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a) Based on recent research on international human resource management, compare and contrast the American and European models of managing human resource based on the case.
As global competition continues to intensify, according to Beer et al. (1984), organisations need to focus on their value of investments in human resources which is the key to sustainable competitive advantage.
Based on recent research, IHRM policies and practices are influenced by the organisation's structure and strategy; its institutional and cultural environments (Ngo et al., 1998; Schuler and Rogovsky, 1998; Schuler et al., 2002; Sparrow et al., 2004). National culture and the country of origin of the Multinational Enterprise (MNE) do influence HRM policies and practices (Ngo et al.,1998).
International Human Resources Management (IHRM) focuses on the complexities of managing people across borders and the competitive constraints within organizations to achieve global competitive advantage (Porter, 1990)
Compare and Contrast American and European HRM in MPS
HRM concept was originated from the United States of America (US), while in Europe, it was created in 1965 (Locke, 1989). The American HRM have been characterised as universal model (Brewster, 1999a, 1999b) as their prescriptions are intended to apply in all circumstances.
The summary of the comparison and contrast of American and European models of HRM based on MPS case is illustrated in Appendix A.
Based on research, the American culture is individualistic and achievement oriented (Hofstede,1980; Lawrence, 1996; Trompenaars and Hampden-Turner, 1997).
The ideal HRM of America is underpinned by the high degree of formalization (process) and a strong sense of managerial 'right to manage' (Jamieson, 1980, 1985). As can be seen in MPS HQ in America, the organization has invested in formalizing clear sets of procedures, management development programmes (TQM) and in search for quantitative data (annual staff opinion survey to determine employees satisfaction, workplace feedback mechanism).
Unfortunately, in the case of MPS in France, the french were against the concept of cellular feedback mechanism. HRM in Europe is based more on qualitative impact of cultural diversity, the organization is influenced by authority network, only hierarchical position can give power to his/her employees. (Laurent, 1986).
According to D'Iribarne (1989), the US managers are free to fire or reward employees within the boundaries of a 'fair contract'. He contrasts that "logic of honour" in France as it is based on status or rank. Failure to employ a capable/sound manager, just like the case of MPS in France, employees will refuse to respond to orders. On the other hand, the labour unions in Europe are very strong, promoting laws to protect employees within the Europe continent as well as EU level (Claus, 2003)
The contrast between American HRM concept and the HRM in Europe is summarised as below:
HRM in America
HRM in Europe
Freedom and autonomy
Qualitative impact of cultural diversity
Sense of organisational and managerial responsibility towards employees
Role of the state
Low interference from the state
Greater involvement of the states and European supranational agencies
Trade unions and employee representation
Traditional antagonism of management towards trade unions
Wider support towards trade union and other forms of employee representation
Source: Communal , 1999, Voynnet Fourboul and Bournois, 1999 and Brewster, 2000 p:180.
It is clearly pointed out that the way HRM conducted in Europe is contrast to the America. (Brewster and Bournois, 1991).
The American HRM viewed as freedom/autonomy to develop their own strategies (Guest, 1990), an opportunity for anyone who work hard to be successful and a vision of the "frontier mentality", the "private enterprise" culture. (Harzing and Ruysseveldt, 2004)
The European concept of HRM is operated with more restricted autonomy, constrained at the national level by culture and legislation, international (EU) level, organisational level by patterns of ownership, and HRM level by trade union involvement and consultative measurements. (Harzing and Ruysseveldt, 2004)
Therefore, MPS faced the problem of diversifying the HR conditions to Europe subsidiaries, as practices established in US do not always translate well in the European context, (see table below).
Considerable degree of difficulty when giving assignments in European subsidiaries.
UK-resentment for working weekend to fulfill emergency orders.
France - refuse to work extra hours.
To minimise the influence of unions by the expatriate manager failed.
UK- highly unionized
France - Work Council not operate properly
Sweden - Over 65% employees unionized, work council meeting resented by the Americans (non-cooperative) - ethnocentric per Perlmutter's typology (1969).
Communications barriers between American expatriates and subsidiary workforce.
UK and France - Performance management system difficulties in setting up initially,
France - Feedback mechanism, prefer line manager with authority.
Sweden - Baulked performance management scheme.
All subsidiaries against the "gung ho" culture through culture training and attitudinal orientation sessions.
Degree of control
European subsidiaries believe control being exerted over them.
UK - targets too harsh
Source: HRM overseas in MPS - Report by Jim Grant
It is noted that in Europe, HRM is less dependent, less autonomy and freedom of action, trade unionism is more important, social partners have more influence, legal regulations are more important, and there is stronger tradition of employee involvement. (Brewster and Hagewisch, 1994)
As can be seen in MPS case, HR model developed in the cultural context of one country may not be applicable to another country without testing the cultural preconception (Claus, 2003). Pieper (1990) concluded that 'a single universal model of HRM does not exist'.
b) Could you say that there is a European model of managing human resources? Justify your answer.
The Europe continent is made up of 43 countries, out of which 27 countries are European Union (EU) members. EU is unique, it is not a federal State like US because its member countries remain independent sovereign nations but they unite their decision making powers to shared institutions (European Parliament, Council (national governments) for joint-interest to gain strength and world influence (European Communities, 2007).
The EU, in just over half a century has delivered unity and prosperity in Europe, a single European currency (Euro) and a frontier-free single market where goods, services, people and capital move freely (European Communities, 2007).
With the existence of EU, the qualitative impact of cultural and institutional diversity on HRM do exist, where the European HRM concept incorporate regional and national differences (Harzing & Ruysseveldt, 2004).
The major difference between American HRM and European HRM is the degree to which HRM influenced and determined by state government.
The emerging model of HRM in Europe needed to be flexible and operable within respective cultural traditions among its member states and supranational agencies by understanding the social standards in society, legal framework protection and greater involvement in labour market issues. (Claus, 2003).
As noted by Germany, the international HR practices basic functions of HR management are given different weights in different countries, they are applied differently (Gaugler,1988:26).
The EU particularly through the European Social Charter and its associated Social Action Programme does have an impact and legislative influence on HRM (Brewster and Teague, 1989) as illustrated below:
Within Europe, differences of cultural/geographical can be identified through various regional areas which show common elements of HRM (see below).
Clusters in Europe
Finland, Norway, Denmark, Sweden.
Austria, Germany, Switzerland
United Kingdom, Ireland
France, Belgium, Italy, Spain, Portugal
Source :Ronen and Shenkar, 1985.
As far as the use of flexible working practices is concerned, European countries are clustered according to their institutional factors (trade unionization/unemployment rate) rather than, go beyond but distinct, cultural factors (Brewster and Tregaskis, 2001).
Institutionalists (e.g. Hall & Soskice, 2001) state national factors like governance, economics, ï¬nancial, legal systems, trade unions, together form the national business system. These sources are the main differences in HRM between nations in Europe (see below chart)
The national culture (values, norms, behaviour) also influence HRM practices (Leat & El-Kot, 2007).
HRM approaches is seen as cultural artefacts in any particular country reï¬‚ecting the basic theories and values of the national culture of an organisation Laurent (1986). Many studies have applied this variable as the major explanatory variable.
A European Model
A proposed European model of HRM that enables analysts to link HRM more clearly to international competition where organisations focus personnel requirements importance, more tolerant to uncertainty/challenges, venturing into greater risks, and able to accept variablility (Bartlett and Ghoshal 1989; Hedlund and Rolander 1990).
This model also provides closer fit between HRM and national success.
Source: Brewster. C (1995), Towards a 'European' Model of Human Resource Management, Journal of International Business Studies, Vol. 26, No.1 (1st Qtr., 1995), p.14
In summary, the model shows business strategy, HR strategy and HR practices of an organisation interact within and with an external environment of national culture.
The dotted lines signify organisation and its human resource strategies/practices in turn interact with/part of that environment.
Recent research findings confirm that this proposed model did reveal significant differences of HRM practices between nations, therefore multinational corporations tend to adapt their HRM to local responsiveness (Brewster and Bournois 1991; Rosenzweig and Nohria 1994).
To expand the US HRM (universal paradigm) concept to Europe, serious understanding that regional differences as well as differences among countries within specific regions exist in Europe (Brewster et al., 2000).
European authors argued that "we are in culturally different context" and, "Rather than copy solutions which result from other culture traditions we should consider the state of mind that presided in the search for responses adapted to the culture" [Albert 1989, p.75, translation in Brewster and Bournois 1991].
Therefore, it is better to mention 'HRM in Europe' rather than 'European HRM' (Sparrow and Hilltop, 1994).
a) In examining cross-national differences in managing organizations, one theoretical approach would be to adopt a culturalist or an institutionalist perspective. How would you explain these theoretical perspective to Jim Grant?
Culture refers to the way of life of a group of people. Every individual is unique, therefore there are different levels of cultural dimension which measures differences in values, assumptions, beliefs and actions (Child, 2002) of a group of society who shared the same experiences (thinking, behaviour) that constitutes its culture.
The cultural studies on national and organisational culture confirmed that there are nationality influences of differences in work values, beliefs and orientations of organisations across different countries (Hofstede, 1991, 2001; Inglehart et al., 1998; Trompenaars, 1994; Black and Mendenhall, 1989).
This proves in MPS, Jim Grant reported that US faced some resistance on the introduction of HR practices of which they have worked successfully in US but not in the three European subsidiaries. As we can see, within the three European subsidiaries, they responded differently to the US HRM policies (see Appendix D). This is due to the cross-national differences within the European countries themselves. On the other hand, the American resented the Swedish work council meetings, where the Swedish viewed the American as non-cooperative.
It is important that Jim Grant to understand the cross-cultural values of each of the three subsidiaries (UK, France, Sweden) to promote co-operation among the group to attain competitive advantage as a group company globally. The key challenge is to what extent national culture influences the organisation behaviour/performance (Edward. T and Rees. C, 2006 p. X).
The two best-known cultural models apply for cross-national organisations are Hofstede (2001) and Trompenaars and Hampden-Turner (1997). They see cultural values as long-term management as it varies systematically between societies and as conditioning what is acceptable organisational practice.
The acceptable method is by linking culture and career success through HR practices about how people should be
managed @ "Norms Regarding HR Practices." (Aumann and Ostroff, 2006).
Hofstede (1980) on cultural dimensions has developed a propositions which link national culture, HR practices influence workers by using a fit perspective (see below)
Norms sensitive to cultural influence
Source: Hofstede's model 1980). Cultural dimensions of how culture impact on HR practices (Aumann and Ostroff, 2006)
Peng et al. (2000) concluded there is no single definition of culture. Researchers highlight various aspects of culture based on adopting workable assumptions about what culture is. Therefore Jim Grant needs to measure and compare the relative strength of different cultural dimensions as well as the possibility of other HR dimensions.
Cross-national differences in institutional structures are likely to create management practices that vary from country to country (state, governments, laws and legal systems, associations, education systems, industrial relation) There are a number of institutional systems whose influence on HRM in a cross-national context (see Appendix E)
From the institutional perspective theory (Scott et al., 2003; Westney, 2005) HR practices are affected by differences in national culture. Success of HR practices will largely dependent on managers' abilities to understand and balance different cultural values and practices (Wang et al., 2008). Based on institutional approach, structure of organisations in a country reflects the country's particular institutional - societal effect (Maurice, Sellier, Silvestre, 1977).
The EU national legislation is unique, it has an increased influence on HRM through the European Community Social Charter and its associated Social Action Programme. The European Union legislation providing institutional arrangements at the supra-national level, arguably have an effect on organizational structure (Maurice, 1989). Although the EU is working towards a more unified institutional context, profound national differences still exist.
In MPS case, it is a national law requirement in EU that the European subsidiaries formed trade union and work council in France and Sweden. Europe has the largest percentages of employees in independent trade unions membership (see Appendix C). Therefore, MPS cannot be immune from the institutional context of the European law which have embedded, the Americans need to be cooperative to the trade union and work council activities.
Instead of importing US universal HRM to the European culture, Jim Grant need to localise HR practice to suit local societies by researching/understanding the national culture presumes insight into institutions. This will benefit MPS as a whole if they will to look for particular comparative and competitive strengths associated with national/regional production, innovation and business systems.
b) How could you convince him that these perpectives' could assist him in understanding and formulating an appropriate IHRM strategy for MPS?
MPS operation is operated based on ethnocentric HR strategy. Perlmutter, 1969 describe ethnocentric management as practices/standards originated from country-of-origin or foreign subsidiaries activities dependent largely on headquarters.
As we can seen, MPS subsidiaries are struggling to adapt/adopt themselves to MPS HRM strategy which they are uncertain, as there is no consideration of local culture or institution values and practices being incorporated, makes it more difficult for the local workforce to apply MPS principles.
MPS needs to adopt a geocentric approach by moving away from ethnocentric strategy to global mindset, a supra-national attitude by applying the national significance of cultural and institutional differences in determining the HR strategy, for example to propose a homogenous performance management. The tendency to be dominant will often reinforced by stereotypes of other cultures and nationalities.
The more MPS is able to internalise the value of culture and institutional norms of HR strategy to the local environment (host country), the greater advantage MPS has to compete globally as MPS able to absorb the best practices of local culture/institution to build a strong diversified organisation internationally (Friedman. T.l., 2006,p.412, Penguin Books, London). Adopt/adapt to the best HRM practice with openness and respect of other nationals, the possibility of developing best talents and fostering the working relationship internationally will be a success.
The table below shows a summary of MPS cultural dimension index of similarities/differences which is important for MPS to understanding in order to develop a transnational HR strategy.
Cultural Dimension Index
The higher index implies hierarchy top down control management (France). Lower index implies equal rights among employees.
Individualism vs Collectivism
The higher index implies individual freedom/challenges (US). This explains why US against the 'trade union' interference. Lower index focuses on physical working conditions (work as per schedule, long holidays entitlement (France), training provided by company for skill improvement/innovation (Sweden).
Masculinity vs Feminity
Higher index focus on material success/ambitious while lower index concern quality of life (France, Sweden)
The higher index indicates members of a culture feel threatened by ambiguous/uncertainty management (France) This proves the problem with feedback mechanism failed in France but well accepted by Sweden.
Source: Hofstede (1980)
For the institutional part, MPS must remember that management of HRM in Europe is governed by national legislation (state law, EU legislation, supranational) which is totally different from HRM in US.
The "cosmopolitanism" concept should be established in MPS strategic HRM. The meaning of cosmopolitan is willingness to engage with other culture/institution, openness toward divergent cultural experiences, a search for contrasts rather than uniformity (Hannerz, 1996:163).Transcending national borders and simultaneously adapting to local responsiveness to develop an ideal HR strategy will achieve competitive advantage/international success.
Cultures that are open to changes have huge advantages in this world (Jerry Rao, MphaiS CEO, The world is flat.p411)
MPS needs to know how outward MPS national culture is and to what degree is it open to accept foreign influences and ideas to improve the HR strategy in MPS. Simultaneously to what degree is there a sense of national solidarity to develop a best fit HRM practice in respect of each national difference?
Culture is shaped by the prevailing circumstances within a country (education system, leadership, government, society historical experience) and so as the circumstances or local leaders change, so too can culture be changed (Friedman,T.L., The world is flat, the Globalised World in the Twenty-First Century, 2006, Penguin Books, London, p.415). Institutional change will follow due to societal effect.