there is a need to devote considerable time and attention to internal promotion. As stated in unit 7. sickness provision and termination of the work contract. Turning to the area of equal opportunities. Firstly. however. it is necessary to attend to the effective design of work to ensure that the high skill base of employees is effectively motivated and deployed. Parents are allowed to return to work up to three years after the birth of a child. • 129 .works council representatives and other interested parties. skill shortages were encountered in a climate of virtually full employment and consequently foreign workers (particularly Turks) were drafted in. Companies do. In the 1960s. In the former West Germany the generous benefits accruing to employees are well known. holiday entitlements. Significantly.Features of the German labour market are that it is large (drawing on the highest population in Europe at around 80 million) and diverse. CVs and references. yet inequalities persist. At the level of the plant. Not only do these include generous basic rates of pay. paid breaks.

In these circumstances. The national apprenticeship system provides national curricula for nearly 400 vocational qualifications. IG Metall. Accordingly. taciturn trade unions in the former GDR had their independence from the State technically restored and gained freedom of association with the right to organise. The effects of re-unification Following the dismantling of the Berlin Wall in October 1990 and the demise of the communist regime in the former GDR that it symbolised. ‘brain drain’ to the point of haemorrhage. This was characterised by technological backwardness. but harder to turn the soup back into an aquarium”. poor infrastructure. but also general courses including languages and sport. chronic overstaffing and environmental pollution. Programmes generally last for three years and combine training in firms with off the job instruction in vocational schools. low wages. it was perhaps hardly surprising that the creation of the New Germany comprised. Women were encouraged to work in the communist era and so provision for equal opportunity had been relatively well established. optimism was felt in all walks of life including employment. subsidised meals. • 130 . a target which proved to be unachievable. including the establishment of West German style works councils at company level. kindergarten and holiday camps.• Training and Development. Turning to the personnel occupation itself. the entire West German State and constitutional system was extended into the East including the institutional infrastructure previously described in the field of employment. Ambitiously.Virtually all medium and large. at a stroke. In the previous era the personnel function had concentrated on two main areas. job incumbents from the East were faced with wholesale replacement by their western colleagues.sized firms in Germany participate in the country’s dual system of initial vocational training. Yet. • Kaderarbeit. Similarly the right of ‘Codetermination’ was extended.This involved the provision of occupational health and welfare. social integration of the disadvantaged. stagnation. in most walks of life.The selection and induction of the managerial elite. as with other managerial and professional activities. in March 1991. a take-over of its estranged and impoverished blood relation by the powerful West. childcare. productivity levels at one third of the West. In effect. training and education. it was easy to underestimate the difficulties in reforming the former GDR economy. Managers were also typically party officials and personnel managers undertook surveillance activity at work on behalf of the party Sozialpolitik. in the climate of euphoria immediately following this seismic political event. A pithy observation from Trust Fund Advisor Andre Leysen captured the problem. “It is easy to make fish soup out of an aquarium. This process was influenced more by political and attitudes and affiliations than by professional knowledge. the engineering trade union. company housing. together with former East German managers and West German employers agreed that harmonisation of western and eastern wage levels should occur by 1994.

subjecting swathes of workers to the blight (and previously unknown experience) of unemployment. the major elements of the regulatory system remained in place. Conclusion In recent years there has been realisation by German industrialists and politicians that the ‘social market model’ may be too rigid. some of the companies were able to introduce sophisticated communication methods to either supplement or even replace works councils. and suggested a pressing management development need. in the era of globalisation. A major fear is that. There was also some experimentation with performance related pay. Significantly. 131 . for example in Asia. personnel management in the East found itself at the brunt of implementing highly unpopular decisions. having establishing productive facilities in South Wales and Spain. One held regular communication meetings during working hours and conducted regular attitude surveys. Such companies viewed works councils as being cumbersome and inhibiting change. not all subsidiaries subscribed to the ‘dual system’.employer pay bargaining and set pay above or below going rates. for example. some preferring to recruit and dispense with staff according to company demands rather than to nurture internal labour markets. Large-scale redundancies were inevitable. along with other managerial colleagues. needed to consider how their function ‘added value’ to the competitive position of the enterprise. This called for considerable shift in the managerial mindset towards strategic thinking. Nevertheless. it should be pointed out that although a number of the corporations achieved some scope for autonomous action in HRM. US ‘non union’ enterprises were bound to establish mechanisms for employee consultation when operating on German soil. effectively undermining the position of the ‘glorified’ worker while empowering a new managerial cadre.Following the ‘Turn’. for example General Motors in Eisenach. Also power relations in industry were restructured along more familiar western lines. there are signs that a reformed ‘Rhineland’ model is emerging which comprises the following features. the new breed of personnel practitioners. Setting up site in Germany German borders are open to international investment and foreign owned multinational corporations now enjoy a considerable presence on German soil. In the field of training and development. In this context. foreign direct investors. businesses will be tempted to relocate into lower cost bases in Europe or perhaps farther a field. Other foreign investors circumvented multi. In the East. So. have found that the former GDR provides considerable institutional latitude for the implementation of flexible working practices with a climate of new found managerial freedom tending to breach the established consensus-orientated German approach. rather than merely implementing decisions flowing from their political masters. some of which carried extreme social costs. In recent years. To what extent do these companies need to adapt their HR practices when operating subsidiaries? In an study of 26 US or UK owned subsidiaries in the banking and chemical sectors. and that expensive labour costs need to be controlled. (as the act of re-unification is colloquially described by Germans themselves). Bosch is among the companies seeking to reap the harvests of more deregulated climes. Finally. Muller finds that a degree of latitude exists in the German system for these companies to transpose elements of HR ‘best practice’ as it is known in the US or UK. trade unions have less of a stronghold and works councils tend to be less potent mechanisms for employee consultation at workplace level.

.2 million (including 7.U. succession planning. Yet signs of ‘neo-liberalism’ in HR practices are suggesting a degree of convergence with the more market orientated systems of the US and the UK. identifying training needs. administering training programmes and work design Administration of legislation and collective agreements vital • 132 . Considerable emphasis placed on skill/ human resources Main political parties Christian Democrats (CDU). non-electrical machinery and chemicals • Cultural predispositions • • • • Power distance. including a high expenditure on health Hourly labour costs higher than the European average. higher added value technologies Undoubtedly the German ‘social model’ continues to demonstrate great durability. Currently CDU/SPD coalition in power under the leadership of Chancellor Angela Merkel Core of economy in manufacturing and related services including transportation equipment.preference for planning The role of HRM • • • • Institutionally determined through the ‘Rhineland’ model Tends to be occupied by lawyers.· Heavier reliance on cheaper manufacturing bases. Germany at a glance Context • • • • • • • • Consists of 16 federal states known as ‘Bundesländer Population of 8.engineered products · Moving into newer. highly.3 million foreigners) One of the lowest birth rates in the world/ thus ‘greying’ of the population Ranked third economy in the world (GDP over 2000bn Euro) Integrated into the global economy and highly dependent upon foreign trade Cost of living higher than the rest of E. work rules and social requirements · More diversified production to meet customer demands and less reliance on expensive. with more goods to be made outside Germany · Greater flexibility with labour costs. economists and social scientists Professional association (DGFP) comprises 1300 members Considerable time devoted to internal promotion. Social Democrats (SPD). Free Democrats (FDP) and the Greens (Die Grünen).orientation towards egalitarianism Highly individualistic Relatively high masculinity Relatively low orientation towards uncertainty avoidance.

In small groups formulate a PEST analysis.. W.europa. Augmented at establishment/ workplace levelmoves towards individualised/ variable/ performance related pay Attractive fringe benefits such as subsidised meals. Programmes generally last for three years and combine training in firms with off the job instructions in vocational accessing available information via web and other sources. holiday entitlements. working week. including sport and languages. Brewster. C. National apprenticeship system provides national curricula for nearly 400 vocational qualifications. M. sickness and termination. for a US company establishing a subsidiary in Germany http://www. free dental treatment and visits to health spas Still unequal pay on grounds of gender/ ethnicity despite legislation No legal provision for minimum pay (although incorporated into industry agreements) • • • Recruitment/ Staffing • • • • • Large/ diverse labour force Emphasis on nurturing internal labour markets State involved in the placement of labour through the Federal Department of Employment Companies advertise jobs and use application forms. and Morley.htm 133 . (2004) Activity (optional). overtime.Pay • Industry level agreements between employers’ associations and trade unions provide for basic rates.eurofound. Mayhrofer. Source. interviews. psychological tests etc. Decisions require agreement of works councils in companies employing more than 20 staff Training • Virtually all medium/ large firms participate in dual system of initial vocational training.

Bulgaria. Mongolia and Vietnam. Bosnia. Important features of this came to include the introduction of five. At least part of the personnel role also involved the monitoring of communist party 134 . Albania. these countries constituting a majority of the ‘first wave’ of E. nevertheless. Czechoslovakia.Herzegovina. Hungary and Poland. of the post-socialist societies in Europe would reveal that it is premature to suggest that free market orientation has ‘triumphed’ in the region) as political structures remain in a state of institutional flux. economic and ideological climate of the socialist era. Hungary.year plans which provided for growth and structural change. 1977). Slovakia. and significant social fragmentation has occurred. Romania and the countries constituting the former Yugoslavia as well as the former German Democratic Republic (GDR). 1998). leaving the ‘losers’ in transition with a sense of nostalgia for the previous. the personnel role was predominantly an administrative one. Hungary. centrally-planned concerns. accession countries in 2004. A founding purpose of COMECON was to deliver a Soviet-oriented economic bloc but which.U. Hungary. Latvia. communist. retained national economic divisions and regional specialisation. era (Verdery. Romania. however. comprising the Czech Republic. Poland. In the context of centralised power structures and planned approaches to economic management. Slovenia) it is tempting to conclude that the transition of Central and Eastern European from planned to market economies has run its course. Challenges for the management of people The role of personnel management and priority areas in terms of policy and practice were conditioned by the prevailing political. Croatia. Closer scrutiny. Soviet influence was pervasive in the post-war economic development of these countries. A broad distinction has been drawn between the ‘northern’ East European countries. Definitions of CEE may vary but would typically include the Czech Republic. Bulgaria. and the ‘southern’ region which would include Albania. also ensuring that industrial projects were supported by the necessary buildings. Romania. and the existence of politically reliable management. It may be argued that the Northern region has achieved more advanced economic development. Poland. Macedonia. prominent features were ‘gigantomania’ or a preference for large. the GDR.HRM and Eastern Europe Introduction As a number of the former ‘iron curtain’ countries are now members of the E. Slovakia. raw materials and labour (Wilczynski. For industrial organisations. Bulgaria. as decisions on key areas such as staffing and pay were taken by central authorities. Czech Republic. which occurred along the lines of the ‘command economy’ (Turnock. Romania. (Bulgaria. 1997).U. the former GDR. the technical provision of full employment. Poland. In this section the nuances of the transformation process are considered as are emerging HRM challenges. Slovenia and Serbia. Lithuania. Provision for international trade occurred through the Council for Mutual Economic Aid (CMEA or COMECON) whose members were USSR. with Albania withdrawing in 1981. Estonia. high levels of monopolisation.

in the new competitive climate. that a range of challenges confront newly professionalising HR managers who. Deregulation of labour markets is stimulating mobility of staff between enterprises. including part-time work.allegiance. then. 2001). The influx of foreign-owned concerns is leading to 135 . building’ initiative. new and flexible working practices may be introduced with workforce compliance.The stigma of unemployment is exacerbated by the societal value which construed the lack of a job as ‘parasitism’. The system whereby jobs were found for people. training and development. Typically.Weisser case in Unit 1). as well as the growth of more flexible forms of labour utilisation. administrative services and records. Enterprises themselves.therapy’ taken towards privatisation of the state sectors has been associates with high levels of unemployment. in general. A ‘shock. The need to motivate employees while controlling labour costs is promoting variability of pay for individuals and differentiation of reward within enterprises. with a paramount to engage in strategic thinking (Hollinshead and Michailova. Managers themselves need to be equipped in psychological and technical senses to operate in competitive environments. and a polarisation of economic fortunes at work and in society (Stiglitz. the growth of the informal economy. had a number of manifestations. It is evident. 2002). for example. Although skill was an important factor in promotion. employee care and benefits administration and health and safety. The EU sponsored PHARE programme has engaged in the transfer of managerial knowledge from ‘west’ to ‘east’. rather than people finding jobs. Recruitment at an organisational level was rendered superfluous. in the Czech Republic and Bulgaria are forming specialist clubs or associations. catered for many aspects of workers’ lives beyond the immediate sphere of their employment. party allegiance had an important bearing on individual career progression and support through training provision. For workers. as were constraints on dismissing staff. First. The ideological imperative of maintaining full employment. In such concerns. the labour force in CEE is highly skilled one and the downward pressure of high unemployment on wage levels means that there is a strong incentive for MNCs wishing to set up ‘green-field’ sites or operate joint ventures. 2001). to bolster the aptitudes of post. from housing provision to childcare (see the ‘Eden. as part of a general ‘institution. personnel administration would be subdivided into separate departments. labour and wages. In the absence of legitimate conflicting interest groups within organisations. implemented by the central authorities. there is a growing need for effective management of staff engagement and deployment and for measures to appraise staff performance. in a paternalistic fashion. The position of female employees is also becoming more precarious by the withdrawal of state facilities designed by the communist regime to force women into the labour market. as well as the need for practical skills development to deal with changing working practices and technological developments. similar problems of adjustment should not be underestimated. clearly had a detrimental effect on labour productivity. Yet. These bolstered worker power at establishment level and the sanctions which accompany western patterns of managerial control were absent.socialist managerial groupings (Hollinshead and Michailove. The pace of change in CEE has created significant training and development needs. the activities of personnel management cannot be isolated from broader societal influences. In the post-communist era. the role of union representatives was confined largely to dealing with individual grievances and welfare matters.

C. ambiguity and W. Placing a focus on the ‘Rhineland’ model it has explored manifestations of HRM in Europe’s leading economy as well as pressures for reform in the face of global competition.socialist country of your choice. (2004) ‘Human Resource Management: a universal concept?’ in C. (2004) ‘HRM in Europe’ in A.htm http://www.) Human Resource Management in Europe.europa. Mayfhofer. M.) International Human Resource Management.Heinemann Hollinshead.) Human Resource Management in Europe. In benchmarking performance of international subsidiaries..Van Ruysseveldt (eds. P. evidence of convergence? Oxford. Activity (optional/alternative) In small groups identify the major challenges confronting HR managers in a post. as that country is exposed to international competitive pressures http://europa. S. relatively highly regulated context for HR policy and practice in Europe. (2001)’Blockbusters or Bridge. M. Arkin A. and Michailova. February Brewster. (eds. evidence of convergence? Oxford. G. operations in CEE are increasingly setting the standards for cost-effectiveness. Morley (eds. Frequently such developments occur in non-union environments. Harzing and J.. W. C.W. Morley. Personnel Management. Elsevier Butterworth.eurofound.. C. Elsevier Butterworth. Where collective bargaining is a predominant method of determining pay and conditions.Heinnemann Communal. Brewster. trade union representatives as well as HR practitioners are experiencing a ‘learning curve’ in negotiating pay through selfdetermining means rather than having it imposed by state. and Morley. and Summary This unit has explored the distinctive. Sage Gooderham.Mayhrofer and M. second edition.. W. Mayhrofer. Study of HR challenges in the transitional economies of Eastern Europe reveals that the European economic and social ‘bloc’ remains one of considerable diversity.‘internationalisation’ of HR practice. C. The Role of Western Trainers in Developing New Entrepreneurialism in Eastern Europe’ Management Learning. 32(3) 136 . (1992) Personnel Management in Germany. associated with radical change from secure and rigid organisational administration of employment towards ‘neo-liberal’ inspired managerial approaches. London. This includes the diffusion of modern ‘western’ techniques and technologies. such as ‘high performance’ workplaces and just-in time production.

(2002) Globalisation and its discontents. Brunstein (ed. J. J..) Human Resource Management in Western Europe. (1997) The East European Economy in Context.Muller M. D. Princeton University Press Wachter H.E. Routledge Verdery. London and New York.De Gruyter Wilczynski. The International Journal of Human Resource Management. (1998) Human resource and industrial relations practices of UK and US multinationals in Germany. Communism and Transition. (1996) What was socialism and what comes next? N. (1995) Germany in I. 9:4 Stiglitz. (1977) The Economics of Socialism. Allen and Unwin 137 . and Stengelhoften T. K. London. Penguin Politics Turnock. London.J.

economic success in the region has often been explained in culturalist terms. sharing values. notably through Confucian and Daoist teachings. or war strategies. Therefore. The concept of Yin and Yang provides a mindset for coping with the environment in an adaptive and flexible way. 1998. Under such influence. such as employment security. the concept of family life as the basic unit in the society is emulated in the work setting as are the broader societal values that ensure that social harmony and behavioural ritual are preserved (Scarborough. 138 • • . The doctrine of harmony and the balance between Yin and Yang: the effort to achieve harmonisation of the workplace and maintain a dynamic reversion that perpetually counterbalances all propensities towards one extreme or the other puts the organisation in a stable and sustained position. The eventual goal of such efforts is to achieve a peaceful and orderly workplace. It is a well defined principle within Confucianism that an individual is not an isolated entity. In the 1980s and early 1990s Japan was regarded as ‘miracle’ economy on the global stage and. Collectivism and interdependent relational value. and the influence of Bing Fa. The outcome of implementing this relational value can be reflected in management and individual behaviours. while employees have high commitment to the organisation. According to these authors. self discipline and the blurred time boundary between work and leisure. As Zhu and Warner (2004) explain. China has emerged as a potential superpower. compensation and reward schemes. and information. Yao. • The establishment of the fundamental version of Ren (heartedness/ benevolence) within the organisation. training (as part of the educational function) and development (including promotion) systems and high such philosophies have impacted upon HRM in East Asia in the following ways. HRM practices such as teamwork. 1998. the concept of ‘workplace is family’ is widespread amongst Chinese organisations.Unit 10 HRM in East Asia Objectives • • • To expose the distinctive cultural (and institutional) ingredients of HRM in East Asia To identify essential features of working/HRM practices in Japan To investigate contexts and practices relating to HRM in China. It requires organisation/ management to look after the interests of fellow employees. 2000). Whiteley et. and to consider problems and issues in establishing a joint venture in the region Over the past forty years East Asia has enjoyed rapid economic development. and group-orientated incentive schemes are based upon the foundation of collectivism. more recently.

trust. Enterprise unionism. 139 .those in the core labour force are assumed to stay with the same employer for their working lives. Seniority.based wage system. which had previously been prominent in large enterprises. • Lifetime Employment. Recruitment • Selection is vital as the expectation is that core employees will remain until retirement. benevolence.incremental pay according to time served. As Hollinshead and Leat (1995) describe. until the beginning of the first world war. a strong emphasis being placed on internal labour markets. female workers have found themselves in the periphery. sincerity. Labour mobility now occurs within the company and three principal elements characterise the Japanese employment system. It was recognised that excessive labour mobility cold be at the expense of national competitiveness and so a dual structure was established. The virtues and qualities of leadership emphasised by Confucianism have been adopted by current management thinking in the area of leadership: managerial leadership requires the qualities of wisdom. peripheral employment. were heralded for the achievement of Japanese ‘miracle’ economic status in the 1970s and 80s. Primary features of Japanese HRM are as follows. ibid. If managers lack these qualities. Primary features of the Japanese employment system. involving high levels of employer/ employee interdependence and the incorporation of the workforce into the enterprise. Core employees were assumed to have lifetime employment and were surrounded by more malleable and dispensable. and the consequence will be low productivity and discontent. as conditioned by prevailing cultural and institutional factors. The outcome of combining different philosophies sych as Bing Fa provides the general guidance for strategic thinking which helps organisations to form business strategies. Major companies recruit directly from educational establishments. Following the serious economic downturn in the early 1990s. courage. • • The inception of these practices was accompanied by the integration of subcontractors. they will experience a shortage of support from employees. 1995).collaborative relations without external interference between management and union representatives. there was a fluid labour market in Japan. 199/200) Japan These cultural predispositions correspond with Whitley’s (2002) institutional framing of the ‘highly coordinated’ business system which epitomised Japan. and strictness to carry out policies (Chu.• • Bing Fa and the philosophy of war strategy leads to strategic thinking and strategic management: the ever changing nature of internal and external factors forces human beings to adopt strategic thinking in order to survive in the short and long term. In general. (Zhu and Warner. the Japanese economy is now well on the road to recovery.

or cellular work group as an adjunct of just-in-time. assistance in cases of accidents and death. and shops. This encourages employees to stay with companies and contributes towards predictability in wage costs. frequently comprising seniority based (male) employees. The concept of ‘internal customers’ is applied to those at progressive stages of the production process. There is collaboration between schools/ universities and companies. The ringi system of decision making involves large-sized company boards. A view of employees as assets. In theory communications are on an equal basis. parts and subassemblies are delivered ‘just-in time’ for the next stage of the production process. officially approving corporate decisions so they gain the fullest possible approval. General disciplines incorporate the philosophy of the ‘company man’.• Careful screening ensures that candidates endorse company values. • Training and Development • The assumption of lifetime employment is positive as far as training is concerned. Flexible and responsive forms of work organisation are based upon the pivotal concept of the team. • • • • • • 140 . Managers spend considerable time on the shop floor. Kaizen. this relieving the accumulation of idle stock. including team activities Remuneration • Many Japanese companies have seniority. A range of other benefits is frequently available to core employees which may include subsidised housing.based wage systems. is emphasised in which all staff constantly consider methods of improving quality and efficiency. in which small groups of workers ‘brainstorm’ ideas for improving quality and productivity in their work areas. Multi-skilling is therefore a fundamental ingredient of training programmes and job rotation a prerequisite for promotion. or continuous improvement. company schools. Quality circles are common. There is a high incidence of ‘face to face’ communications and an absence of visible hierarchy. means that employers are willing to train and develop human resources at their own expense. and the education system incorporates a strong vocational orientation. Entrance ceremonies may involve extensive induction programmes. Such suggestions may then be taken up by time production is a group of related practices aimed at ensuring that the exact quantity and quality of raw materials. • Other important HRM features • Just. and there is an emphasis on open planning in office sand the shop floor. holiday homes. A major aim of training and development under the internal labour market is to provide employees who are readily transferable between jobs. rather than costs.

the influence of ‘Japanisation’ receiving considerable attention from managers and academics in the 1980s. HRM developments in China are considered as this nation emerges as an industrial superpower.led capitalist and. • • • • One in four of the world population lives in China. more recently. As Hollinshead and Leat (ibid) point out. instability in previously secure jobs. with growing international influence in the Japanese economy. Lean and efficient production systems and cellular group working have been established in Japanese concerns and local companies emulating them in countries such as the US.While these practices and philosophies have been associated with world leading business performance through engendering maximum organisational responsiveness to customer demands. the streamlining of corporate decision making processes and company boards. Australia. there is evidence that the above practices are subject to reform and modernisation. and early retirement. a capitalist market economy. a move towards individualised and performance related pay. women and younger workers breaching the patriarchal ‘glass ceiling’ and gaining promotion to senior levels. ibid). for coercing employee engagement in ‘participative’ practices and through intensification of working conditions. In recent years. Japanese working practices have exerted a significant influence on organisation and management across national borders. Accordingly. While Japan has transformed from a feudalistic to a state. HRM in the People’s Republic of China Background The status of the People’s’ Republic of China as the ‘sleeping giant’ on the global economic stage is well captured by some headline statistics. increase mobility of professional staff between enterprises. it remains something of a ‘strange relation’ within the international 141 . or approximately 1. and powerfully informing the emerging ‘philosophy’ of HRM (Hollinshead and Leat. In the remainder of this unit. China may still be regarded a ‘socialist market economy’ having experienced a long period of communist rule in the current century. the following are emerging.flight global economic player is beyond doubt. the UK and Eastern Germany. they have been criticised for binding employees’ ‘hearts and minds’ to their employing organisations in an excessive fashion.particularly ‘ company men’. split almost equally between industry and agriculture Real GDP growth is in the region of 8% with an annual growth in industrial production at around 9% Yet although the potential of China to become a top. (Delbridge and Turnbull (1992).2 billion people It has the second largest consumer market in Asia after Japan There is a workforce of over 700 million. Such employment practices have been related to high levels of suicide and alcoholism and other social malaises.

decentralising the monolithic structures of state owned enterprises as engaging in a programme of enterprise privatisation. • A job for life. This has meant that the guiding principles of Confucianism. At an attitudinal level. it was communist ideology that began to exert a conditioning effect on Chinese culture and values. Yet the economic. employees continue to place both emotional and practical dependency on their organisations. Familiar western HR practices are meaningless in this setting as little attention needs to be 142 . filial loyalty and fidelity to the wife or husband. in contrast to its Soviet mentor. driven to some extent by Soviet economic aid. following ‘ Maoist’ Liberation in 1949. as well as social. the World Bank has hailed the country as a potential ‘economic super power’. Now described as a ‘socialist market’ economy. stressing in particular three primary expressions of loyalty. achievements of China should not be underestimated. the opening of its trade doors to the West in 1979. However. in the Deng Xiaoping era. professional health care. which essentially refers to clanlike networks based on exchange of favours and services. . the powerful cultural legacies defined above continue to hold sway in the domain of people management. Embodying the Marxist glorification of the worker. this essentially places the political imperative of full employment (although often merely technical) before the need for enterprise flexibility. The teachings of Confucius concerned societal bonds and notions of hierarchy. housing and life expectancy (which is now 71 years). have moved rapidly towards liberal market structures. as well as the legacy of communism. While other reforming countries. It was out of such binding social ties that Guanxi emerged. instilled approximately two thousand years community. has been prosaically described as the ‘iron rice bowl’ Associated principles include. In understanding the ‘essence’ of China it is firstly necessary to reflect upon the principles of Confucianism. A central tenet of socialist style economic structures were the large state owned enterprises. entering into trade arrangements with overseas partners. has been combined more successfully with measures for social stability than in most other transitional economies. Authoritarian yet paternalistic state intervention over the past couple of decades has enhanced the diet of the population. for example in Eastern Europe. based mainly in the large cities such as Beijing. Staple HRM practices Although the winds of change are now blowing perceptibly through Chinese employment structures. Now a member of the World Trade Organisation. and the set of HR interdependencies associated with it. a phenomenon still alive and well today. loyalty to the ruler. particularly in the dwindling state owned sector. China has taken a much more cautious and gradual approach to reform. there was experimentation with central planning and Soviet style egalitarian employment principles. Through the period of industrialisation. China has however been treading a path of modernisation and reform since as early as 1979. continue to exert a strong influence on ways of doing business in China. Shanghai and Shenyang and producing around 80% of industrial output in the late 70s. Turning to more recent history. This state of mind. The significance of these informal interdependencies should not be underestimated as they have served to lubricate and streamline more bureaucratic interactions.

given to recruiting staff on grounds of ‘merit’, to configuring organisational and working patterns according to the demands placed on enterprises, or to discharging staff on the grounds of poor performance Eating out of one big pot;. Again epitomising Marxist as well as more traditional communitarian values, this manifests itself in egalitarian payment structures that have no relationship to performance. Orthodox western notions of motivation and career progression clearly have limited utility in this context. Cradle to grave welfare;. In traditional Chinese society the function and responsibility of enterprises has been considerably more extensive than mere employer. They have acted in a paternalistic fashion in all walks of Chinese life, including education, health and housing. This means that labour markets have been highly segmented, there being considerable restrictions on employment mobility from enterprise to enterprise. Passive trade unionism. Workers in all state owned enterprises were members of the only trade union, the All- China Federation of Trade Unions (ACFTU). Possessing over 100 million members at its zenith, this union was organised on Soviet principles, acting as a ‘ transmission belt’ for party and enterprise management. Such a role meant that it was unable to actively oppose enterprise decisions, or represent worker interests in a truly independent fashion. Instead the union role has been confined to enhancing worker productivity, providing training, assisting with welfare provision and promoting spare time cultural activities. Hierarchically- based enterprises. Reflecting Confucian notions of subservience as well as the Marxist orientation towards centralisation of power, Chinese enterprises were found by Laaksonen, a seminal investigator of Chinese organisational life, to be subject to ‘one man management’ with little or no delegation of strategic authority to subordinates. This principle clearly flies in the face of much western management orthodoxy, suggesting a cultural chasm in preferred management styles.

Associated with guanxi are other Confucian- inspired social phenomena that inculcate patterns of behaviour at work. These include renquing, which means maintaining ‘face’ by returning favours, and mianzi, which relates to reciprocal behaviour in relationship building. Chang bei stresses respect for elders and seniority, this explaining access to senior corporate positions on the basis of ‘acquired wisdom’ as opposed to western notions of performance. We should note also that Chinese society remains highly patriarchal, this reflecting the Confucian principle of female servitude. Westernisation and modernisation Since Deng removed the restrictive barriers surrounding the Chinese economy in 1979 the practices outlined above beginning to look increasingly archaic, constituting a diminishing feature in a broader mosaic of practices. According to the Economist (2000), the non-state owned sector, (comprising urban collectives, town and village industries, privately owned enterprises, joint ventures and wholly- foreign funded firms) now accounts for the majority of China’s industrial output and employs more workers than state- owned enterprises. Three hundred out of the top 500 American corporations have invested in China, injecting $35 billion (£24.4 billion) with further commitments of more than $33. China has already become America’s fourth largest 143

trading partner. Although household name multinational corporations are rapidly gaining footholds in the People’s Republic, including GE, Motorola and AOL, small and medium sized British concerns are entering into joint venture arrangements in their wake. The increasing flow of foreign direct investment into the People’s Republic (foreign funded firms now producing a quarter of exports) promises not only economic regeneration, but also modernisation of the HR policies and practices. A recent article in People Management in April 2003, quoting the work of China expert Sue Shaw at Manchester Metropolitan University, reveals significant ‘westernisation’ of HRM practices in the People’s Republic, with quantum leaps towards the use of more sophisticated recruitment tools (including references and testing), employment contracts and performance related pay. There is also some evidence of the freeing up of Chinese labour markets with barriers on staff mobility from enterprise to enterprise being loosened. A new labour law introduced in 1995 reflects the modernisation of HR systems and structures in China and signals a breach of long held traditions and values. Provisions include; • • • • • • • • • • Workers having the right to choose jobs, and to receive payment, holidays, workplace protection and training No employment of children under the age of 16 Equal opportunities on the grounds of sex, race, nationality and religion Minimum wage levels Contracts between employer and employee setting out pay, conditions, tasks and termination arrangements Permission for enterprises on the brink of bankruptcy to discharge staff providing consultation with the trade union has occurred Average working week of 44 hours with one day off An eight hour working day Maternity leave and health provisions for female workers Disputes committees in the workplace, to include employer and worker representatives.

The high or low road to reform? Undoubtedly the near miraculous transition of the Chinese economy owed a great deal to the preparedness of low paid workers to achieve very high levels of industrial productivity. China has demonstrated possessed remarkable productive capacity for commodities such as shoes, clothes, toys, electronic products and data processing machines. The ‘bargain basement’ productive status of the People’s Republic has ruffled feathers in Japan, where labour costs are considerable higher and employment regulation tighter. The allegations of Chinese unscrupulousness in breaking the Asian model Came to a head in a legal battle over the sale of DVD players. Nihon Keizai Shimbun, Japan’s most influential business daily newspaper, has reported slumping US sales for Sony and Matsushita as Chinese competitors “sell cheap knock offs without paying patent fees”. Naomi Klein also graphically demonstrates the bleak side of ‘hell for leather’ Chinese business practice in her best selling anti- global treatise No Logo. In a profile of ‘sweatshops’ she identifies a number of household name US manufacturers outsourcing to factories in the People’s Republic, including Wal Mart, Kmart and


Nike. In flagrant breach of the new legal provisions above, conditions include wages of around $20 a hour, up to 80 working hours a week, forced overtime, corporal punishment and arbitrary fining of pregnant women. In contrast, a number of western companies are now taking a far more benign and investment orientated view of human resource capability in the People’s Republic. A recent Business Week (Feb 3, 2003) reports upon the rapid increase in natural science and engineering college graduates over the decade from 1989 to 1999, from 127,000 to 322,000, with 41,000 now possessing Masters’ qualifications or Doctorates. The expanding pool of ‘knowledge’ workers in the region has proven attractive to Intel, Philips and Microsoft who are drawing upon indigenous strengths in hardware design and embedded software. In the finance sector HSBC has moved credit and loan processing activity to the People’s Republic. Indeed the recent liberalisation of financial services is bound to attract tmore fully-fledged western institutional presence on the Chinese High Street (with Prudential being an early mover in this direction). Yet despite the recent growth spurt of Chinese businesses towards a more obvious manifestation of ‘western’ type maturity, there are still significant deficits in the field of human and intellectual capital. Most glaringly, although China has accumulated reserves of ‘productive’ and even ‘knowledge’ talent, it is still sorely lacking in the relatively intangible area of managerial or entrepreneurial acumen. As in other postsocialist societies, a vacuum in managerial competence accompanied the demise of communist edifices, as the epoch of central planning had engendered administrative rather than entrepreneurial skills. Sorely needed now are capabilities in change management, strategic planning and international vision. Also pressing is the need for Chinese enterprises to adopt globally recognised standards of corporate governance as the drive to produce at an unbeatable cost has involved procedural and ethical cornercutting. In the short term, learning from ‘the West’ is likely to be the most expeditious avenue for reform, most notably through the conduits of the new joint ventures spawning in the People’s Republic. Problems and Issues in Joint Venture Management Although the prospect of gaining a foothold in a massive emerging market place is a tantalising one for many western businesses, the realities of physical location on Chinese territory remain unpredictable and even unfathomable. Although State Owned Enterprises are in demise, the concepts and practices associated with them continue to exert a strong normative effect on the Chinese mindset. Industrial practices in the People’s Republic still constitute a mosaic of old and new, this meaning that embryonic joint ventures quite often find themselves locating on shifting sands. Sargeant and Frenkel (1998) have identified a number of practical problems confronting Chinese international joint ventures in the field of HRM, which we adapt below; Recruitment; high turnover, poaching of skilled staff, nepotism and over- hiring, difficulties in transferring staff from more regulated and paternalistic state owned enterprises. Reward systems; Discrepancies/ inequities between (higher paying) joint ventures and indigenous concerns. The need to incorporate social benefits in pay packages.


social relations based on guanxi. financial methods and so on. although compensation and other motivational tools now can be used to assist. who possess most intuitive understanding in dealing with westerners. bureaucratic rituals which remain at the periphery of much real business activity. The challenge and complexity of this cross.Difficulties in introducing differentials to reflect individual skills/ performance as this disrupts interpersonal harmony. expatriate managers will also need to mentor their Chinese counterparts in joint ventures and transfer appropriate areas of western ‘knowledge’ Not only will new Chinese managers need to be put in the picture about ‘state of the art’ western technologies. lack of personal initiative taking by Chinese staff (including managers) and inadequate attention to product/ service quality. It is likely to be incumbent upon western HR professionals operating on Chinese soil to formulate finely tuned HR policies that stimulate the commitment of individual employees to the quality of the product and goals of the enterprise through appropriate motivational techniques.socialist comfort zones and become more comfortable with risk orientation. and restricted to the formalised. while recognising the precious status of group orientation and social stability at an organisational level amongst indigenous workforces. Poorly established systems for collective bargaining. • Assist fuller integration of expatriates into the Chinese community 146 . then clearly the issue of expatriate adjustment needs to be given more attention by academics and practitioners alike. Employee Retention.cultural balancing act should not be underestimated as it implies an unprecedented fusion of western individualist and materialist values with the Confucian orientation towards reciprocation and social harmony. We conclude by providing recommendations assist western corporations active in China.established networks they will continue to be regarded as outsiders. This not only involves ‘hard’ information on institutional arrangements. Pioneering westerners in the inhospitable ‘Land of the Dragon’ will need to devote more attention to gaining Chinese language proficiency than has been the case in the past. Management. it would seem that nothing less than a mini ‘cultural revolution’ is needed at workplace level to bolster their viability. Unless westerners are somehow able to tap into pre. and this is largely attributable to inadequate understanding of the distinctive facets of Chinese culture by inward investors. but also sensitivity towards. noting the list of ‘practical problems’ confronting new joint ventures listed above.employee relations. although new laws may help consolidate the position of independent unionism. particularistic social phenomena such as guanxi. most of whom now speak English. As is the case with other transforming economies. but also they will need to be coaxed to relinquish their post. If the success rate of joint ventures is to be enhanced. as well as acquiring greater insight into the nuances of Chinese culture. It is salutary to note that around two thirds of joint ventures in the People’s Republic fail. Moreover. Problems in exiting poor performers. Difficulties in holding onto skilled staff. As mentioned above. Work Performance and Employee Management. and empathy with. it is likely to be the younger generation of Chinese managers. financial systems and so on.

promoting mentoring system between westerners and Chinese managers and enhancing the Chinese knowledge base through transfer and internship in the West.Useful policies are likely to include selecting expatriates on the basis of previous knowledge of Chinese language and culture. training and job prioritising social responsibility in matters such as urban regeneration.cultural sensitivity training (for expatriate families also if appropriate) and possibly longer-term placements. Proactive corporate policies to assist with accommodation could pay dividends • Modify in. environmental protection. An overview has been provided of the distinctive nature of organisational and working practices in the region. Activity (seminar): In small groups research and present key points of interest relating to ‘ASEAN’ • • • • Membership (of nation states) History Economic objectives Relations with Europe and other global trade blocs http://ec. 147 . • Manage the interface between the organisation and its environment It is important that western owned concerns eventually become accepted as part of the fabric of the new Chinese business environment and learn from http://www. with variations being apparent between the ‘socialist market’ economy of China. Western owned companies could take the lead in establishing new business networks.organisation barriers between westerners and Chinese managers This could enhance the pooling of local and international knowledge. Useful policies are likely to be the management of business ethics and legal regulation. cross.htm Summary This unit has investigated the influence of time honoured cultural values and philosophical teachings on HRM practices in East Asia.cultural groupings. Useful policies are likely to include the engineering of real and virtual cross. and the more fully fledged capitalistic Japanese context.aseansec.europa. establishing equal opportunities to ensure excellent Chinese staff can gravitate to senior positions.

Harvard University Press Hollinshead. Cheung.K. Human Resource Management in Developing Countries. People Management Scarborough.Sorge (ed. an International and Comparative Perspective. Pitman Klein N. and Warner. and Zhang. HarperCollinsPublishers Laaksonen O (1988) Management in China During and After Mao. (1992) ‘ Human resource Maximisation: The Management of Labour under Just-in-Time manufacturing Systems’ In P. Sage. (1998) China: A New History. second edition. R.Blyton and P. London. P. and Turnbull.S. Singapore. Working with China’s Greatest Asset. Thomson Learning Yao.A.Turnbull Reassessing Human Resource Management. Routledge Whiteley. G.) Organisation. London.Van Ruysseveldt (eds.S. London. London Economist (18th April 2000) The Economist. World Scientific Whitley. Harzing and J. Business Week (3rd February 2003) The New Global Job Shift Delbridge. M.S. Human Resource Management Journal.Q.) International Human Resource Management.J. (2000) Human Resource Strategies in China. November Sunday Times (February 17th 2002) Enter the Yankee Dragon Warner M. (2001) ‘HRM in the People’s Republic of China’ in Budhwar P. Y.(1998) Comparing Chinese and Western Cultural Roots.and Leat. (2004) ‘HRM in Asia’ in A. A.W.. 6(2):32-43 Warner M. Business Horizons. in A. (2001) No Logo. A Survey of China Fairbank J. M. (1996) ‘Human resources in the People’s Republic of China: the ‘three systems’ reforms’. (1995) Human Resource Management. Their Dimensions and Marketing Implications. O. de Gruyter Sappal P (17th April 2003) People’s Republic. and Debrah Y. 148 . (1988) Chinese Cultural Values. R. European Journal of Marketing 22(5) Zhu. and Goldman M. (2002) ‘Business systems’. London Sage.References.

Common conceptions of HRM have typically been derived from the ‘American model’ which is conditioned by.European level as a result of EU policy making. • A relatively high degree of public ownership (by international standards) and ‘interlocking’ / family orientated patterns of corporate governance. communications and employee relations. pay. in Europe.S. U. as a dominant global prototype.S. and is powerfully influenced by internationally diverse institutional and cultural circumstances. • The regulation of recruitment. • A relatively high level of social security provision. job creation for youth and long term unemployed. severance) with little interference from extraneous sources in order to gain competitive advantage. training. • An emphasis on the development of internal labour markets. • Legislative requirements on pay. A cultural value framework which accentuates individualistic and competitive tendencies. industry. co-determination (worker participation) arrangements in some countries and works councils at shop floor level. job design. A minority unionised sector.Unit 11 Synthesis and conclusion Our investigation into international and comparative HRM has revealed that the character and form of HRM varies across global regions. Undoubtedly. • A ‘’ governmental approach and reliance on free and autonomous management (although this might be questioned in the context of statutory support for major finance companies during the economic downturn in 2008). • Regulation of minimum social and employment standards at a pan. conceptions of HRM have tended to be based on the assumption that management is in a position to manipulate HR policy ‘levers’ (including recruitment. 2004). has influenced management thinking well beyond North American borders.S. the following factors condition approaches to the management of people (Communal and Brewster. dismissal and employment contracts. 149 . job transition support. An emphasis on external labour mobility and flexible employment practices in a predominantly service orientated/ high technology industrial setting. • • • • Accordingly. A prevalence of ‘shareholder’ values. • Public funding of labour market programmes (including training. this conception of HRM. allowing managerial discretion over business strategy formulation to prevail across most of U. inspired concepts and practices within those regions. retraining. • Quasi. Most notably. • High levels of trade union membership and collective bargaining over pay and other employment conditions. including the right to trade union nature of industrial relations. yet it clear that institutional and cultural territories in various global regions are not necessarily amenable to the ‘bedding down’ of U.

and Debrah.) International Human Resource Management. Y. war strategy and strategic thinking. including notions such as ‘workplace is family’. 2005) Developing countries are also frequently dependent on capital support from international banks and other financial agencies emanating from developed countries. particularly in the core economy In the foregoing units. these perhaps serving to offer an international counterpoint to typologies of HRM in the developed world. Palgrave Macmillan 150 . considerable attention has been given to emergent HR and employment practices in developing countries. (2004) ‘International HRM in Developing Countries’ in H.S. buttressed by highly co-ordinated business systems • Relative job security. and emphasis on nurturing internal labour markets. Y. Basingstoke. virtuous yet strict leadership. • • • • • Sharing Deference to rank (possibly as a post colonial legacy) Sanctity of commitment Regard for compromise and consensus Good social and personal relations Such values are set in a structural context in which developing countries are significant ‘buyers’ of exports from developed countries as well as suppliers of cheap human and natural resources. the latter being most apparent in developed countries. a common feature in the management of employment in Europe is the incorporation of ‘stakeholder values’ into corporate deliberations and strategy formulation. Scullion and M.Accordingly. Such principles tend to reflect a humanistic rather than instrumental view of the ‘human resource’. Linehan (eds. As a third international infrastructural variation for HRM. Not exclusive Diversity within regions hybridisation Budhwar. Asian approaches to the management of people. P. • Egalitarian conditions of employment • Compliant trade unionism • Consensus forms of decision making at enterprise level. (Budhwar P.W. Adopting a predominantly cultural perspective. and Debrah. A Critical Text. • Confucian thinking. this managerial obligation typically being asserted by the State.W.. collectivism and interdependent relationships. Jackson (2004) asserts that the following values impact upon people management principles in Africa. these possibly having broader applicability across developing regions. despite significant regional diversity.A. tends to be powerfully influenced by. harmony.

Van Ruysseveldt (eds.) International Human Resource Management. (2004) ‘HRM in developing countries’ in A.) International Human Resource Management. T. Sage 151 . second edition.Van Ruysseveldt (eds. Harzing and J. second edition.W. London. C.Communal. Sage Jackson.W. London. C. Harzing and J. and Brewster. (2004) ‘HRM in Europe’ in A.

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