Human Resource Management of Multinational Organisations Operating in Europe Finding the Proper Balance Between Standardisation and Differentiation of Human
Resource Policies and Practices
DISSERTATION
der Universität St. Gallen,
Hochschule für Wirtschafts-,
Rechts- und Sozialwissenschaften (HSG)
zur Erlangung der Würde einer
Doktorin der Wirtschaftswissenschaften
vorgelegt von
Sabine Nitsche
aus
Deutschland
Genehmigt auf Antrag der Herren
Prof. Dr. Martin Hilb
und
Prof. Dr. Chris Brewster
Dissertation Nr. 2840
Die Universität St. Gallen, Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften
(HSG), gestattet hiermit die Drucklegung der vorliegenden Disseration, ohne damit zu den
darin ausgesprochenen Anschauungen Stellung zu nehmen.
St. Gallen, den 26. Juni 2003
Der Rektor:
Prof. Dr. Peter Gomez
ii
Contents
Chapter I: Introduction...................................................................... 1
1
Research Question..................................................................................................................................2
1.1 Practical Background to the Research Question .................................................................................2
1.1.1
Employment Legislation: Trend towards Harmonisation .........................................................3
1.1.2
The European Union and the Single European Market: Forces in the Business Environment .4
1.1.3
Human Resource Management at National Level: Continent of Diversity ...............................6
1.1.4
Implications for Multinational Organisations ...........................................................................8
1.2 Theoretical Background to the Research Question .............................................................................9
1.2.1
Human Resource Management in Europe.................................................................................9
1.2.2
The Universalist versus the Contextual Paradigm...................................................................12
2
Research Objective ..............................................................................................................................18
3
Research Approach..............................................................................................................................18
3.1 Scientific Approach...........................................................................................................................19
3.2 Research Process...............................................................................................................................21
3.3 Definitions.........................................................................................................................................22
3.4 Structure of the Thesis ......................................................................................................................25
Chapter II: Theoretical Framework................................................. 27
1
International vs. National HRM .........................................................................................................27
2
System-theoretical Perspective on Multinational Organisations .....................................................29
2.1 External Context of a Multinational Organisation ............................................................................30
2.2 Internal Context of a Multinational Organisation .............................................................................35
3
First Component of the Theoretical Framework: Internal and External Contexts .......................40
4
Second Component of the Theoretical Framework: HR Strategy for Internationalisation ..........41
5
Third Component of the Theoretical Framework: HR-Subfunctions.............................................48
5.1 Recruitment and Selection ................................................................................................................49
5.1.1
General Steps within International Recruitment and Selection...............................................49
5.1.2
Alternative Pools of Applicants ..............................................................................................51
5.2 Training and Development................................................................................................................59
5.3 Compensation and Benefits...............................................................................................................66
6
Conclusions ...........................................................................................................................................73
Chapter III: Empirical Analysis ....................................................... 78
1
Introduction..........................................................................................................................................78
1.1 The Necessity for a New Approach ..................................................................................................78
1.2 Building on the Theoretical Findings................................................................................................80
1.3 Choice of Methodology.....................................................................................................................81
2
Quantitative Empirical Analysis: The Cranet-E Survey ..................................................................85
2.1 Introduction.......................................................................................................................................85
2.2 Research Sample ...............................................................................................................................87
iii
2.2.1
Selection of the Research Sample ...........................................................................................87
2.2.2
Description of the Research Sample .......................................................................................88
2.3 Analytical Framework for the Quantitative Analysis........................................................................91
2.3.1
Definition of Organisational Types and Concepts of Standardisation ....................................91
2.3.2
Statistical Procedures ..............................................................................................................96
2.4 General Results .................................................................................................................................97
2.4.1
Chi-Square Tests “Country Differences (All Types of Organisation)”...................................97
2.4.2
Chi-Square Tests “Organisational Type Differences (All Countries)” ...................................97
2.4.3
Joint Interpretation of “Country Differences” and “Type Differences” ..................................98
2.4.4
Chi-Square Tests: Country Differences per Organisational Type ...........................................99
2.5 HR-Specific Results ........................................................................................................................105
2.5.1
Strategy and Policy ...............................................................................................................105
2.5.2
HR Practices..........................................................................................................................110
2.6 Summary of Quantitative Analysis .................................................................................................119
3
Qualitative Empirical Analysis - Case Study Interviews ................................................................123
3.1 Introduction.....................................................................................................................................123
3.1.1
Interview Guideline...............................................................................................................124
3.1.2
Research Sample ...................................................................................................................124
3.2 Methodology: Case Study Interviews .............................................................................................125
3.3 Results.............................................................................................................................................127
3.3.1
Structure of the Human Resource Management Functions in Europe ..................................127
3.3.2
Relationship between Central and Local Human Resource Functions..................................130
3.3.3
Human Resource Strategy.....................................................................................................130
3.3.4
Degree of Standardisation of HRM Strategy, Policies and Practices ....................................131
3.3.5
Degree of Standardisation at Various Staff Levels ...............................................................133
3.3.6
Degree of Standardisation according to Stages of Internationalisation .................................134
3.3.7
Reasons for Standardisation of HRM Policies and Practices ................................................135
3.3.8
Obstacles to Standardisation and Problems faced at National Level ....................................136
3.3.9
Standardisation of Human Resource Management Practices ................................................137
3.3.10 Influencing Factors in Europe and Main Problems ...............................................................141
3.3.11 Recommendations by Practitioners .......................................................................................142
3. 4
Summary of Qualitative Analysis ..............................................................................................142
4
Overall Summary of the Empirical Analysis ...................................................................................144
4.1 Continent of Diversity and the Desire to Standardise .....................................................................144
4.2 Can We Reconcile the Findings? ....................................................................................................146
4.3 Implementation of HR ....................................................................................................................147
4.4 What Drives Standardisation...........................................................................................................147
4.5 Outlook and Implications for Future Empirical Work ....................................................................148
Chapter IV: Implications for the Implementation of HRM in Europe
........................................................................................................ 151
1
Introduction........................................................................................................................................151
2
Definition of the Change Process ......................................................................................................153
3
Identification of Organisational Goals and Values .........................................................................155
4
Analysis of the Organisational Environment: External and Internal Contexts ...........................156
4.1 Analysis of the External Environment of Multinational Organisations ..........................................157
4.2 Analysis of the Internal Environment of Multinational Organisations ...........................................159
5
Determination of the Best Practices and the Degree of Standardisation ......................................161
iv
6
Implementation and Evaluation Procedure.....................................................................................162
7
Summary.............................................................................................................................................165
Chapter V: Conclusions................................................................ 166
1
Introduction........................................................................................................................................166
2
The Issue of Standardisation.............................................................................................................166
2.1 External Environment .....................................................................................................................168
2.2 Internal Context...............................................................................................................................169
2.3 Stage of Internationalisation ...........................................................................................................171
2.4 Staff Groups Affected .....................................................................................................................174
2.5 Level of HR (Strategy, Policy and Practice) ...................................................................................174
2.6 Subfunctions of HR (R&S, T&D and C&B)...................................................................................174
2.7 Organisational Factors (Size, Regional Coverage). ........................................................................175
3
Strategy ...............................................................................................................................................175
4
HR Subfunctions ................................................................................................................................176
4.1 Recruitment and Selection ..............................................................................................................176
4.2 Training and Development..............................................................................................................177
4.3 Compensation and Benefits.............................................................................................................178
5
Implications for Future Research.....................................................................................................178
6
Outlook................................................................................................................................................180
Appendices.................................................................................... 182
Appendix I: Questionnaire ..........................................................................................................................182
Appendix II: Division of Sample into National and Multinational Organisations.................................207
Appendix III: List of Variables...................................................................................................................209
Appendix IV: Results from the Chi-Square Tests.....................................................................................214
Appendix V: HR Experts and Interview Partners ....................................................................................231
Appendix VI: Interview Guideline ............................................................................................................233
Literature........................................................................................ 237
v
Figures
Figure I.1: Structure of Chapter I...................................................................................................... 2
Figure I.2: Models of HRM................................................................................................................ 7
Figure I.3: Scientific Approach: Basic Science vs. Applied Social Science .................................... 20
Figure I.4: Research Process........................................................................................................... 22
Figure II.1: External Environmental Factors .................................................................................. 30
Figure II.2: External Environments: Headquarter and Subsidiaries .............................................. 33
Figure II.3: Internal Environmental Factors................................................................................... 35
Figure II.4: Internal Contexts of Headquarter and Subsidiaries..................................................... 38
Figure II.5: First Component of the Theoretical Framework: Internat. Working Environment ..... 40
Figure II.6: Internationalisation Strategies ..................................................................................... 44
Figure II.7: Strategy Mix ................................................................................................................. 46
Figure II.8: Second Component of the Theoretical Framework: Internationalisation Strategy...... 47
Figure II.9: International Recruitment and Selection Activities...................................................... 51
Figure II.10: Advantages and Disadvantages of Recruitment Activities by Target Group ............. 56
Figure II.11: Competencies ............................................................................................................. 61
Figure II.12: Lead in Developing Training Concepts...................................................................... 64
Figure II.13: Advantages and Disadvantages of Compensation and Benefits Systems ................... 69
Figure II.14: Third Component of the Theoretical Framework: Integrated HR-Subfunctions ....... 72
Figure III.1: Research Methodology................................................................................................ 82
Figure III.2: Relevant Situations for Different Research Strategies................................................ 83
Figure III.3: Main Research Question and Perspectives................................................................. 85
Figure III.4: Description of the Research Sample ........................................................................... 88
Figure III.5: Country of Corporate Headquarters........................................................................... 89
Figure III.6: Sector .......................................................................................................................... 90
Figure III.7: European Standardisation .......................................................................................... 93
Figure III.8: Multinational Standardisation .................................................................................... 93
Figure III.9: Headquarters Standardisation.................................................................................... 94
Figure III.10: No Standardisation ................................................................................................... 94
Figure III.11: Mosaic: Four Type of Chi-Square Tests ................................................................... 96
Figure III.12: Combined Results of the Tests by Country and Organisation .................................. 98
Figure III.13: Results and Interpretation....................................................................................... 100
Figure III.14: Research Sample by Sector and Country of Origin ................................................ 125
Figure III.15: Steps of the Qualitative Analysis............................................................................. 127
Figure III.16: Business Lines......................................................................................................... 128
Figure III.17: European Human Resource Department ................................................................ 128
Figure III.18: Country/Region Line............................................................................................... 129
Figure III.19: Structure of the European Human Resource Management Function ..................... 129
Figure III.20: Degree of Standardisation According to Strategy, Policies and Practices ............ 132
Figure III.21: Degree of Standardisation According to Staff Levels ............................................. 133
Figure III.22: Degree of Standardisation According to Stage of Internationalisation.................. 135
Figure III.23: Degree of Standardisation According to HR-Subfunctions .................................... 137
Figure IV.1: Management Process for Implementation................................................................. 153
Figure IV.2: Fields of Investigation and Sources of Strategic Information................................... 157
Figure IV.3: Expected Degree of Standardisation......................................................................... 162
Figure V.1: Stages of Internationalisation..................................................................................... 173
vi
Chapter I: Introduction
Empirical research on European Human Resource Management (EHRM) has
shown that policies and practices vary considerably across nations in Europe.
These variations confront the Human Resource (HR) managers of multinational
organisations with a number of difficult, but also very interesting, questions.
How relevant are these variations for multinational organisations? Do these
variations reflect differences in the external context of firms in different nations
and, if so, is the observed HRM response simply an expression of optimal adaptation to these circumstances? Does the type of organisation matter? Are the
needs and requirements of subsidiaries of multinationals different from the
headquarters of national organisations? What are the implications of the ongoing trend towards European integration?
Existing theoretical and empirical research offers some help in answering these
questions. Large data sets have been evaluated in order to find out which policies and practices vary. Proposals have been made, as to how to approach the
difficulties of international HRM.
This study intends to broaden and deepen these efforts. We want to broaden the
findings by exploring the HRM approaches adopted by multinational organisations in Europe. By distinguishing these from national organisations and by
separating headquarters and subsidiaries of multinationals, we are able to generate a number of new results that confirm the “continent of diversity” finding but
also provide a subtler picture of the efforts of multinational organisations to implement best practices across their subsidiaries.
We want to deepen the existing research by focusing on one particular issue, the
degree of standardisation. We look at the “desire” to standardise among HR directors, we analyse the existing degree of standardisation, explore the factors
that influence the degree of standardisation, look at the evolution of standardisation during the phases of internationalisation, and draw some normative conclusions that are relevant for the task of determining an optimal degree of standardisation for their HRM policies and practices.
Indeed, our analysis leads us to formulate the concept of “flexible standardisation”, an approach that is designed to avoid some of the pitfalls of European
Human Resource Management (EHRM) that our, and previous, research revealed.
However, given the novelty of the research questions we address, the normative
conclusion follows from, but is not at the heart of, this study. The purpose is to
explore the actions taken by European multinational organisations in order to
meet the challenge of a continent of diversity and to study the implications for
1
future empirical and theoretical research that can be drawn from the results of
the research.
This chapter explains the practical and theoretical background of the research
question (Section 1). On the basis of the identified importance of the topic and
the research deficits, the main research objective (Section 2) as well as the research approach (Section 3) are derived. Figure I.1 illustrates the structure of
this chapter.
Figure I.1: Structure of Chapter I
1
Research Question
In the following, the practical, as well as the theoretical, background to the research question are outlined. This puts our research question into the context of
current HRM practice and ongoing research in the field.
1.1
Practical Background to the Research Question
Research in the field of European Human Resource Management has come to
the conclusion that the concept of HRM, which originated in the United States
of America, cannot be transferred to Europe without taking into account the different cultural and legal environments in Europe. It is obvious that research
should focus on HRM in Europe rather than on the findings of America’s HRM.
The European context was given particular emphasis in the EHRM debate and
several factors were identified that are of particular importance to HRM in
2
Europe. In addition to the changes in the European employment legislation by
the European Union (EU) and the impact of the development of the Single
European Market (SEM), multinational organisations operating in Europe are
confronted with various HRM systems at national level. In general, the situation
that multinational companies face in Europe can broadly be described by the
following three categories:
A)
The ongoing trend towards greater harmonisation of employment legislation in the EU member states directly affects companies in Europe, e.g.
via implementation of the Directives of the Social Chapter into national
legislation.
B)
The formations of the European Union and the Single European
Market itself have a number of indirect effects on business in Europe
due to changes in the economic and social environments.
C)
Despite the ongoing trend toward harmonisation, Europe can still be described as a continent of diversity. Multinational organisations are confronted with different nations, cultures and laws. Human Resource Management seems to be strongly determined by the national, legal, and institutional framework in every single country.
The following is a more detailed discussion of each of the factors.
1.1.1 Employment Legislation: Trend towards Harmonisation
The European economy is strongly influenced by the European Union, which
consists of 15 member states1 with an overall population of more than 372 million citizens and a labour force of over 146 million people. Together with its
three partners2 of the European Economic Area (EEA) the EU is the largest economic unit in the world.
Since its foundation by the Treaty of Rome in 1957, the European Union and
its predecessor, the European Economic Community, have followed the goal of
greater economic, political and social integration and harmonisation among its
member states. Employment and social affairs have always been a concern of
the EU with the task to “...promote a high level of employment and social protection, the raising of the standard of living and quality of life, and economic
and social cohesion and solidarity among Member States”. 3
1
2
3
As of 2002 the member states consist of Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom.
The partners are Iceland, Liechtenstein and Norway. The EU member states agreed on 1 January 1994 on
the creation of a single market in the EU with countries of the European Free Trade Association. Switzerland voted not to participate in the European Economic Area in a referendum on December 1992.
Treaty of Rome, 1957, Opening Article.
3
The Social Chapter promotes “improved working conditions and an improved
standard of living for workers, so as to make possible their harmonisation”4 and
calls for “closer co-operation in the social field”.5 By its various directives,6
which have to be implemented into their national legislation by all 18 Member
States of the EEA, the EU intends to establish common basic employment practices across Europe. The goal is to enhance the best possible use of human resources and, hence, to improve the economic competitiveness of the EEA. The
various EU directives of the Social Chapter have a direct impact on specific areas of Human Resource policy like parental leave, part-time work as well as the
information and consultation of employees.7
Overall, the harmonisation of EU-employment legislation has two implications.
On the one hand, it provides the opportunity for more standardisation, as the differences in national legislations are being reduced. On the other hand, the standards picked by the European Union’s legislative bodies may not be the preferred type of European-wide procedures, as these are not always in line with
the interests of the HR leadership of the organisation. Whether this is liked or
not, the harmonisation of employment legislation and the various directives of
the Social Chapter contribute to a convergence of HRM in Europe.
In order to comply with the law, companies in Europe have to keep abreast of
developments in the European employment legislation and have to make sure
that their policies and practices are in line with existing laws.8 They have to find
the best option for their organisation in order to act according to the law and to
suit the interests of their company.
1.1.2 The European Union and the Single European Market: Forces in the Business Environment
With the creation of the Single European Market and its free movement of
goods, labour, services and capital between the Member States, competition between the Member States has increased significantly. Pinder emphasises that
“companies will have to become much more aware of the speed and scope of
the process of legislative and cultural change, and (that) there will be major im4
5
6
7
8
4
Social Chapter of the EEC Treaty: Article 117.
Social Chapter of the EEC Treaty: Article 118.
For an overview of the various EU Directives see European Industrial Relations Review (1999).
Multinational companies and employers’ representatives do not always support the changes in European
employment legislation and the trend toward standardisation. For example, the EU Directive on European
Works Council (EWC) was strongly criticised. The EWC, under the terms of the Directive, was regarded
as inflexible and incompatible with the structure of some organisations and it was feared that it would
provide a basis for European-level collective bargaining. Instead organisations preferred a more nationaloriented or individualistic style of their information and consultation procedures and found the terms of
the directive as counter-cultural for their organisation.
See IPD Executive Brief (1996).
pacts on employment practices arising from the Single Market Programme”.9 As
an effect of the EU and the SEM, the number of mergers and acquisitions in
Europe has more than tripled10 since the 1980s and changes in the economic and
social environment are also affecting European organisations and their management of human resources. Several factors in the European business environment are analysed in the literature11 and general ways are outlined as to how
European organisations might respond to these changes:
• Increased competition and expansion across Europe may lead to the implementation of new organisational structures and change management programmes. Companies are forced by strong international competition to reduce their costs, to improve their labour supply and to constantly develop
their human resources.12 The role of training attracts particular interest as international competition increases and human resources are seen as a major
asset. Language skills, social awareness, adaptability to other cultures and the
management of multi-national teams become important topics.
• The significant number of take-overs and mergers and acquisitions force
some organisations to adapt to different national and organisational cultures.
The opportunities for companies to increase their activities across Europe can
only be optimally used if the required human resources are, both in quantitative and qualitative terms, available. The need for specially trained and selected “Euro-Managers” increases.13
• Changes in the labour market, like the free movement of labour and the
abolition of work permits for employees from the EEA, lead to Europeanwide resourcing and training activities. More knowledge about the various
labour markets in other countries as well as about their recruitment and selection policies might be required. Furthermore, changing qualifications like
language skills and international experience become important.14
• Due to increased mobility of employees across Europe, in particular at management level, compensation and benefits packages are compared at European rather than at national level. Furthermore, differences in pay and social
benefits among the various member states as well as the increased demand
for equal treatment of employees make it necessary to redesign common
compensation and benefits procedures.15 Although companies might standardise their remuneration packages across Europe, differences at the na9
10
11
12
13
14
15
Pinder (1990).
Directorate-General for Employment, Industrial Relations and Social Affairs (1990).
A good overview of the different environmental forces, which affect HRM in Europe, is provided in
Sparrow/Hiltrop (1994).
Hiltrop (1993).
Marr (1991).
IPD: Europe Personnel and Development (1998).
Wagner (1991).
5
tional level, like cost of living, taxes, and state pension, remain and hence
have to be taken into consideration.
European companies face various strategic pressures in the business environment of ongoing change. According to Sparrow and Hiltrop, they have to respond to “a collection of strategic pressures (such as globalisation, rationalisation, business integration and social and demographic problems) that will reshape and possibly supersede national differences in HRM as organisations implement new policies and practices. (...) These pressures for change will not
only shape the context for European HRM, but will increasingly determine its
content.”16
1.1.3 Human Resource Management at National Level: Continent of Diversity
In addition to the mentioned factors and forces of change in HRM in Europe,
multinational organisations are also confronted with various national HR systems. If we compare Europe with the United States of America, it can be described as a multi-national conglomerate17of different nations, cultures, and
laws, rather than as a single nation. Every European country has its own historical and legal heritage. This is also reflected in different traditions of industrial
relations and personnel management.18 The Cranet-E project,19 which is the
largest pan-European study in the field of EHRM, found that HRM in Europe is
very complex, whereby the single countries exercise a variety of different national HRM practices.20 The results of the project provide an overview of the
spectrum of different HRM approaches in Europe and show that HRM varies
significantly across countries. No single European HRM approach could be
identified. In almost all countries HRM seems to be strongly determined by the
national legal or institutional framework. According to the degree of integration
of HRM into business strategy and the degree of devolvement to line management, the HRM practices of European countries can be categorised into four
positions (see Figure I.2).21
16
17
18
19
20
21
6
Sparrow/Hiltrop (1994, p. 137).
Krulis-Randa (1989, p. 134).
See Bamber/Lansbury (1987).
The Cranet-E project is a network of HRM experts from leading business schools or university departments in more than 20 European countries and co-ordinated by the Centre for European Human Resource
Management at the Cranfield School of Management. The research team collects comparable data on
HRM within various European countries on an ongoing basis.
Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster
(1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al.
(1997); Brewster et al. (2000a).
This table combines two tables from Brewster/Larsen (1993), p. 132 and p. 140. It has been up-dated
since we have conducted our research, showing some slightly different categorisation of the countries
based on the results from the latest Cranet-E-Survey (Hilb 2002, p.5).
Figure I.2: HRM Models
22
Source
These results do not mean “...that all organisations in every country fit the
“typical” model. Indeed, there will probably be a range of all kinds of organisations in each country. Nevertheless, the country tendencies are clear”:23
• The professional mechanic position is characterised by operative personnel
administration in “traditional” personnel departments: low integration and
low devolvement (Germany, UK and Italy).
• The guarded strategist position follows strategic personnel management
concepts in “traditional” personnel departments: high integration but low devolvement (France, Spain and Norway).
• The wild-west position can be described as personnel work, which is mainly
done decentrally by line management, but without strategic orientation: low
integration and high devolvement (Denmark and The Netherlands).
• Finally, the pivotal position represents strategic oriented personnel functions
with line management responsibility: high integration and high devolvement
(Switzerland and Sweden).
Overall, the Cranet-E research findings and other research conducted in the field
of EHRM provide a comprehensive overview of HRM policies and practices in
22
23
Brewster/Larsen (1993, p. 132).
Brewster/Larsen (1993, p. 142).
7
European countries. However, in the presence of the multitude of Europeanwide operating organisations, as well as the ongoing trend towards European integration and internationalisation, the question of “what HRM policies and practices in every single country look like” is not the only relevant issue. It appears
equally important to analyse what the HRM concepts of those multinational organisations look like that are operating on a European-wide scale and hence are
confronted with both an ongoing trend toward harmonisation on the one side
and different national personnel practices in Europe24 on the other. It is this issue that we will focus on in this dissertation.
1.1.4 Implications for Multinational Organisations
The development of European Human Resource departments in multinational
organisations has increased over the past four to five years. Recruitment adverts
searching for European HR managers with European-wide experience and particular knowledge in at least two different European countries are more and
more common.25 It seems that widely recognised national HR policies and practices no longer fit the demands of European multinationals, and HR strategies
and techniques are reassessed in the light of the European environment. Hiltrop
discovered that “although experience has shown that managerial understanding
of and responsiveness to these issues generally is low, research shows that a
number of European companies are addressing these challenges and are taking
actions that will dramatically change their approach to managing people.”26 In
this context Krulis-Randa states that “...it is essential for companies to generate
strategic HRM approaches rather than to persist with professional PM if they are
to survive and prosper in the emerging European environment...”27
Strategically minded HR specialists have to react to these changes in their company’s business environment and have to anticipate future demands. In order to
respond effectively they have to develop and co-ordinate policies and practices
that are flexible and adaptable to the demands of the different European countries. In order to find the right balance alongside the needs of the organisation, a
European-wide HRM approach is required, which takes the spectrum of different factors into consideration.
But how do these policies and practices look like, which should fit across various cultures and national systems? No definite agenda exists for HR managers
on how they should respond to these new challenges.28
24
25
26
27
28
8
Europe is not restricted to only the countries of the European Union. The emphasis in this project is on
West-European countries, which include Switzerland and other non EU member states. Note that the origin or headoffice of the multinational companies analysed need not to be in Europe. However, in EHRM
EU-policy clearly plays an important role in the non-member states as well.
See e.g. People Management Magazine: Appointments.
Hiltrop (1993).
Krulis-Randa (1989, p. 138).
Pinder (1990).
Hence, from a practical point of view, there is a clear need for a holistic framework and advice for HRM professionals regarding the development, implementation and management of HRM in Europe, in order to find the proper balance
between standardisation and differentiation of their HR policies and practices.
1.2
Theoretical Background to the Research Question
The discussion on HRM over the last two decades shows a clear shift away from
traditional Personnel Management to strategic-oriented Human Resource Management.29 There is an increasing interest for HRM at top management level30
and HRM is valued as an important part of the organisation’s corporate and
business strategy.31
As the role of the HR function transformed from a support function to an increasingly strategic function for the organisation, its particular importance for
the internationalisation of the organisation was more and more emphasised.32
Today, an effective management of human resources is seen as a competitive
advantage for multinational organisations.33
Both, theory and practice of HRM at an international level can no longer be described as being in its infancy-stage of development,34 and interest from researchers and practitioners is increasing.35 This is true for (strategic) human resource management in general,36 and human resource management from an international or European perspective in particular.37 In the following we provide
a brief summary of the developments of human resource management in
Europe.
1.2.1 Human Resource Management in Europe
29
30
31
32
33
34
35
36
37
Teagarden/Glinow, v. (1997); Analoui (2002a&b); Karami (2002); Storey (2001a); Purcell (2001); Tyson
(2002).
Sparrow/Hiltrop (1994).
Schuler/Rogovsky (1998); Watson (1986); Hendry/Pettigrew (1986); Buttler (1988); Purcell (1989); Boxall/Dowling (1990).
Teagarden / Glinow, v. (1997).
Porter (1980 & 1987); Mabey et al. (1998); Miller (1989); Ferner/Quintanilla (1998); Huang (1998); Beer
et al. (1985); Birkinshaw/Marnison (1998); Hendry/Pettigrew (1990).
In his article, Laurent (1986) describes HR as being in its infancy-stage of development. We believe that
this description no longer describes the current status quo, as research in this field has developed significantly over the last decade.
Scullion (2001); Black et al. (1999); Dowling et al. (1999).
e.g. Storey (1995 & 2001); Sisson/Storey (2000); Purcell (2001); Tyson (2002); Analoui (1999 & 2002).
e.g. DeCieri/Dowling (1999); Dowling et al. (1999); Black et al. (1999); Brewster (2001); Scullion
(2001); Jackson (2002), Joynt/Morton (2000), Albrecht (2001); Mayrhofer et al. (2000); Kamoche (2001);
Brewster/Harris (1999); Kumar/Wagner (1998); Duane (2001); Brewster et al (2000a). See also Clark et
al’s review (1999) on the increasing number of publications within the field of HRM.
9
Historically, the concept of HRM found its entry into the theoretical debate in
Europe via the UK. Several authors have significantly contributed to the discussion of HRM.38 The questions arose of how consistent the American model of
HRM is with British “Industrial Relations” and what advantages could arise
from HRM compared to traditional PM. Within the European theoretical debate
it was emphasised more and more that research should concentrate on a European model of human resources rather than to try and fit the American approach
to the European environment.39 It was argued “we are in culturally different
contexts” and “rather than copy solutions, which result from other cultural traditions, we should consider the state of mind that presided in the search for responses adapted to the culture.”40 Therefore, the European environment of different national industrial relations and personnel management systems was
given particular consideration. The following aspects of European concepts
were identified within the literature as being distinct from American concepts of
HRM: 41
1.
More restricted employer autonomy.
2.
Less emphasis on the market processes.
3.
Less emphasis on the individual, more emphasis on the group.
4.
More emphasis on workers rather than managers.
5.
Greater importance of “social partners” in employment relationships.
6.
Higher level of governmental intervention in many areas of HRM.
Taking the above-mentioned factors into consideration, it became more and
more important to understand HRM from a European perspective, and research
within EHRM increased significantly within the last decade. Various research
projects covering HRM within Europe can broadly be summarised into the following categories42:
1.
38
39
40
41
42
43
10
Research within single European countries conducted by national researchers in order to investigate various topics concerning HRM within
their country.43
See Guest (1987 & 1994); Legge (1989); Hendry (1994); Purcell (1988); Storey (1995 & 2001a)); Tyson
(1987 & 2002); Torrington/Hall (1995); Purcell (1989 & 2001); Sisson/Storey (2000).
Cox/Cooper (1985); Thurley/Wirdenius (1991).
Albert (1989), cited after Brewster/Hegewisch (1994, p. 5).
Sparrow/Hiltrop (1994, p. 30); see also Brewster/Larsen (2000b).
This categorisation provides an overview of different research investigations within Europe, but should
not be exclusive.
For an overview of several national researchers by country, see Sparrow/Hiltrop (1994, p. 4).
2.
Research focusing on a single subfunction44 of Human Resource Management like competencies for a “Euro-Manager.”45
3.
European-wide groups of researchers taking a polycentric approach,
whereby individual domestic studies are conducted in various countries.
This approach is characterised as ascertaining and describing the “many
ways”, rather than the “one way”.46 For example:
• Clark et al.47 examine whether there is a single shared concept of
HRM, which transcends national boundaries. The European-wide research team tried to answer the question of “what do people in different countries understand as HRM?”; or
• Kumar et al.48 investigate the practice and particularities of HRM in
several European countries.
• Brunstein et al.49 follow the goal of providing detailed “insider” descriptions of HRM within various European countries.
44
45
46
47
48
49
50
51
52
53
54
4.
Research, which focuses on HRM approaches in Eastern Europe.50
5.
Worldwide HRM research, which also covers European countries, such
as the survey by Towers Perrin51 or research by Duane52, who investigates four regions of the world (US, Western Europe, Eastern Europe,
and the Middle East) in terms of their HR practices.
6.
Research investigating European organisations abroad.53
7.
An ongoing Pan-European research project, which compares various
concepts of HRM. Within the Cranet-E project, a theoretical model was
developed, which analysed HRM polices and practices within the European “external environment of national culture, power systems, legislation, education (and) employee representation”.54
Newell/Tansley (2001); Leblanc (2001).
See Marr (1991).
Adler (1986, p. 41).
Clark et al. (1996).
Kumar/Wagner (1998); Urban (1998); Hollinshead/Weik (1998); Echenarria/ValNumez (1998);
Eckartstein, v./Müller (1998); Thom et al. (1998).
Brunstein et al. (1995).
Holtbrügge (1995); Adam (1987); Frank/Bennett (1991); Pieper (1990); Lang (1998).
Towers Perrin (1992).
Duane (2001).
Kidd et al. (2001); Festing (1996); Kumar et al. (2001); Worm et al. (2001), Charles-Pauven (2001).
Brewster/Hegewisch (1994, p. 7).
11
In general, the various above-mentioned research approaches provide important
information about HRM in Europe and come to wide ranging comparative results.55 The research investigations reveal differences between various European
countries with respect to their HR policies and practices, although distinct regions, showing similar cultural pattern56, management development techniques57
or HR policies and practices58, were analysed.
This finding, of different HR policies and practices across various European
countries on the one hand, and a trend towards standardisation at the institutional level on the other hand, leads us to the question of how HRM, from the
perspective of multinational organisations operating across various European
countries, looks like and should look like.59
Should multinational organisations adapt their HR policies and practices to the
various national circumstances, or should they standardise them? Multinational
organisations have to consider carefully whether the benefits of a homogenous
company culture are greater than the costs of not adapting to environmental circumstances.
Within the literature, two main research paradigms are discussed, dealing with
this question of standardisation versus differentiation: the universalist versus the
contextual paradigm.
1.2.2 The Universalist versus the Contextual Paradigm
The universalist and the contextual paradigm not only represent different ways
in which HRM is conducted, but also reflect different research traditions
through which HRM is explored.60
The universalist research paradigm concentrates on the management of human resources across various national borders, i.e. within an organisation. The
idea of the universalist paradigm is that HR policies and practices can be transferred from one country to the other, in the belief that what works in one country can be applied to organisational units in other countries as well. The proponents believe that successful HR policies and practices are universally applica-
55
56
57
58
59
60
12
Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster
(1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al.
(1997); Brewster et al. (2000a).
Hofstede (1988).
Evans et al. (1989).
Brewster/Larsen (2000a&b); Larsen/Brewster (2000); Brewster et al. (2000b).
Myloni (2002); Ferner (1997); Ferner/Quintanilla (1998).
Brewster (2001); Brewster (1999a&b); Brewster et al. (2000b); Weber et al. (2000); Schreyögg et al.
(1995); Mayrhofer et al. (2000); Holden (2001a); Brewster et al. (2001).
ble. This “one-best-way-perspective” places little emphasis on the external context, but concentrates on specific organisational characteristics.
Standardisation of HR policies and practices is regarded as a strategic advantage
and an improvement in the organisation’s overall performance. Standardisation
not only underpins the organisational culture, but also has synergetic effects for
the multinational organisation. For example,
-
the costs for the development of certain recruitment or training programmes can be shared; and
-
Managers working across different nations can apply the same management systems, which creates managerial homogeneity.61
Given the assumed positive effects of standardisation for the organisation, it is
believed that multinational organisations favour standardisation62 and that this
leads to a competitive advantage for multinational organisations relative to national organisations.63
The contextual research paradigm compares the HR systems of one country
with others, identifies similarities and differences between those countries (or
regions) and investigates the antecedents for those differences. The proponents
of the contextual paradigm doubt that certain HR policies and practices that
work well in one particular environment, lead to the same success within other
environments. They place particular emphasis on environmental factors impacting HR policies and practices within the various countries. Hence, researchers
analyse the differences between the countries’ HR systems and try to understand
what factors cause those differences.
The universalist paradigm focuses on organisational factors, which are applicable across countries, while the divergence paradigm leads to the necessity of
considering the organisation’s internal and external environment. Overall, the
discussion of the universalist versus the contextual paradigm leads to the conclusion that the former is more likely to call for a high degree of standardisation,
while the latter is more likely to call for differentiation.
Each research paradigm clearly has its advantages and disadvantages.64 A synthesis of the major ideas of the different paradigms is regarded as a useful way
forward65 and Mayrhofer et al.66 argue “we can learn most by drawing on the
best of both traditions.”
61
62
63
64
65
66
Celestino (1999).
Child (1981); Adler (1997); DeCieri (1996).
Sparrow/Hiltrop (1994).
Holden (2001).
Beardwell/Holden (2001).
Mayrhofer et al. (2000, p. 10).
13
We can learn from the universalist paradigm that standardised HR policies and
practices might be favoured by multinational organisations, due to various company-specific reasons like company culture, synergies or cost-saving aspects
and that they might be a competitive advantage for the organisation.
From the contextual paradigm we learn that environmental factors play an important role in the use of HR policies and practices.
In the following, we will discuss in more details results from research investigations that are particularly relevant for our research, because they focus on
-
multinational organisations in Europe, and
-
analyse the impact of country-specific factors, including home67- and
host-country-specific factors68, and/or
-
organisation-specific factors.69
All these aspects are important for the issue of standardisation, which is at the
heart of our study. The following three studies are of particular relevance: The
study by Gooderham, Nordhaug and Ringdal,70 Tregaskis’71 research, and the
investigation by Weber, Kabst and Gramley.72
The research investigation by Gooderham, Nordhaug and Ringdal73 analyses
whether, and to what degree, US subsidiaries in Europe adapt their HRM practices to the varying national institutional contexts. Their findings indicate that
US subsidiaries make use, on the one hand, of their home-country-specific HR
policies and practices, while also adapting to the local conditions of the hostcountries.
Their approach is to compare practices of US subsidiaries with those of local
firms in Ireland, the UK and two Nordic countries, Denmark and Norway. They
define a set of calculative or central HRM practices, stemming predominantly
from PM in the USA: performance measurement, non-recognition of labour unions, direct channels of communication. They use this set of HR practices or
core features of American-style HR in order to prove their thesis that the strategic discretion available to the subsidiaries of US multinationals to implement
67
68
69
70
71
72
73
14
Myloni (2002); Mabey et al. (1998); Carell et al. (2000); Holden (2001).
Holden (2002); Schuler/Rogovsky (1998); Newman/Nollen (1996); Myloni (2002); Rosenzweig/Nohria
(1994); Carell et al. (2000).
Rosenzweig/Nohria (1994); Bae et al. (1998); Müller (1998); Ferner (1997); Myloni (2002).
Gooderham et al. (1998).
Tregaskis (2000).
Weber et al. (2000).
Gooderham et al. (1998).
and apply US-style HRM in Europe, will largely be a function of the host country’s specific institutional environment.
In particular, they test two hypotheses: First, being a US subsidiary in the UK,
Ireland or Denmark/Norway, as opposed to being a domestic firm in these countries, has a positive effect on the use of calculative HRM practices. This shows
that multinationals differ from national organisation – a finding that will be supported by our research. Second, the use of calculative HRM practices by subsidiaries of US multinational companies is greater in the UK and Ireland than in
Denmark/Norway. This is intended to prove that the “ethnocentric” approach
finds its limit in the host country’s institutional environment. This result suggests that multinational organisations implement a standardised (“home country”) approach, whenever possible.
While it is an interesting hypothesis to investigate whether the institutional environment has an influence on the policies and practices adopted, we believe that
this should be enriched by also asking the more subtle question whether there
exist policies and practices where standardisation would be feasible but does not
occur. A question not addressed in this research.
However, their results clearly indicate the value of more detailed research into
the policies and practices of multinational organisations in Europe.74 They find
an interesting organisational effect: the size of the company, whether a subsidiary or a domestic firm, has a significant positive effect on the adoption of calculative HRM practices. Furthermore, a corresponding effect is associated with
being in the banking and finance industry, as contrasted with all the other included industries.
Tregaskis75 assesses the impact of the home-country versus the host-countryspecific context on the use of certain human resource development policies and
practices in foreign multinational organisations in Europe. Tregaskis’ results reveal that the impact of the host-country context is more important than the
home-country context.
She tests the relative impact of the host-national context, and the national origin
of the parent company in shaping the Human Resource Development (HRD)
practices of foreign multinational organisation in Great Britain and compares
European, US and Japanese multinationals. She tests the following hypothesis:
There will be statistical differences in the HRD practices of MNOs based in
Britain according to the national origin of their parent company (Japanese, US
and European). Four sub-groups are built: The European group consists of
French, German and British subsidiaries, based in Great Britain; Japanese subsidiaries in Britain; US subsidiaries in Britain and indigenous organisations consist of independent single or multiple site organisations, based in Great Britain.
74
75
Ferner (1997); Ferner/Quintanilla (1998).
Tregaskis (2000).
15
Differences between the practices of the three types of MNOs (European, Japanese and US) are examined. In the second stage, it is assessed whether there are
significant differences between the practices of MNO and British indigenous
organisations.
The three types of MNOs show significant differences in only 3 out of 50 variables measured, which fails to support the argument put forward by the first hypothesis that the parent company’s national origin predicts MNO HRD practice.
As 90% of the practices examined reveal no differences, this suggests either a
similarity in MNO practices, reflecting the practices of successful companies or
a strong similarity between MNO and host-country practices. This was the key
question of the second test.
Comparisons of MNOs and indigenous organisations reveal both differences
and similarities. These results suggest that, in some areas of HRD, there is a
commonality among MNOs, irrespective of national origin – what some may
consider the element of multinational ‘best practice’. However, in other areas
the similarity in MNO and indigenous practice suggests that the national context
of operation is a key factor influencing organisational HRD approaches.
These findings suggest that MNOs demonstrate a stronger element of strategic
integration of HR and business issues than indigenous organisations. Tregasikis
concludes that the findings provide mixed support for the second hypothesis, although, on the whole, there is greater similarity than difference between the
MNEs. This means that in a few areas HRD practice is more likely to be a product of a common multinational approach, but in the majority of areas it is reflective of the national conditions in which the company has to operate.
Weber, Kabst and Gramley76 analyse the influence of country- versus organisation-specific factors on the formulation of HR policies. They investigate whether
company-specific factors lead to convergence, whereby country-specific factors
lead to divergence in the formulation of HR policies and practices. Their results
cannot provide a universal answer and each of the HR policies considered
shows its own pattern of significant factors of influence. However, their results
do show that the impact of organisation-specific factors is more dominant, particularly for training and development and, to a lesser extent, for compensation
and benefits. Recruitment and selection is influenced by both, company- and
country-specific factors. The company-specific antecedents considered are the
corporate strategy, the size and the sector of organisation.
They find that corporate strategy has a positive influence on the existence of HR
policies. Corporate strategy is the main explanatory factor for a policy for R&S,
T&D and C&B. Company size is another independent variable, which exercises
76
16
Weber et al. (2000).
a positive influence on all of the HR policies. Indeed, the results show that organisation-specific factors exercise the dominant influence.
All three studies provide valuable contributions that are relevant for this thesis.
The study from Gooderham, Nordhaug and Ringdal demonstrates the homecountry-specific effect. They and the research from Weber, Kabst and Gramley
find that organisation-specific factors, like size, have a positive effect on the use
of a certain HR policy or practice. Tregasikis finds that multinational organisations show no significant differences from each other, leading to a multinational-organisation-specific effect. Furthermore, she finds both differences and
similarities between multinational and national organisations, leading to the interpretation of both, a common multinational-organisation-specific factor, as
well as a reflection of the national conditions.
However, the research samples of all three studies include both, multinational
organisations from abroad and local multinational organisations, without a distinction of subsidiaries and headquarters. We believe that the results of these
studies suggest that there is a benefit in dividing the group of multinational organisations into subsidiaries and headquarters of multinational organisations, as
the latter group also represents home-country-specific factors, while the former
represents host–country-specific factors. Therefore, building on the above discussed research results, our quantitative empirical investigation is designed as
follows:
-
We investigate home-country-specific factors by building a sub-sample
containing only multinational organisations that have their headquarters
outside the country of investigation.
-
We analyse host-country-specific factors by building two sub-samples
containing, on the one hand, multinational organisations that have their
headquarters within the country and, on the other hand, national organisations.
-
This division is important for the third factor analysed within literature,
the organisation-specific factors. The division into three sub-samples:
subsidiaries of multinational organisations (MSUB), headquarters of
multinational organisations (MHQ) and national organisations (NAT) allows us to investigate the organisation, in particular multinationalorganisation-specific factors.
Overall, this discussion shows that the analysis of the question of standardisation versus differentiation requires a wide context of analysis.77 We examine this
question from the perspective of a multinational organisation and want to find
out to what extent they standardise their HR policies and practices across vari77
Scholz (1993); Myloni (2002); Kamoche (1996).
17
ous European countries.78 In addition, we analyse how foreign subsidiaries of
multinational organisations differ from domestic multinational organisations and
from national companies in their use of specific HR policies and practices
across various European countries. This comparison allows us to take the abovementioned (home- and host-) country-specific, as well as organisation-specific
factors, into consideration. The resulting research objective of this dissertation
is described in the section below.
2
Research Objective
Due to the identified importance of the topic, the need of agendas for HR managers and the analysed deficits in theory and research further investigations in
the field of EHRM are relevant from a practical and from a theoretical point of
view. The overall objective of this dissertation is to contribute to the understanding of EHRM from the perspective of multinational organisations within
Europe.
The analysis of the various HRM approaches adopted by multinational organisations in Europe will provide answers to the following questions, which have, to
our knowledge, not been thoroughly addressed by research to date:
• What does the HRM approach of multinational organisations across
various European countries look like?
• To what extent do they standardise their HR policies and practices
across European countries, and why?
While these questions characterise the main explorative interest of our work, we
also intend to go further and ask the following question:
• What normative conclusions can be drawn for HRM practice of multinational organisations that operate in Europe?
Answers to the above mentioned questions as well as further results from a detailed analysis of the HRM approaches adopted by multinational organisations
within Europe enrich the current research with an important transnational perspective.
3
Research Approach
The scientific approach adapted in our research is explained in Section 3.1, the
research process in Section 3.2 and the structure of this dissertation in Section
78
18
Ferner (1997); Ferner/Quintanilla (1998).
3.4. Section 3.3 covers the main definitions of key concepts used in this research
investigation.
3.1
Scientific Approach
The scientific approach of this dissertation is based on the understanding of
business administration as an applied social science.79 The goal is to reach science-based knowledge, which will help people to act within practice. The task
of the researcher is to provide information and guidance for practitioners in order to build a basis for them to develop their own action model. Therefore, specific knowledge for the development of practical solutions is systemised and
typical problems are analysed.
Compared to basic science, applied social science has a different scientific and
empirical approach to the generation of scientific questions, the argumentation
of scientific statements and the application of scientific findings:
The “generation” of scientific questions is characterised by actual problems
within practice, where not enough knowledge exists in order to find a solution.
While the typical research problem of basic science develops within the theoretical context, the typical problem of applied social science develops within
practice. Hence, the practical context is constitutive, which means that the ultimate goal of applied science is to provide practitioners with the opportunity to
act on the basis of scientific knowledge.
The “argumentation” of scientific statements is, compared to basic science,
not the main research objective. The current reality forms the starting point for
research in order to systemise existing experience and knowledge from practice
as well as to analyse typical problems.
The “application” of scientific findings is a main component within the research process and the scientific findings include solutions for practice.
Figure I.3 contrasts the scientific approach of basic science with applied social
science.
79
For more detailed information on the scientific approach see Ulrich (1984).
19
Figure I.3: Scientific Approach: Basic Science vs. Applied Social Science
Based on the theoretical foundation of system thinking,80 this dissertation regards an organisation as a complex and open social system that takes input from
the environment. This input goes through various transformations within the organisation and finally results as an output.81 As an open system there is a need
for the organisation to maintain favourable input and output transactions with
the environment in order to survive over time. Organisations as systems are
composed of multiple independent elements, whereby changes within one part
of the system will result in changes in other parts.
Some congruence models take the view of organisations as open social systems.82 In these frameworks the organisation is regarded as a conglomerate of
systems being composed of tasks, formal and informal structures, individual and
various subsystems. The basic hypothesis of these models is that organisations
will be most effective when their major components are congruent with each
other. The congruity concept highlights that the interaction among organisational components is perhaps more critical than the characteristics of the components themselves.
Furthermore, following a contingency approach,83 the solution found by one organisation cannot be generalised and hence cannot be transferred one-to-one
without adjustment to other organisations. They are only valid under specific
80
81
82
83
20
Bertalanffy (1951); Ulrich (1984); Ulrich et al. (1984); Probst/Siegwart (1985).
Katz/Kahn (1978); Ulrich/Krieg (1972); Ulrich (1984); Bleicher (1991); Staehle (1991); Hill, et al.
(1994).
Leavitt (1965); Lawrence/Lorsch (1969); Khandwalla (1973); Galbraith (1987).
Nadler (1987).
circumstances and within a clearly defined context. Therefore, there is no one
right way to manage HRM across Europe and the appropriate strategies, policies
and practices vary from company to company and from environment to environment. Hence, no general conclusion can be drawn from the research. Following this perspective, the goal of this dissertation is to provide “situationally relativised (…) statements.”84 The results provide companies with detailed information, which they can use to develop their own context-specific EHRM approach.
3.2
Research Process
As a first step a theoretical framework was developed as a general basis for the
empirical analysis of the research project. It covers strategic and operational aspects of international human resource management under consideration of the
various external and internal factors influencing multinational organisations
within Europe.
As a second step an empirical analysis of EHRM approaches adopted by multinational organisations was conducted. In order to pursue the research and to
seek answers to questions arising from both the problem’s practical and theoretical background, an interview guideline was developed, which broadly covered the following HRM functions: structure and strategy; recruitment and selection; training and development as well as compensation and benefits. Due to
the lack of previous relevant research and because of the broad and complex nature of the research field, the methodological research approach is characterised
by:
a)
Interviews with HRM experts in order to discuss the HRM situation in
European multinational organisations. These expert interviews are followed by a case study approach making use of the semi-structured interview guideline, in order to encourage interviewees to describe their current EHRM approaches.
b)
A secondary analysis of the rich database collected by the Cranet-E research team85 in order to gain new insights by posing new questions.
The application of both qualitative and quantitative empirical research points to
the analysis' empirical focus, which is largely of explorative character. It is
hoped that learning about the EHRM approaches that have been used by advanced multinational organisations and by the companies covered in the CranetE database enhances our knowledge about problems and solutions to the Euro-
84
85
Ulrich/Fluri (1995, p. 30); translated by the author.
I would like to thank the Cranet-E research teams for their permission to use their dataset for my research.
In particular, I thank the British, Danish, German and Swiss teams that provided me with their 1999/2000
country dataset for secondary analysis.
21
pean dimension of HRM. Interpretations and theoretical assumptions are assessed and revised step-by-step.86
Finally, as a third step based on both the theoretical framework and the empirical research finding, conclusions are drawn for both theory and practice. These
should provide multinational organisations that are operating in Europe with
guidance for designing their concept of HRM in Europe. Figure I.4 illustrates
each step within the research process.
Figure I.4: Research Process
3.3
Definitions
In this section we briefly review the use of, and define the three key terms for
this research project: the general meaning of “Human Resource Management”,
the particular meaning of “European Human Resource Management” and the
term “multinational organisations”.
After a long lasting debate about the meaning of Human Resource Management,
it is today distinguished from traditional Personnel Management as taking a
more holistic view of the organisation and as being more strategic in the way
human resources are managed.87
Within literature, a number of distinctive features of strategic HRM are analysed: 88
86
87
88
22
See Hilb (1985) and Keller, v.(1982).
Guest (1987 & 1994); Legge (1989); Hendry (1994); Purcell (1988); Storey (1995 & 2001a); Tyson
(1987 & 2002); Torrington/Hall (1995); Purcell (1989 & 2001); Sisson/Storey (2000).
As within the discussion of HRM and strategic HRM the terms became increasingly more synomymous
and hence should not be further differentiated here. See Mabey et al. (1998) and Karami (2002).
• Strategic HR decisions are characterised by more uncertainty in the decision-making process since future changes within the environment of organisations are anticipated.89
• This leads to a more choice and flexibility of strategic HR decisions, changing the nature of HR activities to being more adjustable to change and less
determined by rules.90
• The role of the HR department91 is emphasised and becomes more central,
particularly in the strategic decision making process of the organisation.92
Moreover, the concept of integration distinguishes strategic HRM from personnel management. Integration has many facets:
a) The integration of HR with corporate strategy and the strategic needs of the
business93, in order to reach the organisation’s goals and to achieve employee satisfaction and development.94 This integration process is regarded
as very complex.95
b) The organisational integration of the HR function with other organisational
functions of the company, as well as the involvement of line management
and employees in HRM. The HR function becomes an integral part of the
strategic planning process of the organisation.
c) The importance of integrating the various HR subfunctions, like recruitment
and selection, training and development, and compensation and benefits,
with each other. 96
Overall, due to its strategic role, HRM is seen as source for a competitive
advantage, allowing the organisation to act more effectively in an environment
of ongoing change and being able to maximise the added value provided by its
human resources.97 This is mainly due to the proactive role of HR, searching for
the organisation’s particular way, due to individual and situational requirements.
89
90
91
92
93
94
95
96
97
Johnson (1987); Purcell/Ahlstrand (1994).
Analoui (1999 a&b).
Legge (1989); Tyson (1987); Storey (1992b); Purcell/Ahlstrand (1994).
Miller (1989); Analoui (1998).
Purcell (1989); Boxall/Dowling (1990); Purcell/Ahlstrand (1994); Watson (1986); Hendry/Pettigrew
(1986); Buttler (1988); Beer et al. (1994); Fombrun et al. (1984); Schreyögg (1987); Karami (2002);
Wright et al. (1998); Mabey et al. (1998); Miller (1989); Schuler/Rogovsky (1998).
Pearce/Robinson (1997).
Hiley (2002).
Hilb (2002).
Mabey et al. (1984 & 1998); Beer et al. (1985); Hendry/Pettigrew (1990); Storey (2001a), Porter (1980 &
1987); Huang (1998); Miller (1989); Ferner/Quintanilla (1998).
23
Within the context of our explorative research questions we certainly do not
limit our interest to strategic HRM. We simply want to find out how multinational organisations manage their personnel, whatever their approach may be.
However, in the context of our theoretical approach and our normative research
question we clearly operate within the context of strategic HRM research.
After we have looked at the distinguished features of strategic Human Resource
Management we now investigate what is meant when we speak about European
Human Resource Management.98
As already outlined above (1.2.1) the theoretical debate on HRM in Europe distinguishes itself from the American concept, due to distinct features identified
within the European environment. Furthermore, several researchers investigate
whether a distinct European HRM approach exists that differs from the approach taken in other parts of the world, like the US, Japan, or the Pacific Rim
region.
Indeed, important differences in the way HRM is conducted in Europe, compared to other regions in the world, have been identified. However, this difference of Europe compared to other economic areas does not necessarily imply
that the several European countries show a consistent pattern of HR. Researchers have identified variations across the European countries (1.2.1), although
some distinct regional patterns within Europe were identified.99 Therefore, on
the basis of the identified wide-ranging differences of HR policies and practices
and the national institutional frameworks within Europe in general but also
across the countries of the European Union, some authors regard it as impossible and absurd to speak of a “European system or model” of HRM.100
The focus of our study is on the HRM approach of multinational organisations
in Europe. Whilst we, therefore, see our work as a contribution to the literature
on HRM and European HRM, we do not intend to generate particular insights
on whether the term of European HRM is justified. This would require not only
an analysis of the degree of diversity observed within Europe (which we do),
but also an analysis of policies and practices prevailing in other regions. For instance, our work will not answer the question as to whether the differences
within Europe may be greater than the differences across the Anglo-Saxon
countries that span several continents.
Finally, we want to clarify the term multinational organisation, which is often
used in this study.
98
99
100
24
At this stage, we do not want to investigate the difference between national and international level HRM
(therefore, see our discusion in Part II). Here, we concentrate on the understanding of European HRM.
Brewster/Larsen (2000 a & b); Larsen/Brewster (2000); Brewter et al. (2000c).
Whitley (1992); Holden (2001).
Several terms have been coined in order to describe organisations that operate in
several countries: multinational, global, international or transnational organisations.101 These various definitions intend to distinguish organisations by their
organisational structure, their international business activities, or according to
their stage of internationalisation.102 Some authors also show an ideal version,
which organisations operating on an international scale should reach at the end
of several sequential stages.103
While these normative implications attached to the various terms are interesting,
they do not fit well into our explorative interest. We use the term “multinational
organisation” since it is the most commonly-used term within literature and can
be regarded more or less as a collective term for organisations operating across
borders. We will use the term multinational organisation without any normative
connotation.
The following section introduces the structure of this study.
3.4
Structure of the Thesis
Chapter I covers the practical and theoretical background of the research problem, the evolving research objective and the scientific approach taken in this
dissertation.
Chapter II analyses this dissertation’s theoretical background and develops a
model of EHRM by drawing upon research results from various fields. The internal and external environmental factors of the multinational organisation are
examined. Internationalisation strategies are discussed, whereby the question of
European-wide integration and co-ordination is given particular interest. The
three main HR subfunctions: recruitment and selection, training and development as well as compensation and benefits are discussed from an international
point of view. Finally, all three steps: external and internal environment,
internationalisation strategy and HR subfunctions are combined within an
overall theoretical framework for International/European HRM.
Chapter III presents the empirical part of the research, the quantitative and
qualitative analysis. The research methodology is discussed. The research findings are presented, by looking again at the external and internal environment,
the internationalisation strategy and the three distinct HRM subfunctions: recruitment and selection, training and development, as well as compensation and
benefits. Herein, the question of European-wide integration, i.e. how far multinational organisations standardise their HR policies and practices, is given spe-
101
102
103
Bartell/Ghoshal (1989); Sherman et al (1996); Ivancevich (1998).
Adler/Ghadar (1992); Bartlett/Ghoshal (1991 & 1995); Kanoche (2001); Scullion/Starkey (2000); Scullion (2001); Hilb (2000).
e.g. Adler/Ghardar (1992).
25
cific attention. In this context, we investigate in detail whether HR policies and
practices are influenced by either external (country-specific) or internal (organisation-specific) factors.
Chapter IV evaluates both the theoretical results, as well as the empirical research findings, with a view to developing an overall guideline, which intends to
support multinational organisations in their efforts to design their HRM in
Europe.
Chapter V concludes and summarises the implications of this research study for
both theory and methodology. This chapter ends with a brief outlook.
26
Chapter II: Theoretical Framework
The purpose of this chapter is to develop a theoretical framework for international Human Resource Management in order to investigate HRM within the
European context of HRM diversity. The following three levels of international
HRM are discussed and combined in the theoretical framework: environmental
level, strategic level and operational level.
• Environmental Level: In order to analyse the environmental level, international HRM is compared to HRM at national level (Section 1). Then, the
system-theoretical perspective is introduced and both the external and internal environments are given particular attention (Section 2). Building on the
results of the two sections, we derive the theoretical framework’s first component: the external and internal context of a multinational organisation
(Section 3).
• Strategic Level: Based on the traditional, contingency theoretical internationalisation strategies, Section 4 develops the theoretical framework’s second component: the HR strategy for internationalisation. The discussion of
HR strategies focuses on the drivers of standardisation.
• Operational Level: Finally, in Section 5, the three main operational subfunctions of HRM: recruitment and selection, training and development as
well as compensation and benefits are discussed from an international point
of view. This is the third component of the theoretical framework.
The main ideas of the various steps undertaken are condensed in the theoretical
framework. We use this framework in the empirical part of this study (Chapter
III) as well as for the development of guidelines for practitioners (Chapter IV).
1
International vs. National HRM
In this section we show that, compared to Human Resource Management at a
national level, the complexity of HRM within multinational organisations is significantly higher.104 The confrontation with various environments and external
settings, the different nationalities of and geographical distance between the
workforce as well as the different local HR systems lead to a more complex system of Human Resources. The higher degree of complexity mainly arises due to
“...national differences in the legislative systems, differences in the cultural context and in the stage of development of the economy of the countries.”105 Based
104
105
Acuff (1984); Dowling (1988); Morgan (1986); Marcharzina (1989 & 1992); Albach (1981); Torrington
(1994); Ivancevich (1998).
Albach (1981, p. 19); translated by the author.
27
on work by several authors, Schulte106 summarises the following six categories
of higher complexity of international HRM:
• More HRM functions and activities: Due to the higher complexity of the
multinational organisation and its national and international subsidiaries, the
amount of HR functions and activities increases. The HR department is confronted with additional tasks next to national HRM and has to deal with different types of employees in the relevant countries.
• Broader perspective: Multinational organisations have to consider a wider
spectrum of factors in order to reach a solution. They are confronted with a
variety of different groups of employees, especially across different cultures
or economic systems.107 Therefore, for example, the complexity of treating
groups of employees equally in terms of pay or personnel development
across the various countries increases.
• Higher degree of involvement in the private sector of employees: Especially in the field of expatriation, a higher degree of involvement in the private sector of employees becomes necessary in order to reduce the additional
burden of expatriates, e.g. to cope with different social security systems, relocation and housing problems.
• Change of importance of various HRM activities according to the maturity of the foreign business: The focus of HR activities might change
during the organisation’s internationalisation process. In this context
Dowling108 identified that during the early stages of internationalisation, the
selection of expatriates is given higher priority while in later stages personnel development of third country employees plays a more dominant role.
• Higher risk and degree of insecurity: Organisations face higher risks in
the HRM decisions they have to take. For example, in case an employee
terminates expatriation earlier than agreed, or an employee does not perform
according to the company’s expectations within the host country, additional
costs for the organisation as well as for the career of the employee might result. Furthermore, costs of expatriation like higher salary, special development or relocation costs, are in general three times higher than for local employees.
• Higher degree of external influences: Multinational organisations operating in various national contexts face more external influences on their management of human resources, e.g. by the various national legal systems or
the different economic developments of each country. Therefore, HR profes106
107
108
28
Schulte (1988, pp. 180 – 183).
See also Morgan (1986).
Dowling (1988).
sionals need to invest a lot of time and energy in learning about local differences.
Thus, international HRM is confronted with a variety of tasks beyond national
HRM. For the purpose of our study it is helpful to consolidate the above list into
two main aspects in which international HRM differs from national HRM:109
1)
International HRM needs to cope with more heterogeneous external
(environmental) factors such as economic, cultural or legislative aspects of the various host countries that lead to a higher degree of dissimilarity, diversity and fragmentation.
2)
It faces higher internal (organisational) complexity of the multinational
company and its international subsidiaries, requiring a higher degree of
(international) co-ordination.
In order to understand the various internal and external factors of influence and
their impact on the optimal degree of standardisation of HR policies and practices for multinational organisations, a theoretical framework is needed. This
framework must not neglect the environment’s variety but should make it its focus. Thus, we suggest a holistic perspective on the situation of multinational organisations. Therefore, in the following, the systemtheoretical perspective is introduced, building the basis for our model in order to think, analyse, develop
and evaluate Human Resource Management within the European context.
2
System-theoretical Perspective on Multinational Organisations
System-oriented management theories focus on the design and management of
the whole system rather than on the individual employee or small groups.110
System-theoretical approaches emphasise the network character and the interrelation between the individual parts of the systems as well as between the individual parts and the whole system.111 Furthermore, the various systemtheoretical
approaches, which are either rooted within natural science,112 like biology, cybernetic or information technology, or within the context of social science,113
enable us to systematically analyse the external relationships of the organisation.
109
110
111
112
113
See Macharzina/Wolf (1998).
Next to the systemtheoretical perspective other theoretical models like the transaction-cost theory or contingency-theoretical approaches are discussed in the literature (see Wolf (1994) or Festing (1996)) in order to understand HRM from an international point of view. However, especially due its focus on the organisation as a whole system and its interaction with the organisational (internal and external) environment, the systemtheoretical perspective is selected for the underlying study.
See Probst (1987).
Bertalanffy (1979); Emery / Trist (1965); Johnson et al. (1973); Ulrich (1970); Bleicher (1972).
Barnard (1970); Homans (1968); Parson (1960); Luhmann (1968 & 1984).
29
Organisations, as open social systems, do not only react to environmental influences, but also stand in a reciprocal relationship with their environment. This
means that the environment an impact on the organisation, but also, due to its
interactive relationship, the organisation has the possibility of actively shaping
its environment. Social systems do not have clear borders. Hence, organisations
have to draw their own limits by defining areas of activities. This allows an organisation to distinguish itself from other organisations and makes it identifiable
as a system in relation to its environment.
In the following, the various external and internal contexts of influence are
looked at and integrated in the general system-theoretical frame underlying this
research investigation.
2.1
External Context of a Multinational Organisation
Figure II.1 demonstrates the four main external environmental factors114 identified in the literature.115
Figure II.1: External Environmental Factors
International human resource management is influenced by various economic
factors.116 The economic systems of host countries, their economic development, as well as related factors like the inflation rate or the labour market situa114
115
116
30
Next to these four selected external environmental factors, others were identified within the literature,
such as the ecological factor. However, as we believe that the above-selected four factors are particulary
relevant for Europe and as they are the most commonly used within literature, we restrict our analysis to
these four factors. This does not mean that further factors are always irrelevant. The concentration on the
main factors is pursued in order to reduce complexity and, hence, to make the evaluation of the organisation’s external environment manageable.
See Farmer/Richman (1970); Kammel/Teichelmann (1994); Steinmann/Schreyögg (1997); Dülfer (1991);
Hilb (2002).
Garelli (1997).
tion, are important for human resource management.117 For instance, they have
an impact on the multinational organisation’s compensation and benefit systems
due to different standards of living or tax systems. Furthermore, national labour
markets118 influence the availability of specific qualifications or staff groups
within the various countries.
Technological factors entail the condition of production technologies as well as
information and communication technologies.119 They are relevant for the decisions of specific production locations and they influence the cost structure of the
organisation, their working productivity as well as the need for specific qualifications, as they determine how people work and interact within the organisation.
The impact of the political-legal environment on multinational organisations is
due to different national employment laws and social legislation systems.120 The
latter covers employee representation systems like works councils or employment contracts, and employee protection such as maternity leave, pension
schemes or tax systems. In addition to the national systems of each country, the
EU social legislation system has an impact on multinationals. Key social and
employment directives from the EU cover areas like equal treatment, employment protection, employee relations as well as health and safety regulations.
Changes within the legal environment are important to comply with, and they
often change more frequently than other environmental factors.
The socio-cultural environment of the organisation has an outstanding importance within the strategic decision-making process. Several failures and misinvestments are due to a lack of consideration of this factor.121 This is mainly
due to the hardly comprehensible and quantifiable character of the relevant aspects of the socio-cultural environment, such that the impact of socio-cultural
aspects is neglected. However, for the success of Human Resource Management
within multinational organisations, the importance of considering socio-cultural
aspects is mentioned frequently within literature.122
Socio-cultural aspects imply culture-related norms and values as well as social
relationships and commitments.123 The former involves cultural building aspects
like religion, ethical norms, ideological paradigms or general socialisation principles within single countries. They might influence the way in which employees are motivated as well as the leadership style and resulting problems of compensation, personnel development and planning.124
117
118
119
120
121
122
123
124
Kammel/Teichelmann (1994); Cherrington (1983); Hentze (1989).
Kammel/Teichelmann (1994); Torrington/Hall (1987); Kienbaum (1989); Buttler/Bellman (1992).
Hilb (2002).
Gustaffson (1990); Pieper (1990).
Steinmann/Schreyögg (1997 p. 141).
Keller, v. (1989); Hossain/Davis (1989).
Hofstede (1988 & 1991); Schein (1985); Adler (1997); Trompenaars (1993); House (1998); Hilb (2000).
Scherm (1999).
31
Social relationships are important for the international management of human
resources, as in general one tries to fulfil expectations of the social environment.
Thus, aspects like social classes, equal opportunities or trade unions are important within international working relationships. Various areas of international
HRM, ranging from manpower planning to industrial relations, are affected.125
Sparrow and Hiltrop emphasise that environmental factors have a significant
impact on multinational organisations. In order to survive and prosper in the international business environment, multinational organisations should anticipate
and understand these influence factors. This would “...place them in a better position to capitalise on opportunities and to minimise or avoid problems.”126
While these influencing factors are well established in the literature, we intend
to emphasise that a multinational organisation faces different environments in
the mother country and each host country (see Figure II.2).
125
126
32
Scherm (1999).
Sparrow/Hiltrop (1994, p. 92).
Figure II.2: External Environments: Headquarters and Subsidiaries
This change in perspective raises some interesting questions. How far should
multinational organisations standardise their HR policies and practices, given
that the local environments of subsidiaries differ? Which of the four aspects discussed above are the most important impediments to standardisation in practice?
In the empirical part, we will provide answers to these questions. Here we want
to develop some conjectures.
Multinational organisations intend to standardise their HRM policies and practices across the various host countries as much as possible.
Their intent might be to reduce costs, to increase the overall international corporate identity and image of their organisation, to be more transparent across countries or to be able to transfer employees from one country to another more eas-
33
ily. Overall, a higher degree of economic advantages and synergies might be
reached by implementing a standardised HRM approach across the organisational sub-units. For example, some organisations implement global training
programmes in order to save development costs, to reach overall quality standards, to increase the comparability of qualifications and to enhance the mobility of staff.
Given this a priori interest in standardisation, we now investigate potential obstacles to standardisation that are due to the environmental factors presented
above. We develop four conjectures.
Technological factors have a minor impact on the standardisation decision in
the context of European HRM.
While technological factors may be of importance if subsidiaries of multinational organisations are based in less developed countries, they are of minor importance in the context of European HRM. For example, in all European countries there is access to the necessary hardware for setting up efficient HRM
software or install adequate communication technologies, such as e-mail or teleconferencing. Moreover, the training and development needs of employees,
which may depend on the technological standards within a country, are likely to
be similar across Europe, as defined in this study.
Both the political-legal as well as the economic factors are likely to become
more homogenous across European countries in the future.
As pinpointed in Chapter I, the EU legislative process is harmonising the legal
environment in Europe. This is of crucial importance, since previous research
has shown that current differences in national HRM systems in Europe are
mainly due to differences in the national legal environments. Thus, national
HRM systems are likely to change significantly in the future. This said, it is also
important to consider that a number of differences are likely to prevail. Take for
instance the recent Directive on European works councils. While it requires
multinational firms to set up a European works council covering all countries in
which an organisation has a significant presence, different national systems of
employee representation continue to exist.
Partly as a result of the harmonisation of the legal environments, but also due to
increased economic integration and the resulting pressures on national governments, the economic conditions in the EU Member States are becoming more
equal. Despite this trend, some economic factors are likely to continue to play
an important role in the future, as local conditions determine aspects like the
supply of and demand for labour.
Socio-cultural factors will remain of significant importance for European HRM.
34
Culture is more difficult to change than law. As a result socio-cultural factors
are likely to remain heterogeneous even if the political-legal environment is
harmonised. As a result, multinational organisations might prefer (or are forced)
to adapt as much as possible to the local circumstances of the host country. The
organisations may prefer to be in line with the common practices and traditions,
first, in order to reduce resistance against new and unknown practices among the
workforce, and second, in order to be comparable to other national organisations. Failing to adapt may make the recruitment (personnel marketing) of local
employees more difficult or may have a negative impact on motivation. Note,
however, that as a result of internal factors, like corporate culture, there may
nevertheless be a net benefit of standardisation. We will take up this issue below
when discussing the internal factors.
2.2
Internal Context of a Multinational Organisation
The internal context covers the actors of the organisation as well as companyspecific structures, cultures and employee-related issues, such as staff qualification or HR policies and practices.127 The following figure shows the main internal factors mentioned in the literature.128
Figure II.3: Internal Environmental Factors
The strategy of the organisation has an impact on the organisational structure,
inter-organisational communication and co-operation, the integration of HR
policies and practices, as well as the approach of the organisation towards internationalisation.
The structure of the multinational organisation and its various subsidiaries is an
important internal factor to consider as it determines the way of processes and
127
128
See Footnote 115: External factors.
Freeman (1984); Rowe et al. (1989); Wagner (1998).
35
procedures within the organisation and its various sub-units.129 The organisational structure can be regarded as the result of a conscious, goal-oriented formation of rules for social co-operation.130 The analysis of the organisational
structure allows the HR department to gain a broader understanding of the organisational action, being determined by certain characteristics of the organisational structure. According to the Aston concept131 the following six dimensions
of the organisational structure can be identified:132
• Specialisation: Degree to which tasks are differentiated within the organisation, like the number of specialist positions that require specific job descriptions.
• Co-ordination: Degree to which shared positions are integrated, e.g. by
managers who are primarily in charge of co-ordinating employees in these
positions.
• Configuration: Levels of hierarchies within the organisation and the number of employees reporting to one manager.
• Standardisation: Degree to which tasks are reglemented by routine procedures, e.g. the number of standardised and programmed procedures.
• Formalisation: Degree to which organisational rules and regulations are determined in writing.
• Delegation: Degree to which decision-making takes place at lower staff levels.
The greater the differences are between the internal structures of the headquarters and the international subsidiaries, the more complex are the organisation’s
internal procedures and the more complicated are the internal European-wide
co-ordination and co-operation processes.
Stakeholders133 are individuals or groups who have a legitimate interest in the
organisation and can either influence the decision-making of the organisation or
are affected by these decisions. The importance of the organisation’s stakeholders are discussed frequently within the literature134 and the various stakeholders of both the parent organisation and the subsidiaries are important to
consider, as their goals and power within the organisation may differ and thus
129
130
131
132
133
134
36
See Bleicher (1990); Hilb (2000); Analoui (2002b); Ghoshal/Bartlett (1997)
See Staehle (1989).
For more details regarding the Aston concept see Hill et al. (1994); Kieser/Kubicek (1992); and
Kubicek/Welter (1985).
See Kubicek/Welter (1985).
For more information about the stakeholder approach see Freemann (1984) and Salaman (1992).
See Freeman (1984) and Rowe et al. (1989).
lead to inner-organisational conflicts. The perspectives and goals of the owner,
customer, the management team,135 and the employees of the multinational organisation are to be considered. Particularly, the interests of both the managers
and the various employees are important for multinational organisations, as conflicts of interest might exist. While managers of the organisation mainly follow
business and profit-oriented goals, the employees and their representatives are
likely to be interested in social aspects.136
In addition, multinational organisations are confronted with the problem of conflicts between a manager of the company’s headquarters and a manager within
the various company’s international subsidiaries regarding different goals, language systems, cultural and social norms or specific qualifications.137 Therefore,
next to the general question of international HRM, particular aspects like the
sharing of competence, interaction and co-operation, are central areas for HR to
solve.
The organisational culture is an important internal factor of the multinational
organisation.138 The main idea of a strong organisational culture is to build an
organisation-wide system, containing a set of overall shared norms and values,
which transcends national boundaries and systems. The culture gives the organisation its identity and enhances its integration e.g. via socialisation of employees into certain cultural procedures. Furthermore, the organisational culture
has a strong impact on various areas of HRM and determines the leadership
style of the organisation, the way in which employees are treated as well as
working relationships. In addition, the organisational culture plays an important
role for the organisation’s internationalisation strategy. Therefore, the more different the various organisational sub-cultures are from each other, the more
complex the organisational internal procedures and the more complicated the internal European-wide co-ordination and co-operation processes are.
Following the approach we have applied to the external context of a multinational organisation, we now focus on the differences in the internal contexts of
the parent organisation and each subsidiary (see Figure II.4).
135
136
137
138
See Hilb (2002).
See Marr/Stitzel (1979).
Holtbrügge (1995).
See Hilb (2000); Schein (1989); Hall/Hall (2001); Wong-Rieger/Rieger (1989).
37
Figure II.4: Internal Contexts of Headquarters and Subsidiaries
It turns out that these differences lead to a number of special challenges for
HRM of a multinational organisation in Europe. In the following, we discuss
three aspects that seem particularly important.
Headquarters and subsidiaries are likely to differ in terms of structure.
There are several straightforward reasons why the structure of a subsidiary is
likely to differ from the structure of its headquarters. First, in most cases subsidiaries are smaller than their headquarters. Since structure will follow size, at
least to some degree, it is our conjecture that subsidiaries will tend to be characterised by a lower degree of formalisation, a flatter hierarchy, and less delegation and specialisation. The second reason, why the structure of subsidiaries is
38
likely to differ, is that subsidiaries typically face different tasks. For instance,
some functions, like marketing or research and development, may be pursued
centrally at the organisation’s headquarters. Moreover, the local organisation’s
structure is likely to be influenced by external environments, which differ across
countries, as we have discussed in the previous section.
These differences between headquarters and subsidiaries lead to particular challenges for European HRM. For instance, employees of the headquarters, who
are moved to a subsidiary, will face a different environment. While they may
have acted as a specialist in a clearly defined role at the headquarters, a subsidiary may require more generalist skills and management capabilities. This requires specific training and development, a task for European HRM. By the
same token, if an expatriate returns to the headquarters he may have to be reintegrated and an adequate position needs to be found.
Nevertheless, the differences may also help HRM to develop employees. Subsidiaries provide the opportunity to test the employees’ skills and can be used as
a pool for recruiting top management. Given that the performance of local employees can be better monitored than the past performance of external applicants, such a pool can be of great value.
The stakeholders and their incentives differ between headquarters and subsidiaries. This is likely to cause tensions and conflicts of interest.
The most obvious difference in the stakeholders is often a result of the hierarchy
between headquarters and subsidiaries. While the former have to satisfy stockholders, the latter have to report to the headquarters. Moreover, subsidiaries may
compete among themselves – for resources or in the product market.
As a result it is a particular requirement for HRM of the multinational organisation to improve communication and co-operation. Conflicts of interest have to
be solved by appropriate conflict management. This is an important task for
European HRM.
A strong corporate culture may ease or hinder the tasks of European HRM in a
multinational organisation.
The challenges that result from the different incentives of stakeholders are even
more pronounced if there are differences in the organisational cultures of the
subsidiaries and the headquarters. Such differences may result in
misunderstandings that lead to or escalate conflicts. On the other hand, there are
a number of arguments in favour of adapting the culture of a subsidiary to the
external environment of that subsidiary. Recruiting and motivating employees
with a different cultural background than the local (recruiting) organisation, is
well known to be difficult in a number of contexts. However, a strong corporate
culture may also be helpful for HRM as it provides a degree of common under-
39
standing and may also be attractive for local applicants and employees who favour the resulting atmosphere.
3
First Component of the Theoretical Framework: Internal and External Contexts
On the basis of the categories discussed above for an international working environment of a multinational organisation, Figure II.5 shows the four most important sub-systems. This builds the first piece of the theoretical model, which is
developed step-by-step within this chapter.
Figure II.5: First Component of the Theoretical Framework: Internat. Working Environment
This model contains the important sub-units of the external and internal contexts
of the multinational organisation. Therefore it builds the main frame for the
40
model underlying this study in order to analyse, implement, manage and evaluate human resource management within Europe.
As a theoretical frame, it allows us to analyse a complex international human resource management system with its interrelations to various (sub)systems139 and
its main fields of European-wide integration and co-ordination. Organisations
need to take this information into consideration, when they decide how far they
will consider country-specific differences and how much autonomy they will
give to national HR departments.
After having identified the four main sub-systems of the international working
environment, the following section looks at the main internationalisation strategies.
4
Second Component of the Theoretical Framework: HR Strategy
for Internationalisation
International Human Resource Management has an important but difficult role
within the internationalisation process of an organisation. During this process
companies are confronted with various external environments and need to coordinate their international sub-units. Organisations have to find the right balance between standardisation and differentiation of their HR policies and practices.140 The aim is to reach the maximum synergetic effect, on the one hand,
and optimal differentiation in order to cope with the internal and external differences on the other. Another area of importance is the management of coordination.141 One important question in this context is whether the main responsibility of HR policies should be centralised at the company’s headquarters
or decentralised to the subsidiaries.
We follow the literature in using a situation-focused, contingency-theoretical
perspective as a basis for identifying an optimal internationalisation strategy for
multinational organisations. This perspective suggests that there is no one best
way to manage all organisations. Organisations have to be analysed in relation
to their specific context. The contingency-theoretical approach provides a
framework for thinking, developing, implementing and managing an international HRM strategy, as a basis for international HRM policies and practices.
Based on the differentiation of Perlmutter,142 the following four HRM strategies
towards internationalisation can be classified:143
139
140
141
142
See Conradi (1983); Drumm (1989), Berthel (1995).
Kamoche (1996).
Macharzina/Wolf (1998); Wolf (1994 & 1997); Morgan (1986); Welge (1980).
Perlmutter (1969) and Heenan/Perlmutter (1979); see also Hilb (1985); Hofstede (1988); and
Joggi/Rutishauser (1980).
41
The ethnocentric strategic approach is based on a (universalistic) attitude.
Therefore, values and strategies of the parent organisation are transferred to all
subsidiaries. This point of view disregards national, as well as cultural, differences of host countries and asks for a high degree of standardisation of personnel policies in line with the practices of the parent organisation.
The polycentric strategy on the other hand emphasises the country-cultural influences and strengthens the independence of cultural-bound and national factors. Therefore, every single subsidiary will be regarded as an autonomous, independent sub-unit, with its locally, recruited employees and national practices.
This cultural-bound point of view argues that the differences across countries
are due to cultural diversity and differences in the national institutional frameworks. These differences are said to imply that practices are not transferable into
other cultures or nations. This approach can also be described as multiethnocentric.144
The regiocentric strategy (in this case Eurocentric) assumes that with a view
towards Europe, one overall regional approach should be implemented. This
strategy also follows a more universalistic perspective, because Europe is regarded as one single region145 where national and cultural differences are ignored.
The geocentric strategy considers both the organisation-wide commonalties as
well as the cultural and national differences in its strategic approach towards internationalisation. Hereby, “world-wide normative personnel-political guidelines and global standardised systems are developed, integrated, and evaluated
under consideration of strategic regional conditions as well as operative national
conditions.”146 This strategy emphasises the internationality of organisations and
strengthens both cultural differences and commonalties.
The first three strategies have a one-dimensional perspective, because they either over-emphasise or underestimate cultural differences or regional- and organisational-specific commonalties. Only the geocentric strategy emphasises
both and makes use of the advantages of multicultural HRM.
143
144
145
146
42
Next to the categorisation by Perlmutter, other authors also differentiate between three or four different
strategic position. As these categorisations are similar to the ones discussed above and as they do not
bring additional information for the underlying research question, the “traditional” version of internationalisation strategies from Perlmutter is used here.
Wunderer (1993).
This assumption is in contrast to the results obtained by Hofstede (1991). He came to the conclusion that
no separate continental cultures like Europe, Asia or America, exist.
Hilb (1995, p. 216); translated by the author.
The approach of Perlmutter is only one of many approaches that consider the
question of global integration and co-ordination.147 The majority of the alternative approaches also take culture-specific and system-specific differences into
account and postulate several sequential stages of international human resource
management. These stages then typically lead to one favoured stage, which the
multinational organisation should adopt – whether it is termed a geocentric, a
global or a transnational position.
The internationalisation strategies of Perlmutter have been criticised for a number of reasons:148
-
Given that the optimal strategies are usually formulated within the context of
HR, there is an issue as to whether it is possible to define internationalisation
strategies independent of the organisation and business strategies.
-
The concepts are sometimes criticised for not having spelled out the practical implications. Some critics question whether multinational organisations
are able to put the strategies into practice149 and complain that the typologies
fail to give accurate answers on what the HR polices and practices within the
certain categories should be.
-
Another criticism is that no differentiation, according to others factors than
the stage of internationalisation, is made. Important factors to consider are
staff group or the dimension (strategy, policy, practice).150
-
The Perlmutter categorisation is regarded as too simplistic in order to describe the complexity of the multinational organisations.151
We do not believe that these criticisms imply that we need to reject the approaches and the terminologies adopted. Rather, we feel that the critique points
to further extensions and more detailed work with regard to the inner context of
the organisation and the specific policies and practices in question. In the following we make use of Perlmutter’s terminology, as no other theories on internationalisation strategies152 provide such a clear-cut typology153 of different in147
148
149
150
151
152
Scholz (1993); Kumar (1998); Milliman et al. (1991); Schuler et al. (1993); Dowling et al. (1994); Bartlett/Ghoshal (2000).
Rosenzweig/Nohria (1994); Tayeb (1998); Scholz (1993); Myloni (2002).
While the majority of authors do not provide further information how these strategic positions should be
reached in practice, Hilb developed a very complex model of “glocalpreneuring” for the transnational
management of human resources (Hilb 2000). He describes in four main components: profile analysis,
purpose creation, people management, and process evaluation various techniques as to how multinational
organisations become glocalpreneurs. But as his concept is a very complex and detailed HR management
model, whereby the internationalisation strategy is one important component, we will not go into further
detail at this stage.
Wunderer (1993).
Myloni (2002).
For example see the discussion on the concept of fit in IHRM like Sorge (1991); Milliman et al. (1991);
Ivancevich (1998); Scholz (1987 & 1993).
43
ternationalisation strategies, a categorisation, which is helpful for the purpose of
our research investigation.
The following table provides an overview of the four strategies in terms of their
consideration of multicultural differences and commonalties.
Figure II.6: Internationalisation Strategies
Source154
All four strategies lead to variations between the two alternatives, standardisation and differentiation of HRM policies and practices. In essence, the ethnocentric strategy suggests complete standardisation, whereas the polycentric suggests
complete differentiation. The regiocentric approach suggests both complete
standardisation within the region and complete differentiation between the regions. Only the geocentric strategy calls for a mix of standardisation and differentiation.
Moreover the strategies imply different structures for the HR department. For
instance, in the context of European-wide co-ordination responsibility for HR
decision-making and implementation can either be centralised, at the companies headquarters, or decentralised, at the national level of the subsidiary.155
This requires that the adequate degree of the subsidiaries’ autonomy is determined as well as the degree to which intervention, rules and regulations of the
parent organisation are binding. The ethnocentric strategy implies a centralistic
approach and the polycentric strategy a decentral. The regiocentric strategy suggests centralisation within the region but decentralised HR across regions. The
geocentric strategy suggests a central HR department at the company’s headquarters that co-ordinates and co-operates intensively with the local decentral153
154
155
44
Myloni 2002.
Hilb (1995, p. 213).
Brewster et al. (2001).
ised HR units. The exchange between the headquarters and subsidiaries is intended to be two-way.
In order to retain control with regard to Human Resource Management or to reduce costs, or to create a common corporate identity and company culture, a
multinational organisation might decide to leave the main responsibility for
HRM decision-making as well as their development, implementation and management, centrally, at their companies headquarters.
However, decentralisation and differentiation of HRM policies and practices increases the autonomy of the various subsidiaries and helps integrating local HR
expertise into the decision-making process. In the following, we derive some results from the theoretical and empirical literature regarding the use and application of the different strategies.
Firms often adopt an ethnocentric strategy during the first stage of internationalisation. This does not seem to be an ideal approach.
As research shows, organisations, particularly in their first stage of internationalisation, neglect the importance of an international Human Resource Management strategy.156 They mainly adopt an ethnocentric strategy towards internationalisation by simply transferring the local HR policies and practices of the
parent organisation into the host countries. Problems resulting from such a strategic position towards internationalisation, were reported frequently in the literature.157 Therefore, it seems to be important that organisations, already in their
early stages of internationalisation, consider their management of human resources as an important business tool and as a major component of competitive
advantage.158 “Wrong” systems, already in practice, are difficult to change at a
later stage due to resistance to change among the workforce, and an already
“frozen” organisational culture is hard to “unfreeze” and modify.159
The degree of standardisation implied by an internationalisation strategy should
depend on the staff group that is affected by the resulting HR policies and practices.
Wunderer160 suggests using a mix of the various internationalisation strategies in
order to find the right balance between a unique management of the organisation
and the situational adaptations to the national environments of the single countries in which the organisation operates. Figure II.7 illustrates the strategy mix
according to dimension and target group.161
156
157
158
159
160
161
Scherm (1999).
Tung (1982); Wirth (1992); Black et al. (1992); Bahai/Reisel (1993); Caliguiri (2000); Duane (2001).
Bennett et al. (1998); Mabey et al. (1984 & 1998); Beer et al. (1985); Hendry/Pettigrew (1990); Storey
(2001a), Porter (1980 & 1987); Huang (1998); Miller (1989); Ferner/Quintanilla (1998).
See Lewin (1963).
Wunderer (1993).
Figure II.7 combines the pyramide from Wunderer (1993, p.13) with a table from Hilb (1995, p. 217).
45
Figure II.7: Strategy Mix
According to Wunderer, the geocentric strategy should be applied at the normative level. General company-specific regulations and rules, such as equal opportunities, business ethics, full-employment policies or general rules for employee
involvement should be reached with a geocentric strategy. Furthermore, policies
and practices like career planning, compensation and benefits for senior management staff, should be developed with respect of a geocentric perspective.
The regiocentric strategy should cover the strategic dimension and be applied at
the level of potential managers and future expatriates. The regiocentric approach
seems to be appropriate for programmes or target groups such as graduate recruitment or the adaptation of leadership guidelines to specific regions like
Europe or Africa.
Finally, the polycentric approach should be applied at the operational dimension
and for non-managerial staff. This involves the level of strategy implementation
within the single countries and the management of local employees according to
the national rules, regulations and habits.
We make use of the idea that the degree of standardisation is likely to vary with
regard to the staff group affected by the HR policy in question. Moreover, we
follow the argument that the degree of standardisation is likely to depend on the
dimension. However, rather than identifying the strategies with standardisation,
we argue that a geocentric approach is compatible with different degrees of
standardisation. In fact, if applied to different staff groups the geocentric strategy will indeed lead to different levels of standardisation. Moreover, based on
the discussion above, we add a factor that is known to have an impact on standardisation: the stage of internationalisation.
Figure II.8 integrates the three factors, staff level, dimension, and stage of internationalisation into the theoretical framework of the multinational external and
46
internal influencing factors, demonstrating the relationship between the organisational strategy and the internal and external environmental factors of multinational operation.
Figure II.8: Second Component of the Theoretical Framework: Internationalisation Strategy
After having looked at the main strategic questions, in a next step, the specific
HR policies and practices of international management are important to consider. An integrated approach is envisaged, which aims to make the HR subfunctions consistent amongst each other and congruent with the context of the
international organisation.
47
5
Third Component
Subfunctions
of
the
Theoretical
Framework:
HR-
The system-oriented consistency approaches regard HR practices not as single
independent instruments, but as a part within the net of interrelations.162 In the
following, the three main areas163 of HRM: recruitment and selection, training
and development as well as compensation and benefits, are discussed in more
detail, building on existing research on international HRM.
We will follow common practice and analyse each of these areas separately.
However, this should not induce us to neglect the need of an integrated HRM
approach164, as the various HR subfunctions are related to each other.
For example, in an integrated HR approach, training and development is coordinated with recruitment and selection. The required qualifications and competencies of new recruits can be identified within the training and development
function, to name but one example of such interrelations. On the basis of these
company-specific demands, the appropriate candidates are selected within the
recruitment process.
Although employees bring certain skills and qualifications when being recruited, they will typically have specific training and development needs, like a
special induction into the actual position. In addition, next to technical or workrelated knowledge, these are also factors relating to the culture of the company,
like certain norms or values that are to be communicated. Here, the recruitment
and selection function can provide input for the training and development function.
Similarly, the career planning and staff assessment functions of training and development are an important input for the planning of compensation and benefits.
Where necessary, we will, in the following, point to these interrelationships.
However, our focus will not be on them. Indeed, given the explorative nature of
our research and the added complexity of co-ordinating HRM at an international
level we will emphasise the international dimension and standardisation across
countries in order to keep the analysis tractable.
162
163
164
48
Mintzberg, (1979); Staehle (1991); Probst/Siegwart (1985); Gomez/Probst (1985 & 1989).
Next to the three selected subfunctions of HRM, recruitment and selection, training and development, as
well as compensation and benefits, other subfunctions like employee relations or staff assessment exist
(see Hilb (2002)). However, we focus on the three selected functions for three reasons: First, they represent the functions typically discussed in the literature. Second, they cover a wide range of HR actitivies
from the entrance of the employee into the organisation (recruitment and selection) via its growth and development (training and development) as well as techniques to keep and motivate the employee (compensation and benefits). Third, due to complexity issues within our research investigation we need to limit the
number of subfunctions.
Hilb (2002).
5.1
Recruitment and Selection
5.1.1 General Steps within International Recruitment and Selection
One of the main goals of the HR function is to make sure that Human Resources
are sufficiently available, in both quantitative as well as qualitative terms.
Thereby, vacancies can either be filled
a)
from the internal labour market;165
b)
from the external labour market;166 or
c)
from both, the internal and external labour markets.
In order to use the internal labour market of the organisation, the HR functions
have to make sure to advertise and communicate vacant positions within the organisation. This can either be done nationally or internationally, according to the
recruitment strategy of the organisation.
Internal recruitment (at national level) is always combined with internal transfer
or promotion of existing staff. Therefore, within an integrated HRM the internal
recruitment process is combined with other HR activities, including staff assessment, long-term career planning as well as the individual training and development of employees.
The main advantages of internal recruitment are the low costs, as no expenses
have to be made for advertisement, complex screening procedures as well as the
time spent in order to introduce the new employee to the specific organisational
contexts. The last point mainly implies the employees’ knowledge of the internal structure of the organisation, the company’s culture and already existing
working relationships. In addition, the overall risk of recruitment decreases, as
the employees are already known within the company, and information on their
past performance is often available via internal staff assessment procedures.
Irrespective of whether organisations recruit their employees internally or externally, it is important to identify the core competencies needed for the particular
position available.167 Within the literature, general management skills are mainly
divided into social competencies like creativity, communication, and leadership
style as well as technical skills required in order to perform the position.168
165
This strategy has particular impact on related areas like staff assessment and development.
This strategy is difficult to implement in an organisation with a strong organisational hierachy, due to the
restriction of promotion of employees (motivational factor). Rather, this strategy is appropriate for companies with a flat organisational structure with equal staff teams, mainly composed of experts from different fields.
167
Leblanc (2001); Sparrow (2000).
168
Staehle (1989); Scherm (1999).
166
49
These competencies may vary from company to company, from environment to
environment and from employee level to employee level. Furthermore, the difficulty of measuring competencies should be taken into account.
According to Heymann and Schuster169 the HR department can use the following techniques in order to identify and select international management staff,
whereby they distinguish between internal and external organisational instruments.
Internal instruments in order to identify and select international managers are:
• Internal job market: The internal job market should be transparent across
the various international operations of the company. It provides the employees with the possibility of being in charge of their own international career
and hence to be able to use the international job-rotation system or to apply
for permanent positions abroad.
• Management review: On the basis of regular management reviews, the
leadership potential can be analysed, based on their overall performance and
potential, and hence, might be selected in an integrated IHRM approach for
specific management-development programmes. Some organisations use
specifically designed mobility-reviews.170
• International high-potential seminars: Specially designed assessment centres for managerial positions are an important source for international recruitment activities for the multinational organisation. They provide the opportunity to assess the potential candidate according to specific job-related
competencies. Furthermore, within an assessment centre, employees can be
confronted with critical real-life situations that can be simulated.
External instruments, in order to select and recruit international staff, include the
screening of application forms, one-to-one and panel interviews as well as assessment centres. Again, the international perspective should be reflected and
national systems should be taken into account.
Compared to recruitment at national level, international recruitment activities
imply a wider range of tasks and hence, more potential problems171 like the difficulty of comparing qualifications172 and experience of applicants arise.173
Therefore, multinational organisations increasingly use external recruitment
169
170
171
172
173
50
Heymann/Schuster (1998).
For example Henkel KgaA; see Heymann/Schuster (1998).
Fritsch (1990); Wiltz/Koppert (1990).
For the European Union it is intended to standardise “Diplomas” (“berufliche Befähigungsnachweise”), in
order to make qualifications more comparable. See Sellin (1991), according to Scherm (1999, p.156).
See Nelson (2001); Talbott (2001); Sparrow (2000); Heyman/Schuster (1998); Duane (2001); Newell/Tansley (2001); Scullion (2001).
agencies, as these are more familiar with the various national systems and have
knowledge of national labour markets. They often have more knowledge of different employee demands, such as living standards or pay and benefits, as well
as of different recruitment and selection procedures operated within the various
countries. Furthermore, it is an advantage of some recruitment agencies that
they also operate on an international scale. These firms are able to provide international HR expertise, which might be hard to gain for smaller multinational
organisations or for an organisation within their early stages of internationalisation. Therefore, the use of external advice becomes more and more common
among multinational organisation.
5.1.2 Alternative Pools of Applicants
The recruitment and selection process of multinational organisations operating
in Europe is dominated by the question of whether the organisation should recruit local nationals for vacancies in subsidiaries or whether they should transfer
employees from the headquarters to the individual countries.174 In addition, a
European-wide employee recruitment and selection process, to date mainly
adopted for graduate recruitment, is a third interesting alternative to consider.
Figure II.9 shows the main three areas of European recruitment and selection activities.
Figure II.9: International Recruitment and Selection Activities
In the following, the three types of procedures are discussed in more detail.
A)
Recruitment of Employees within each Host-Country
In particular, the recruitment and selection of employees within each host country requires knowledge of the various national systems. In this context multinational organisations are confronted with the question of European-wide inte174
Some authors also distinguish the possibility of recruiting third country nationals, but this is not considered here. For further information see Festing (1996) and Kumar et al. (1998).
51
gration: Should the multinational organisation transfer its recruitment and selection policies and practices to the host countries or should they operate according to the national common practice? The answer to this strategic question
might vary according to the respective staff group, the distance between the
practices of the parent organisation and the subsidiaries, as well as other factors
of the organisations internal and external context.175
One important advantage of recruiting employees in each host country is that
local employees are familiar with the business practices and socio-economic,
political and legal environment of their host country. Moreover, it is less costly
than expatriation.
If recruitment and selection occurs in the host country, this raises the question of
European-wide co-ordination.176 Should the recruitment and selection process
be developed, organised and managed from the company’s HQ, the national HR
department, or the line management? Again, the answer to this strategic question is likely to vary according to the staff group or the stage of internationalisation of the organisation. This means, if the multinational organisation has only
minor operations within a specific host country, it is more likely that the management of human resources is co-ordinated from the company’s headquarters.
In case of extensive international operation in another country, the necessity to
implement a national HR department increases.
In this context, the multinational organisation should be aware of various expectations among potential candidates in different countries, which results from different meanings of working177 such as status, job for life, or expected career
prospects. Therefore, companies have to make sure not to encourage wrong expectations, which lead to the demotivation or decommitment of employees.
More generally, there may be difficulties in communication between local employees and home office personnel. These problems are likely to be less pronounced for managerial positions, since applicants for these positions are likely
to have a more international perspective.
Clearly, the decision to fill positions by recruiting locally takes away the opportunity for staff in other subsidiaries or the headquarters to gain international
and/or cross-cultural experiences.
In general, employees are often recruited within the host country:
• for lower staff levels,
175
See the system-oriented frame with internal and external context of the multinational organisation in
Chapter II.2 & II.3
176
Please bear in mind that the same questions of European-wide integration and co-ordination arise for the
other HR subfunctions training and development, as well as compensation and benefits. But the aspects
considered here should not be repeated within the discussion of each subfunction. Macharzina/Wolf
(1998); Wolf (1994 & 1997); Morgan (1986); Welge (1980).
177
See the result from the “Meaning of Working Study” in Europe; Wilpert et al. (1990).
52
• if country-specific knowledge or experience is required, or
• in order to emphasis or develop a multinational culture of the organisation.
The last argument becomes more important, especially within Europe, where
national boundaries disappear and former barriers like language, work permits,
varying levels of qualification become less significant.
B)
Expatriation
The experience of expatriation is widely discussed within the International Human Resource Management literature. Due to the fact that this research is
mainly dominated by US American researchers, the focus lies on examples of
US American organisations operating within less developed countries and using
an expatriation system in order to manage their foreign operations. However,
most of the problems analysed in this setting are different from the problems organisations face in the European environment. Large differences between employees’ education level and therefore particular skill shortage at management
level are not experienced in Europe. Furthermore, the living conditions of expatriates in the host country, as well as the differences in culture, are of minor
concern in the European context, if compared to organisational relations with
developing countries. In Europe, however, multinational organisations have to
deal with the expatriation issue when employees are transferred from one European country to another.
In general, expatriation178 is mainly used
• at senior management or management level,
• within early stages of internationalisation,179
• in countries with a significantly lower skill level than that of the mother
country and for
• highly trained and specialised workteams with particular expert knowledge.
178
179
Note that expatriation systems will vary depending on the internationalisation strategy of the organisation.
For example, organisations that follow a geocentric strategy will use a different approach than organisations that follow an ethnocentric strategy.
In this case it has to be considered that organisations, which did not operate at an international level before, might not have the appropriate skills internally available for business abroad. Therefore, this problem might either be solved by intensive training within this field or by external recruitment of employees
with international work experience (see Wilhelm (1989) and Fritsch (1990)).
53
One important advantage of expatriation, which implies recruitment and selection within the mother country, lies in the ease of administration, the knowledge
of the local labour market as well as the application of common recruitment and
selection procedures of the home country. Moreover, the use of expatriates often
is a positive factor for the international working relationship between the HQ
and the subsidiaries, as cultural habits, in terms of leadership and management
style and decision-making, can be communicated to the various international
subsidiaries.180
Disadvantages of the use of expatriates are widely discussed within literature.181
Here we focus on the most important issues. In contrast to the positive assessment of the impact of expatriation on communication between the headquarters
and the subsidiaries pointed out above, the use of expatriates might also have a
negative effect on the international working relationship as the subsidiaries
might lose their autonomy and local employees may feel “invaded” by foreign
policies and practices.
Moreover, the concept of expatriation has its clear limits, as staff might resist
long-term stays abroad, due to personal reasons like children, double career
prospects or problems of reintegration. In addition, the high costs of expatriation, due to special compensation packages or training requirements, are reported frequently in the literature. 182
The problems of expatriation are likely to decrease within the European environment, as it becomes increasingly common among graduates, especially from
European business schools, to live within various countries and to speak more
than one foreign language. Therefore, it becomes more popular among multinational companies to recruit candidates directly from international-oriented business schools and the traditional concept of expatriation might lose its importance over time. We address this issue in the next section.
180
See Kumar/Steinmann (1989).
Ivancevich (1998); Black et al. (1991); Roberts (1998).
182
Harvey/Wiese (2001); Foster (2000); Lineham (1999); Black et al. (1999); Scullion (1994); Caliguiri
(2000); Duane (2001); Hill (1997); Roberts (1998); Wirth (1992).
181
54
C)
European-Wide Recruitment
The recruitment of graduates directly from universities (milk round) is becoming increasingly common in Europe. 183 One reason for this is that universities
support it in order to make sure that their graduates find appropriate positions.
For international organisations, the milk rounds of European business schools
are of particular interest, because certain skills, including language, mobility,
and international work experience, are provided by those candidates. Some organisations already have a selection of “good” universities from which they recruit most of their employees. Focusing on a few universities leads to the advantage, that existing employees who are involved in the selection process (e.g. in
the interview process or assessment centre) bring a better understanding of the
qualifications gained by the applicant. Furthermore milk rounds have a costsaving advantage, as interviews can be held at the university and are limited to
only a few locations.
The following table summarises the advantages and disadvantages of recruitment of employees within each host country, of expatriation and of graduates
with European or international experience mentioned within literature. The table
draws on previous surveys from Borg and Harzing.184 However, while the authors compare the advantages and disadvantages between the use of parentcountry nationals vs. host-country nationals and third-country nationals, here the
use of European-wide recruitment, such as graduates from European business
schools, is given greater emphasis than the recruitment of third-country nationals in general.
183
184
Bosler/Lescher (1992); Kolter (1991).
Borg/Harzing (1995, p. 186). See also Macharzina/Wolf (1998).
55
Figure II.10: Advantages and Disadvantages of Recruitment Activities by Target Group
56
Looking at the decision of the HR department as to which pool of potential applicants to approach, our analysis of the pros and cons leads to a list of criteria
that can be used for assessing the appropriateness of a procedure. The criteria
are:
• the quality of the pool of potential applicants,
• the costs of the recruitment and selection process,
• the required compensation and benefits in order to make recruitment successful,
• the applicant’s characteristics (in terms of culture, knowledge of organisational procedures etc.),
• the likelihood of successful recruitment,
• the potential for a high quality screening of the applicants.
If we apply these criteria and make use of the list of pros and cons provided in
Figure II.10, can we draw some more general normative conclusions for multinational organisations? We attempt to make a first step in this direction with the
following conjectures.
At the beginning of an internationalisation process, the use of expatriates is particularly attractive.
Experience shows that local recruitment requires significant knowledge of local
common practices. This knowledge needs to be built up over time. Even if this
problem can be overcome by the use of local recruitment agencies, there are a
number of factors that make the use of expatriates advantageous in this start-up
phase. The possibility that expatriates can transfer the organisational procedures
and cultural habits to the subsidiary seems particularly important at the infant
stage of the subsidiary as the early policies and practices are likely to determine
the future development through the persistence of culture and procedures.
Moreover, in the early phase of internationalisation the need for communication
between subsidiaries and the headquarters is likely to be more intense, as small
subsidiaries rely more on the knowledge and services of the HQ. Again, this is a
strength of the expatriation system.
In Section 4 we argued that firms, at the beginning of an internationalisation
strategy, should not adopt an ethnocentric approach. Indeed, the literature has
reported a number of problems that result from this strategy. This suggests that
expatriates face an even more difficult task than transferring the culture and
procedures of the headquarters to the subsidiaries. At the same time they have to
57
feed back the problems that the firm’s culture and procedures cause within the
host country and work, together with the headquarters, on an improved corporate culture and improved policies and practices that have a European fit. This is
true for all employees, but in particular for the human resource managers themselves.
As the subsidiary matures, the disadvantages of the expatriation system become
more important. If the subsidiary has a strict high-level staff expatriation system, local employees will be demotivated as their career perspectives are significantly hindered. Moreover, tensions may arise if an organisation of a significant size is perceived as ignoring the local habits and needs. In practice, another
important problem appears if there is a mix of local employees and expatriates
and (typically) the latter have a significantly higher income than the former.
Does this imply that at a later stage firms should not use expatriates any more?
The answer is no.
In later stages of internationalisation, a mix of all sources for recruitment and
selection seems best.
The key advantage of a local staff is the fit with the subsidiary’s external environment. Expatriates, on the other hand, can continue to stimulate a lively exchange of cultures and ideas across the organisation and confirm the corporate
culture. Thus, from a geocentric perspective there are good arguments for both
sources. Hence, if the costs of using both recruitment and selection procedures
are not prohibitive, it seems advisable to use an open procedure. Then the obvious criterion is to choose the best candidate for the job out of all pools. This is
also motivating for local staff as it shows that there is a career opportunity if
performance is good. Hence, there are good arguments for using expatriates and
recruiting within the host country.
“Milk rounds” are a good way of recruiting locally or internationally.
Whenever external recruitment is chosen, milk rounds have a number of very attractive features. They can be concentrated on good universities, making recruitment cost effective. The screening of the applicants is eased, if the same
universities are approached over time, which improves the assessment capabilities of the recruiting staff.
In general, irrespective of the country from where the employee comes, in order
to recruit the right candidate for an international operating organisation, certain
steps within the recruitment and selection process have to be taken, as discussed
above.
The following part looks at various techniques for training and development at
the international level.
58
5.2
Training and Development
The goal of training and development is to guarantee a high degree of qualification among the workforce. This involves activities such as analysing the training
needs of the company, providing or organising training courses, assessing staff
and identifying their potential and career planning.
Training and development at an international level needs to take the additional
international demands of the organisation into consideration. In the literature,
the following three areas of personnel training and development activities are
distinguished according to the extent of the employee’s involvement in international operations: 185
a)
The training and development of employees who work at national level,
but for an international operating organisation.
Compared to employees who work on a national scale only, the additional qualifications employees need in the international working environment are specific work-related knowledge about the various countries
where the organisation operates, their languages as well as information
on country-specific practices.
The spectrum and the demand for the various training and development
activities are related to the overall internationalisation strategy of the organisation. Hereby, one has to consider that due to the international environment different standards for training and development might exist.
This means that due to the heterogeneity of the working environment,
and, hence, due to different education and qualification systems, different
training and development practices might exist at the national level.
These factors have to be taken into consideration within the analysis of
the external and internal framework of all training and development activities for a multinational organisation.
b)
Training and development of employees with minor international exchange, who are either sent for short assignments abroad or have close
working relationship with colleagues in other countries and international
work teams.
Due to the increased extent of their international contacts and the amount
of time they spend in different countries, special international training
and development activities may be envisaged for those employees. Furthermore, particular knowledge of co-operation within multinational
teams or different leadership styles becomes a topic for those employees,
185
Scholz (1993).
59
but complex cross-cultural training activities and particular preparation
courses for international assignments might only be appropriate for the
staff groups discussed in point c).
c)
Training and development of graduates, potential managers, specialists
as well as expatriates for future international assignments.186
Next to the additional demand for training and development activities for
local staff, particular training and development programmes for international managers, specialists and expatriates have to be dealt with. This
area of training and development was given particular interest by researchers over the last decade187 and specific cross-cultural training activities will be discussed in more detail below.
In an international organisation, employees need to be able to work with
colleagues or clients from different countries and cultures. Therefore,
they need to be open to different cultural systems in order to build up a
working environment that allows a high degree of cross-cultural cooperation and understanding. In addition, due to the increased complexity
of working relationships, employees need to be more flexible. Moreover,
it demands individual and organisational learning in order to adapt to
changes in the external and internal organisation’s environment.188
Therefore, international personnel development activities have to envisage wide-spanning international training and development activities in
order to encourage information and innovation transfer between the various units of the organisation and to make sure that the right range of
competencies is present among the international operating workforce
(see Figure II.11).
186
Ivancevich (1998); Scullion (2001); McCune (2001); Francis (2001).
See Dowling/Schuler (1994), Wirth (1992).
188
Scullion (2001); Scullion/Starkey (2000).
187
60
Figure II.11: Competencies
189
Source
The extent of training and development activities might vary according to the
following points:190
• The degree of interaction with the foreign culture,
• the time spent on the foreign assignment,
• the divergence between the home and host culture and
• the risk potential, which means the likelihood of the employee to culturally
misbehave and the costs of potential consequences.
Furthermore, according to the internationalisation strategy of the organisation,
the extent of training and development activities varies. This means, in case an
organisation follows a more ethnocentric strategy, the core training and development activities focus on the preparation of expatriates for their mission, as
well as their reintegration after their stay abroad.191 The whole process is developed, implemented and managed from the company’s headquarters and the involvement of the local HR department is minor.
189
This table is based on a table by Huber/Lange (1998 p. 109); some competencies have been selected and
slightly modified by the author.
190
Tung (1981); Mendenhall et al. (1987).
191
Black et al. (1999); Scullion (1994); Kumar (1993); Marlias et al. (1995).
61
A geocentric strategy demands the training and development of managers, specialists and other employees from, and in, various countries.192 Organisations
should consider that, due to cultural differences, training courses and development programmes, which might have been developed in one country, need to be
adjusted to the specific needs of other countries. Certain aspects, like learning
style, have to be taken into account. Therefore, it seems to be appropriate to involve local HR staff and employees in the development and evaluation of training and development activities.
Multinational organisations need to develop specific concepts in order to gain
and select the country-specific information required. The development of a demand profile in combination with a complementary qualification profile leaves
room for individual interpretation and consideration of the different countries
education and qualification systems. However, a complete picture of the employees’ training and development needs is hard to get. Thus, other techniques
might be envisaged. For example, specially designed assessment centres are interesting alternatives or additional methods. In these assessment centres, the jury
can be composed of employees from various international locations.
Due to the problem of international comparability of specific skills and the
training needs of employees, a common understanding of the organisational
training and development activities has to be developed. Hence, multinational
organisations have to work in close relationship with their business partners and
managers in the various countries in order to communicate the overall goals and
values of an international training and development system. In this context the
personnel department should see its role as a consultant supporting the management team locally. An international network of external consultants and local
trainers can support the role of the HR department.
The goal of cross-cultural training programmes is to provide the necessary
qualifications and competencies needed, next to the technical know-how, in order to operate on an international basis and to work in international relationships
with employees from other cultures.193
As several studies show, training programmes before foreign assignments lead
to a better performance of the expatriates.194 Cross-cultural training will initially concentrate on basic information that will enable the employee to learn
within different cultures and to understand different systems and structures. The
degree of information the employee gets depends on the extent of the foreign assignment, as well as on the position the employee will hold abroad. At this
stage, the employee gains knowledge of the country’s actual political situation
192
Monka (1992); Robinson/Riekhof (1992); Sulanke (1992).
“Cross-cultural training enables the individual to learn both content and skills that will facilitate effective
cross-cultural interaction by reducing misunderstandings and inappropriate behaviors,” Black/Mendenhall
(1990); cited in Scherm (1999, p.120).
194
See Tung (1982 & 1998); Briggs/Harwood (1982); Vance (1992).
193
62
as well as of its economic and social status quo. Next to important legal and social facts he learns how to easily integrate into the foreign culture without any
conflicts.
According to Gudykunst and Hammer, four different categories of cross-cultural
training can be distinguished:195
a)
General Culture Training:
• Intercultural (verbal and non-verbal) communication or behaviour
training (intercultural competence).
• Awareness of own culture in order to understand own cultural beliefs,
norms and values as a basis for understanding other cultural systems
(empathy).
b)
Specific Culture Training:
• Language and general information about the foreign country.
• Sensitivity training, field experience or specific culture-related case
studies.
Cross-cultural training should prepare the employee for his foreign assignment
in order to perform well. However, the international experience per se can be of
value to the employee’s development.
A foreign assignment can be an important step within the employee’s career. It
mainly implies the possibility for a career move, to take on more responsibility
or to get a leadership position. In addition to similar roles in the home country,
the intercultural perspective provides the chance to gain intercultural competence. Due to the high costs of expatriation and foreign assignments, a stay
abroad has to be planned properly and the employee has to be sufficiently prepared. Not only the foreign assignment itself has to be organised but also the repatriation. At the time of repatriation the right vacant position must be found
and, ideally, this position should benefit from the experience gained in the foreign assignment.196
Training and development at an international level deal with particular crosscultural topics, in order to manage staff in various countries and to integrate
employees from various nations into the international organisation. The main
problems, which multinational organisations face derive from different national
195
196
Gudykunst/Hammer (1983).
Black et al. (1999); Scullion (1994); Gregersen (1992); Kumar (1993).
63
systems and individual qualifications of each employee. It is therefore important
for international training and development to ensure that all necessary information is available in order to assess the employee, to develop individual training
and development criteria and to systematically analyse the success of training
and development interventions.
One purpose of this section is to derive some conjectures regarding the potential
for standardising and centralising the training and development function. In the
following, we focus on training and distinguish training by content. By way of
summarising, we find:
With the exception of vocational training, all training concepts can be developed centrally with a high degree of standardisation.
Figure II.12 provides an overview of what we believe are the most important
training contents and the required involvement of either the headquarters or the
subsidiary.
Figure II.12: Lead in Developing Training Concepts
While cross-cultural training can potentially be developed decentrally, there are
a number of arguments for keeping the lead at the headquarters. First, in the
context of preparing expatriates, which is one important purpose of crosscultural training, persons to be trained are likely to be based in the headquarters.
Second, and related, cross-cultural training involves, by definition, the knowledge of both the local culture and the cultural background of the person that is to
be trained. Thus, the subsidiary is not necessarily better placed to provide these
services. This is even truer when persons of several cultural backgrounds are
trained together. Third, often there are specialised agencies that provide a “onestop-shopping” offer for cross-cultural training for many different combinations
of cultures. Thus, the selection and monitoring of the agent that provides the
service is easier if the services are sourced centrally. Finally, cross-cultural
64
training can be combined with corporate culture training, which we now argue
should be developed centrally.
The argument for developing corporate culture training centrally is straightforward. By definition, corporate culture intends to define the organisation’s common cultural ground. Thus, for corporate culture to have a meaning there should
be no differences in, say, induction programmes between the subsidiaries.
Since the management and leadership style in an organisation is indeed one important component of corporate culture the same argument applies for this category.
A less critical role is seen for skills training. Often skill training programmes
need to be adapted to local circumstances in order to provide adequate examples
and use the right “language”. Since, within Europe, the cultural and educational
differences between countries are not extreme and often well known to European nationals, we see a large degree of flexibility for the development and
monitoring of such training. Beside the option of central or local in-house development, there is the option of outsourcing this training either to local agencies or to international agencies at the headquarters. The latter has the advantage
that standardised training is adapted to local needs while the content and quality
of the local training are guaranteed to be on a similar level across countries.
The only aspect of training that has to be developed with significant input from
the subsidiary or under full control of the subsidiary is vocational training. Here
national legislation, and national attitudes of employees play an important role
so that standardisation does not seem feasible. There is, however, scope for a
common element in vocational training that could be combined with the induction and provided at one location jointly for the relevant employees in all subsidiaries.
By “expert training” we mean training of certain techniques that are particular to
the industry or the specific tasks of the employee. This training should be developed or sourced by the organisational unit that has the best skills. There are no a
priori arguments for allocating this task to the headquarters or a subsidiary.
Standardisation of training and development is likely to be higher than standardisation of recruitment and selection.
The most obvious reason for this conjecture is based on the analysis presented
above. While standardisation seems a feasible option for all training contents
except vocational training, the analysis of recruitment and selection has shown a
much more diverse picture.
A further reason for this conjecture is that in host country recruitment, multinational firms have to compete with national firms. If national habits and standards
65
are ignored, multinationals may miss a large segment of the market of potential
employees. To name one example: if a multinational firm chooses as a standard
policy to recruit employees via a recruitment agency, it may, in some countries,
miss a large fraction of potential employees who only study adverts in local
newspapers.
Another important reason for conjecturing that the degree of standardisation is
higher in training and development is that training and development is a more
long-term process, which is, often, designed to unify the employees.
Finally, most training and development efforts are targeted at the management
staff level. As analysed in the section on recruitment and selection, the cultural
differences among international management staff are likely to be less pronounced than for local employees.
Next to the training and development of employees, it is important to reach a
highly motivated workforce in order to get the highest return on the employees’
skills and performances. This can be achieved by a well-balanced compensation
and benefits package. In an integrated approach of HRM, this is already important at the early stage of personnel marketing in order to attract good candidates
for the vacant positions. Therefore, in the following section, various techniques
of staff compensation at an international level are looked at.
5.3
Compensation and Benefits
Organisations have an incentive to develop a good and fair197 staff compensation
system. A high-value compensation and benefits package is required in order to
recruit the best candidates. Compensation and benefits help in order to bind the
employee to the organisation and to avoid absenteeism. Moreover, compensation and benefits are an important motivational factor. Finally, positive rewards
(salary increase, bonus), or the lack of it, can signal the assessment of the performance to the employee.
At an international level, multinational organisations can use their compensation
and benefits system to encourage or discourage international mobility of their
staff.
Compensation and benefits at an international level face the question of international comparability.198 Both level and structure of compensation and benefits of
similar positions in different countries often vary significantly. Even if the level
is the same, there may be differences in structure as the mix of fixed salary,
variable salary and non-monetary benefits varies.
197
198
Staehle (1987); Steinmann/Schreyögg (1997).
Perkins/Hendry (2000); Duane (2001); Speer (1998).
66
When determining the level and structure of compensation and benefits, multinational organisations consider the following factors:
• The national and international job-market,
• employment law and social security system, as well as
• fairness, which is determined by culture and common practices.
In order to avoid dissatisfaction among the employees, the compensation and
benefits system should be perceived as fair among the workforce. According to
Hahn and Willers199 four components of fairness can be distinguished:
• The employee, group or company performance.
• Certain staff expectations, such as employees performing the same position
getting the same compensation.
• Social factors, like age, family structure or time spent with the company.
• Market rate and the compensation provided by competitors.
It is obvious that these components are not reconciled easily and lead to a number of trade-offs. We will address some trade-offs below.
The design of the compensation and benefits system depends on the internationalisation strategy of the organisation. Multinational organisations that follow an
ethnocentric strategy try to transfer their compensation and benefits system as
much as possible to other countries in order to reduce the administrative burden
and to increase the comparability and simplicity. All expatriates are treated
equally, irrespectively of the country where they are working.
From a polycentric perspective, the country-specific different systems are the
guiding factor. Then the overall comparability lags behind and the burden of
administration increases.
The disadvantages are reduced and the advantages are used by applying the
geocentric strategy. Here, organisational-wide guidelines reduce the administrative burden and increase the comparability of the systems without loosing
sight of national differences. A well-developed international compensation system demonstrates the success of international HRM, as it reflects the consideration of external and cultural factors and the overall fit with organisational circumstances.200
199
200
Hahn/Willers (1992).
Scherm (1999).
67
For staff on international assignments, the following five compensation models
are discussed within literature:201
• Home-country-based compensation: The employee receives the base salary he would receive in a comparable position in the parent organisation. In
addition he might get an extra bonus to compensate for his foreign assignment and to outbalance additional costs and differences in the tax, pension
and social security system. The goal of this compensation model is to be fair
to all employees within the parent organisation, although big differences
might be reached within the single host countries.
• Host-country-based compensation: The employee receives the basic salary
that is normally paid for his position in the host country. The main idea of
this model is to treat the expatriate as a local employee, although a misbalance might result to his colleagues at the parent organisation. In general, this
approach is mainly applied for longer stays abroad.
• Headquarters-related compensation: All expatriates in all host countries
receive the same salary, oriented at the compensation and benefits level of
the companies’ headquarters. Hence an overall common compensation system is practised. It is mainly used in organisations where expatriates, coming
from various countries, work together and where expatriates or groups of
specialists are transferred from one country to another quite often.
• Market-related compensation: The compensation and benefits package is
in line with the market rate for a comparable position. The main goal is to
keep the employee with the organisation, in particular in areas, which demand a specific skill level.
• Hybrid model: A mixture of the above-discussed concepts in order to find
the most appropriate compensation package. Hereby in general, the expatriates’ compensation and benefits package is related to the local market system. If this salary level is not appropriate e.g. in comparison to the local
standards of the home country, extra benefits might be added.
The compensation and benefits system of a multinational organisation varies according to the stage of internationalisation. As internationalisation advances, the
home country-based model loses significance. The majority of multinational organisations relate their expatriate compensation to the basic salaries of the host
countries and balance out the differences in order to avoid a lower income level
than the expatriate had previously.202 Overall, international compensation and
benefits systems show a higher degree of flexibility and more transparency
201
202
See Macharzina (1993); Speer (1993); Foster (2000).
See Speer (1993).
68
among the employees. Figure II.13 illustrates the main advantages and disadvantages of the above-discussed compensation models:
Figure II.13: Advantages and Disadvantages of Compensation and Benefits Systems
Source203
203
Figure II.13 is due to Speer (1993).
69
The problem of compensating expatriates can be made transparent by the following thought experiment. For simplicity, consider a firm with two subsidiaries, each based in a different country, and one headquarters. Assume that local
market rates for a certain position differ in each country and that firms cannot
pay below that rate locally. A multinational organisation that wants to make use
of expatriates faces an important constraint: pay-cuts are likely not to be accepted by expatriates. On the other hand, firms aim to equalise local pay for the
same position. This leads to the following conjecture.
Each compensation and benefits system for expatriates faces a trade-off between equality and cost saving.
Given the scenario introduced above, there is a simple but expensive way to
achieve the goal of equality. Let pay be uniform across all parts of the organisation at the highest of the subsidiaries’ market rates. Of course, this approach is
expensive as it involves paying local employees, at two of the three locations,
more than required.
An alternative approach is to compromise on the aim of equality and pay the
expatriates the higher of the two pay-levels in question (source location and destination). This makes the system work but raises an issue of inequality. If the
pay-level in the host country is lower than that of the source country, expatriates
will receive a higher income for the same position as local employees. If the
pay-level in the host country is higher than in the source country, there is no
inequality issue, while the expatriate remains in the host country. However, the
issue appears on reintegration.
Firms can (and do) reduce the significance of the trade-off by either hiding inequality or making pay cuts less transparent.
Both ends can be achieved by providing extra non-monetary benefits, such as
free accommodation, or temporary monetary compensations, like lump sum
payments for, say, moving. This makes differences in the compensation
schemes less transparent. At the same time there is no need for a cut in basic
salary when the employee returns.
More generally, the aim of hiding inequality can be achieved by keeping salary
levels confidential. This may even be in the interest of those employees, who
regard knowledge about their salary as a private matter, an attitude that is common in some, but not all, European countries. Moreover, in some industries it
may not be welcomed, making (potentially high) salaries of employees public.
However, non-transparent compensation schemes suffer from some significant
drawbacks. If compensation is not clearly linked to a position, employees do not
get information about their relative treatment within the firm. This reduces the
70
incentive to perform and may be perceived as unfair. The intransparency gives
room for hidden patronage as pay decisions cannot be monitored. Moreover, if
considered as strictly private, attractive compensation and benefits systems cannot be marketed as effectively as in a transparent system.
Based on this discussion, it does not come as a surprise that firms often use a
pay range for each position and most firms, even in an Anglo-Saxon environment, avoid making pay levels fully transparent.
In the context of expatriates the problem of comparability already solves the
transparency issue to some extent. While in our simple scenario we have assumed that it is clear when an employee has to accept a pay cut, in practice this
is not so. Effectively, an assessment of the “real” income of an expatriate is a
difficult task as the nominal exchange rate is likely to be of limited relevance. A
proper assessment requires an estimation of the local cost of living compared to
the cost of living in the source country (or city). Moreover, the result depends
on the savings-rate of the employee and the likely future place for spending
those savings.
Figure II.14 puts the three HR-subfunctions into the context of our theoretical
framework. We expect that the degree of standardisation is likely to vary by
subfunction. Thus, each subfunction should be evaluated separately.
71
Figure II.14: Third Component of the Theoretical Framework: Integrated HR-Subfunctions
Note that together with the first and the second component we have now identified five drivers of standardisation:
1.
the stage of internationalisation,
2.
the staff groups affected,
3.
the level or “dimension” of HR (strategy, policy, practice),
4.
the HR-subfunctions (R&S, T&D, C&B), and
5.
organisational factors (size, regional coverage).
This categorisation will re-appear in the empirical analysis. In the interviews the
importance of each of the standardisation drivers was highlighted.
72
After having discussed the three main areas of HRM: recruitment and selection,
training and development as well as compensation and benefits, the next section
intends to integrate the main results into the theoretical framework of European
HRM.
6
Conclusions
The purpose of our study is to draw conclusions for theory and practice regarding HRM in Europe. Today, there exists a well-established body of literature
that shows that HRM policies and practices in European countries differ significantly. From a system-theoretic perspective, this should not come as a surprise.
We expect the choice of HR policies and practices to be determined, at least to
some degree, by the external context of an organisation. However, this external
context differs from country to country. As a result, we expect that management
choices in each country differ too. The empirical research that follows will replicate this general finding.
These differences in national HR policies and practices raise one important
question, which is at the centre of this dissertation: How do multinational organisations respond to this European environment of diversity?
Multinationals have an incentive to standardise their HR policies and practices.
Indeed, we have identified a number of reasons why multinational organisations
are likely to standardise their HRM policies and practices across the various
host countries: they may intend to reduce costs, strengthen the corporate identity, increase transparency, improve the mobility of employees and so on.
This incentive to standardise HRM policies and practices, combined with the
findings of a continent of diversity, makes the explorative question that we analyse in this dissertation a very interesting one. If not only national organisations,
but also multinational organisations, choose different HR policies and practices
in each country that they operate in, this suggests that the obstacles to standardise are perceived to be prohibitive. If, however, multinational organisations
choose to standardise their HRM approach, we can conclude that the reason for
diversity is mainly due to historical factors. Then, firms that have an incentive to
change their approach can do so.
The shift in our perspective from a simple country-comparative perspective to
an analysis of the HRM approaches of multinational organisations naturally
leads to another interesting question: If multinational organisations choose to
standardise their approach, which one is best?
Of course, given our system-theoretic view, we do not expect a simplistic answer to the questions raised. Rather, we expect that we will find some areas of
73
HRM where standardisation is feasible and, as a result, has been pursued by
multinational organisations. Others are likely to be more difficult to standardise
and we expect that multinationals will follow the respective nationals in their
approach. Indeed, one of the main aims of the quantitative empirical analysis
that follows is to identify which HR policies and practices of multinational subsidiaries differ from those of national firms.
There are further issues that follow from our approach. The HR department of a
multinational organisation not only faces a different external environment in
each country that the firm operates in, it also needs to take into account the different organisational contexts of the headquarters compared to its subsidiary.
Thus policies and practices in those parts of the organisation, that are located
outside the headquarters’ location, may be determined, by the fact that they are
subsidiaries and not by their or their mother firms location. Again, we will address this issue in the empirical approach.
Internal and External Context
On the environmental level we have distinguished the external and the internal
context of a multinational organisation in Europe. Following the general approach in the literature, we have identified four main factors that determine the
external context of a multinational organisation: the economic, the sociocultural, the political-legal and the technological environment.
Clearly, the first interesting question that is raised by this distinction of external
factors is the relative importance of each aspect of a European HRM approach
chosen by multinational organisations. Here, we derived a number of conjectures. First, we believe that in the European context technological factors are
likely to play a minor role compared to the remaining three external factors.
Second, political-legal as well as the economic factors is likely to become more
homogenous across European countries in the future. This will shift the balance
even more in favour of standardisation within the European HRM approach of
multinational organisations. This leaves the socio-cultural factors to play an important role. Here, however, the motives for and obstacles to standardisation are
subtler than in the other areas. Current employees may be difficult to motivate
unless the compensation and benefit scheme as well as the training and development programmes are adapted to their expectations. On a similar footing, future employees may be difficult to recruit unless they find the culture they are
used to.
However, a policy of always adapting to the local culture has some important
consequences for the internal structure of a multinational organisation. Here, our
analysis of the internal context shows that a multinational organisation should
not necessarily follow national socio-cultural differences. First, and most simply, being different may be perceived as a strength. Moreover, there is a large
74
body of literature that argues that corporate identity is an important motivating,
or at least satisfying factor for employees. Certainly, a common, “corporate”
culture eases communication within an organisation. Since an organisational
culture of a multinational organisation cannot be the sum of local cultures, there
is a necessary divergence from national approaches. Indeed, we conclude very
cautiously that corporate culture may ease or hinder the task of European HRM.
Finally, our analysis of the internal context of a multinational organisation in
Europe has highlighted two further important aspects that we have to consider
when pursuing the empirical analysis. First, headquarters and subsidiaries are
likely to differ in terms of structure. This is a straightforward conjecture that
builds on the presumption that the headquarters is likely to be larger than the
subsidiary and has to deal with a greater variety of tasks. Second, the relationship between the headquarters and its subsidiaries is not necessarily without
conflict. Subsidiaries have a different set of stakeholders than the headquarters.
One of the two most important stakeholders in a subsidiary are the local employees and the headquarters. In contrast, the latter will have to take into account the needs of stockholders as well as the needs of the employees in all subsidiaries.
Strategic Level
The second level of analysis is the HRM strategy. Here we draw on the familiar
distinction of ethnocentric, polycentric, regiocentric and geocentric strategies.
Indeed, we find a straightforward link between the strategic focus and the question of standardisation. While an ethnocentric strategy implies maximum standardisation, it does so with the “one best way” being determined by the habits
and procedures of the headquarters. The polycentric, as the opposite extreme,
leads to a complete adaptation to local practices and policies. The regiocentric
approach, as a mixture of the two approaches, suggests standardisation within
and differentiation among regions. This leaves the geocentric strategy, which
puts much more emphasis on finding a more appropriate approach that develops
HRM policies and practices by taking into account the local circumstances and
the benefits to standardisation.
Further theoretical work has made use of the typology of these four strategies. It
has been shown that firms change their strategic approach depending on the
stage of internationalisation. While starting off with an ethnocentric strategy,
firms become more open toward different strategies in later stages of internationalisation.
From a more normative perspective it has been argued that the polycentric, the
regiocentric and the geocentric approaches should be used, but for different purposes. We do not fully follow this methodological approach but take on board
75
the idea that the degree of standardisation is likely to vary according to the staff
level to which the HR policies and practices are applied.
In the empirical part we investigate what strategies those multinational organisations follow, which operate on a European-wide scale. Furthermore, it is analysed how far multinational organisations standardise their HR policies and
practices across the various European countries and how far they co-ordinate
their HR policies centrally at the companies international or European HQ or
decentrally within the single country of operation.
HR Subfunctions
Finally, we derived some conjectures for each HR subfunction. This leads to
some normative conclusions regarding the policy choices of an HR department
in a multinational organisation. These will supplement our empirical findings
when developing a guideline for practice.
A central question regarding the recruitment and selection policy of a multinational organisation is the extent to which expatriates should be used. Previous
research has shown that firms tend often to use expatriates early in the process
of internationalisation. In line with this empirical finding, we conclude in the
theoretical analysis that at the beginning of internationalisation the use of expatriates is particularly attractive. However, this does not imply that expatriates
should not be used in later stages of the process, as well. Rather it seems that a
mix of sources: expatriates, locally recruited employees and employees recruited on international milk rounds seems a good approach. In particular, the
use of milk rounds has a number of attractive features for multinational organisations, like the ease of targeting high-potential future employees and improved
possibilities for monitoring the quality of applicants.
With regard to training and development, we derive two explicit conjectures regarding the potential degree of standardisation. First, we argue that, with the exception of vocational training, all other training concepts can or even should be
developed centrally, with a high degree of standardisation. Second, we conclude
that the degree of standardisation in training and development is likely to be
higher than in the other HR subfunctions.
This leads us to the last of the three subfunctions, compensation and benefits.
Here, we conjecture that each compensation and benefits system for expatriates
faces a trade-off between equality (e.g. of C&B for a position) and cost saving.
The trade-off arises as, first, it is unlikely to get expatriates unless the candidates
are not worse off compared to their current remuneration and, second, local pay
levels will often differ depending on the country where the subsidiary is located.
Indeed, we find that multinationals can pursue two strategies in order to over-
76
come some of the difficulties raised by this trade-off, they can hide the inequalities or make pay cuts less transparent.
77
Chapter III: Empirical Analysis
1
Introduction
In this dissertation we intend to shed light on the achievements of, and potential
obstacles to, a successful development and implementation of European HRM.
We not only want to provide an overview of the existing EHRM strategies, policies, and practices; we also intend to explore what drives HRM in Europe and
what are important obstacles.
While these are “big” questions, the analysis focuses on the HRM approaches of
multinational organisations in Europe. Moreover, we will have a special interest
in the degree of standardisation chosen by multinational organisations for their
European HRM strategies, policies and practices.
In this chapter, we present the results of the empirical analysis. We also intend
to motivate and explain the methodological approach, which consists of two
complementary studies, a quantitative analysis of the largest dataset that is
available in the field of international HRM in Europe and a qualitative analysis,
which is based on case study interviews with representatives of ten multinational organisations.
The empirical analysis builds on the findings of the theoretical analysis. At the
same time one purpose of the empirical analysis is to check and question the
conjectures that have been developed in the theoretical analysis.
The next section relates the empirical approach to previous empirical work in
the field (Section 1.1). We then move on to clarify the link between the theoretical analysis of the previous chapter and the empirical analysis presented here
(Section 1.2). Finally, we motivate our methodological choice (Section 1.3).
1.1
The Necessity for a New Approach
At the heart of many previous empirical analyses of European HRM was the
question of whether policies and practices differ across countries in Europe (see
Section 1.2.1).204 We intend to explore new aspects of this issue and focus on
multinational organisations.
We want to know whether multinational organisations standardise their HR
policies and practices within their organisations. We are also interested in
204
78
Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster
(1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al.
(1997); Brewster et al. (2000a).
whether different multinationals adopt similar approaches. If there are differences in the degree of standardisation between multinationals, we want to learn
why we observe them.
In order to see why this raises some new issues that have not been the focus of
previous research, consider the following possible explanations for differentiation or standardisation:
• Differences between multinational organisations’ HRM policies and practices may arise because of an ethnocentric approach of the headquarters. If
headquarters impose their home country’s traditional HRM approach on
their subsidiaries, we would expect that the subsidiaries of one multinational
differ from those of another, if they have their headquarters in different
countries that are known for variations in their HRM policies and practices.
Thus, this kind of diversity would be perfectly in line with standardisation
(and we will reserve the term “headquarters standardisation” for it).
Standard quantitative empirical evaluation techniques that have been applied
in the past cannot pick up this kind of standardisation. By simply comparing
HRM policies and practices between organisations in different countries,
headquarters standardisation cannot be identified, since differences between
HRM policies and practices between countries may be driven by differences
of national organisations and/or differences between multinationals. Qualitative analyses can, of course, address this issue more directly.205 However, as
we will discuss in more detail below, addressing the question with qualitative methodologies alone may make the empirical analysis vulnerable to a
critique that stresses on the methodological limitations of the qualitative approach.
• Differences between multinationals could also be due to a perfect adaptation
of local practices. This would underpin the finding of diversity by showing
that, even within organisations, there is no European approach (i.e. there is
“no standardisation”).
• If multinationals adopt similar approaches in the European member states,
we ask whether this reflects a specific multinational approach (we term this
“multinational standardisation” or whether it simply reflects that, for this
particular policy or practice, a common approach has been taken by all
organisations in Europe “European standardisation”.
• Finally, it is clear from the theoretical analysis that organisational factors
may well influence the policies and practices that are adopted. Thus, we
would like to be able to distinguish organisational types in order to identify
205
Festing (1996).
79
differences between subsidiaries and headquarters of multinational organisations and between these and national organisations.
In order to explore questions like these, we develop a special evaluation framework, which allows us to address these questions by using the most extensive
data set on HRM in Europe, the Cranet-E survey.
The quantitative analysis is complemented by qualitative analysis that is based
on ten case studies of multinational organisations.
1.2
Building on the Theoretical Findings
The empirical analysis builds on the theoretical findings of the previous chapter.
We make use of our theoretical framework, which combines the three main
components of international HRM identified in the literature: the international
working environment of a multinational organisation, the internationalisation
strategy and the three integrated HR subfunctions, recruitment and selection,
training and development and compensation and benefits.
Based on this framework we have, in the previous chapter, identified a number
of factors that we expect will drive observed differences in the degree of standardisation:
1. the stage of internationalisation,
2. the staff groups affected,
3. the level or “dimension” of HR (strategy, policy, practice),
4. the HR-subfunctions (R&S, T&D, C&B), and
5. organisational factors (size, regional coverage).
This categorisation will re-appear in the empirical analysis. In particular in the
interviews, the importance of each of the standardisation drivers was highlighted. The common thread of these drivers is that all affect the relevant external or internal environment of the organisation.
The chosen empirical methodology is designed to further explore the importance of these factors. Moreover, the theoretical analysis yielded a number of
conjectures and we will take these to the data and see what empirical support we
can give.
Whilst the focus of this chapter is on the positive analysis of European HRM,
i.e. on finding out what multinational organisations do, the empirical analysis
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also serves two other purposes. First, in the interviews, we asked HR managers
what they aim for when designing their HR policies and practices. Comparing
the aims with our findings on the actual practices reveals the contrast between
wishes and reality. It also helps to explain what we observe. Second, the empirical findings will, together with the theoretical findings of the previous chapter,
serve as a basis for the normative analysis pursued in Chapter IV, which looks at
the practical implications of our study. The empirical analysis helps us to identify areas where there may be scope for increased standardisation and where this
scope is unlikely to exist.
1.3
Choice of Methodology
One of the main goals of the empirical research that follows is to provide a systematic analysis of EHRM approaches within practice. The scientific findings
are explorative and the research questions relate to a concrete problem within
practice. Due to this explorative characteristic and the complexity of the research problem, a combined approach of both qualitative and quantitative research is selected (see Figure III.1).
81
206
Figure III.1: Research Methodology
Indeed, the choice of the methodological approach depends on various factors
and according to Yin each research approach has particular advantages and disadvantages, depending on the following three conditions:
• The type of the research question,
• the control the researcher has over actual behavioural events, and
• the focus on contemporary, as opposed to historical, phenomena.
Yin identified five different research strategies (see Figure III.2). Although
these strategies are not mutually exclusive and in some research projects a combined approach might be appropriate, Yin postulates specific situations in which
a specific strategy has a distinct advantage.
206
82
This table is based on an overview of quantitative and qualitative research methodology by von Keller
(1981) and supplemented by a third component of the mixed approach of both qualitative and quantitative
methodology by Hilb (1995). The table was translated by the author and slightly modified for the purposes of the research question.
Figure III.2: Relevant Situations for Various Research Strategies
Source207
According to Yin208 a quantitative survey data analysis is the preferred strategy
when “who, what, where, how many and how much” research questions are being posed.
In order to obtain general pattern and to identify objective correlations regarding
the degree of standardisation of HR policies and practices in Europe, a quantitative survey, making use of statistical procedures, is helpful.
In the context of our analysis the survey data provide us with information on, for
instance, how many multinational organisations use a certain HR policy or practice within a certain European country? This information allows us to draw conclusions regarding the degree of standardisation of HR policies and practices
operated in Europe.
However, a quantitative survey data analysis does not allow us to give answers
to the “how and why” type of research questions. Therefore, in order to understand the character of the information we gained and to understand the intention
of the multinational organisations within Europe, a qualitative methodology is
often superior.
We have, therefore, chosen a combined approach. Interviews with multinational
organisations in Europe provide us with more detailed information on how and
why they standardise certain HR policies and practices across Europe, or why
they prefer not to. In order to identify a regular pattern on the one hand and to
207
208
Yin, (1994, p. 6).
Yin (1994).
83
understand the logic behind them, a combination of both a quantitative as well
as a qualitative investigation of our research question is sensible.
While the qualitative research sample concentrates on ten selected multinational
organisations that operate across various European countries, the quantitative
research sample contains overall 1095 data sets from national and multinational
organisations within four different European countries.
Both research samples were collected at around the same time in 1999 and
2000, which increases the comparability of the information gained from both
data sets.
The qualitative research sample provides a more detailed description of the
HRM approach taken by multinational organisations operating in Europe and
provides information on how far they standardise their HR policies and practices
across the various European countries, and why. Moreover, by asking organisations, we can directly address the question of the degree of standardisation chosen within an organisation.
The quantitative research sample allows us to compare the HR policies and
practices of a large amount of multinationals operating within different European countries. However, we can only indirectly infer conclusions on the degree
of standardisation within an organisation. The survey provides information on
how different organisations differ across countries and does not address the issue of standardisation within an organisation directly.
Figure III.3 illustrates the main research questions, the quantitative and qualitative information analysed and the various research perspectives.
Quantitative Analysis
Research Questions
Qualitative Analysis
What does the HRM approach of multinational organisations
across various countries look like?
To what extent do they standardise their HR policies and practices?
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Type of Information
Survey data
Case study interviews with
EHRM practitioners
Research Perspective Comparative perspective of Perspective from the point of
HRM approaches practised in view of single multinational
various European countries:
organisation:
-
country-comparative
spective
per- -
-
inner-country and organisation comparative perspective
transnational,
perspective
company
Figure III.3: Main Research Question and Perspectives
By choosing a two-pronged approach, we hope to overcome the limitations of
choosing either. This does not imply that our approach is without limitations.
Indeed, one of our purposes is served if we can show how future empirical research can be improved and more focused. For instance, we would hope that future surveys on international HRM will be designed to distinguish more clearly
the differences within an organisation and across organisations. We will address
the implications of our findings for future research more extensively, at the end
of this chapter in Section 4.
In the following section we present the quantitative part, and in Section 3.3 we
continue with the qualitative analysis. The main results of the quantitative and
the qualitative analyses are compared and jointly interpreted in Section 3.4.
2
Quantitative Empirical Analysis: The Cranet-E Survey
2.1
Introduction
On the basis of previous research results and according to European HRM
literature, the starting point of the empirical analysis is the finding that no
unified European HRM approach exists and that the majority of organisations in
a country show a distinct country pattern, being influenced by national factors
like legislation or common practice.
Taking these results into consideration, the question arises how multinational
organisations, operating in the European context of HR diversity, react to these
environmental circumstances? To which extent are HR policies and practices
85
standardised? Standardisation implies a company-specific approach irrespective
of country-specific factors, whereas differentiation allows it to adapt to the local
circumstances of every single country, implying the subordination of factors
such as company-culture.209 We also investigate why multinationals choose, or
prefer not to choose, a standardisation strategy for the different HR policy areas.
In order to find answers to the above questions, the goal of the quantitative
analysis is to gain information on particular human resource management policies and practices of multinational organisation in various European countries.
We investigate whether multinational organisations have a similar HRM approach in the various European countries or not? This question is asked for a
number of selected HR policies and practices.
Due to data restrictions, the quantitative analysis can, in most cases, only identify whether a certain policy or practice has been adopted by an organisation,
and not why and how. Moreover, the data contains a different set of organisations in each country. As a result we cannot directly measure the extent to which
a particular multinational organisation has standardised its HR policies and
practices across Europe. Effectively, we can only compare the penetration of the
use of a certain instrument for, say, multinationals in one country with the percentage of multinationals that use this same instrument in another country.
While these data restrictions put serious limitations on our analysis, we believe
that the results are nevertheless valuable.
First, our database provides a very detailed set of HR policies and practices.
Thus, it goes a long way in answering the “how” question. Second, when we
find that a certain policy or practice has been chosen by a similar percentage of
multinationals in all countries, this not only suggests, indirectly, that each single
multinational has standardised, but also that all multinationals have chosen the
same instrument. We believe that this provides a very powerful result, as it
shows that European-wide standardisation appears to be achievable. Third, by
complementing our quantitative analysis with the qualitative analysis, we can
underpin some of the results with information that does not suffer from the restrictions listed above.
Moreover, we can compare the use of a certain instrument by multinational organisations in one country with the use by domestic organisations and draw further conclusions based on this comparison.
The following sections introduce the research sample, present the methodology
and discuss the results from the quantitative survey data analysis.
209
86
The word “factor” is used in this context for either company or country-specific characteristics. In this
context, e.g. country-specific factors might imply national legislation or common practices as well as habits within the countries, while company-specific factors imply company culture, corporate identity as well
as the company’s size or sector.
2.2
Research Sample
In order to find answers to the above-outlined research questions, data from the
written survey by the Cranfield Network for the study of Human Resource
Management in Europe (Cranet-E), carried out in 1999/2000, were analysed.
The Cranet-E dataset is based on a questionnaire,210 covering the following areas of Human Resource Management: personnel/human resources function;
staffing practices; employee development; compensation and benefits; as well as
employee relations and communication. The questionnaire was sent out by the
member organisations of the Cranet-E Research network to organisations within
their country. More than 20 European countries participated in the international
survey. For the underlying research purpose a specific sample was selected on
the basis of certain criteria outlined below.211
2.2.1 Selection of the Research Sample
Our analysis will focus on four selected European countries. The selection is
based on the integration – devolvement matrix by Brewster and Larsen (see
Chapter I). In order to maintain the scope of various HRM policies and practices
operated within Europe, one country out of each category was analysed. The selected countries are:
• Germany represents the professional mechanic position. This approach is
characterised by operative personnel administration in “traditional”- style
personnel departments.
• Great Britain has also been classified as professional mechanic. However,
it is close to the guarded strategist position. The latter implies the use of strategic personnel management concepts, but being operated in “traditional”
personnel departments.212
• Denmark characterises the wild-west position. Hereby, the personnel-work
is mainly done decentrally by line management, but without strategic orientation.
• Switzerland represents the pivotal position. This position combines a strategic-oriented personnel function with line management responsibility.
210
The questionnaire was developed by the Cranet-E research team. A copy of the 1999 questionnaire can be
found in Appendix I.
211
The selected questions for the underlying research investigation are listed in Appendix III.
212
At the time of the data analysis no data set of a country that represents the guarded strategist position was
available. This is why Great Britain was chosen as an approximation.
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The goal is to explore the HRM approach of multinational organisations in four
different European countries and to draw conclusions for the development of a
European HRM approach for multinational companies. A further aim is to analyse how far multinational organisations differ from “domestic” companies in
their HRM. Therefore, as a second stage, the database was divided into three
main groups: one containing all national organisations and two for the multinational organisations. We distinguish those multinationals that have their headquarters in the country where the questionnaire was filled out and those that are
subsidiaries of multinational organisations that have their headquarters in another country (see Appendix II). This categorisation allows us to compare the
HR policies and practices of national firms with those of subsidiaries of foreign
parent organisations. If we find differences, this supports the conjecture that the
multinationals do not fully adapt to the local policies and practices. A finding
we could not reach when comparing the nationals with those multinationals that
have their headquarters within the same country.
2.2.2 Description of the Research Sample
Finally, a dataset containing 1,095 questionnaires covering 4 different countries
was selected for further analysis. Hereby 352 companies were categorised as national (NAT) and 743 as multinational organisations with 382 having their
headquarters in the country where the questionnaire was filled out (MHQ) and
361 subsidiaries of multinationals with their headquarters outside the country
where the questionnaire was answered (MSUB). Figure III.4 provides an overview of the selected sample.
Figure III.4: Description of the Research Sample
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The proportion of UK and German questionnaires in the dataset is higher (UK:
40% and Germany: 35%) compared to Denmark (17%) and Switzerland (9%).
The distribution of the three groups of organisations is almost equal with 33%
MSUB, 35% MHQ and 32% national organisations.
Organisations’ Headquarters
By definition of the three main groups of organisations:
• National companies,
• multinational companies with domestic headquarters, and
• subsidiaries of multinational companies with headquarters outside the country in which the questionnaire was filled out,
the headquarters of the first two types of organisations lies within the country in
which the questionnaire was filled out. The corporate headquarters of the third
group of companies lie within the following six countries (see Figure III.5).
Figure III.5: Country of Corporate Headquarters
It is noteworthy that there is a large fraction of subsidiaries of US-American organisations in the set MSUB. We will take this into account when evaluating the
results.
Sector
The organisations in the research sample operate in different sectors (see Figure
III.6).
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Figure III.6: Sector
Almost two thirds of the organisations operate in production, which comprises
of energy and water, non-energy chemicals, metal manufacture, other manufacturing and building and civil engineering. Almost a quarter is in services, which
includes distribution trades, transport and communication as well as banking
and finance. The sector public includes personal services, other services, health,
and education. Note also that we have excluded all (fully or partly) state-owned
organisations and focused exclusively on private companies. Thus, in the remainder of this section, we will use the terms "company" and "organisation" interchangeably.
Company Size
Around one third of the firms in the research sample have up to 300 employees
(34%), another third between 301 and 750 employees (31%), and the last third
more than 751 employees (35%).
While around 40% of both national (40%) and MSUB organisations (39%) employ up to 300 employees, only 23% of the MHQ sample belong to this category
of small organisations.
If we compare the two types of multinational organisations in terms of their
worldwide size, we find that MSUB companies are substantially larger than
MHQ companies. MSUB organisations, though rather small in their national
size, are large worldwide. 37% of the MSUB companies have 4,500 – 27,000
employees worldwide and 42% have more than 27,000 employees. Thus, almost
80% of all MSUB companies have more than 4,500 employees. This is true for
only 49% of the MHQ organisations.
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Size of the HR Department
All organisations within the research sample have an HR department. Thereof
48% have up to five employees, 36% between six and 20 employees and 16%
more than 21 employees working in their HR department. Compared to national
and MSUB companies, MHQ organisations have larger HR departments. This
fact correlates with the overall size of MHQ companies within the country
where the questionnaire was filled out.
Since both the worldwide company size and the size of the HR departments may
have an impact on the structure and policies of the HR department, we have to
keep the differences described here in mind, when interpreting our results.
2.3
Analytical Framework for the Quantitative Analysis
In the following, we develop an analytical framework for the quantitative analysis. Our aim is to make as much use of the available data as possible. Moreover,
we intend to explore questions that were not explicitly addressed in the Cranet-E
questionnaire. As a result, the analytical framework is more complex than usual.
However, we believe that it is worth the effort since it is the only way to evaluate the current state of affairs, making use of the most extensive survey available. Furthermore, it will help future efforts to improve this survey. Indeed, the
survey is constantly worked on and it will adapt to the new research questions
raised. We are certain that questions like those raised in our analysis will become more prominent in the future.
2.3.1 Definition of Organisational Types and Concepts of Standardisation
The research sample contains information about companies in four different
European countries. Their HR policies and practices are compared under specific consideration of the three different types of organisations: multinational
organisations with their headquarters outside the country where the questionnaire was filled out (MSUB), multinational organisations with their headquarters within the country where the questionnaire was filled out (MHQ) and national companies (NAT).
The categorisation into the three main groups of organisations is based on the
assumption that according to the discussion in the theoretical part, the following
three factors have an impact on the management of human resources:
a)
b)
c)
The host-country.
The country of origin.
The type of organisation (national vs. multinational organisation).
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The sample with national organisations provides information on how HR policies and practices are used within the country where the questionnaire was filled
out. As these companies operate on a national basis only, the impact on their
HRM from other countries is assumed as being minor. They might only face the
problems of standardisation and differentiation of their HR policies and practices on a national basis but not on an international basis. Therefore, they represent their country mode well.
The MSUB sample on the other hand represents organisations, which operate on
a European or international scale and need to decide whether or not to standardise their HR policies and practices across the various countries. Furthermore,
they have their companies, headquarters outside the country where the questionnaire was filled out.
The MHQ sample more or less stands in between the two groups introduced
above. On the one hand, they have their companies headquarters in the country
where the questionnaire was filled out, and on the other, they are multinational
organisations operating European-, or worldwide. This means that while they
might be influenced by the country (of origin) specific mode, they also adapt to
the multinational (external and internal) environment they are operating in.
Having distinguished these three groups we can analyse the data in order to
identify three different types of standardisation.
1.
The most complete form of standardisation is that, across the four countries, all types of organisations show the same pattern regarding the use
of a particular HR policy or practice. We will reserve the term “European standardisation” for this kind of standardisation.
2.
Alternatively, multinational organisations may standardise, but do so
with an ethnocentric approach. If national approaches differ, we would
then expect that the policies and practices of a multinational with its
headquarters in, say, Germany differ from the policies and practices of a
UK multinational. At the same time the policies and practices per firm
will not differ across countries. We denote this type of standardisation
“headquarters standardisation”.
3.
Finally, multinational organisations may adopt the same common approach across all countries, while national organisations use different
policies and practices. We will term this “multinational standardisation”.
With the available data we can identify the different types of standardisation, as
follows. The findings support a European standardisation, if all types of organisations do not differ across countries. Moreover, we would then expect that
92
when taking a “per country perspective” all three types of organisations do not
differ from each other as well (see Figure III.7).
Figure III.7: European Standardisation
The empirical findings support multinational standardisation, if the nationals’
policies differ across countries but the policies of headquarters of multinationals
do not (see Figure III.8). By way of underpinning this result, we would then also
expect that the subsidiaries of multinationals do not adopt differing policies
across countries either (this finding alone would also be compatible with no
standardisation). Moreover, when taking a per country perspective we would
expect that headquarters of multinationals and nationals differ from each other,
as do subsidiaries of multinationals and nationals. Subsidiaries and headquarters, on the other hand, should not differ from each other per country.
Figure III.8: Multinational Standardisation
93
We will conjecture a headquarters standardisation, if the policies of nationals
differ across countries and the policies of headquarters of multinationals do so
too (see Figure III.9). This conclusion is confirmed, if the subsidiaries of multinationals do not differ (provided that the distribution of the parent organisations
is similar in each country). From a per country perspective we would expect that
the headquarters of multinationals and nationals do not differ from each other,
whereas the subsidiaries differ from the headquarters and the subsidiaries differ
from the nationals.
Figure III.9: Headquarters Standardisation
Finally, when firms do not standardise but adopt the “country mode”, we expect that both the subsidiaries and the headquarters of multinationals differ in
their HR policies across countries. This conjecture is confirmed, if organisational types do not differ per country (see Figure III.10).
Figure III.10: No Standardisation
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Note that multinational standardisation is closely related to the geocentric approach. The geocentric approach suggests standardisation where possible. However, there is an important difference. As discussed in Chapter II, the geocentric
approach explicitly allows for national differences, where required. Multinational standardisation is therefore more “restrictive” than the geocentric approach, in two ways. First, it implies full standardisation across countries,
whereas the geocentric approach is compatible with diversity, where required.
Second, due to the data limitations, we can only identify those practices as multinational standardisation that are applied across multinationals, while the geocentric approach would allow different practices for each multinational firm.
Note further that the finding of headquarters standardisation and multinational
standardisation has an immediate normative implication. The fact that multinational organisations standardise these policies and practices shows that there are
no insurmountable obstacles to standardisation. This raises the question why national organisations choose not to standardise these policies and practices.
While it would be too simplistic to suggest that for all these policies and practices nationals should adopt a common strategy, our findings give some indication with regard to the practices where nationals could potentially implement a
best practice that works well in other countries. We deliberately use cautious
language. For two reasons this finding is only an indication for areas where nationals may look for European best practices:
• First, multinationals have to consider the trade-off between the benefits of
standardisation within an organisation and a good cultural and institutional
fit with the local external environment in each country. This is not true for
national organisations. They can concentrate on optimising their organisation for the local environment. This caveat is relevant for headquarters standardisation. However, it is less so for multinational standardisation, which
implies not only standardisation within, but also across, organisations.
• Second, multinationals may have other organisational characteristics that
imply a value of standardisation which does not exist for nationals, e.g. they
may tend to be larger which may increase the value of more standardisation
relative to the loss of flexibility that goes along with it.
Having said this, we still believe that it is of great value to find that standardisation is feasible. If organisations look for areas where they could potentially learn
from experiences in other countries, it makes sense to focus on those where we
find headquarters or multinational standardisation.
The following section describes the statistical procedures in more detail. We not
only conduct the tests suggested by our new framework. We also analyse our
sample with reference to more standard methods of analysis.
95
2.3.2 Statistical Procedures
Four types of Chi-Square tests were undertaken. They can be seen as a “mosaic”
(see Figure III.11).
Figure III.11: Mosaic: Four Type of Chi-Square Tests
The results of the Chi-Square tests “country differences (all types)” provide information, on how far the organisations in the four different countries within the
research sample differ in their use of specific HR policies and practices. That is,
we compare all organisations in Switzerland with all organisations in the UK,
with all organisations in Germany and with all organisations in Denmark. This
analysis is conducted mainly to generate a benchmark that reflects the traditional approach to investigate European HRM.
The results of the Chi-Square test “type differences (all countries)” provide information on whether the different type sets, NAT, MHQ, and MSUB, differ
from each other in their use of specific HR policies and practices. The set used
for each type of organisation contains organisations from all four European
countries in the research sample. This analysis gives a first idea as to whether
the types of organisation are distinct.
These results represent the traditional approach to analysing European HRM.
However, they can only be interpreted to a limited extent. For example, country
differences being discovered in the first round of Chi-Square tests might be
caused by one type of organisation only, whereas organisations that belong to
another type do not show significant differences.
In order to avoid this problem the other two types of Chi-Square tests divide the
research sample into comparable sub-groups, and hence allow a more qualified
interpretation than the first two types of tests.
Chi-Square tests were undertaken in order to analyse each type of organisation
separately. Here, we take the sub-sample that contains all organisations of one
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type, say MSUB, and investigate whether the distribution of a variable differs
significantly across the four European countries. Again, this was pursued for all
variables.
For some selected variables further Chi-Square tests were undertaken, investigating the distribution of the three types of organisation within a country.
We will make use of all testing procedures. However, the focus of our analysis
will be on the Chi-Square test that tests the differences across countries for each
type of organisation separately.
In the following, we present the general results (Section 2.4) for all types of
Chi-Square tests shown in Figure III.11. Then, we discuss the results for each
variable in more detail (Section 2.5).
2.4
General Results
2.4.1 Chi-Square Tests “Country Differences (All Types of Organisation)”
At the first stage, it is analysed whether the four countries show significant differences in their use of specific HR policies and practices. We use the following
Chi-Square test for each variable:
H0: µUK = µDK = µG = µCH
Based on both previous empirical research and the theoretical analysis presented
above, we expect a high degree of European-wide diversity.
The selected research sample confirms this expectation. The Chi-Square tests
for each variable show that in the majority of all variables (n=84 out of 98 variables) the four European countries show significant differences.
Taking the system-theoretical frame (Chapter II) of the various external and internal factors impacting multinational organisations into consideration, these
cross-country differences point to the importance of the external, countryspecific factors including economic, political-legal, technological or social aspects. However, the results that are presented below will paint a much more subtle picture of these findings.
2.4.2 Chi-Square Tests “Organisational Type Differences (All Countries)”
At the second stage, it is analysed whether the three types of organisations show
significant differences in their use of specific HR policies and practices. We use
97
the following Chi-Square test for each variable:
H0: µMSUB = µMHQ = µNAT
The results of the various Chi-Square tests show that for more than half of the
variables (n=56 out of 98 variables) the three types of organisations show significant differences. These differences might be explained according to the system-theoretical model by company-specific internal factors like the interest of
the various stakeholders, the size of the company or the qualification of the employees etc. influencing the management of human resources within these organisations.
2.4.3 Joint Interpretation of “Country Differences” and “Type Differences”
The results of these Chi-Square tests, those by country and those by type of organisation, can be categorised into the four main groups, being summarised into
the following matrix:
Figure III.12: Combined Results of the Tests by Country and Organisation
The first quarter (A) represents all variables (m= 52) showing significant variations across both, the four countries and the three types of organisation. This
means that both countries and organisations show differences, e.g. in their use of
a specific HR policy or practice. Therefore, one can conclude that the use of a
specific HR policy might be influenced by both company- and country-specific
factors.
The second quarter (B) contains all variables (m=32), which show significant
variations across the four countries, but no significant differences across the
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three types of organisation in their distribution of the selected variables. This
means that the countries show differences in their use of e.g. a specific HR policy, while the three types of organisations are similar. Therefore, differences in
the use of a specific HR policy might be explained by country- rather than by
organisation-specific factors.
The third quarter (C) contains all variables (m=4), showing no mentionable
variations across the four European countries, but significant variations across
the three types of organisations e.g. in their use of a specific HR policy. The
fourth quarter (D) shows all variables (m=10) that neither differ across the four
countries nor across the three type of organisations.
Due to former research results and the selection of the four respective countries
on the basis of the devolvement – integration matrix, it was anticipated that the
majority of all variables would show significant differences across the countries.
Hence, in order to investigate how multinational organisations react in the
European environment of HR diversity, the first two quarters (a & b) build the
main focus of analysis.
Furthermore, across the first two quarters, the sample either shows significant
variations across the three types of organisations or not. This shows that the type
of organisation might also influence variations in the use of a specific HR policy
or practice. These results are enriched with the outcome of a more detailed organisation-by-organisation analysis across the four countries, being discussed
below.
2.4.4 Chi-Square Tests: Country Differences per Organisational Type
While the previous analysis reflects the general research approach adopted in
the existing empirical literature, we now move on to analyse the question, which
is of particular importance in the context of our study: what are the country differences, if we consider each type of organisation in turn? By analysing each
type individually, we can control a possible impact of the type of organisation
on the selection of a specific HR policy or practice. We use the following ChiSquare tests for each variable:
H0: µMSUBUK = µMSUBDK = µMSUBG = µMSUBCH
H0: µMNATUK = µMNATDK = µMNATG = µMNATCH
H0: µMHQUK = µMHQDK = µMHQG = µMHQCH
Figure III.13 shows the possible outcomes. In the table a “#” indicates that we
found significant differences between the countries for the respective organisational type. The “=” sign indicates that we found no significant differences.
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MSUB MHQ
=
=
=
=
=
#
#
#
=
#
#
=
#
#
#
=
NAT
=
#
#
#
=
=
=
#
F
11
6
11
50
10
3
4
3
Interpretation
A. European standardisation
B. Multinational standardisation
C. Headquarters standardisation
D. No standardisation
E. Organisational differences
F. Organisational differences
G. Organisational differences
H. Organisational differences
Figure III.13: Results and Interpretation
A: European standardisation: NATs, MSUBs, MHQs are equal across
countries
If all types of organisations show an equal pattern across all countries, then this
suggests that, for these policies and practices, a common European HRM approach has evolved. We find this “European standardisation” for 11 out of the
98 variables analysed. As it was to be expected, European standardisation is
most common for strategy and policy. Almost a quarter of all questions in this
field were answered without significant differences across countries – irrespective of the organisational type.
Also in line with the theoretical expectations, we find the least degree of European standardisation in the area of compensation and benefits. Only one out of
the 38 compensation and benefits questions showed this outcome.
Altogether, our finding clearly shows that Europe is a long way from having a
standardised approach across organisations and countries. However, this is what
we would expect, given the findings of previous research. More interesting are
the next two constellations. Do we find any evidence that multinationals choose
similar approaches – either across organisations in different countries or within
the multinational organisation?
B: Multinational standardisation: NATs differ but MHQs and MSUBs are
equal across countries
The finding that nationals differ but MSUBs and MHQs are equal across countries suggests that standardisation is possible and that the observed differences
in the practices of the national organisations may be due to historical reasons.
Thus, although previous research found a continent of diversity, finding that the
subsidiaries of multinational organisations choose a similar approach suggests
that a European HRM approach is feasible.
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Contrary to a comparison of the MSUB sample only, the homogeneity213 of
MHQs allows us to draw a conclusion regarding the type of standardisation.
Homogeneity of headquarters policies across countries is not compatible with
the ethnocentric headquarters standardisation if national approaches differ.
Thus, this finding allows the conclusion that multinationals adopt multinational
standardisation.
Indeed, we find evidence of multinational standardisation: 6 out of 98 variables
show significant variation between the national organisations, but similar approaches across countries for multinational headquarters and subsidiaries alike.
This is particularly relevant for recruitment and selection where 17% of the
variables show this pattern.
Thus, although previous research found a continent of diversity, findings that
the subsidiaries and headquarters of multinational organisations choose a similar
approach suggest that a European HRM is feasible.
Nevertheless, some remarks are due. If we find that the MSUBs show equal distribution for a variable, then this implies only that the penetration of a policy is
similar among MSUBs in all countries. The same applies for MHQs. For example, if in all countries only ten percent of the subsidiaries of multinational organisations use a certain policy, then this suggests homogeneity in the distributions but does not necessarily imply that firms have standardised their policies
and practices. What does this mean for our analysis?
We believe that the strengths of the results stem from the fact that the questionnaire is very detailed. Thus, if we find a common pattern, for instance about
whether an assessment centre or a personal interview is used for recruitment and
selection, this goes a long way in suggesting that policies and practices are standardised. However, when interpreting variables that cover broader questions,
like the existence of an R&S strategy, we have to be more cautious. If a common large percentage of firms answer with yes, then this does not yet suggest
standardisation.
C: Headquarters standardisation: MSUBs equal, but MHQs and NATs are
different across countries
A further type of standardisation that could be hidden in the finding of a “continent of diversity” is headquarters standardisation. If the policies of nationals differ across countries and the policies of headquarters of multinationals do so too,
this evidence is consistent with headquarters standardisation. This conclusion is
confirmed if the subsidiaries of multinationals do not differ (provided that the
213
We use the term “homogeneity” as a shorthand for the empirical finding that there are no significant differences across countries. Similarly we use “heterogeneity” when we find significant differences.
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distribution of the parent organisations is similar in each country). From a per
country perspective, we would expect that the headquarters of multinationals
and nationals do not differ from each other, whereas the subsidiaries differ from
the headquarters and the subsidiaries differ from the nationals.
We find headquarters standardisation for eleven out of 98 variables – and it is
interesting to see where. While only one percent of the recruitment and selection
variables show this characteristic, we find it for more than ten percent of the
training and development and over 15 percent of the compensation and benefits
variables. This finding is interesting, since we know that national legislation is
particularly relevant for C&B. It shows that multinationals are eager to
standardise C&B where possible. This is in line with our theoretical discussion
of the difficulties that arise within multinational organisations when C&B
policies vary significantly across the various locations of the organisation (see
Section 2.5.2).
D: No standardisation: NATs, MHQs and MSUBs differ across countries
If both the subsidiaries of multinational firms and the national firms show significant differences in their HR policies and practices across countries, then this
not only confirms the general results in the literature (“continent of diversity”)
but also suggests that there are obstacles to standardisation, which hinder multinational organisations from standardising. Or, to put it differently, even multinationals seem to perceive benefits to adopting the country mode that outweigh the
benefits of standardisation.
We find “no standardisation” for about half of the 98 variables. While this confirms to some extent the “continent of diversity” finding, our analysis provides a
much more subtle picture. However, this result is to some extent driven by the
high level of diversity in compensation and benefits, where over 70% of the
variables show no standardisation. Taking C&B out we find that the nostandardisation result is true for less than 40% of the variables.
However, a qualification is warranted. We do not measure standardisation directly, since the samples do not contain data on the policies and practices per
multinational firm across Europe. Rather, in each country there is a different set
of organisations. Thus, what we really measure is the homogeneity (heterogeneity) among multinational organisations.
So, how can we be so firm about the implication that if both nationals and subsidiaries of multinationals differ in their country policy, that this suggests a lack
of standardisation? Consider European and multinational standardisation first.
Clearly, these two types of standardisation are not compatible with the finding
that the subsidiaries of multinationals differ across countries. Now consider
headquarters standardisation. Then subsidiaries of, say, British multinationals
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may well have chosen different approaches than subsidiaries of Swiss multinationals. Still, we argue the result that the subsidiaries in the country samples differ significantly, which suggests that they have adopted the host country’s policies.
The reason for this, is as follows. Assume that the distribution of the country of
origin of the subsidiaries parent organisation is similar across all countries. We
would then expect a similar average use of a particular HR policy in each country. There may be minor differences, though. Say we compare the subsidiaries
of foreign multinationals in the UK with subsidiaries of foreign multinationals
in Switzerland. Then, the mix of mother country origins differs slightly since the
UK MSUBs do not contain UK firms but, among others, subsidiaries of Swiss
firms and, similarly, the Swiss MSUBs do not contain Swiss firms but subsidiaries of UK firms. The data show that the effect of these differences is minor. The
distribution of mother countries origins in the different MSUB samples is similar.
Note that the separation of the subsidiaries from the headquarters of multinationals is crucial for generating the conclusion suggested above. Had we included the headquarters and then found differences across countries, this difference could have been compatible with headquarters standardisation. By looking
at the subsidiaries only, we can conclude more firmly that differences between
countries reflect that each multinational adopts host country-specific policies
and practices in each subsidiary.
In order to confirm the result that a multinational firm adopts the host country
policy if we find that MSUBs and NATs differ across countries, we pursue three
more analyses in the more detailed discussion of the variables that follows in the
next section.
First, we complement our findings with results from the comparison of organisational types within a country. Suppose that we find that the policies and practices of national firms in one country are similar to those of a foreign subsidiary
in that country. Then this would confirm the conjecture that there are major obstacles to standardisation. If we do not find a similarity between nationals and
subsidiaries of multinationals, then this suggests a more cautious assessment of
the differences. Note, however, that such a finding is not sufficient to reject the
possibility of major obstacles to standardisation, as the differences between nationals and multinationals may be due to organisational differences and, therefore, do not indicate a degree of freedom for the multinationals.
As a second measure, we analyse the respective variables in a more detailed
way in order to make use of the findings of the theoretical analysis. As it turns
out, this kind of more additional analysis eases the interpretation of the data.
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Third, in Section 3 we will look for supporting or contradicting evidence by
supplementing the quantitative analysis with a qualitative empirical analysis.
The latter does not suffer from the data restrictions that are relevant here, since
we have interviewed multinational organisations and could address the questions of standardisation and centralisation directly.
We presented and discussed the high-level evidence that suggests standardisation or no standardisation. We now move on to results that suggest that internal
organisational factors play a role too.
E to H: Organisational factors
E: MHQs differ, but NATs and MSUBs are equal across countries
If headquarters of multinationals choose different policies or practices across a
country but nationals and subsidiaries do not, it is likely that this is due to organisational differences. This is not a rare result; we find it for ten out of 98
variables.
The following interpretations may explain the finding. If a certain policy or
practice is, in general, not relevant for national organisations, the common answer of national organisations or subsidiaries across all countries is that they
have not adopted this policy. Multinationals on the other hand may or may not
use this instrument and can, therefore, show different penetration patterns across
the countries. A related reason can follow from the fact that the national organisations and subsidiaries in the research sample tend to be much smaller organisations (see Section 2.2.2). This could also imply that some instruments are irrelevant for smaller firms but optional for large multinationals. Finally, it may
also reflect the fact that, in the headquarters, the answers reflect organisationwide policies and practices, which level out.
In the next section, we will discuss all variables in more detail. However, before
we move on, we will discuss some other, although very rare, findings, which
may also be primarily due to organisational differences.
F: MSUBs differ but NATs and MHQs are equal and across countries
Equality among national organisations and headquarters in various countries but
inequality among the subsidiaries of multinationals is certainly not a result that
we expect to play an important role. Indeed, we find this for only three out of
the 98 variables. If a certain policy or practice is, in general, not relevant for national organisations, the common answer of national organisations across all
countries is that they have not adopted this policy. Multinationals may or may
not use this instrument and can, therefore, show different penetration patterns
across the countries. Again organisational differences can explain the finding.
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G: NATs are equal, MSUBs and MHQs differ across countries
Equality among national organisations in various countries but inequality among
the headquarters and subsidiaries of multinationals suggests that there are organisational differences between multinational and national organisations. We find
this for four out of 98 variables.
This also points to organisational factors, if a certain policy or practice is, in
general, not relevant for national organisations, then there is no variation across
national organisations, while multinationals may well show different penetration
patterns across the countries.
H: MSUBs and NATs differ, but MHQs are equal and across countries
For three out of 98 variables, we find that headquarters of multinationals choose
the same policy or practice across a country, but nationals and subsidiaries do
not. Again, this is most likely due to organisational differences. It may also reflect the fact that in the headquarters the answers reflect organisation-wide policies and practices, which level out.
In the next section, we will discuss these findings by considering the concrete
variables for which they were obtained. This helps to interpret the result.
2.5
HR-Specific Results
In this section we present and discuss the empirical findings by the field of
HRM. First, we analyse the results with respect to the existence and the development of corporate and HR strategies and policies. Then, we discuss the results
for each practice area, recruitment and selection (R&S), training and development (T&D), and compensation and benefits (C&B). A summary of the results
is provided in table format in Appendix IV.
2.5.1 Strategy and Policy
Regarding the use of corporate and HR strategies by multinational organisations we find a clear and consistent result: The share of multinationals (MHQ
and MSUB) that have developed strategies and policies does not differ significantly across countries. Almost all multinational organisations in the sample
have a corporate strategy and some 80% have an HR strategy.
Indeed, having a corporate strategy is common among all organisations and
does not depend on the headquarters’ country of origin or the type of organisation. This is not true for the existence of an HR strategy. Here the average share
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of nationals that have an HR strategy is lower (73%) than that of the multinationals and this share varies significantly across the four countries. Making use
of our evaluation framework developed above, we find that this indicates a multinational approach for multinationals.
Regarding the existence of HR policies214, we also find that most organisations
have HR policies and, that there are little differences across organisational types
and across countries: Around 90% of all organisations have a policy for training
and development, we obtain similar figures for compensation and benefits.
There is no significant variation across the four countries per organisation or
across the three types of organisations.
The only exception is recruitment and selection. Whether organisations have an
HR policy for R&S varies significantly across the four countries, ranging from
75% in Germany to 93% in the UK. Furthermore, all national and MHQ companies differ significantly across the four countries, while the MSUB sample
shows no significant differences across the countries. Within our evaluation
scheme this result suggests that multinationals follow a headquarters approach
in their use of an HR policy for R&S.
Having recorded this noteworthy exception, we do find in the general picture,
however, that the use of strategies and policies is common among organisations.
The next results show that the way they are developed is more diverse.
About half of the companies involve the HR department in the development of
the corporate strategy from the outset. Only some 13% of firms do not consult
the HR department at all. The remainder consults the HR department (27%) or
involve it for implementation (10%). The degree of involvement varies significantly across countries and for each organisational type. Since the types do not
differ significantly, this suggests that multinational firms adapt to the country’s
practice, which differs.
One important aspect is where HR policies are determined. On average it
turns out that around half of the organisations develop the HR policies for each
of the three areas centrally. Comparing the degree of centralisation across the
different policy areas, we find that a higher share of organisations determines
C&B policies centrally (63%) than T&D (49%) or R&S (46%). We also obtain
this ranking if we look at multinationals only. From a theoretical point of view,
this result is unexpected, since for multinationals we had expected that C&B in
particular requires local input due to the diversity and importance of tax regimes
and industrial relations across countries in Europe.
214
The variable was categorised into those companies having HR policies, including written or unwritten and
in those companies without HR policies. For more information on the categorisation of the single variables analysed see Appendix III.
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Making use of the evaluation scheme, we find a plausible result. Headquarters
and nationals tend to have different attitudes towards centralisation across countries. The share of MSUBs that centralise is similar across countries, showing no
significant difference for each policy area. Using our terminology, this suggests
headquarters standardisation, i.e. if policies are determined locally in one subsidiary of a multinational, then this tends to be true for all subsidiaries and vice
versa. However, whether headquarters choose to determine policies centrally, is
an issue that depends on the country of origin.
Comparing the types of organisations, we have a surprising ranking for each
area: MSUBs have the highest and the NATs have the lowest degree of centralisation in the development of the policies. Since the nationals operate in a less
diverse environment, we expected a higher degree of centralisation than for
multinational organisations.
While unexpected, this result may be explained by the fact that in multinational
organisations HR departments have a greater say in determining the policies.
First, a higher share of multinational companies has an HR director. In particular the MSUBs, which are larger organisations on average, contain a significantly larger percentage of firms with HR directors (60%), than the national
firms (45%). Second, in multinational organisations the HR departments tend to
have more responsibility for major policy decisions, as the next results show.
We discuss each aspect in turn.
According to HRM literature, the existence of an HR director on board is an
important difference between Human Resource Management and traditional
Personnel Management. As an HR director on board is often described as a
common practice of US-American companies, the question arises, where those
MSUB companies, having an HR director on board, come from. The results
from the survey data shows that the majority of all companies from the MSUB
sample having an HR director on board are non-European organisations, mainly
from the United States of America. This explains, for example, the significant
difference in the UK sample, as the amount of US American MSUB companies,
is particularly high within this sample. But in addition to the country of origin,
other company-specific factors like the overall, world-wide size of MSUB
companies, as well as the international nature of these companies might be important factors on the decision as to whether a multinational organisation has an
HR director on their board or not. Comparing, for each type of organisation, the
proportion of companies having an HR director on board, we find no significant
differences. This suggests that, within Europe, the likelihood that an organisation has an HR director does not depend on the country.
On average in about half of the organisations the primary responsibility for
major policy decisions on the three practice areas lies with the HR department
and not with line management. However, the allocation of responsibility between HR and line management varies significantly across countries for all ar-
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eas and all types of organisations. This is an interesting result, as it shows that
the role of the HR department is determined by the external environment of the
organisation. Given that there are neither political-legal, nor obvious technological or economic factors that would suggest a particular allocation of responsibility to HR or line management, we conclude that the role of the HR department is determined by socio-cultural factors.
A similar result appears for the use of external providers. While, as expected,
multinational organisations tend to make more use of external providers than national organisations on average, there is noteworthy diversity across the countries for all types of organisations.
Let us investigate the organisational differences first. Take training and development: while 80% of MSUB and 79% of MHQ companies use an external provider for training and development, only 68% of the national companies do so.
The number of multinational organisations using external providers, is across all
three areas of HR policies significantly higher than those of national companies.
This might be explained by the necessity, particularly for the MSUB sample, to
adapt to local circumstances and hence, to use local HR expertise. In particular,
by using e.g. local trainer, companies avoid the problem of language, different
culture, and knowledge or education system. By using e.g. recruitment agencies,
they might adapt to local practices like adverts in local newspaper or application
forms. Compensation and benefits specialists provide the necessary local expertise in terms of tax systems, pension schemes etc.
Comparing the use of external providers across the practice areas, we find that
external providers are involved by a large share of firms for training and development (76%) and recruitment and selection (64%). Only a quarter of all firms
uses external providers for compensation and benefits. For each practice area,
the differences between the organisational types are significant with MSUBs
making the most, and NATs making the least, use of external providers. This is
a plausible result, since outsourcing is one way multinational firms can adapt to
the country environment and since multinationals are likely to face more complex problems than nationals.
Probably more interesting is the finding that the use of external providers by
multinationals differs significantly across countries for all three areas (with the
exception of MSUBs use of external providers for R&S). Thus, similar to the
role of the HR department with respect to primary responsibility for major policy decisions, the degree of outsourcing seems to be determined by sociocultural factors.
A similar diversity emerges with regard to the background of the most senior
HR-manager. While some 70% of multinationals recruit their most senior HRmanagers from the personnel department or external personnel specialists, this
share is lower for national firms (62%). However, the background of the most
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senior HR-manager varies significantly across countries for all types of organisations.
The preference of multinational organisations towards HR specialists might result from the complexity of international HRM, compared to national HRM discussed in the theoretical part. This means that, due to the complexity of HRM at
international level, the necessity of specialist HR expertise might become more
important and particularly HR specialists from outside the organisation might
also bring international HR experience in addition to national-oriented, company-specific knowledge.
Summary (of Quantitative Results for Strategy)
Overall, the analysis reveals a clear message. There are almost no differences
regarding the existence of a corporate strategy, HR-strategy, and HR-policies
(with the exception of R&S policy) across countries. Moreover, the use of
strategies and policies is widespread for all types of organisations; as a fairly
general rule at least 80% have a strategy or policy irrespective of the country of
origin, the organisational type or the policy area covered. Although less common, the existence of an HR-director position does, within Europe, not depend
on the country.
However, the way strategies and policies are implemented and the positioning of
the HR-department within that process depends on the country where the organisational unit operates. This is true for the background of the most senior HRmanager, the use of external providers and the responsibility for major policy
decisions.
Since, for each of these areas, we tend to find the diversity across countries for
all types of organisations, it seems very unlikely that the differences are due to
the internal context of an organisation. Rather the differences are likely to be determined by the external context. However, since we can exclude technological,
economic, or political-legal reasons for internal decisions on the style of HRimplementation, we conclude that the style of implementation is still very much
determined by local customs. Thus, although we find significant differences
across the countries, the differences uncovered could, in principle, be overcome.
Whether firms should choose a common approach, is a question we cannot answer, since it depends on a number of other factors, some of which we will address in Chapter IV.
However, we take our finding as an interesting question for future research. If it
makes sense, say, to use external providers to recruit personnel specialists or to
allocate responsibility to the HR department in one country, then there is no obvious reason why this should not be optimal in another. Our research suggests
that the differences seem to be determined by custom, not by external forces that
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prohibit standardisation. If future research supports these findings, then there
seems to be scope for implementing European best practices.
Another interesting finding is that the share of nationals who have policies and
strategies is consistently lower than the proportion of multinationals. This is true
for HR policies for R&S, T&D, C&B as well as for corporate and HRstrategies. Also a larger proportion of multinationals
• has an HR director on board,
• determines policies centrally,
• recruits their most senior HR manager from personnel specialists, and
• uses external providers for R&S, T&D and C&B.
We take this as an indication that HR-departments play a more important role in
multinational than in national organisations.
Some of the findings on strategy and policy are of relevance for the analysis of
the HR practices, which we discuss in the ensuing sections. While for all areas,
most organisations have general policies in place and the way these are developed does not differ much across the areas, the use of external providers varies.
While the use of external providers is common for recruitment and selection as
well as training and development, compensation and benefits is, for most organisations, an internal matter. This is particularly true for national organisations, where less than 20% of firms make use of outsourcing.
2.5.2 HR Practices
After the HR strategies and policies were analysed in more detail, this section
examines HR practices of the following three core HR subfunctions: recruitment
and selection, training and development, as well as compensation and benefits.
Selected questions from the Cranet-E questionnaire are analysed, providing
more detailed information on the use of specific HR practices within the three
subfunctions.
Recruitment and Selection
As argued in the theoretical analysis, recruitment and selection is clearly influenced by the external context of an organisation, which is most obvious with respect to the external recruitment of employees. However, from a theoretical perspective recruitment and selection also offers scope for common practices, in
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particular regarding the selection of employees or the relative importance of internal recruitment.
Our empirical analysis shows a striking result. Not only the way multinationals
fill external positions varies across countries (as expected), but also selection
techniques. We first focus on recruitment and then move on to discuss selection.
The empirical results regarding recruitment show a number of interesting and
plausible patterns:
• Recruitment consultants are the most important way to fill senior management positions. 72% of all firms use recruitment consultants. However,
about half of all firms recruit senior management internally. Newspaper advertisements (34%) and word of mouth (12%) play a minor role.
• Internal recruitment (81%) and newspaper advertisements (71%) are the
most important ways to fill middle management positions. Here, recruitment
consultants are much less important (42%). A similar picture emerges for
junior management positions, with the role of recruitment consultants being
even less pronounced (18%).
• Multinational organisations tend to use a greater variety of recruitment
sources and rely relatively less on newspaper advertisements than national
organisations. In most cases a direct comparison of the organisational types
shows significant differences.
A less clear picture emerges with regard to the variation of practices across
countries. We find that recruitment practices vary from country to country and
in most cases the variation is significant. However, there are also a nonnegligible number of cases where there are no significant differences.
We suspect that this somewhat mudded result is due to the great number of influences. On the one hand, organisational factors clearly play a role. A much
higher share of multinational organisations (almost 70%) report that they experience difficulties recruiting IT staff, whereas fewer nationals (52%) report
difficulties here. On the other hand, local economic factors play a role (the
number of multinational firms that report difficulties in recruiting management
and professionals varies significantly across countries). Moreover, it is well
known that local practices follow different traditions and that the acceptance of
certain techniques varies across countries.
An analysis of the selection techniques shows a clearer, but at first glance, potentially surprising result: the use of selection techniques varies significantly
across countries for all organisational types. There are only two exceptions.
First, and obviously, one-to-one interviews are used by all organisations at one
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stage and the common approach found here is not surprising. Second, MSUBs’
use of interview panels does not differ significantly across countries.
Looking at the patterns more generally, we find that the use of references (93%),
application forms (77%) and interview panels (75%) is now widely spread
across organisations. Less commonly used techniques include assessment centres, which are known as a selection technique for managerial position and used
by 42% of firms. The use of psychometric tests is also widespread with 56%,
while the more controversial method of graphology is only used by 10% of
firms.
With the exception of the interview panels reported above, we find that the use
of each of these techniques varies significantly across countries. As we have
these findings for multinationals and for nationals, this suggests significant obstacles to standardisation. Since the organisational types do not differ, these obstacles are likely to be due to the external context of the organisations. Again
there are neither obvious political-legal, nor technological or economic factors
that are good reasons for explaining these findings. Thus, we conclude that
socio-cultural differences are the main drivers of this diversity. In the following,
we present the results in more detail.
The use of application forms varies significantly across the four European
countries, being less used in Germany (63%), but in the majority of all companies in the UK (92%). Furthermore, all three types of organisations differ significantly across the countries. Although the three types of organisations do not
differ significantly from each other, they show the following trend:
MSUB>MHQ>NAT.
The use of one-to-one interviews is widespread across the research sample
(96%) and does not show mentionable variations, either across the countries, or
across the types of organisation. This result might be explained by the general
value of selection interviews, which are used across all staff levels. Furthermore, interviews are also a common component in sets of selection procedures
as well as specially designed selection processes, like the assessment centre.
Furthermore, interview panels are also used by 75% of organisations in the research sample, but with significant variations across the countries. In Denmark
69% of the companies use interview panels as a selection method, while 83% of
the Swiss sample do so. While the types of organisation do not differ significantly from each other, national organisations show highly significant variations
across the countries. This variation is less extreme but still significant for the
MHQ sample and almost non-existent in the MSUB sample.
While national organisations differ significantly across the four European countries, it seems that the use of interview panels is strongly influenced by countryspecific factors. Furthermore, the fact that these variations are less for the MHQ
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sample and not even present for the MSUB sample shows that multinational organisation do not necessarily need to adopt the practices of the (host)country in
their use of interview panels. Nevertheless, the MHQ sample reflects both company and country-specific factors, while the MSUB sample shows a rather company-specific, equal approach across the four countries and hence favour interview panels more.
Assessment centres (AC) are used in 42% of the research sample. There from,
the minority of organisations (20%) in Denmark uses assessment centres, while
they are more common in Switzerland (64%). The country differences are significant and each individual type of organisation shows significant variations
across the four countries. Furthermore, the three types of organisation differ
significantly from each other, by showing the following trend:
MHQ>MSUB>NAT (47%, 41%, 36%). This leads to the interpretation that the
use of AC is more common for multinational organisations and, in particular, at
their company’s HQ. This effect might be explained by the size of MHQ companies and the centrality of recruitment activities at the company’s headquarters
particularly for (senior) managers and expatriates.
The use of psychometric tests for employee selection varies significantly
across the four countries. While in Germany only 16% of organisations use psychometric testing, 60.2% in Switzerland, 77% in the UK and 79% in Denmark
do so. Furthermore, each individual type of organisation shows significant
variations across the countries. In addition, the organisational types also vary
significantly from each other. The use of psychometric tests is more common in
multinational organisation (67% MSUB and 58% MHQ) than in national companies (47%).
Graphology, as a selection technique, is only used in 10% of all companies.
Thereby, significant differences can be observed between the UK (2%), Denmark (3%) and Germany (6%) on the one hand and Switzerland (71%) on the
other. Also, results for each organisational type does vary extremely across
countries. The three types of organisations also differ significantly from each
other, whereby graphology is less used among MSUB companies than among
domestic organisations - MHQ and national companies.
References are a common selection method, used in 93% of all cases. Both the
countries and the three types of organisations across the four countries show
significant variations, while the types of organisation do not vary much from
each other.
On a more detailed level, there seem to be three potential sources for the persistence of local differences. First, local HR-personnel may be used for certain
practices, and this preserves the custom. A good example for this is the extensive use of graphological analyses in Switzerland. Second, and more important
as an obstacle to standardisation, the acceptance of selection techniques among
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applicants may play a non-negligible role in the recruitment procedure. For example, filling in application forms in Germany is seen, for candidates for most
staff levels, as an extra burden. In the UK, however, such a procedure is standard, at least for junior staff. A third obstacle for standardisation is the overall
common practice in the country. While it is standard for employers to write letters of reference for staff in Germany, asking a UK manager to provide written
evidence of the performance of an employee can cause surprises.
Summary (of Recruitment and Selection)
Altogether, the analysis of recruitment and selection practices underlines the
“continent of diversity” findings of previous studies. Even in those areas where
one would suspect scope for standardisation, it turns out that the differences between countries are significant. Since these differences tend to exist for all organisational types, we conclude that the obstacles to standardisation are significant. This is true for 9 out of the 24 R&S variables, whereas a common European approach (“European standardisation”) is chosen for only three variables.
Nevertheless, a more detailed analysis reveals that there are some areas where it
is likely that the lack of standardisation may be due to adherence of customs and
traditions. This is also reflected in the finding of multinational standardisation
(in four cases) and headquarters standardisation (in one case). However, before
turning this into a normative conclusion that the organisations might standardise
more, we are required to speculate as we reach the methodological limits of the
quantitative analysis. Clearly, we expect the case studies to provide further evidence on these conjectures.
Another interesting finding is that multinational organisations tend to use a
broader range of techniques for recruitment and selection. For fifteen out of
nineteen techniques, the share of multinationals that use the technique is higher
than the proportion of nationals that use them.
Training and Development
The Cranet-E Survey questionnaire covers the way organisations analyse training needs and evaluate training as well as development techniques employed.
Before beginning the discussion of the practices, let us briefly recall the results
on T&D policy.
The majority of organisations in the research sample have a policy for training
and development (89%). Of these, around half (51%) determine their training
and development policies decentrally, at their subsidiaries or sites. The main responsibility for training and development lies in 53% of all cases with the HR
department, with significant variations across the four countries.
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The analysis of training needs is common among all organisations. On average
76% pursue such an analysis. However, there are significant differences across
the organisations. A higher share of multinationals (76% MSUB, 81% MHQ)
than nationals (69%) analyses training needs.
Moreover, each organisational type shows significant variation across countries
in answering whether training needs are analysed. Thus, the necessity to analyse
training needs seems to be judged differently in each country. However, almost
all firms that have decided to analyse training needs do this by taking into account line management (100%) and employee requests (99%). Due to the high
amount of companies using these methods, it is obvious that neither the countries nor the three types of organisation differ significantly from each other.
Also for the more pro-active methods performance appraisal (93%), training
audits (91%) and the analysis of projected business plans (91%), the amount
of companies using these techniques is quite high among the research sample.
With the exception of MHQ, the use of projected business plans does not differ
significantly across countries. However, the use of training audits and performance appraisals seems much more diverse across countries. This leaves training
audits and performance appraisals as the two techniques that seem to be influenced the most by local customs. Indeed the national sample shows significant
variation across countries for both methods and the same is true for the two multinational samples with the exception of MHQ showing no significant variation
across countries, regarding the use of training audits.
This is an interesting result as it shows that the use of pro-active techniques,
which typically involve and require the participation of employees, still varies
across countries. This finding is a rather general pattern across organisational
types and we do not see any obvious political-legal, technological or economic
reasons that would prevent standardisation. Thus, we have again a finding that
suggests that diversity is due to socio-cultural factors, but seems to be driven by
custom rather than the necessity to adapt to local circumstances. This underpins
some similar results obtained in the analysis of recruitment and selection practices.
A subtler picture emerges regarding the evaluation of the effectiveness of the
training pursued. While the results also show significant variation across countries regarding the question whether the effectiveness of training is monitored,
the techniques to do this seem to be standardised using a headquarters approach.
In fact, the monitoring of the effectiveness of training is not common practice.
On average only 63% of all organisations pursue such an analysis with the percentage being higher for multinational organisations than for nationals. Interestingly, the share of firms that monitor effectiveness varies significantly across
countries for all types of organisations. This suggests that the importance of
monitoring is driven by socio-cultural differences. Indeed, the country differ-
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ences are extreme. While 83% of the companies in the UK monitor the effectiveness of their training, only 35% in Denmark do so.
If training effectiveness is monitored, however, the results consistently indicate
that firms apply evaluation techniques developed centrally according to the
country preferences of the headquarters and being then applied across all subsidiaries (headquarters standardisation). This interpretation is due to the fact
that, while the techniques used by nationals and MHQ vary significantly across
countries, MSUBs show a similar distribution across countries. This pattern is
true in the use of all four techniques: checking employees’ reactions, measuring
changes in job performance, in organisational performance and in learning.
On a more descriptive level, we observe that of those companies that evaluate
training, 98% pursue the evaluation immediately after the training and 89% pursue (another) evaluation some months later.
The most often used technique is to ask participants in the training for their reaction (88% of all companies). Also a high share of firms monitor changes in
job performance (74%) and organisational performance (63%). Only a third of
the firms measure the effect on learning, e.g. assessed by tests.
There is no common development technique that is used intensively by all organisations. The technique used by the highest share of companies is a succession plan (57%), followed by high-flyer schemes (43%), formal career plans
(30%), job rotation (29%), international experience schemes (27%) and internal
assessment centres (25%).
With a few exceptions, the use of all techniques varies significantly across countries, irrespective of the type of organisation we study. Thus, we find again a result that shows significant diversity across countries, even for multinational organisations, although this practice seems independent from external forces that
limit the degree of freedom of the organisations.
Summary (of Training and Development)
Overall, the results from the analysis of training and development underpin the
broad finding that resulted from the analysis of recruitment and selection: even
in those areas where standardisation seems possible, there is an adherence to local traditions and customs. However, we did find some standardisation. In particular, the techniques used to evaluate the success of training show a clear pattern of headquarters standardisation - a result that we had expected to see more
often. Some techniques that are used to identify training needs are used by all
organisations and in all countries to a similar extent. However, with the exception of one more variable, this is the only area where we find European standardisation.
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Another interesting finding is that the proportion of multinational firms that apply a particular T&D practice is consistently higher than the share of nationals.
Only in two out of nineteen practices do we find the reverse result. Again this is
a finding that is consistent with the result obtained in the analysis of R&S.
Compensation and Benefits
In this section, we analyse how basic pay is determined and the use of incentive
schemes. Before analysing the practices, we briefly recall the results for C&B
policies. In general, 90% of the organisations in the research sample have a policy for compensation and benefits, mainly being determined at the company’s
national or international headquarters (63%). In 52% the responsibility for compensation and benefits policies lies with the HR department and in 48% with
line management, with significant variations across the countries and types of
organisation.
For all levels of pay determination, national, regional, company, establishment
and individual level, the four European countries show significant variations for
all four types of staff level: management, professional, clerical and manual employees. Furthermore, with the exception of a few cases, all three types of organisations differ significantly across the four countries as well.
For example, the share of companies that determine their basic pay for managers
at the individual level varies from 45% of companies in the UK to 89% companies in Germany. Hereby, all three types of organisations show significant variations across the countries as well, and hence, multinational organisations are
more or less in line with country-specific practices.
A similar picture emerges with regard to incentive schemes. For all four different incentive schemes: share options, profit-sharing, group bonus and merit pay,
again the four European countries vary significantly for all four types of staff
levels: management, professional, clerical and manual employees.
The amount of companies providing their employees with share options decreases from management level (35%) to manual level (17%). Hereby, except
for manual employees the MHQ and the national sample differ significantly
across the countries, while the MSUB sample shows a rather equal distribution.
This leads to the interpretation that at lower staff levels the MSUB sample is
more in line with the practices of the host country, while it seems rather independent from country-specific variations for higher staff groups. Furthermore,
for all four staff groups, the three types of organisation vary significantly from
each other, whereby the share of companies, which offer share options, is in all
four cases higher among the MHQ sample than for MSUB or national compa-
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nies. This effect might be explained with the severe country variations of the
MHQ sample, ranging from 25.4% of German companies to 77.3% UK organisations. Other factors, like company size or HQ, may also play a role.
The amount of organisations using profit sharing decreases with the staff level,
from 54% for management to 23% for manual staff. Profit sharing varies significantly across the four European countries and both multinational samples
vary significantly across the countries for all staff levels, while the national
sample only shows significant country variations for the management and the
clerical employee group.
In all four cases, although not always significant, the following trend can be regarded: the share of domestic organisation (MHQ & NAT) offering profit sharing is higher than the share of MSUBs. This result shows that a country-specific
impact can be found, leading to the interpretation that the use of profit sharing is
more common for “domestic” organisations rather than for “foreign”-country
organisations. This result might be explained with the high amount of expatriates in MSUB organisations, who might have, due to tax reasons for example,
other compensation packages than the host-country’s profit sharing.
The use of group bonus shows significant variations across the four countries
for the three staff groups: management, professional and clerical. For manual
employees, the distribution is rather equal across the countries. Furthermore, all
three types of organisations also show significant variations across the countries
for the above-mentioned three staff groups.
Thus, the use of group bonus schemes shows country-specific differences for
the higher staff level, whereby the use for manual employees seems to be rather
common in the four countries and in all three types of companies. Furthermore,
for the first three staff groups the following trend can be regarded:
MSUB>MHQ>NAT, being significantly different. This shows that next to
country-specific differences the use of group bonuses depends on companyspecific factors (e.g. size).
Performance-related pay is the most commonly used incentive scheme for all
four staff groups. But, again, the four countries show, for all staff levels, significant variations. These country-specific differences are also reflected by significant variations of all three types of organisations across the countries. This
shows that the use of performance-related pay by multinationals is influenced by
country-specific factors.
Summary (of Compensation and Benefits)
In the area of compensation and benefits, we did expect significant variations
across countries as this area seems to be influenced significantly by the politi-
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cal-legal and economic environment in each country. Indeed, we do find significant variations across countries for all organisational types: over two thirds of
the variables fall into the category “no standardisation”.
Contrary, to R&S and T&D, however, compensation and benefits are influenced
by the local political-legal environment of an organisational unit. This is particularly true for the question at which level basic pay is determined. But it also
applies, albeit to a less significant extent, to the incentive schemes employed.
Here the tax system is a relevant parameter that may favour one incentive
scheme relative to another.
Thus, we believe that the scope for standardisation is probably less pronounced
for compensation and benefits, unless EU legislation leads to further harmonisation of the tax systems and the industrial relations regimes employed across
Europe.
However, we do also find relevant evidence of headquarters standardisation. Six
out of 38 C&B variables (i.e. 15%) fall into this category. This is in stark contrast to other forms of standardisation, which we observed very rarely (no multinational standardisation, only one variable shows European standardisation).
This may show that multinational firms undertake all efforts to standardise
within the organisations, whenever this is possible.
2.6
Summary of Quantitative Analysis
The quantitative analysis is useful, since it allows for the evaluation of data for a
large number of firms, which enables us to draw more representative conclusions from the analysis compared to what we can infer from a limited number of
case studies. However, in the context of our study the availability of data did
lead to methodological constraints. While one of the key questions in this study
is the degree of standardisation of multinationals firms, we had no data that
measures the practices of each multinational in a number of host countries. We
overcame this limitation by distinguishing three types of organisations. With
this distinction, we could infer whether certain practices were standardised or
not. Moreover, it allowed us to draw further conclusions regarding the standardisation: Do multinationals follow a headquarters or a multinational approach to standardisation or do we observe a common European approach
shared, by nationals and multinationals?
Broadly speaking, our quantitative empirical analysis confirms the finding of a
“continent of diversity”. However, the methodology chosen allows us to provide
a subtler picture. While national firms do, indeed, differ in 70 out of 98 cases,
the analysis of the multinational organisations shows that for 17 of these 70
variables, multinational organisations choose some form of standardisation. For
11 variables the evidence suggests that multinationals choose a common ap-
119
proach within the organisations (headquarters standardisation) and for six policies and practices, we find that multinationals choose the same approach across
the countries we analysed.
Indeed, for 15 cases, the standard approach in the empirical literature, which
compares all organisations in each country across countries, would have yielded
the continent of diversity result, whereas we find that multinationals do standardise.
This finding is important. Not only does it provide a more differentiated picture
of the diversity finding, it also points to areas where national organisations
could, in principle, adopt an approach that is popular in another country. While
we have been careful not to argue that this implies that national organisations
should do this, the finding that they could do so is, itself, of considerable importance for the normative analysis that follows in Chapter IV.
This does not necessarily imply that multinational organisations choose to standardise where they can. Indeed, the more detailed evaluation of the variables in
the light of our theoretical approach has identified a number of areas where the
external and the internal environment of the multinational organisations should
not restrict efforts to harmonise policies and practices within an organisation.
However, let us discuss the main results of the detailed analysis step by step.
The first interesting finding of our analysis is that the use of strategies and policies is common across all countries and all organisational types. However, while
the existence is common, the way they are implemented (role of the HRdepartment, background of HR-managers, etc.) differs. Moreover, as the analysis of the three practice areas shows, there are significant differences in the actual practices chosen for implementing the policies and strategies.
Another interesting result is that multinationals tend to use a broader range of
HR practices in the areas of training and development and recruitment and selection. Overall, we find that the role of the HR-departments seems to be more
prominent in multinational organisations.
In the preceding theoretical analysis, we developed the conjecture that multinationals should have an incentive to standardise wherever the obstacles to standardisation are low. In particular, in the fields of T&D and R&S we identified a
number of activities and practices that are potential candidates for standardisation.
With a few exceptions, the quantitative analysis suggests that multinationals
standardise to a less extent than they could according to the conjectures developed in the theoretical analysis. This is true for:
• The way HR-policies are implemented locally,
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• a large number of recruitment practices,
• almost all selection techniques,
• whether training needs are analysed,
• most pro-active techniques to analyse training needs,
• whether training is evaluated,
• most development techniques,
• where pay is determined, and
• the types of incentive schemes used.
On the other hand we do find some areas where there is either a common European approach or a headquarters approach:
• Having a corporate strategy, an HR strategy and HR policies are generally
not an issue that depends on local influences (European standardisation).
• If training is evaluated, it is done with a centrally determined set of techniques (headquarters standardisation).
With respect to compensation and benefits, we find the results less surprising.
Here it is well known that the industrial relations systems vary across countries
as do the tax regimes. Both have a direct impact on how pay is determined and
what incentive schemes are used. And indeed, we tend to find significant variations across countries for all types of organisations.
We can offer four explanations for the finding of very limited standardisation of
multinationals across countries.
First, we find the diversity result for practices. In fact a lower degree of standardisation for practices than for policies is in line with the theory. Still, we believe that for the practices described above, there should be benefits to standardisation. Moreover, there is a danger that common policies either exist only
on paper or are meaningless, if practices are not aligned.
Second, the Cranet-E survey naturally covers only a selection of practices. For
instance, we have no information on whether the training content or application
forms are standardised across countries. Moreover, the questionnaire does not
always distinguish practices by staff groups. Thus, existing standardisation for
higher-level staff groups may not be picked up, if dominated by differing ap-
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proaches for lower level staff groups. Although these are limitations, the CranetE survey provides, we believe, a good sample of practices, in particular bearing
in mind the large number of firms that participated.
Third, there may simply be more and significant obstacles to standardisation,
than conjectured in the theoretical analysis.
Fourth, the data intentionally covered a wide range of organisations, not systematically focusing on firms that have implemented best practices. Thus, the results may reflect a lack of initiative on the side of the headquarters’ HR departments that should strive to develop (jointly with subsidiaries) HR policies and
practices for European operation. If HR departments restrict themselves to defining common policies and delegate practices to local staff, then this may lead
to local staff simply following local customs. While this may not be bad in all
cases, it raises three important concerns:
1.
If practices are adapted to host country policies in all subsidiaries, they
may often not be in line with the policies formulated for the entire organisation.
2.
Differentiation of those practices that could be easily standardised potentially implies foregone economies of scale or scope.
3.
Local practices that have evolved by tradition may differ in their qualities. Thus, standardisation offers the chance to pick the best practice and
spread this across the organisation. This is clearly a missed opportunity,
if HR practices simply follow local customs.
These comments should not be misunderstood as a request for a central dictate
that would most likely lead to an ethnocentric headquarters approach with all
the known, socio-cultural and other problems to follow. Rather, standardisation
has to be pursued carefully, with the participation of local staff, only where it
brings a net-benefit. In Chapter IV we make a number of suggestions to this
end. Having said this, the quantitative empirical results, combined with our
theoretical analysis, strongly suggest that for a number of multinationals there
exists room for improvement by looking for and implementing best practices in
HR.
We expect that in the future standardisation will increase. In particular, we see
the following drivers:
• We expect that as HR departments become more sophisticated,
• the external environment is harmonised,
• firms reach later stages of internationalisation, and
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• the international mobility of employees increases.
Thus, it will be interesting to see whether firms will choose a headquarters or a
multinational approach to standardisation. Capturing the dynamic effects in the
development of European HRM would be an interesting and demanding project
for research that would pursue time series analysis.
In the next section, we make a first step towards identifying the potential scope
for standardisation. We have interviewed ten organisations that claim to implement best practices in HR.
3
Qualitative Empirical Analysis - Case Study Interviews
3.1
Introduction
The case study approach constitutes the core of the qualitative empirical research undertaken in this project. The in-depth case study interviews aim to
generate research results that provide a holistic and realistic picture of the current EHRM approaches taken by selected multinational organisations. Since
Human Resource Management, from a transnational perspective, is a relatively
new field of research, the intention of the case studies is to provide a picture of
reality, which allows us to explore the research field in order to reach a deeper
understanding of the research context. One of the main characteristics of the
case study approach is that the research objective is analysed in its whole complexity and within the specific context of the operation. Yin proposes that „case
studies are the preferred strategy when ‚How‘ or ‚When‘ questions are being
posed, when the investigator has little control over events and when the focus is
on a contemporary phenomenon within some real-life context.“215
In the particular context of the research project presented here, the case study interviews aim at identifying the achievements of, and potential obstacles to, a
successful development, implementation and management of EHRM strategies,
policies and practices. The knowledge gained from the experience of practitioners is systemised and typical problems are analysed. The results reflect typical
EHRM approaches and illustrate successful strategies, problems of implementation as well as solutions developed within practice.
215
Yin (1994, p. 1).
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3.1.1 Interview Guideline
Therefore, as a first step, an interview guideline216 was developed on the basis of
both the theoretical hypotheses developed in Chapter II and a brainstorming exercise with a number of HRM experts.217 These experts are e.g. HR consultants,
researchers or HR managers of multinational organisations, who are familiar
with European Human Resource Management from different Angles. Overall,
the views of 15 experts are considered, supplemented with the attendance at international conferences covering the research topic as well as actual publications. The interview guideline covers the following HRM functions: structure
and strategy, recruitment and selection, training and development, compensation
and benefits as well as staff assessment. During the interview process outlined
below, the guideline was assessed step-by-step and revised, in order to constantly develop the research design and to gain a broader and deeper understanding of the research problem.218
3.1.2 Research Sample
By making use of the guideline, ten semi-structured, face-to-face interviews219
were conducted at the most senior HR levels in multinational organisations. The
selection of the companies was based on the following criteria:
• Multinational organisations, being one of the top 500 international organisations within Europe according to the Financial Times Top 500 Index, and/or
• Multinational organisations with extensive European-wide operations.
• Multinational organisations that claim to implement best practices.
In the selection of case study interviews, factors like country of origin or sector
were not considered as specific selection criteria. Figure III.14 provides an
overview of the companies, which participated in the research project, by country of origin and their main sector of operation.
216
See Appendix VI.
See Appendix V.
218
Becker/Geer (1979); Girtler (1988).
219
See Appendix V.
217
124
Figure III.14: Research Sample by Sector and Country of Origin
The companies were approached with a letter to the HR director, describing the
research project and the intention of the interviews. One week after the letters
were sent to the various organisations, they were followed up with a telephone
call, asking the organisation for their co-operation within the research project.
The interviews were conducted in 1999 and 2000, lasting between 90 and 120
minutes. The results of the interviews were transcribed and categorised under
specific headlines like structure of the European HR function, standardisation
vs. differentiation of HR strategies, policies and practices, as well as according
to a single HR subfunction like recruitment and selection, training and development as well as compensation and benefits.
3.2
Methodology: Case Study Interviews
By making use of the guideline, the HRM practitioners were encouraged to describe their current EHRM approaches and to talk about their experience in the
field of European Human Resource Management. This process was emphasised
by posing open questions, with the goal of building a natural and open communication atmosphere and to leave room for the interviewee to mention what
he/she finds important.220 Furthermore, the face-to-face interviews allowed more
room for actual aspects and for individual experiences of the interviewee. Additionally, the use of semi-structured interviews allowed the interviewer a higher
degree of flexibility e.g. by posing additional questions and to reach deeper scientific results and a better understanding of complex interrelations. These ad-
220
See Osterloh (1982).
125
vantages are of particular interest due to the novelty of the research problem.
Closed questions, providing the interviewee a selection of different answers
were used in order to gain more comparable information for some specific topics and to help the respondent to get ideas.
In addition, where possible, interviews were held with employees in the company, either in the HQ office or in a national HR department. As these interviews were mainly in order to confirm the results of the main case study interview, they were, in the majority of all cases, short telephone interviews. The information gained from the various personal interviews was supplemented by the
study of internal documentation on the research topic.
Overall, the main content of the case study interviews is the EHRM approaches
of the multinational organisations. The analysis of more than one case allows for
a broader picture of different influencing factors as well as a comparison of different procedures and actions taken. The limitation of a small number of companies interviewed allows for a more detailed analysis of the respective cases.
The case study interviews aimed at identifying the achievements of, and potential obstacles to, a successful development, implementation and management of
EHRM strategies, policies and practices. The knowledge gained from the experiences of the practitioners is systemised and typical problems are analysed.
The results reflect typical EHRM approaches and illustrate successful strategies,
problems of implementation, as well as solutions developed within practice.
Figure III.15 provides an overview of the various steps of the qualitative analysis taken.
126
Figure III.15: Steps of the Qualitative Analysis
After the research methodology of the qualitative analysis was introduced and
the research sample of the case study interviews were described, the following
section now discusses the results.
3.3
Results
3.3.1 Structure of the Human Resource Management Functions in Europe
The structure of the HR functions of almost all221 multinational organisations interviewed is primarily organised alongside business rather than country lines. In
general, three distinct structural layers can be differentiated:
Business Line
All organisations are (primarily) organised by business lines. In most cases the
HR function is divided according to business lines too. As a result, HR policies
and practices might vary from business line to business line, due to different
needs of each business area. Therefore, although the overall philosophy/strategy
of the organisation of the way in which they manage their human resources
might be identical, a single business might use different HR approaches. This
means, although HR policies and practices may be consistent within each busi221
In order to avoid the impression of statistical validity of the qualitative research results, the author has
decided to use a broad categorisation of the results of the ten case studies like „almost all“, „the majority
of“, or „only a few.“
127
ness line and might also be consistent across various countries within these
lines, they nevertheless might vary from business line to business line, in order
to serve the needs of the business.
Figure III.16: Business Lines
Functional Line
All organisations have a central HR department or co-ordinating HR manager to
provide assistance to the business units in the different countries/regions where
the organisation operates. They are mainly divided into functional areas, like
compensation and benefits, management development or recruitment, and have
generalists as well as specialists serving the business.
In some organisations, the HR function works on an entirely global basis and
HR-managers have responsibility for every HR activity worldwide. Europe, in
this model, is regarded as one part of the worldwide organisation.
Other organisations have a particular European HR team, headed by a European
HR director and specialists, dedicated to individual European countries or
groups of countries.
Regardless of the geographical differences between global or European, the responsibility of these central HR functions is to develop HRM strategies as well
as to co-ordinate the HR activities across the various countries. In most cases,
the policies and practices of the various functions are integrated with each other.
Figure III.17: European Human Resource Department
128
Country or Region Line
Additionally, most companies operate national HR departments in some countries of operation. This is restricted to countries with substantial business and
staff of at least 15 to 100 employees, depending on the organisation. The idea of
local HR functions is to provide the necessary local HR expertise and to implement HRM policies and practices. Although the local HR functions might be involved in developing strategy and HR policies and practices to a certain extent,
in most cases their role is restricted to the implementation of HRM and the adaptation to the local employment conditions. The organisation has to decide how
far the policies and practice across the various countries are either standardised
or differentiated.
Figure III.18: Country/Region Line
In general, the structure of the HRM activities of multinational organisations in
Europe can be illustrated by the following figure. It shows a rather simplified
organisational structure of the HR functions of multinational organisations.
Figure III.19: Structure of the European Human Resource Management Function
In general, the European/Global HR director has overall responsibility for all
HR business in this respective region. Local HR managers mainly have two reporting lines, one to the European HR department and one to the manager of
their business line. Some also have dotted lines to some HR specialists, providing particular services to their country or region. The relationship between HR
director and business unit director is usually on an equal level. In most cases,
129
the HR departments work in a business partner relationship with the business
lines.
3.3.2 Relationship between Central and Local Human Resource Functions
The core activity of local HR functions generally covers the day-to-day administrative personnel responsibility as well as the implementation of centrally developed HRM policies and practices in line with the overall strategy of the organisation and with local employment conditions. Historically, at an earlier stage of
internationalisation of the various companies, at the time the companies expanded their business into the different countries, the local HR departments had
a wider range of responsibility and greater autonomy. At a later stage of internationalisation, when the organisations were already settled in the various host
countries, the companies tended to prefer a more centralised HRM structure
with HR strategy development at the top (centrally) and HR implementation at
the bottom (country level). In general, the HR activities tend to revolve around a
European or globally shared plan, which is interpreted at local level.
Communication of the various countries with the central HR team is given high
priority by all firms. It is regarded as significant, especially in order to empower
people and to gain their involvement. However, in general, the problem of
communication increases with the number of countries the company operates in,
because „the more countries you have involved, the more angles you have to resolve and the more difficult it becomes“- as one HR-director put it.
In general, due to geographical distances between the various HR departments,
the communication process is not easy to handle. Although direct, face-to-face
communication is the preferred communication technique, it is reduced due to
geographical distances and costs. In general, meetings with the principle local
HR staff are held every two to four months. Local HR staff tends to be involved
in the decision-making process, when appropriate. Next to direct communication, techniques like teleconferences, e-mail or Internet are widely used tools to
communicate and to share information on various HR topics.
3.3.3 Human Resource Strategy
None of the interviewed multinational organisations has a specific HRM strategy for Europe. They either have a global HR strategy, which is also transferred
to their European operations or they are currently in the process of developing a
global HR strategy. The HR strategy covers general aspects like supporting the
business, working as partners with line managers to maximise human capital or
ethical principles. Generally, it is implemented in all countries. There is a shared
view, that the HR strategy should be consistent across the whole organisation,
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by being flexible enough of being capable for individual country or business
needs.
Almost all organisations describe their overall HRM approach in practice as an
ongoing process of continuously developing new policies and practices or redefining those in operation. Most interviewees said that they moved, or intend to
move, away from a differentiated, country-oriented HR approach to a more standardised, integrated HR approach. Their former HR approaches were more reactive, while they now demand a more proactive approach in order to support the
process of ongoing change. The majority of companies interviewed prefer a
high degree of standardisation among their HRM strategy, policies and practices
across the various countries they operate in: here is a clear trend toward more
standardisation.
Companies are very much in favour of standardisation and hence like to standardise their HR policies and practices as much as they can. Proponents of a
high degree of standardisation said:
• „... to the greatest extent possible we develop standard policies and (...) the
only reason for diversion is the local legislative requirement.“
• „...we try to standardise as much as possible (up to 100%) (...) and we use
the same practices unless we are forced for legal reasons to do this or (...) by
strong local conditions...“
• „...we are looking to standardise as much as possible (...) we are less interested in individual countries (...) we have to look at what is good for the
business.“
Differences in the environment at national level are seen as a major obstacle to
standardisation. Some interviewees argue that standard policies will not always
work and in some cases standardisation might cause more problems than it
might resolve. Therefore, they describe their approach as a mix of standardised
and differentiated HR policies, but with the intention of finding common approaches and share best practices where possible. Overall, the majority of companies interviewed shared this point of view.
3.3.4 Degree of Standardisation of HRM Strategy, Policies and Practices
While almost all organisations have standard European-wide or global HR
strategies, the degree of standardisation decreases at the level of HR policies and
again at the level of HR practices. This means, that the highest degree of standardisation is reached/practised at the level of HR strategy and the lowest degree of standardisation at the level of actual HRM practices. The following chart
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demonstrates the various degrees of standardisation vs. differentiation among
the three categories: HR strategy, HR policies and HR practices.
Figure III.20: Degree of Standardisation According to Strategy, Policies and Practices
This outcome reflects the overall development and implementation process of
HRM strategies, policies and practices in the majority of organisations interviewed. In general, the multinational companies develop an overall HRM strategy, at their organisation’s central HR function. In just a few cases are the country HR managers involved in this process. The HRM strategy is then communicated to the local HR staffs, who follow the strategic guidelines that cover general principles of the organisation.
In most cases, specific HRM policies are developed at the central HRM function
of the organisation. At this level, the involvement of the national HR staff in the
development process increases, in order to provide local HR (legislative) expertise like „...there are global policies being developed where everybody is involved to a great extent and gives input...“ or „...we do not sit in a vacuum (...)
involvement is important (...) and people that are affected by the policies have
an input.“ HRM policies cover general guidelines in order to underpin corporate
culture on issues like equal opportunities or the way information is handled.
Finally, HRM practices are the most differentiated, due to their need of adaptation to local circumstances and common practices within the different countries.
In general, HRM strategies and policies are developed centrally and then communicated to the local HR department, which puts them into practice at the local
level, like „we develop overall strategies and policies (centrally) (...) and the
rest is local adaptation.“
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3.3.5 Degree of Standardisation at Various Staff Levels
Differences in the degree of standardisation can also be identified across various
staff levels. A higher degree of standardisation can be analysed for HRM policies and practices at senior management levels compared to the management
level and an even lower degree at the non-managerial staff level. Figure III.21
gives an overview of the differences across the various staff levels.
Figure III.21: Degree of Standardisation According to Staff Levels
This tendency seems to evolve due to various factors. The overall staff population tends to be smaller, the higher up the staff is located in the organisational
hierarchy. Therefore, overall HRM policies and practices seem to be easier to
implement and manage for a small proportion of staff. Furthermore, specific
HRM policies and practices, like special management development programmes
or competencies, seem to be more commonly used at management level and
above, due to their high costs of development and implementation, as well as to
special treatment of the respective groups of employees. A few organisations articulated that they developed a framework in order to standardise their HRM
policies and practices, which was implemented at the senior management level
first. This means they started their standardisation process at the top senior level
and then put the framework down the different layers of the organisation, while
reviewing and adapting it to the various staff levels.
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3.3.6 Degree of Standardisation according to Stages of Internationalisation
Most organisations interviewed either changed or are currently changing their
HR approach from a more country-oriented to a more centralised, standardised,
European/global approach. In general, the following three stages of internationalisation, as well as the HRM approaches practised during these different stages,
were reported by most of the multinational companies:
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A)
At their early stage of internationalisation (Stage I), most organisations
operated an ethnocentric approach towards internationalisation, based on
a universalistic attitude. Therefore, HRM strategies, policies and practices of the parent organisation were transferred to all subsidiaries. This
point of view disregards the national as well as the cultural differences of
the various countries and asks for a high degree of standardisation of personnel policies in line with the practices of the parent organisation. In
particular, US-based organisations faced the following problems during
their early stages of internationalisation into the European market: “...we
have suffered in the past by policies being developed and transferred
from the US, which were then implemented without great discussion in
the countries outside (...) and we spend all our time unwinding them...”.
None of the organisations interviewed was still in this period of internationalisation.
B)
At the second stage of internationalisation (Stage II), usually due to business expansion into the single countries of operation, more staff was
hired locally. HR departments were implemented in countries with severe operations and “...we were increasing our businesses and it was becoming more and more difficult with the complexity of the local labour
law to support that from an HR perspective out of London...”. The single
country HR departments became far more independent, with policies and
practices developed and managed nationally.
C)
At the third stage of internationalisation (Stage III), which is the stage
almost all the companies interviewed are either in or are heading for, organisations tend toward greater global business integration. The HR responsibility again is more centralised, generally at the organisation’s
headquarters. In contrast to the first, ethnocentric strategy, organisations
now develop overall, European or global policies in co-operation with
their national HR departments e.g. “...today there is a global policy being
developed where everybody is involved to a great extent and gives input
(...) this means the involvement changed (in comparison to the first, ethnocentric stage of internationalisation) because before we were not involved to a great extent”.
Furthermore, instead of transferring HR practices from the head office to the
countries, the approach now intends to develop an HRM framework including
certain underlying principles. These principles should be implemented and interpreted in the light of the particular circumstances and individual regulations
and legislation of each country. Nevertheless, the responsibility and independence of national HR department mainly decreased and „...people who set the
policies, who make the policies and make the big decisions are global...“ and the
HR functions might return to a more administrative role. The degree of standardisation of HRM policies and practices increased from Stage two to Stage
three, although the two approaches discussed in part 3.5. (Standardisation vs.
Differentiation of Human Resource Policies and Practices) can be differentiated
(Stage IIIa and Stage IIIb). They are different in their degree of standardisation.
Overall, the degree of standardisation varied according to the different stages of
internationalisation, which almost all interviewed organisations experienced.
Figure III.22 provides an overview of the identified process.
Figure III.22: Degree of Standardisation According to Stage of Internationalisation
3.3.7 Reasons for Standardisation of HRM Policies and Practices
In general, the multinational organisations interviewed now tend towards greater
transparency of their HRM policies and practices than they did before. The majority of companies see the necessity for a high degree of communication and
the creation of a good atmosphere and company culture by involving local HR
people in the decision-making process.222 The overall trend towards standardisa222
Note the conflict of this statement and the more administrative role of local HR functions, which is a
result of the standardisation process.
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tion is faced with the goal to reach a common set of standards e.g. by developing an overall company framework, which „...is easy to work with and (...) that
fits in with the local organisation of that specific country and than also fits into a
global environment and global organisation“. The main reasons for a high degree of standardisation mentioned in the interviews are (by frequency of occurrence):
• Ease of administration and ease of management,
• cost reduction,
• increased mobility of employees within Europe, and
• transparency.
Multinational organisations see a particular advantage in standardisation, because of the possibility for senior management to manage one organisation
across, e.g. 7 or 8 countries rather than to manage 7 or 8 individual businesses.
Therefore, standardisation is not only seen as an advantage, it is regarded as a
requirement, because „people do not want to see seven different styles of performance reviews, if they are all working for the same boss around the globe...“.
3.3.8 Obstacles to Standardisation and Problems faced at National Level
The main obstacles toward a high degree of standardisation mentioned are:
• national legislation in the single countries,
• different common practices of the countries, as well as
• the employees’ ”mind-set“.
National legislation is regarded as the main influencing factor for the development of an overall company-wide HRM approach across various countries. This
finding reflects the results of the Cranet-E database that the various HRM policies and practices identified across Europe are strongly determined by national
legislation. Although multinational organisations tend to have a common set of
terms, the legal framework within Europe does not support it. It is anticipated
that the legislation in the countries will not change in the near future and hence
HRM policies and practices remain effected by national laws, particularly as
many HRM issues are legislatively provided.
The second frequent obstacle to standardisation mentioned, is the different practices that are common to the various countries like different tax regimes, languages, as well as information management. They confront multinational or-
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ganisations with major logistical problems and a burden of administration, e.g.
in order to gain the relevant information necessary.
The third obstacle mentioned, the „mind-set“ of employees within the different
countries is regarded as a main influencing factor towards standardisation by
more than half of the companies interviewed. These organisations favour a
change of their employees mind-set from a country/national specific way of
thinking towards a more European or global mind-set. They try to encourage
their employees to be more business-oriented, although they realise that people
like to be different and certain expectations that employees have are very hard to
overcome. A solution for this specific problem is seen within the following example: „...I cannot think of an HR policy which we implemented everywhere,
that has satisfied everybody (...) but people have to be willing to try things (...)
on the basis that if they do not work we will review and change them (but) it has
been helpful that these policies have been developed in co-ordination with the
HR people in each country...“
3.3.9 Standardisation of Human Resource Management Practices
If we compare the degree of standardisation among the three core HRM subunits, recruitment and selection, training and development as well as compensation and benefits the following differences, illustrated in the Figure III.23, can
be identified.
Figure III.23: Degree of Standardisation According to HR-Subfunctions
In almost all cases, training and development is regarded as the most standardised HRM subfunction, due to less influence of national legislation and national
restrictions. Companies argue that „...it is easier to be more standardised be-
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cause of less impact by legislation and (...) you train people on certain issues or
products, or a skill (...) much more general things...“
The main impact on HR practices is experienced on compensation and benefits
practices due to national systems like taxes or state pension schemes, etc. In the
following, the various subfunctions will be discussed on an individual basis. We
begin with recruitment and selection, continue with training and development,
and then discuss compensation and benefits.
Recruitment and Selection
Recruitment and selection practices seemed to be more country-specific compared to training and development. Nevertheless, their degree of standardisation
is valued relatively high among most of the companies interviewed. Although
most of the organisations share overall objectives regarding recruitment and selection, like „to hire individuals that can add value to the business“ or „to find
the best fit to the job“, each country might operate in different ways. Those
practices that are mentioned as being standardised to the highest degree are:
• Graduate recruitment activities,
• competency based selection, and
• use of specific techniques such as assessment centre.
A lot of organisations mentioned that the actual procedures in practice are
dominated by the individual style of the different countries. The reason why a
large part of the recruitment and selection activities are differentiated and
adapted to the different countries is mainly because of local employment legislation and common practices. People on the job market might not be willing to accept company-specific recruitment procedures, and techniques like application
forms or references might be handled differently across the countries. In a lot of
organisations there seems to be a gap between strategies and reality in terms of
recruiting practices: although they would like to have more standardisation,
pragmatically, they are in the situation that the local practices and laws force
them toward more differentiation.
Organisations seem to prefer recruitment at national level in Europe, while in
the long-term European-wide recruitment activities are envisaged. Nevertheless,
most organisations interviewed do not look for a specific „Euro-Manager“ and
most companies expect their graduate intake to cover the vast majority of their
future European managers. Therefore, in some organisations this intention is reflected in the profile of their graduates as well as in special training programmes.
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Recruitment and selection activities for senior management staff and graduates
seem to be quite standardised and mainly centrally organised. The recruitment
procedures are usually joined processes of local HR departments in co-operation
with the central HR team. This means that, for example, the actual recruitment
process is very much locally driven, while the final selection tends to be a consensus of people in various locations, depending on the working relationships of
the actual positions. Local managers and non-managerial staff are mainly recruited and selected at the national level.
In general, although practices vary at the country level, most organisations apply
an overall consistent and standardised recruitment and selection approach, e.g.
the way that vacancies are advertised, whether positions are filled by internal
and external candidates, or the use of specific selection criteria for specific
groups of employees like competency-based interviews. This means, generally,
a common shared framework is in place but the actual techniques used are interpreted in various ways.
Training and Development
A lot of organisations offer company-specific training courses, which they intend to apply consistently across their operations. These training courses usually
contain aspects in order to create a strong company culture or a “global mindset”. They involve programmes like induction courses for all employees as well
as specific graduate or management development programmes. In general, they
are developed centrally and translated and transferred into the specific countries.
Some of them, like induction weeks for graduates, might also be held at the
company’s head office. The following list provides an overview of the most
standardised training and development policies mentioned in the interviews:
• Management development programmes,
• performance management systems,
• career planning and promotion criteria, and
• technical skills or product knowledge.
Most organisations offer both internal and external management development
programmes. While the internal training courses concentrate on more companyspecific topics or competence-related areas, external training covers specific
management skills. Especially at manager level, companies see the importance
of bringing employees from all over Europe together in order to share international information and to enhance the global network and flow of communication.
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Nevertheless, quite a substantial number of companies complain about problems
with low willingness towards mobility among their management staff and particular problems with expatriation. Therefore, they would like to see more mobility across Europe, but find it difficult to persuade managers to take this opportunity. They therefore encourage employees to share their experience and
exchange skills across Europe as much as possible via European-wide or global
training events or management conferences. Furthermore, they also encourage
them to enhance their language skills, although in almost all organisations interviewed English is the official business language.
Training and development at senior management level is generally developed
and organised at the central HR function, while management programmes, in
general, are both organised at the central function as well as locally. Most organisations offer specific skill training to their employees at the national level of
the organisation. While some of them might be developed centrally and translated into the specific languages, most courses tend to be at national level, particularly the practical on the job day-to-day training. Although the actual training delivered might vary from country to country, the overall process for training and development seems to be consistent across most of the organisations interviewed. This means that procedures, like identification of training needs by
line managers or delivery of training from either the centralised training unit or
the country’s training team, are similar. If possible, some organisations share
training materials among the various countries or implement regional training
centres.
Most organisations do not offer European-specific training courses except for
European languages or seminars on issues around the European legislative area.
Compensation and Benefits
Although some organisations use standardised compensation and benefits procedures across Europe, like variable compensation packages, the actual mechanism of how people are getting paid is country-specific. The majority of companies try to implement European-wide or global policies and practices, like performance-related pay, share options, profit sharing, bonus schemes, company
cars or pension schemes, but they are very much limited by national legislation
and common practices in the various countries. This means that, although they
try to use the same formula across their European operations, the way they actually realise it is different in each case. Overall, the compensation and benefits
procedures are regarded in almost all companies as the least standardised or
most differentiated. Especially the expectation of employees in the different
countries regarding certain common practices within their countries, like company cars or annual bonus schemes, makes it particularly hard not to offer these
benefits even though they might not be in line with the overall company policy.
In general, organisations tend to have an overall framework, but nevertheless
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different national markets and staff groups have to be considered. Some organisations try to ensure that employees that held similar positions across the various countries are paid around the same amount, but in order to pay employees
effectively according to local conditions, they need to take local advantages, like
tax opportunities into account, which makes the whole process very complex.
The high degree of differentiation of employee compensation and benefits
across the various countries, cause particular problems in the use of expatriates
as well as the management of international teams. In general, the compensation
and benefits packages tend to be less transparent and comparable across the
countries and show a high degree of differentiation.
3.3.10 Influencing Factors in Europe and Main Problems
The main factors influencing multinational organisations in Europe and their
management of human resources are as follows:
• European legislation,
• different national systems,
• economic situation, and
• environment of change and increase in competition.
European legislation, including the social chapter and the various EU-directives,
are seen as the main factor of influence on HRM in Europe among almost all
companies. This is mentioned in statements like “ten to twenty statutes coming
in and we have to do something (...) that is big for us...”. Organisations see that
they have to be very conscious of existing and forthcoming EU social legislation, which they have to take into account when developing new policies. The
majority of companies see the necessity to keep abreast of EU-employment legislation and, hence, use various forums to monitor European legislative issues
such as legal groups, advice from agencies as well as professional bodies like
the IPD. The European Works Council Directive as well as the Working Time
Directive affect most organisations interviewed, which is a major topic at the
moment. The Working Time Directive causes for some companies severe problems and additional administration.
Next to the impact of the overall European social chapter legislation, companies
are affected by the various national legal systems in the different countries
where they operate. Therefore, the necessity increases for the development of
local HR departments, providing local expertise. Most companies see the importance of a good understanding of each country's employment legislation and
work practices. Although some organisations take external advice on specific
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topics, they complain that agencies provide legal information more often than
operational. Furthermore, country-specific common practices, like social security systems or tax regimes are regarded as significant for European-wide HRM.
The economic situation in Europe, like low interest rates, changes in demographics, skill shortage and unemployment, are regarded by almost all organisations as an impact on their business in general, as well on the management of
human resources in particular. Furthermore, increased competition in Europe as
well as an ongoing change in the business environment are also factors that were
mentioned by some multinational organisations. They argue that because of the
changing environment the necessity for a more pro-active and flexible HRM approach across Europe is increasing. European-wide standards allow companies
to be more flexible, because they would design special HR solutions for every
single country. The likelihood that these have to be changed is much higher than
it would be by having more flexible policies and practices.
3.3.11 Recommendations by Practitioners
Most interview partners recommended that it is important for multinational organisations to anticipate future changes in the European environment and to be
pro-active, flexible and willing to adapt to various and changing conditions.
Therefore, companies should see the importance of continuously refining and
developing HR policies and practices and agree on company-wide overall HRM
frameworks and company templates.
3. 4
Summary of Qualitative Analysis
The objectives of the qualitative analysis were, to a large extent, complementary
to those of the quantitative analysis. While the latter focused on the status quo of
European HRM, the focus of the qualitative analysis was on the reasons for the
policy choices and the experience gained with the implementation and management of European HRM. With a view to the normative analysis (Chapter IV),
we deliberately chose multinational organisations that claim to implement best
practices.
All of the ten firms interviewed have an HR director on board and base their
management on a firm-wide strategy. However, none of them has a special
European approach, it always reflects the global reach of the firm. The HR directors generally have a view towards the HRM process that reflects the following understanding of the HRM process: The headquarters develops the HRM
policies and practices in line with the overall strategy of the organisation, while
local HR functions generally cover the day-to-day administrative personnel responsibility.
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It is interesting to note the strong desire to standardise whenever possible. Indeed, the interviewees saw a clear trend towards standardisation. They backed
up their desire by naming a number of advantages of standardisation, including
ease of administration and management, cost reduction, increased mobility of
employees within Europe and transparency.
With this desire in mind, why do we not observe a higher degree of standardisation? Three main obstacles where highlighted, the national legislation in various
countries, different common practice and the employees’ “mind-set”.
The more detailed questions about the approach to standardisation revealed a
number of interesting findings. First, in line with their ideal to have a centrally
defined HR strategy and to standardise policies as much as possible, HR directors see the highest degree of standardisation in HRM strategy, a lower degree
of standardisation in HRM policies and the lowest degree of standardisation in
HRM practices. There is an obvious logic to this approach, which was usually
mentioned in the interviews on a number of occasions. HR departments try to
provide the general framework and then adapt as much as is needed to local circumstances.
To some extent, this is consistent with a finding in the quantitative analysis.
Compensation and benefits is an interesting example. While C&B policies are,
in the vast majority of organisations, determined centrally, the actual practices
vary significantly. This finding reappears in the case studies. A number of organisations pointed out that they use standardised compensation and benefits
procedures across Europe, like variable compensation packages, the actual
mechanism of how people are getting paid is country-specific. Thus, despite the
central determination of the framework, the compensation and benefits practices
are seen as the least standardised HRM field - a problem, in particular with regard to the desire to increase mobility within the organisation.
Similar arguments were made in relation to training and development. However,
here another factor appeared to be important: the level of the staff affected.
Training and development at senior management level is generally developed
and organised at the central HR functions, while management programmes often
involve local input.
This reflects a more general finding, that the degree of standardisation is at senior management level rather than at management level, which in turn shows a
higher degree of standardisation than non-managerial staff. A number of factors
were identified as causes for this. The higher staff is located in the organisational hierarchy the smaller are the number of people to administer. Moreover,
managerial groups are often addressees for company-specific training asking for
standardisation and some HR directors argued that they would start a process of
standardisation at the senior level, in order to start a top-down procedure.
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For recruitment and selection, we find again that the organisations claim to have
an overall consistent and standardised approach, but that the actual techniques
used are interpreted in various ways.
Clearly, one interesting finding is the emphasis that the HR directors put on
flexibility. This is reflected in their recommendation to anticipate future changes
and to be pro-active and flexible. However, it is also reflected in the dynamic
view of the HR approach depending on the stage of internationalisation. We
identified that, at the beginning of internationalisation, firms have a high degree
of standardisation. This is usually followed by a significant increase in differentiation and only in the third stage of internationalisation, a higher degree of
standardisation is again achieved. We will pick up this dynamic process in
Chapter IV, when we analyse ways to manage this process more effectively.
4 Overall Summary of the Empirical Analysis
European HRM has many facets. In this study we focus on multinational organisations. The starting-point and the main emphasis of our empirical analysis was
to explore their HRM approaches, to analyse why these approaches have been
taken and how they are implemented.
This wide-ranging explorative ambition determined the choice of the empirical
research methods. While a quantitative analysis performs well with regard to the
more simple factual questions regarding who does what and where, it performs
less well in the analysis of the how and why questions. Thus, we decided to pursue a two-pronged approach and conducted both a quantitative and a qualitative
analysis. In this way, we aimed at overcoming some of the limitations of either
approach.
In this conclusion of the empirical analysis we attempt to integrate and compare
the main results from both analyses. However, we also want to highlight the remaining limitations, which have immediate consequences for future empirical
research.
We put less emphasis here on the normative implications of our empirical
analysis, as these will be dealt with extensively in the next chapter. Moreover,
the focus is on the empirical results, the integration of theoretical and empirical
results will be pursued in the overall conclusion of this study (Chapter V).
4.1
Continent of Diversity and the Desire to Standardise
In line with the strengths and weaknesses of the two empirical methods, the contributions to our analysis vary. One of the key findings that comes out of the
quantitative research is that the general picture of the continent of diversity pre-
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vails. This is true although our approach allows us to detect forms of standardisation that would not have been picked up by standard country-by-country comparisons that do not distinguish organisational forms. Indeed, the quantitative
analysis shows a higher degree of standardisation for subsidiaries of multinational organisations (38 variables do not vary across countries) than for national
organisations (24 variables do not vary across countries).
The diversity finding is interesting if compared to one important result of the
qualitative analysis. The interviewees stressed the importance of standardisation
and were well aware of its advantages (including ease of administration and
management, cost reduction, increased mobility of employees within Europe,
and transparency).
The interviewees suggested three explanations: for the persistence of diversity,
despite the desire to standardise. In the order of importance, these are: the national legislation in various countries, different common practice, and the employees’ “mind-set”.
In this context the quantitative analysis provides interesting complementary evidence. Multinational organisations standardise to a less extent than they could.
This is true for the way HR-policies are implemented locally, a large number of
recruitment practices, almost all selection techniques, whether training needs are
analysed, most pro-active techniques to analyse training needs, whether training
is evaluated, most development techniques, where pay is determined, and the
types of incentive schemes used.
For these policies and practices, there are no insurmountable legal reasons for a
lack of standardisation. While the analysis also reveals a large number of areas
where there seem to be significant obstacles to standardisation – many of which
are legal – other factors must also play an important role.
The interviewees offered two alternative explanations, the different common
practices and the mind-set of the employees. Indeed, both may lead to significant impediments to standardisation. We discussed a number of examples (e.g.
if it is local custom to recruit via newspaper advertisement, it may make little
sense to employ an external agent, even if this is the preferred approach). However, while this is true for a number of areas, there are still a number of policies
and practices that could be more standardised.
The quantitative analysis also has some interesting implications for national organisations. In those areas where we find headquarters or multinational standardisation, standardisation is possible. While this does not suggest that it is desirable, the finding is interesting.
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4.2
Can We Reconcile the Findings?
The clear desire to standardise that was expressed in the interviews seems to be
in contrast to the factual implementation of standardisation revealed in the Cranet-E survey. Is this an interesting tension between objectives and reality? In the
following we anticipate a number of possible reactions to, or explanations for,
the finding of very limited standardisation of multinationals across countries,
and offer our comments.
• It is best practice not to standardise. We feel that for a large number of policies and practices, this is the correct interpretation. First, the finding of diversity for practices rather than strategies and policies, is what is predicted
by theory. Indeed, practices should, and to a large extent still must, be different, in order to accommodate differences that are due to local differences
in the external and internal environment. However, while this explanation is
often correct, we have identified policies and practices for which it seems
likely that the prevailing diversity misses the opportunity to choose a best
practice.
• Standardisation prevails, but is, to a large extent, not measured by the Cranet-E survey. As with any empirical method, the survey method also has its
limitations. In section 2.6, we provide a detailed discussion of the methodological limitations that go along with a survey in general and with using the
Cranet-E survey for the questions addressed here, in particular.
• There are more significant obstacles to standardisation, than conjectured in
the theoretical analysis. While this may well be true, we trust the theoretical
analysis and we tend to favour different explanations.
• The desire to standardise as much as possible reflects the wishes of the interviewees but not reality. This would refer to the methodological limitations of
the qualitative empirical methods and, again, we address these more fully in
the next section.
• The interviewed firms are special. They have been selected on the grounds
of them claiming to have implemented good practices. This is not true for
the organisations in the Cranet-E survey. Moreover, all organisations have
been quite advanced in the internationalisation process. Again, this is something that need not reflect the average multinational firm in Europe. This
point is correct and important. We have chosen the case study organisations
to see what those organisations do, which appear to be advanced. Thus, we
would expect that their efforts to implement best practices are more advanced. However, we believe that the general desire to standardise is an interesting finding from the qualitative analysis that may be of wider relevance
to the average multinational, as well. We therefore believe that the tension
that stems from the perceived need to standardise and the actual lack of
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standardisation contains a truly interesting question. The results may indeed
show that there is room for improvement for a number of multinational organisations and a number of practices and policies.
4.3
Implementation of HR
Before we move on to discuss some potential explanations of the lack of standardisation, we will review some of the evidence that is available, regarding the
HRM process.
First, the quantitative analysis reveals that having a corporate strategy, an HR
strategy and HR policies is generally not an issue that depends on local influences (European standardisation).
Second, most multinationals have an HR director on board and, more generally,
the role of the HR department seemed to carry more weight in the multinational
organisations, if compared to the national organisations. These findings of the
quantitative analysis are supported by the qualitative analysis. All organisations
interviewed had an HR director.
Indeed, the interviewees had a very clear idea of the process of HRM. The
headquarters would determine the HR strategies for the entire firm (no organisation had a specific “European” approach) and aim at standardising HR policies
as much as possible. The practices would then be adapted to local circumstances
as much as necessary. The main function of the local HR departments is seen as
an administrative one.
While the interviewees stressed the importance of communication, the way the
HRM process is presented by them may point to one important area of improvement that is of relevance to the normative analysis that follows in the next
chapter. The perception of the process seems to be very much one-way. The
headquarters develop strategies and policies and pass them on to all other countries. The local HR departments then need to find practices that somehow fit in.
An alternative approach would be to involve the local know-how from the outset, and develop strategies and policies that take into account local experiences
and local restrictions.
4.4
What Drives Standardisation
One of the important contributions of the qualitative analysis is to identify a
number of key drivers of standardisation.
First, and most expected, they stressed the importance of the national legislative
environment.
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Second, independent of the practice area we discussed, one argument was made
very frequently: the degree of standardisation is higher at senior management
level than at management level, which in turn shows a higher degree of standardisation than non-managerial staff. This is in line with theoretical conjectures
and a number of good arguments were put forward for this.
Third, the interviews also highlighted another important driver of standardisation: the stage of internationalisation. It is noteworthy that most organisations
interviewed either changed or are currently changing their HR approach towards
a more standardised approach. Moreover, most organisations mentioned that
they had started off from an ethnocentric approach towards internationalisation.
Finally, the interviewees, pointed to “common national practices” and the
“mind-set” of their employees.
4.5
Outlook and Implications for Future Empirical Work
The empirical analysis in this study is characterised by a two-pronged approach,
which combines the quantitative analysis of the most extensive survey of HRM
in Europe with a qualitative analysis that concentrates on the experiences gained
by a small sample of multinational organisations. We are convinced that this
combined approach overcomes a number of the limitations that we would have
faced had we based our research on one method only.
This does not imply, either, that we can ignore the limitations of each approach,
nor does it suggest that we see no room for improved future research. Quite on
the contrary, we feel that our analysis raises a number of interesting issues and
has some important implications for future qualitative and quantitative research
in the field.
The most obvious limitation of our empirical research is the scope. While it is
always tempting to do more, we had to focus our analysis in order to keep the
analysis tractable. In the quantitative survey this resulted in a selection of four
countries. While we carefully selected the four countries to represent as much
variety as possible, including more countries would be one obvious way to improve future research. The same is true, of course, for the qualitative analysis.
We interviewed the HR directors of ten multinational organisations. A number
of extensions are possible. First, one could crosscheck results by pursuing interviews with representatives of subsidiaries. Second, while we have deliberately
focused on organisations that considered themselves as being “advanced”, one
could extend the sample to provide a more representative picture. While it is
necessary to point to these limitations, we feel that our empirical coverage is
quite extensive and suffices to provide a solid foundation to the conclusions we
draw.
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In the following, we discuss more technical issues for the quantitative and qualitative analysis separately.
Quantitative analysis
One of the main obstacles of the quantitative analysis is that the Cranet-E survey
was not designed to address the question of standardisation directly. Rather than
exploring which policies and practices are standardised within a multinational
organisation the questions focus on whether certain policies and practices exist.
For our research question this raises a number of important issues:
• We have to address the issue of standardisation within organisations indirectly by use of the concepts of the headquarters and multinational standardisation. For 11 out of 98 variables, the evidence suggests that multinationals choose a common approach within the organisations (headquarters
standardisation) and for six policies and practices, we find that multinationals choose the same approach across the countries we analysed (multinational standardisation). These types of standardisation are not normally
picked up in cross-country comparisons. The evidence of these “hidden”
forms of standardisation suggests that it would be worth, in future empirical
research, to address the question of standardisation directly. This would significantly reduce the complexity of the analysis.
• Moreover, the questionnaire does not always distinguish practices by staff
groups. Thus, existing standardisation for higher-level staff groups may not
be picked up if dominated by differing approaches for lower level staff
groups.
• Many questions focus on whether a certain policy or practice exists, but not
on the intensity of its use or the content. This somewhat limits the inferences
we can draw.
• Like any survey, the Cranet-E survey is incomplete in the sense that it cannot cover all policies and practices that are relevant. It cannot be denied,
however, that it covers a range of important policies and practices.
• Furthermore, there are some methodological limitations that are inherent in
the survey methodology. First, the questionnaire does not ask “why” certain
policies and practices have been adopted or not. Such an open-ended question is difficult to address in a questionnaire framework. Second, it is not always exactly clear, what the respondents had in mind. For example, some
respondents may have answered what they feel is correct for the entire organisation, whereas others may have answered what they believed to be correct for the organisational unit they represent (e.g. the subsidiary). If there is
149
a systematic bias, in the sense that representatives of headquarters provide
the correct answers having the entire organisation in mind, while representatives of subsidiaries may answer having only the subsidiary in mind, this
may have an impact on results.
Although all limitations mentioned are serious, the Cranet-E survey provides,
we believe, a good sample of practices, in particular bearing in mind the large
number of firms that participated. However, we hope that some of the points addressed above could lead to improvements in future research.
Qualitative analysis
The main methodological problem of the interviews is the filtered view that we
obtain by asking the HR directors of the chosen multinational organisations:
• All interview partners are senior HR staff that predominantly deals with strategic issues. Thus, they may lack knowledge of the reality with regard to implementation of policies and practices.
• The answers may reflect to some extent what is socially required rather than
what is the known reality.
• The interviews were conducted with headquarters only. Future research
could focus on subsidiaries and compare the perception of both.
Our comments with regard to the limitation of our empirical approaches could
be put into four categories. First, there is always an issue of extending the scope
of the work by extending the sample and asking more questions. Second, there
is an issue about the precision with which the questions are asked and how
clearly they address the relevant research questions. Third, there are inherent
methodological issues that cannot really be overcome. Fourth, new research
questions develop and put new demands to the questions asked.
While the first and third categories are desirable, there is always a limit to what
is tractable in a research project. We believe that it is the second and third which
may help in improving future research.
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Chapter IV: Implications for the Implementation of HRM in Europe
1
Introduction
The harmonisation of the European employment legislation and the trend toward integration among the European Member States on the one hand and the
variety of different Human Resource Management approaches practised at national level on the other hand have been the starting point of this research investigation. The goal of this research was to investigate how multinational organisations operating in Europe react to these external circumstances and what effect
they have on their European-wide organisational integration and co-ordination.
On the basis of the results generated in the previous chapters, this section
sketches a guideline for practitioners. For this purpose the following findings
are key in determining our approach:
• There is a willingness of HR Directors of multinational organisations to seek
a higher degree of standardisation and an awareness of the benefits that this
could bring. This became very clear during the interviews we conducted
with ten multinational organisations.
• The choice of policies and practices should be informed by an analysis of the
external and internal environments. These environments are likely to differ
by staff level, type of policy and practice, stage of standardisation, level of
HR, and organisational characteristics. This implies that standardisation is
not appropriate for all HR functions – even if the national legislatives
frameworks would allow such an approach. This result is supported both by
theory and by our quantitative and qualitative empirical research.
• There are a number of areas where the quantitative analysis revealed that
multinational organisations choose a common approach (multinational standardisation) while nationals are characterised by significant variety. We have
emphasised that this finding is not sufficient to deduct the normative conclusion that national organisations should follow the multinationals. However,
it suggests that nationals should focus on these areas when analysing the potential for change and improvement.
• We have, in the quantitative analysis, identified a number of areas where
multinational organisations do not standardise to a significant extent,
whereas theoretical arguments suggest that they could. There appears to be
unexploited areas for economies of scale and scope.
• The interviews pointed to some interesting possible explanations for this.
While most HR directors named external, legislative factors and national
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common practices as the most important reason for the observed diversity, it
has also often been highlighted that the mind-set of the employees may be an
important obstacle.
We see a crucial connection between two of these findings that may not have
received the attention in the HR literature and practice that it deserves: the path
of internationalisation will affect the mind-set of the employees.
Indeed, it became quite clear in our interviews that in most HR headquarters
there still is a perception of the HR process that is characterised by an active
headquarters that determines the strategy, most policies and as many practices
as possible. While at first glance this may seem perfectly in line with a method
to find the optimal degree of standardisation, very often it is not. In many cases
it reflects the national origins of the multinational organisation. It ignores the
strategic value that can be contributed by the national HR functions that are
downgraded to purely administrative work.
Indeed, we feel that a good HR approach needs to be characterised by flexibility
and by learning. There is incredible potential in a multinational organisation to
identify best practices. This potential is overlooked by an obsession to implement the headquarters’ approach where local diversity is seen as an obstacle and
a hindrance, rather than as a pool of inspiration.
Thus, we shall not attempt to develop a blue print for HRM in Europe. Rather
the guidelines that are developed here, focus on the process of improving HRM
in Europe with particular emphasis on issues related to standardisation.
Many HR directors observe how their HR policies and practices evolve over
time. The stages of internationalisation have an influence on the HR approach
taken. Thus, the requirement of flexibility is not an issue that will surprise HR
managers – they know that it is key. What is of interest, however, is that the
classic evolution of HR within the various stages of internationalisation is likely
to be sub-optimal in a large number of cases. The headquarters approach, which
is the source of the multinational organisation’s HR, is always the natural historical starting point. While this is fine in terms of content, it is not in relation to
process. The first thing HR departments of multinational organisations will need
to learn in the stages of international infancy is to learn and to listen. This way
they can avoid what is the typical path of HR as internationalisation proceeds:
the move into an HR mess that is characterised by excessive diversity.
Clearly, this is particularly an issue in Europe, where countries are small and
differences between nations that are contiguous are potentially great. In the following, we propose a management process that attempts to avoid the pitfalls of
internationalisation and pays particular attention to the underestimated obstacle
to implement best practices – the mind-set of the employees. To have a clearly
defined concept we will term our approach “flexible standardisation”. This in-
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tends to signal not only the fact that not all and everything can, or should be,
standardised, but also that the process of standardisation needs to be dynamic
and responsive to the fact of multinationality.
With a growing awareness of the headquarters, there is a chance to move to a
truly multinational organisation that is not defined by the headquarters culture
but by the organisational culture of the firm. This is, in our view, the key to acceptance by locals and, therefore, the key to tackle the issue of “the mind-set”
being perceived as a critical obstacle for the implementation of best practices.
In the following, each step within the strategic human resource management
process is investigated. On the basis of the theoretical model underlying the empirical study the following steps for multinational organisations to take are discussed (see Figure IV.1).
Figure IV.1: Management Process for Implementation
Each step is discussed individually, although the steps are clearly inter-related.
However, the process is continuously evaluated and, hence, at every stage
changes within one part of the strategic management process might result in
changes within other parts.
2
Definition of the Change Process
We have emphasised that the key implications from our analysis are not related
to content but to the process of HRM. We therefore begin by defining the process of change. The emphasis on the design of the process follows from our empirical findings. If it is not the analytical problem to identify best practices for
HR but the resistance to change that hinders the development of HRM in
Europe, the definition of the process, as such, should be an important element of
HRM in Europe.
Clearly, the various strategic options, as illustrated by the contingency theoretical strategic concept in the form of the EPRG model from Perlmutter, imply dif-
153
ferent attitudes with regard to the process. The four strategic options: ethnocentric, regiocentric, polycentric or geocentric strategies influence whether HR decision-making should be centralised or decentralised:
• The ethnocentric strategic position implies that HR policies and practices are
developed at the organisational HQ and transferred and implemented at the
individual international sites. Thus, the process is centralised. This means
that strategy decision and policy making are at the headquarters and the role
of the local HR department is to adjust those centrally developed HR polices
and practices to the local circumstances. This puts the local HR department
into a passive role of implementation only.
• In contrast, the other two strategic positions, polycentric and regiocentric,
imply a decentralised HR system. This means that HR strategies, policies
and practices are developed and implemented either within every single
country or region, according to the national circumstances. This decentralised procedure allows the development of a single independent local HR
subdivision and bears the danger of conflicting policies and practices within
a multinational organisation and the problem of overall cultural building
concepts like shared strategies, policies and practices.
• The geocentric position is different in two ways. First, it requires that HR
strategies be developed jointly by an international HR team. Second, it suggests the standardisation of the best practices where possible and diversity
where necessary.
Based on our analysis, we suggest adopting a geocentric approach, as defined
above. Thus, the key implication regarding the process is that all organisational
units should be involved from the outset. Note that within our concept of flexible standardisation we view the geocentric approach as compatible with both a
high degree of standardisation (e.g. for high-level management) and a low degree of standardisation (e.g. for blue-collar workers).
Here are a number of examples of what can be done that characterise our approach of flexible standardisation:223
• Involve the local teams – there are many ways to achieve this, for instance
by: quality circle, joint strategy sessions, having trial periods of new policies
and practices that involve feedback rounds with local staff;
• Upgrade the local role - move away from the “we develop, they implement” mind-set of the typical headquarters’ HR department;
223
Note that the following aspects follow the idea of glocalpreneuring as defined by Hilb (2000). However,
flexible standardisation only covers one aspect out of many covered by glocalpreneuring, which is a much
wider and more complex model.
154
• Become a learning multinational organisation - emphasise organisational
learning not the practice as such, have a new role for the headquarters HR,
which is the facilitation of the exchange between local outlets and mutual inspiration.
Multinational organisations may have suffered from an incorrect perspective.
By being obsessed with the admittedly daunting difficulties that arise from
adapting to the many national external (and in particular legal) environments,
they have failed to see the variety of practices as a source of finding the best.
This is the opportunity to seize.
3
Identification of Organisational Goals and Values
Organisational goals and values provide guidance for the areas on which the organisation should concentrate. If organisations do not know where they want to
go, what they want to reach and why, the basic requirements for strategic action
are missing and hence improvisation and ad hoc management follow.224 Therefore, management should either implicitly (e.g. via an organisation philosophy,
vision or mission) or explicitly (e.g. via statues, charter or basic rules) have
ideal visions of the company’s current and future behaviour. These organisational goals and values have the function of filtering, evaluating and selecting
the external and internal environment of the organisation, or as Bühner put it:
“The awareness with respect to opportunities and risks due to the organisational
environment as well as the consciousness regarding the organisation’s own
strengths and weaknesses are pre-determined by [the organisational goals and
values]. Information is being perceived, consolidated and processed according
to the interests and values.”225
We found that, to date, almost all organisations have a corporate strategy. Thus,
the corporate strategy is a natural starting point for identifying the goals and
values, which should also drive HRM in Europe. The HR strategy should be in
line with the overall business strategy in order to support the goals and values of
the company. Here the economic goals of the organisation (profitability) as well
as practicability or ethical justifiability are of importance. Moreover, consistency with personnel or technical conditions or legal constraints has to be
checked. Clearly, there should be feedback from later stages of the management
process. If it turns out that certain goals cannot be achieved in practice, they
should receive less emphasis.
224
225
See Staehle (1991, p. 573).
Bühner (1985, p. 92).
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4
Analysis of the Organisational Environment: External and Internal
Contexts
In order to be able to analyse the complex and variable organisational environment it is important for multinational organisations to reduce complexity. According to the model introduced in the theoretical part of this study, the environment of the multinational organisation can be divided along the following
dimensions (see Chapter II):
• The internal vs. the external context,
• the environment of the parent organisation on the one hand and the various
environments of the subsidiaries on the other.
For the external context, we suggested taking the common approach to prestructure the environment according to the following categories:226 economic,
social, technical and political-legal.
For the internal context, the approach is to distinguish organisational structure,
strategy, stakeholders, and organisational culture.
For the analysis227 of the external and internal environment different sources of
information228 can be helpful. Figure IV.2 summarises the proposed structure.
226
See Farmer/Richman (1970). Other authors like Gloede (1991) or Dülfer (1991) also consider, next to the
above four “man-made” environmental factors, the natural environment of the organisation implying the
climate, essential resources, pollution etc. In addition, some authors like Dill (1958) or Porter (1983) also
consider the wider context of the organisation, the specific tasks environment of the organisation
including external interaction partner like customer, supplier or competitor.
227
Hilb (2002) provides detailed information for multinational organisations in order to analyse their external and internal environments and provides a wide set of techniques multinational organisations might
use.
228
See Staehle (1991).
156
Figure IV.2: Fields of Investigation and Sources of Strategic Information
In the following we discuss the external and the internal environment of the organisation in turn.
4.1
Analysis of the External Environment of Multinational Organisations
From a systemtheoretical perspective the understanding of organisations as open
social systems and the importance of various exchange processes with organisations’ external environments demonstrate the central role of the analysis of the
external environment within the strategic management process. This step provides the information needed in order to formulate a successful internationalisation strategy for the management of human resources.
The results from the empirical study underpin the importance of continuously
analysing the external context of the organisation:
157
• Our results replicate the finding of the “continent of diversity”. Clearly,
there is a need to analyse the external context not only of the headquarters
but also of each subsidiary.
• We also found that, albeit potentially beneficial, in some areas there is no
standardisation. Thus, a careful analysis of the external environment should
help identifying scope for implementing best practices.
• Finally, we argued that some external barriers to standardisation, in particular economical and political legal factors, are likely to be reduced as European integration proceeds.
According to Scherm229, HRM at an international level can only be effective in
the long-term if all relevant factors of influence from the organisational environment are considered. This means in particular that all relevant factors within
the various countries impacting e.g. personal management decision or the use of
specific personal management instruments within the respective countries.
Therefore, the main tasks of the analysis of the organisational environment is to
identify the relevant factors of influence and to estimate their impact on the
management of human resources and the single HR subfunction like R&S, T&D
or C&B. The results of this study give some indication as to which factors
should be most prominent in the analysis.
• The findings suggest that political, legal and socio-cultural factors are likely
to be the most important obstacles to standardisation.
• It is likely, however, that the importance of external socio-cultural factors
are being overemphasised by both practitioners and scientists. Based on our
research, we believe that internal socio-cultural factors, “the mind-set”,
should be considered more carefully.
In order to systemise, and to illustrate the relationships between, and meanings
of, the various external factors, it has been recommended to use a multiplelayer-analysis.230 Hereby, within a specially designed matrix, the inter-relations
between the organisational environment and its most relevant inter-relations are
combined and hence, can be proved and revised where necessary. In addition, in
order to evaluate the factors and to weigh their importance for international
HRM the results from the analysis of the external factors can be consolidated
into a matrix231, which illustrates the relationship between the single environmental factors and the HR-subfunction for each country. The next section looks
at the analysis of the internal factors.
229
Scherm (1999, p. 37).
See Scherm (1999, p. 51); see also Macharzina (1982) and Steinle (1982).
231
See Scherm (1999, p. 53).
230
158
4.2
Analysis of the Internal Environment of Multinational Organisations
From a systemtheoretical perspective, the multinational organisation can be regarded as a system of various sub-systems, each having its own structure, culture etc. But these sub-systems cannot be regarded as single, independent units
but rather as one part of the whole system, which stands in a reciprocal relationship with its organisational internal and external environment. Therefore, next to
the external factors, the internal factors should get the same attention. Different
internal structures, sub-cultures or stakeholder intentions confront the HR department with a large number of aspects and conflicts to consider.
The results from the quantitative analysis show that the three different types of
organisations, national organisations, multinational organisations with domestic
HQ and multinational organisations with HQ abroad, differ in around 50% of all
cases in their use of specific HR policies and practices and that companyspecific factors like the type of organisation, size or country of origin seem to
influence the management of human resources.
Therefore, the analysis of the internal environment is of specific importance for
the strategic planning of the multinational organisation. Again, it is relevant to
filter the most important internal aspects from the factors of influence within the
European internal organisational environment. Thus, the main task is to structure the internal environment and to identify the relevant factors being aware of
the risk of selection. Hence, like the analysis of the external environment the
main tasks of analysis of the organisational internal environment are to identify
the relevant factors of influence and to estimate their impact on the management
of human resources.
We follow the approach in the literature and propose to distinguish the organisational structure, the stakeholders and the organisational culture as well as the
strategy.
The different structure of subsidiaries, compared to headquarters, is clearly of
importance for the issue of standardisation. Smaller subsidiaries have different
needs with regard to HR practices than large organisational units.
In particular, the interests of the organisation’s various stakeholders232 are important to take into account, e.g. how far they might accept or resist the selected
HR strategies. In this context, we mean that the interests of:
• The owner of the organisation (profit-related perspective),
• the employee (human-oriented perspective),
232
For further information see Hilb (1995).
159
• the customer (market-oriented perspective), and
• the environment (society-related perspective)
should be considered. The interests of the organisation’s important stakeholders
are not always in line with each other and hence conflicts of interests and priorities for the one perspective at the costs of the other, have to be made. This implies that in order to reach a certain goal other goals might be limited or not
reached at all. Therefore, certain priorities have to be set and final decisions
have to be made, being aware of the goal conflicts. In order to reach a high acceptance among the various stakeholders, the different interests have to be considered and have to be made transparent. Only if the single stakeholder can follow the decision-making process, he might be in the position to understand the
organisational decision-making procedure.
In order to successfully implement HR strategies within the organisation, the
acceptance of conflicting interests is important as well as the goal of balancing
them out. The demands of the organisation’s several stakeholders must be satisfied within an acceptable frame, and the strategies should lead to a successful
realisation from which important stakeholder can profit and whereby the most
competitive advantage can be reached.
One important factor that influences the way conflicts of interest are resolved
within an organisation is its culture. There is a long debate as to which extent
culture can be “managed” or “implemented”. Irrespective of this point of view,
there is a consensus that by determining the process of how policies and practices are developed and implemented, the organisational culture is determined.
The literature on culture has emphasised the importance of flexible organisations with a culture of learning. We find that our research underpins the need for
a flexible organisation that is open to learn from all sub-units.
Determining the process of developing and implementing policies and practices
is not the only way that HRM influences an organisation’s culture. The actual
choice of policies and practices is also of importance. Does HR offer induction
courses? Is the system of expatriation used and well prepared? What are the incentives given by compensation and benefits to enhance mobility? This is but to
name a few of the relevant questions that will affect an organisation’s culture.
One should always bear in mind that the analysis of both the external and internal environmental factors will never be “value-free” and no “objective” factors
will be reached. They are always a result of subjective selection and interpretation due to different perception and evaluation results. This explains why identical changes within the environment are, for one organisation, considered as a
change, while another organisation perceives them as a threat. Hence, the mis-
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interpretation of the one organisation might be the competitive advantage of the
other.233
The distinction into the above-discussed categories of the external and internal
environment is, to a certain extent, artificial. In practice inter-relations exist.
Nevertheless, such a distinction is helpful in order to reduce complexity. However, interrelations have to be analysed and their impact on international human
resource management has to be identified, as well as their fit.234 In order to do
this, a number of instruments are available, e.g. a network diagram.
5
Determination of the Best Practices and the Degree of Standardisation
Both the theoretical and the empirical analysis have revealed the necessity of
standardisation and diversity. Focusing on one or the other is of no value. This
shifts the emphasis to the factors that determine what approach is best. This is
an area where we see valuable contributions from both, our theoretical and our
empirical analysis.
In general, the process of identifying the strategic options and choosing a strategy requires the weighing up of all relevant pros and cons under consideration:
for this purpose, techniques like scenario techniques can be used. As the results
of this study show, the optimal degree of standardisation is likely to depend on
• the stage of internationalisation,
• the staff groups affected,
• the level of HR (strategy, policy, practice),
• the subfunctions of HR (R&S, T&D, C&B), and
• organisational factors (size, regional coverage).
Hence, multinational organisations may not agree on one single HR internationalisation strategy regarding the degree of standardisation, but rather on a mixture of different approaches, reflecting the various situations and the level of
concern that the organisation faces. The goal of this selection-process is to
maximise the objective function and the organisations potential. Based on our
research, we would expect a specific relationship between standardisation and
233
234
Staehle (1991).
For a detailed discussion on the fit vs. misfit between environmental factors, the internal and external
environment, and the management of HRM see Scherm (1999, p. 55).
161
the factors listed above (see Figure IV.3): a process we named “flexible standardisation”.
Figure IV.3: Expected Degree of Standardisation
In this chapter we focus on the process of implementation rather than the content of the resulting practices. For a more detailed discussion of the reasons for
the expected degree of standardisation, we refer to Chapter V.
6
Implementation and Evaluation Procedure
After the appropriate policies and practices as well as the degree of standardisation have been determined, the way of implementation and the evaluation procedure need to be determined.
In order to develop a strategic programme, the organisation should concentrate
on certain parts of action, which are regarded as critical for the successful implementation of the selected strategies. The whole implementation process is,
therefore, selective and concentrates on filtered parts of action only, whereby
the strategic programme provides rather a general framework235, than a comprehensive plan of action.
At the stage of realisation of the strategic programme, the process of global coordination becomes important and the efficient realisation of the interaction between the HQ and the various subsidiaries is central for the success of the strategic programme in practice. This implies that the responsibilities of the HQ and
235
The concentration on important parts of action stands in contrast to the idea of trying to transfer the strategies into single action steps, which is not only impossible to do but also highly dysfunctional for the
whole process.
162
the subsidiaries as well as their interaction, communication and co-operation
process are arranged and function efficiently.
In our research we found that the responsibility regarding major HR policy decisions is in about half of all multinational organisations with the line management. Thus, a crucial aspect of implementation is to design an appropriate exchange between line management and the respective HR departments.
In our case study interviews we found that communication of the various countries with the central HR team was given high priority by all firms, not only in
order to empower people but also to gain their involvement. Due to geographical distances and the number of locations involved, the communication process
is not easy to handle. Thus, apart from the preferred face-to-face communication, other techniques have to be used. In practice, meetings with the principle
local HR staff are held only about every two to four months in the firms we interviewed. In the meantime, techniques like teleconferences, e-mail or Internet
are widely used tools to communicate.
The HR strategies and the resulting policies and practices determine the HR activities of the multinational organisations in Europe. With resulting action plans,
budgets or manpower planning the mental constructions are put into practice.
The role of evaluation within the strategic management process is to continuously assess the management process, to analyse the certain steps within the
process and to initiate changes where appropriate. This means that due to a permanent assessment process changes within the external environment of the organisation can be taken into consideration as soon as they occur. Problems
within the internal communication or co-ordination process can be solved and
might result in changes within HR policies and practices.
As we know from research236 the process of information gathering, problem
formulation and problem solving is not a linear procedure, but rather a cyclical
process. Therefore, the steps within the strategic management process are discussed individually for analytical reasons only.237
In general, the more dynamic and turbulent the organisational environment, the
less important becomes the strategic planning process and the more important
becomes the strategic control and evaluation process, implying organisational
adaptation and learning processes.238 In this context Schreyögg and Steinmann239 differentiate between the following three types of control: strategic
monitoring, implementation control and assumption control, which altogether
build the strategic control system.
236
See Mintzberg et al. (1976) and Lyles (1987).
See Steinmann/Schreyögg (1997).
238
See Staehle (1991, p. 623).
239
Schreyögg/Steinmann (1985).
237
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Strategic monitoring involves non-directed analysing and, without any control
standards, the possible impact of organisational internal or external factors of influence on the selected strategy.
The control of assumptions requires a continuous questioning of the validity of
strategic core beliefs. Within the whole planning process the setting of premises
is necessary in order to structure the decision-making process. But, as making
assumptions involves that other factors are not considered, the goal of the control process is to assess whether the selected assumptions are still valid.
Finally, there is the control during the implementation phase. If there are
problems or unexpected situations, the control process evaluates whether the
strategic course is in danger or not.
The whole strategic process is based on complex information and uncertainty. In
order to be able to agree on certain HR strategies, policies and practices the
amount of information has to be reduced to a manageable extent by certain filter
procedures, interpretation raster, setting priorities, and so on.
This process is characterised by filtering information and is subjective. The selection implies a risk of mis-selection.240 The intention of the evaluation process
is to minimise this risk. Hence, the task of the evaluation process can be characterised as
“... a continuous monitoring of the strategic plans and their implementation regarding their sustainability in order to signal the threats and point to required
changes in the strategic path. The risk of selection that is invariably linked to
strategic planning implies that strategic plans have to be understood and treated
as being potentially risky.”241
A systematic evaluation is an important step within the strategic management
concept. It
• builds the main ground in order to reach and guarantee high quality and
permanent improvement of the process,
• controls the effectiveness of the used and selected techniques and to control
whether the goals set are reached,
• provides information, whether the techniques used are efficient and hence
provide an adequate balance between cost or effort and benefit or return, and
240
241
Steinmann/Schreyögg (1997).
Steinmann/Schreyögg (1997, p. 202); translated by the author.
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• provides information of the success of the strategic HRM process in Europe
and encourages the information exchange between the various HRsubsidiaries within the multinational organisation.
Overall, evaluation builds a central part within the strategic HR management
process and, hence, is important for the successful development, implementation
and management of HR at European level.
7
Summary
In this chapter, we proposed a process for implementing HRM in Europe with a
particular focus on the issue of standardisation. We termed this approach “flexible standardisation”.
Flexible standardisation is characterised by two aspects. First, it reflects the fact
that standardisation should not occur across the board. Second, it builds on a
process of HR that involves the local functions into the development of HR –
right from the outset.
This approach avoids, we argue, the pitfalls of the often-observed process of internationalisation, which starts with the headquarters approach, then “falls” into
diversity, then, improves with increasing attempts to implement best practices.
The approach also takes into account the, by now, established finding that the
development of HRM strategies, policies and practices requires a careful analysis of both the external and internal contexts of the organisation. We have proposed a framework that helps in categorising the areas of investigation. Moreover, we have identified the key drivers of standardisation in order to provide
guidance as to which factors should receive particular attention in the analysis.
However, building on the results of the research presented in the previous chapters, the main message we intended to convey was that the process of developing HRM in Europe should receive considerable attention and should be developed with care. Involving local staff is a key requirement when best practices
are to be identified and, more important, implemented. The headquarters’ HR
department may pursue a perfect analysis of the organisational environment and
carefully derive optimal policies and practices. This is of little value if it does
not succeed in getting local staff on board.
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Chapter V: Conclusions
1
Introduction
In this study we explored the HRM approach of multinational organisations in
Europe, with a focus on their efforts to implement best practices across Europe.
The results of the quantitative and qualitative empirical research, reported in the
previous chapter, provide an overview of the strategies, policies and practices
adopted in HRM in Europe. In this section we summarize the main results and
draw on both the empirical findings and the theoretical results. This enables us
not only to report our findings on existing HRM, but also to have an integrated
discussion of the key empirical and theoretical findings.
The chapter is structured as follows. In Section V.2 the main results regarding
the degree of standardisation are discussed on a more general level. Sections
V.3 to V.5 then discuss the findings on HRM in Europe for strategy and policy,
as well as each of the three practice areas. We then move on to discuss the implications of our study for theory and practice.
2
The Issue of Standardisation
One important question emphasised in the study is the actual degree of and the
potential scope for standardisation. In fact, we started off with the hypothesis
that multinational firms have an incentive to standardise policies and practices
across the various countries as much as possible. This desire to standardise was
strongly confirmed by the HR-managers interviewed when we conducted the
case studies.
Based on the theoretical and the empirical analysis, our understanding of what
should be the “desire to standardise” evolved. We propose a concept of flexible
standardisation that is characterised by three elements: contextual variation, dynamic variation, and an open HRM process. All elements fit well into an HRM
approach that is characterised by a geocentric culture. However, we prefer to refer to flexible standardisation because the concept is narrower – it does not
cover all fields of HRM but focuses on the issue of standardisation. Moreover,
concepts like the geocentric approach have not been defined in the same manner
by the many authors that refer to this concept: This is a source of confusion we
want to avoid.
So what is flexible standardisation? First, it is an approach to standardisation
that is flexible because it will seek to implement best practices, depending on
the external and internal contexts of the organisational units affected, the policy
or practice at issue, and the types of employees involved. In this research project
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we found that the degree of standardisation should, and to a large extent does,
depend on
• the staff groups affected,
• the level of HR (strategy, policy, practice),
• the HR-subfunctions (R&S, T&D, C&B), and
• organisational factors (size, regional coverage).
In what follows we will discuss in more detail how we found these factors to influence HRM of multinational organisations in Europe.
Second, we have analysed the dynamic variation of standardisation. Based on
extensive and insightful literature on the process of internationalisation of multinational organisations, we have been curious to see how the degree of standardisation evolves as the firm expands in more and more countries. We found
that there is a significant degree of flexibility – nevertheless, probably not optimal. Multinational organisations typically move from an ethno-, to a poly-, to a
geocentric approach to HR. While this sounds like a natural process, we believe
that it is not, and can be improved. Flexible standardisation aims at avoiding the
lack of flexibility that leads to the excessive move into variety and that, we believe, explains one of the main obstacles to implementing those best practices
that should be put into action: the mind-set of the employees.
The dynamic aspect of flexible standardisation leads directly to the third defining characteristic, the open HRM process. Indeed, it is natural that the content of
HRM is determined initially by the policies and practices of the country of origin of the multinational organisation. However, the process of HR should
change immediately. Even though we interviewed HR directors of ten organisations that defined themselve as advanced, we still observed a lot of behaviour
that seems to reflect a one-way process of HRM. The headquarters defines the
strategy, the policies and, as far as possible, the local practices. Only if there are
obstacles can local variation be allowed. However, this is not what we mean by
flexible standardisation. The very development of HRM should be informed by
the variations that exist within the firm’s many subsidiaries and external environments.
Moreover, this process should be informed by the cultural coordination proposed by Hilb, which is to apply in each country a mixture of the best transferable strengths of the home country, of third countries and of the country of the
respective subsidiary.242
242
Hilb (2000, p. 99).
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Such a process should have a direct and positive feedback to the dynamic path
of standardisation. Rather than moving from an ethnocentric to a polycentric organisation, it allows a gradual shift to a transnational (geocentric) organisation.
This not only avoids a degree of variation that is overly costly from the point of
view of the organisation (of which we found significant evidence in our qualitative empirical research), but also avoids the difficulties of changing the mind-set
of local teams that have began to ask for local variations because of the ethnocentric inflexibility in the headquarters of the early days of internationalisation.
Thus, there is a straightforward normative implication for the HR leadership in
the headquarters: the first aspect that needs to change is the headquarters’ mindset – and with it the process of HRM development.
Having focused on the normative implications of our research, we now move on
to provide a more detailed summary of our main theoretical and empirical results.
We begin by briefly reviewing the main findings regarding the external and internal contexts of an organisation. We then move on to discuss each driver of
standardisation in turn.
2.1
External Environment
Following the theoretical literature an organisation is mainly affected by four
external factors: economical, technological, political-legal and socio-cultural.
One of the key arguments against standardisation is that these factors may differ
from country to country. In the context of European HRM we developed three
conjectures:
• First, technological factors have a minor impact on the standardisation decision.
• Second, political-legal, as well as economic factors, are likely to become
more homogeneous across European countries in the future.
• Third, socio-cultural factors will remain of significant importance for HRM
in Europe.
Our first conjecture was clearly supported by the qualitative research. No interviewee mentioned technological factors as a major obstacle to standardisation in
Europe. Here, the environment of HRM in Europe clearly differs from the environment multinationals face in developing countries.
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The second conjecture clearly has a normative implication. The judgement,
which was confirmed by most interview partners, suggests that HRM in Europe
should continuously look for a potential to implement common best practices as
legal barriers diminish. This is particularly true since HR-managers interviewed
named political-legal factors as the greatest obstacle to standardisation. The
quantitative research, however, tends to qualify this assessment to a certain extent. We found a “continent of diversity” for a number of practices that could, in
principle, be easily standardised, since neither political-legal, nor economical or
technological factors are of any influence.
This points to the importance of socio-cultural factors as a barrier to standardisation and emphasises the significance of the third conjecture. In fact, the third
conjecture has two elements. First, it claims that the importance of sociocultural factors is high. This is supported by both quantitative and qualitative
empirical findings. Second, it claims that this importance will remain as such.
Inspired by the results of the quantitative empirical analysis that there are a
number of areas that seem “easy to standardise” but are not, we suggest a more
subtle analysis of socio-cultural obstacles to standardisation. In fact, sociocultural aspects are relevant for both the external and the internal contexts of an
organisation. We argue that the latter is a true obstacle to standardisation and
should be considered carefully when developing HR policies and practices. It
clearly makes no sense to base a recruitment campaign exclusively on recruitment agencies, when it is common practice in a country to advertise the position
in a particular newspaper – to name but one example.
2.2
Internal Context
Socio-cultural factors also influence the internal context of an organisation to
the extent that staff is recruited locally and follows existing customs and practices. The quantitative research has highlighted that in the areas of training and
development as well as recruitment and selection, there is considerable diversity, although there is no need to follow local practices. This result is supported
by the qualitative research when HR-managers argue that, beside national legislation and different common practices, it is the “mind-set” of employees that is a
main obstacle to standardisation.
In fact, the results of the quantitative analysis raise the suspicion that the political-legal factors may play a less important role in preventing the implementation
of best practices. It may well be that the difficulty of the headquarters’ HRdepartment to gain local acceptance for the common practices developed is a
greater hurdle than legal restrictions. The latter is just a better excuse.
This clearly is an element of organisational culture and the headquarters’ HRdepartment may suffer from the problems created by simply imposing their
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standard practice and not a best practice that was identified and developed
jointly with local staff in the host countries. Some interviewees complained
about the difficulty of implementing practices developed elsewhere, which were
not suitable for the local conditions. One such experience can prevent the acceptance with regard to a number of useful suggestions. As the qualitative research
has underlined, good communication between the headquarters and the subsidiaries’ HR-department is of key importance.
Overall, these results confirm the theoretical conjecture that a strong corporate
culture may ease or hinder European HRM. There is only one exception: if there
is a culture of developing policies and practices jointly and of being open to
change, this is likely to ease the development of the flexible standardisation approach.
Organisational culture is only one out of four internal factors covered in this
study. We also considered the organisational structure, the stakeholders and the
strategy.
Due to the differences in the stakeholders, we conjectured in the theoretical
analysis that the incentives in subsidiaries and headquarters differ and that this
is likely to cause tension and conflict of interest. This again underlines the importance of communication and gives another reason why efforts to implement
best practices may fail due to the internal context rather than the external context of an organisation.
While we have identified the resistance to change due to the differences in
mind-sets and due to conflicting interests as areas for HR to work on the differences in the organisational structures may require different HR policies and
practices.
One important point here is that the subsidiaries are often likely to be smaller
organisational units in comparison to the headquarters. Thus, less formal and
less structured procedures can be potentially employed here. Differences like
these have to, and will be, identified if European HR is developed jointly with
the subsidiary.
Finally, we looked at the HR-strategy for internationalisation in order to analyse
standardisation. The literature on HR-strategies for internationalisation provides
a useful tool in order to identify different types of standardisation. If each strategy were implemented according to pure theory, an ethnocentric strategy would
lead to complete standardisation with the standard being the local standard of
the headquarters. A polycentric strategy would lead to no standardisation unless
the host country’s practices are identical. A regiocentric strategy would lead to
complete standardisation in the respective region, but to different policies and
practices relative to other regions. A geocentric strategy would lead to standardisation where possible and differentiation where necessary. The standard
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would be developed jointly with the involvement of representatives from all
countries.
In the case study interviews we found a significant effort of multinational organisations to move from an ethnocentric to a geocentric strategy. The quantitative analysis showed that despite the common existence of strategies and policies, the practices are predominantly polycentric.
In order to interpret these results and building on the discussion of the external
and internal contexts of a multinational organisation, we now move on to analyse each of the five drivers of standardisation identified.
2.3
Stage of Internationalisation
Clearly, the finding that resistance to standardisation may be due to a lack of acceptance and different mind-sets of the local employees, supports the theoretical
conjecture that adopting an ethnocentric approach to standardisation
(“headquarters standardisation”) is not ideal. Nevertheless, firms often adopt
such an approach in early stages of internationalisation. The most obvious
reason may be that an expatriate, being familiar with the headquarters’ practices,
builds up the foreign location. Indeed, we argued that at the beginning of an
internationalisation process the use of expatriates is particularly attractive.
Another reason is that the benefit to standardisation increases with the number
of subsidiaries in different host countries. Thus, in the early stage, when there
are only a few foreign subsidiaries, the need to standardise is less obvious.
Finally, host country “start-ups” are likely to be much smaller than the parent
organisation, thus requiring a different HR-approach. We believe that these are
valid arguments for starting with the headquarters’ practices at the very
beginning of internationalisation.
Indeed, the problems result when more and more local staff is being recruited
and the subsidiary grows into a more independent unit. At this stage the “we
have to implement the headquarters’ dictate” problem arises and leads to a resistance to standardisation. Thus, the key problem of applying an ethnocentric approach seems to be joint improvement of the common practices. A proper flexible standardisation strategy at the beginning of the internationalisation process
would probably also start with fairly standardised practices according to the
headquarters’ ideas. However, it would distinguish itself from an ethnocentric
approach by being open to local influences from the outset, developing the
framework in co-operation with local HR- and line managers.
Some managers in headquarters said that it is difficult to unfreeze a local behaviour when it has been implemented in the early stages of internationalisation.
We would argue that it is also a necessity to unfreeze the behaviour of the head-
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quarters’ staff in order to open the organisation for an evolution according to the
principles of flexible standardisation.
In fact, we believe that during the stages of internationalisation the organisation
will undergo change. But this should not lead to a change from an ethnocentric
to a polycentric to a geocentric approach. The struggles reported by the HRmanagers to change attitudes as well as the quantitative findings of existing diversity suggest that the cost of pursuing such an internationalisation strategy is
great. Rather, we suggest an approach that adopts a flexible standardisation
strategy from the outset.
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Figure V.1: Stages of Internationalisation
Figure V.1 compares the existing dynamic and our proposal. Avoiding the resistance to change would hopefully lead to an avoidance of the polycentric approach predominant in the second phase of expansion. In fact, developing a culture of change right at the beginning of the expansion process will train staff to
innovate, to co-operate and, finally, to identify with the resulting policies and
practices.
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2.4
Staff Groups Affected
Theoretical work suggested that the degree of standardisation should depend on
the staff group that is affected by the resulting HR policies and practices. This
idea has been strongly supported by the interviewees. Interestingly, the quantitative research does not always support the idea. For three practice areas the question asked distinguished senior, middle and junior management or similar staff
groupings. Theory would suggest a higher degree of standardisation the greater
the seniority. For the way of pay determination, the use of incentive schemes
and the recruitment practices, we do not find strong support for this conjecture.
Note, however, that the dataset provides only limited information in order to investigate this question.
We maintain that from a normative perspective it is useful to distinguish staff
groups. The background and the needs of staff will vary significantly depending
on the level of the position. With more senior staff being with a higher probability mobile, recruited internationally, in continuous co-operation with units in
other countries, comparing the attractiveness of practices across countries. All
arguments for standardisation are less significant for lower staff levels.
2.5
Level of HR (Strategy, Policy and Practice)
Both the quantitative and the qualitative empirical analyses support the theoretical conjecture that strategies should be common for the entire organisation,
whereas policies and, in particular, practices should reflect the local needs, implying a lower degree of standardisation.
However, encouraged by the quantitative results that practices are local even
when there is scope for standardisation, there seems to be a danger that the differences in local practices imply that the common strategies and policies exist
on paper, but are not implemented locally. Alternatively, policies and strategies
may contain meaningless statements that provide no guidance to best practices.
It is well known that policies like “equal opportunities” in R&S or “fair compensation” in C&S can be rendered meaningless unless there are specific efforts
to implement them and to monitor the results.
2.6
Subfunctions of HR (R&S, T&D and C&B)
Another driver of standardisation is the subfunction of HR. Here, both theory
and the statements made by the interviewees suggest a clear ranking. The scope
for standardisation seems to be highest in the area of training and development
followed by recruitment and selection. Due to the importance of different tax
regimes and industrial relations environments, it is believed that the scope for
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standardisation is the lowest in the area of compensation and benefits. In the
quantitative analysis, however, we find that, while it is common to have a policy
for each area, the actual practices differ, even where there are no external factors
that would suggest a need to differentiate.
Notwithstanding this result, there is also clear evidence that external factors
matter more for compensation and benefits than for recruitment and selection,
and more for recruitment and selection than for training and development. We
maintain the normative conclusion that the importance of the external factors, as
well as the variance of these factors, should drive the scope for standardisation.
This suggests that, in particular, in the area of training and development there is
likely to be room for significant improvements in standardisation, which we
found only for the techniques used when training was evaluated.
2.7
Organisational Factors (Size, Regional Coverage).
It is obvious that a typical headquarters differs in structure from a typical subsidiary. One of the most obvious is that subsidiaries tend to employ a smaller
number of people and cover a smaller set of tasks. In fact, size differences between the headquarters and subsidiaries can be seen clearly in the description of
the research sample for the quantitative analysis.
We have argued that these differences will pose a particular challenge for HR in
multinational organisations. It leads to a justified demand for diversity and
poses particular problems if employees are transferred across organisational
units. However, we have also identified opportunities. (Smaller) subsidiaries offer the potential to test the skills of employees and can be used as a pool to recruit top management.
3
Strategy
To date almost all large firms have a corporate strategy, irrespective of the
country of origin or whether they operate in several nations or in one only. Over
80% of all firms in the quantitative research sample also have an HR-strategy
and in the case study interviews we were told that those who do not have an international one yet are currently developing one. Thus, in the near future each
large European organisation will have thought about its HR approach. Of
course, as long as such a strategy covers very general aspects only, like “working as partners with line management” the impact of these strategies are minor.
A similar argument applies for the policies. Again, we found that the existence
of HR policies for the three practice areas is common and does neither depend
on organisational type nor on the country of origin (with the exception of R&S
policies, which are not equally common across nations and organisational
types).
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Formulating policies and strategies is an opportunity to develop and communicate a common HR-approach that reflects best practices and defines the working
relationships among those involved in the development of the practices. However, both a number of comments we received during the interviews as well as
the quantitative research suggest that the key difficulty is not formulating, but
implementing, best practices across Europe.
Here, the quantitative analysis showed that the way HR-policies are implemented (e.g., line vs. HR-department, use of external providers) depends on the
country of the organisational unit. While this may be reasonable to some extent,
e.g. if operations are much smaller in one subsidiary than in another, we believe
that this is already an indication that, in practice, the differences are often
greater than envisaged in the strategies and policies agreed for the organisation.
We find this an interesting result, since multinational organisations tend to employ a wider range of practices than national organisations. Thus, there clearly is
no lack of knowledge regarding the practices. Still the use of these practices often depends on the host countries local customs and traditions rather than on the
quality of a practice.
The case study interviews strongly supported a theoretical conjecture. Given the
differences in interests and the different socio-cultural backgrounds of the local
employees, successful implementation of common best practices is difficult, but
of prime importance. Finding a good way to involve local HR-departments
seems to be as crucial as identifying the best practice to be implemented. In fact,
this question may be at the heart of developing a successful flexible standardisation strategy. There should be an emphasis on good strategies and policies on
process, not only on content.
4
HR Subfunctions
4.1
Recruitment and Selection
The analysis in this study covered a wide range of aspects regarding recruitment
and selection. We looked at the existence of policies for this area, investigated
the pros and cons of using expatriates and recruiting externally. Moreover, in
the quantitative research we analysed, which recruitment channels (newspaper
advertisements, recruitment consultants etc.) firms use and we looked at the use
of seven different development techniques.
Overall, the pattern that emerged for recruitment and selection is one of diversity. The share of firms having a R&S policy varies across countries for each
organisational type and the recruitment and selection techniques also appear to
be significantly influenced by local practices. Based on the theoretical work we
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expected this result in particular for recruitment. Indeed, external recruitment
manages the boundary of the firm, the link between its external and internal
contexts. Thus, firms have to adapt to local practices to some extent in order to
gain a good local pool of applicants.
On a normative level we also found that the use of expatriates is particularly attractive at the early phases of internationalisation. Later, we found that firms
should (and indeed do) use a greater variety of sources. Moreover, we found that
milk rounds are an attractive tool for graduate recruitment of multinational organisations.
4.2
Training and Development
Training and development is an area where, according to our theoretical conjectures, standardisation could and should be achieved across countries. Indeed,
this idea was confirmed in the case study interviews. In the quantitative analysis
we looked at the T&D policies, the evaluation of training needs, as well as the
monitoring of the effectiveness of training and the use of development techniques.
Indeed, the existence of T&D policies is common and does not depend on the
organisation’s country of origin. However, contrary to our expectation, we
found that whether or not training needs or the success of training is evaluated
varies from country to country. Generally, the same is true for development
techniques and more pro-active evaluation techniques for identifying training
needs. Only the techniques used in order to evaluate the effectiveness of training, show headquarters standardisation.
In particular, the finding that the development techniques differ is not in line
with the practice of the firms that participated in the case study interviews.
There, it was stated that the most standardised training and development policies
are
• management development programmes,
• performance management systems,
• career planning and promotion criteria, and
• technical skills or product knowledge.
Firms also often use induction courses in order to create a company culture or
“global mind-set.”
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4.3
Compensation and Benefits
In line with theoretical conjectures, we found that compensation and benefits is
an area where standardisation is considered difficult to implement. Nevertheless,
there are clear efforts to develop European-wide or global policies, like performance-related pay, share options or profit sharing. However, the way these
policies are implemented depends on the country. Almost all interviewees regarded compensation and benefits as the area where standardisation is currently
the most difficult. An assessment that is confirmed by actual practice, as shown
by the quantitative analysis. Clearly, this is the area where one can expect more
scope for standardisation in the future, as European integration proceeds. In particular, efforts to harmonise tax regimes and industrial relations across Europe
will have an impact on this field.
5
Implications for Future Research
Our study aims at exploring HRM of multinational organisations in Europe.
However, we also wanted to learn why multinational organisations do what they
do and discover whether there is room for improvement. This led us to pursue a
two-pronged empirical approach that consists of a quantitative analysis of the
most extensive dataset on European HRM which is currently available and a
qualitative analysis that is based on interviews with HR directors in ten multinational organisations.
While we believe that this approach allowed us to overcome some of the methodological limitations of applying one empirical approach in isolation, we identified a number of areas which future research can, and should, improve.
First, we find the research question, to focus on the degree of standardisation
within multinational organisations, important and exciting. However, in order to
pursue the quantitative analysis with a given dataset, we had to burden the
reader with a number of quite complex definitions (e.g. the distinction of multinational, headquarters, and European standardisation) and, not less complex, inferences from the data. We would hope that the ongoing interest in HRM in
Europe will feed into the development of future questionnaires that may then
address the question of standardisation directly.
We can envisage two main ways in which this could be achieved. First, there are
a number of potential questions that could explore standardisation (e.g. questions like “estimate the share of subsidiaries that also follow this practice”).
Second, the questionnaires could be sent to headquarters and subsidiaries, trying
to explore the different views within an organisation.
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Indeed, we would see the lack of direct comparison within an organisation as an
important limitation of our research approach. While we have used a variety of
techniques to interpret the quantitative data, the questionnaire used for the quantitative analysis did not address the standardisation issue directly and while we
asked direct questions regarding standardisation in our interviews, these were
limited to the most senior HR function of the organisations analysed.
Future research could be improved by “holding the organisation constant” and
by illuminating it from as many angles as possible. This was not, and could not
have been, the approach here, which was a first, to a large extent exploratory,
step into the field. However, encouraged by our finding that for those practices
that could, and should, be standardised, it is the mind-set of the people that prevent this from happening, we believe that future research could generate valuable new results if it were to explore the HRM approach of multinational organisations from as many view points within the firm as possible.
From a theoretical point of view, we believe that the link between the path of
HRM during the phases of internationalisation and the obstacles to standardisation could be explored further. We conjectured here that the latter may be a
function of the former. This is a start. We also found elements of proof, particularly in the interviews. However, much more could be done to explore this issue
in more depth. Several questions seem especially interesting. Is it really the ethnocentric, inflexible attitude of the first phase that leads to excessive variation of
a polycentric approach in the second? Is the damage caused, the “organisational
trauma” in the subsidiaries, significant enough to create the “mind-set” problem
that was reported in the interviews?
Moreover, our normative analysis was “high level” and, therefore, represents a
first step towards the implementation of “flexible standardisation”. We see, as a
future task, exploring in more detail the techniques that can be employed to
avoid the pitfalls of HR, which we identified.
The investigation focused on three selected subfunctions of HRM: recruitment
and selection, training and development, as well as compensation and benefits.
Clearly, human resource management needs to address more issues than these,
like industrial relations, health, and safety. While many of our findings are
likely to be transferable to these fields of HRM, this remains a conjecture until
further research covers these other fields as well.
Finally, while our research was informed by the ongoing research into European
HRM and while we pointed out that some of our normative conclusions are
closely related to existing proposals to improve HRM, more can be done to clarify the implications of the findings generated in the set-up of our “standardisation” focus to the broader theories of European HRM developed in the literature.
While we have tried to raise a number of obvious implications here, we believe
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that future research into “standardisation” will bring up more and fruitful insights for European HRM in general.
6
Outlook
There are a number of good arguments for standardisation. In the case study interviews four main reasons for a high degree of standardisation were put forward. Standardisation
• eases administration and management,
• reduces costs,
• increases mobility of employees, and
• leads to more transparency.
Given the good arguments for standardisation one would expect a high level of
standardisation within an organisation, across all countries of operation. Only
where national legislation or common practices of the host countries make standardisation costly or infeasible, we would expect differing practices across subsidiaries of multinationals. However, the empirical analysis revealed that there
are major obstacles to standardisation beyond the external requirements and necessities that force firms to adapt to local circumstances.
These obstacles appear to be due to two related factors. First, local staff may
simply follow policies and practices that they are used to, unless there is a particular incentive to change them. Second, local staff may resist changes. Resistance to change is a common phenomenon, not exclusive to changes of HR policies and practices. However, in the interviews it has been made very clear that
bad experiences with an ethnocentric approach of the headquarters, the lack of
proper communication across the organisational units, and the lack of identification with the common purpose increase the impediments to standardisation.
We therefore propose a concept of flexible standardisation that is characterised
by three elements:
• a process of HRM that involves the local HR functions at the start of internationalisation;
• a dynamic path of HRM that avoids the polycentric approach, which many
multinational organisations adopt and which is difficult to change;
• an approach to standardisation that is aware that standardisation needs vary,
depending on the context.
180
This approach does not imply that multinational firms should not start off with
what they have, the policies and practices of the headquarters. It does imply,
however, that the headquarters should be prepared to adapt and develop the
practices – from the very beginning – jointly, with local staff.
181
Appendices
Appendix I: Questionnaire
HOW TO COMLETE THIS QUESTIONNAIRE
This questionnaire is designed to make completion as easy as possible and fast as possible.
Most questions can be answered by simply ticking boxes. Very little information will need
to be looked up.
Wherever it says “you” in the questionnaire please answer from the point of view of your
organisation.
“Organisation” means your firm, subsidiary or, if you are in a head office, the group in
which you work. For the public sector it refers to the specific local or health authority,
government, department, etc.
“Part of a larger group” refers to subsidiaries or the parent company of a group. For
central government departments the “larger group” is the civil service as a whole.
The questionnaire has been adapted for simultaneous use by private and public sector
employers in 22 countries; some questions may therefore be phrased in a slightly
unfamiliar way.
THANK YOU FOR YOUR HELP
SECTION I: PERSONNEL/HUMAN RESOURCES FUNCTION
1.
Does your organisation have a personnel or human resource department/manager?
1__
Yes
2__
No
2.
Approximately how many people are employed by your organisation in the
personnel/human resources function (including wage administration and training)?
a)
in total:____
182
Male_____
Female_____
1 __ Don’t know
b)
Do you use external providers in any of the following areas?
A.
B.
C.
D.
E.
c)
2__
Same
3__
Decreased
Yes (If Yes, go to question 5)
2__
No
If No, who on the main Board of Directors has responsibility for personnel issues?
A.
B.
C.
D.
E.
F.
5.
Increased
Does the head of the personnel/human resources function have a place on the main
Board of Directors or the equivalent?
1__
4.
1__
1__
1__
1__
1__
How has the use external providers changed during the last three years?
1__
3.
Pay and benefits
Recruitment and selection
Training and development
Workforce outplacement/reduction
No external providers used in personnel function
Chief executive/Managing director
Administrative director
Finance director
Company secretary
Production director
Other, please specify
1__
2__
3__
4__
5__
From where was the most senior personnel of human resources manager recruited?
A.
B.
C.
D.
E.
From within the personnel department
From non-personnel specialists in your organisation
From personnel specialists outside of the organisation
From non-personnel specialists outside of the organisation
Others, please specify
1__
2__
3__
4__
183
Strategy and Corporate Policies
6.
Does your organisation have a policy for the following personnel/human resource
management areas:
Yes,
written
A
B
C
D
E
F
G
7.
B
C
8.
Recruitment and
selection
Training and
development
Employee
communication
Equal opportunity /
diversity
Flexible working
practices
Management
development
Don’t know
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Does your organisation have a:
Yes,
unwritten
No
Don’t know
Mission statement
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Corporate strategy
Personnel/HR
management strategy
If you have a corporate strategy, at what stage is the person responsible for
personnel/human resources involved in its development?
A.
B.
C.
D.
184
No
Pay and benefits
Yes,
written
A
Yes,
unwritten
From the outset
Through consultation
On implementation
Not consulted
1__
2__
3__
4__
9.
Is the performance of the personnel/human resources function/department
systematically evaluated?
1__
Yes
2__
No
3__
Don’t know
(If Yes, go to next question, otherwise go to question 12)
10.
Whose views are considered in evaluating the performance?
A.
B.
C.
D.
E.
11.
Internal measures of cost effectiveness
External benchmarking of cost
Performance against objectives
Others, please specify
B
C
D
E
F
1__
1__
1_
If your organisation is part of a larger group of companies/divisions, etc., please
indicate where policies on the following issues are mainly determined.
Private sector:
Public sector:
A
1__
2__
3__
4__
What criteria are used for evaluation?
A.
B.
C.
D.
12.
Top management
Line management
Employees
Personnel/HR function/department itself
Other, please specify
International
HQ
National HQ
Subsidiary
Site /
Service dept / establishment
division
Local offices
Pay and benefits
Recruitment and
selection
Training and
development
Industrial relations
Workforce expansion /
reduction
Management
development
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
185
13.
With whom does the primary responsibility lie for major policy decisions on the
following issues?
Line
management
A
B
C
D
E
14.
B
C
D
E
15.
186
HR dept
Pay and benefits
Recruitment and
selection
Training and
development
Industrial relations
Workforce expansion /
reduction
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Has the responsibility of line management changed over the last 3 years for any of
the following issues?
Increased
A
Line mgt in
HR dept in
consultation consultation
with HR dept with line mgt
Same
Decreased
Pay and benefits
Recruitment and
selection
Training and
development
Industrial relations
Workforce expansion /
reduction
__1
__2
__3
__1
__2
__3
__1
__2
__3
__1
__2
__3
__1
__2
__3
What do you consider to be the major challenge for personnel/human resource
management in your organisation over the next 3 years?
SECTION II: STAFFING PRACTICES
1a.
Has the total number of your employees increased or decreased in excess of 5% in
the last three years?
1__
Increased
2__
Same
3__
Decreased
4__ Don’t know
1b.
Please provide approximate percentage of change: ________%
2.
Is it difficult to recruit/retain employees in the following categories?
A.
B1.
B2.
C.
D.
3.
1__
1__
1__
1__
Have you introduced any of the following in relation to recruitment or retention?
A.
B
C.
D.
E.
F.
4.
Management
Professional/technical: Information Technology
Professional/technical: Other
Clerical
Manual
Recruiting abroad
Retraining existing employees
Increased pay/benefits
Relocation of the company
Marketing the organisation’s image
Other, please specify
1__
1__
1__
1__
1__
Have any of the following methods been used to reduce the number of employees?
A.
B
C.
D.
E.
F
G.
H.
I.
Recruitment freeze
Early retirement
Voluntary redundancies
Compulsory redundancies
Redeployment
Outplacement
No renewal of fixed term / temporary contracts
Outsourcing
Others, please specify
1__
1__
1__
1__
1__
1__
1__
1__
187
5.
How are managerial vacancies generally filled? (Please tick as many as applicable
for each management level).
A
Internally
B
C
Recruitment/head
hunters/ consultancies
Advertise in newspapers
D
Word of mouth
E
Others, please specify
6.
Senior
Management
Middle
Management
Junior
Management
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
Please indicate how regularly any of the following selection methods are used.
For every For most
appoint- appointment
ments
For some For few
appoint- appointments
ments
Not used
A Interview panel
B One-to-one
interviews
C Application forms
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
D Psychometric test
E Assessment centre
F Graphology
G References
H Others, please
specify
188
7.
Do you monitor the proportion of the following in your workforce with regard to
recruitment, training and/or promotion?
Recruitment
A
B
C
8.
Training
Promotion
Don’t know
People with disabilities
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
Women
People from ethnic
minorities
Have you specially targeted any of the following in your recruitment process?
A.
B
C.
D.
E.
F
G.
H.
Long-term unemployed
Older people (over 50 years of age)
People with disabilities
People from ethnic minorities
Women
School leavers
University graduates
Women returnes
1__
1__
1__
1__
1__
1__
1__
1__
189
Flexible Working Practices
9.
Has there been a change in the use of the following working arrangements over the
last three years?
Increased
A
B
C
D
E
F
G
H
I
J
K
L
190
Same
Decreased
Not used
Weekend work
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Shift work
Overtime
Annual hours contract
Part-time work
Job sharing
Flexi-time
Temporary / casual
Fixed-term contracts
Homebased work
Tele-working
Subcontracting /
oursourcing
10.
Please indicate the approximate proportion of your workforce who are on the
following working arrangements:
Not
used
Less
than
1%
1 – 5%
6 – 10% 11 –
20%
More
than
20%
A. Part-time
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
__1
__2
__3
__4
__5
__6
B. Temporary/casual
C. Fixed-term
D. Homebased work
E. Tele-working
F. Shift working
G. Annual hours contract
11.
Has there been a major change in the specification of jobs over the last 3 years?
(Please tick as many as are applicable for each job category).
Management
A
Jobs made more specific
B
No major change
C
Jobs made wider / more
flexible
Don’t know
D
Professional / Clerical
Technical
Manual
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
191
SECTION III: EMPLOYEE DEVELOPMENT
1a)
Approximately what proportion of the annual salaries and wages bill is currently
spent on training?
%
1__
don’t know
1b)
Approximately what proportion of employees have been on internal or external
training activities within the last year?
%
2.
1__
don’t know
How many day’s training per year does each employee in each staff category below
receive on average?
Don’t
know
A.
B.
C.
D.
3.
Management
Professional / technical
Clerical
Manual
B
C
D
E
F
192
1__
1__
1__
1__
Do you systematically analyse employee training needs, how often are the
following methods used?
Always
A
days per year per employee
days per year per employee
days per year per employee
days per year per employee
Analysis of projected
business/service plans
Training audits
Line management
requests
Performance appraisel
Often
Sometimes
Never
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Employee requests
Others, please specify
4.
Do you monitor the effectiveness of your training?
1__
5.
Yes
2__
No
B
6.
Immediately after
training
Some month after
training
B
C
D
Often
Sometimes
Never
__1
__2
__3
__4
__1
__2
__3
__4
Do you systematically evaluate training on the basis of:
Yes
A
Don’t know
If Yes, how often is formal evaluation used?
Always
A
3__
Learning (usually
assessed by a test)
Behaviour (changes in
job performance)
Results (changes in
organisational
performance)
Reaction/evaluation (e.g.
satisfaction expressed by
employees)
No
Don’t know
__1
__2
__3
__1
__2
__3
__1
__2
__3
__1
__2
__3
7. Do you regularly use any of the following?
Yes
A
Formal careers plans
B
Assessment centres
C
Succession plans
D
Planned job rotation
E
“High flyer” schemes
for managers
International experience
schemes for managers
F
No
__1
__2
__1
__2
__1
__2
__1
__2
__1
__2
__1
__2
193
8. Has there be a change in the use of any of the following to deliver training over the last
three years?
Increased
A
Internal training staff
B
Line managers
C
D
External training
providers
On-the-job training
E
Coaching / mentoring
F
Computer based
packages
Same
Decreased
Not used
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
9. How important do you think the following training areas will be to your organisation
over the next three years?
Very
A People management &
supervision
B Computers and new
technology
C Business administration
Quite
Average
Not very
Not
used
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
__1
__2
__3
__4
__5
D Strategy formulation
E Marketing and sales
F Health, safety and work
environment
G Customer service skills
H Management of change
I
Quality management
194
Appraisal
10. Do you have an appraisal system in operation for any of the following staff categories?
Yes
A
B
C
D
No
Management
__1
__2
__1
__2
__1
__2
__1
__2
Professional / Technical
Clerical
Manual
11. If you have an appraisal system, do any of the following formally contribute to the
appraisal process?
A.
B
C.
D.
E.
F
G.
Immediate superior
Next level superior
The employee
Subordinates
Peers
Customers
Others, please specify
1__
1__
1__
1__
1__
1__
1__
12. Is the appraisal system used to determine any of the following? (Please tick as many as
applicable).
A.
B
C.
D.
E.
F
Individual training needs
Organisational training needs
Promotion potential
Career development
Individual performance related pay
Organisation of work
1__
1__
1__
1__
1__
1__
195
SECTION IV: COMPENSATION AND BENEFITS
1. At what level(s) is basic pay determined? (Please tick as many as applicable for each
category of staff).
Management
A
C
National / Industry-wide
collective bargaining
Regional collective
bargaining
Company / division, etc.
D
Establishment / site
E
Individual
F
Others, please specify
B
Professional / Clerical /
Manual
Clerical
Administrative
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
2. Has there been a change in the share of the following in the total reward package in the
last three years?
Management
A
Variable pay
B
Non-money beneftis
196
Professional / Clerical /
Manual
Clerical
Administrative
__1
__2
__3
__4
__1
__2
__3
__4
3. Do you offer any of the following incentive schemes? (Please tick as many as are
applicable for each category of staff).
Management
A
Employee share options
B
Profit sharing
C
Group bonus
D
Merit / Performance
related pay
Professional / Clerical /
Manual
Clerical
Administrative
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
4. Do you offer any of the following schemes?
A.
B
C.
D.
E.
F
G.
Workplace childcare
Childcare allowance
Career break scheme
Maternity leave (in excess of statutory requirements)
Paternity leave (in excess of statutory requirements)
Pension scheme
Education / training break
1__
1__
1__
1__
1__
1__
1__
197
SECTION V: EMPLOYEE RELATION AND COMMUNICATION
1.
2.
What proportion of the total number of employees in your organisation are
members of a trade union?
1__
0%
2__
1-10%
3__
11-25%
5_
51-75%
6__
76-100%
7__
Don’t know
Increased
2__
Same
Yes
2__
B
C
D
E
F
198
4__ No influence
No
Has there been a change in how you communicate major issues to your employees
during the last 3 years?
Increased
A
3__ Decreased
Do you have a joint consultative committee or works council?
1__
4.
26-50%
Has the influence of trade unions on your organisation changed during the last three
years?
1__
3.
4__
Through representative
staff bodies (eg. Trade
unions)
Verbally, direct to
employees
Written, direct to
employees
Computer / electronic
mail systems
Team briefings
Others, please specify
Same
Decreased
Not used
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
5.
Which employee categories are formally briefed about the following issues?
(Please tick as many as applicable),
Strategy
A
B
C
D
6.
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
__1
Professional / technical
Clerical
Manual
Has there been a change in the way employees communicate their views to
management in the past three years?
E
Direct to senior
managers
Through immediate
superior
Through trade unions /
works council
Through regular
workforce meetings
Team briefings
F
Suggestion schemes
G
Attitude survey
B
C
D
Organisation
of work
Management
Increased
A
Financial
Performance
Same
Decreased
Not used
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
199
SECTION VI: ORGANISATIONAL DETAILS
1.
Please indicate the main sector of industry or services in which you operate?
A.
B
C.
D.
E.
F
G.
I
J.
K.
L.
M
N.
O.
P.
2.
3__
4__
5__
6__
7__
8__
9__
10__
11__
12__
13__
14__
15__
In total_____
Part-time _____
Male___
Male___
Female___
Female___
Please provide the following information about your workforce:
A.
B.
C.
D.
200
1__
2__
Approximately how many people are employed by your organisation?
A.
B.
3.
Agriculture, hunting, forestry, fishing
Energy and water
Chemical products; extraction and processing of
non-energy minerals
Metal manufacturing; mechanical, electrical and instrument
Engineering; office and data processing machinery
Other manufacturing, (eg food, drink and tobacco; textiles;
Clothing; paper, printing & publishing etc.
Building and civil engineering
Retail and distribution; hotels; catering; repairs
Transport & communication (eg rail, postal services,
telecoms etc)
Banking; finance; insurance; business services (eg consultancies,
PR and advertising; law firms etc)
Personal, domestic, recreational services
Health services
Other services (eg television and radio, R&D, charities, etc.)
Education (including universities and further education)
Local government
Central government
Other, please specify
Annual staff turnover
Age structure
Absenteeism
Education structure
__%turnover per year
1__don’t know
__%of employees > 25 years 1__don’t know
__%average days per year 1__don’t know
__%of graduates
1__don’t know
__%of post graduates
4.
Please provide the following information:
A.
B.
C.
D..
5.
__%workforce
__%workforce
__%workforce
__%workforce
In the UK
World-wide, including UK
1__don’t know
1__don’t know
What percentage of the operating costs was accounted for by labour costs?
__% of operating costs
7.
Well in excess of costs
Sufficient to make a small profit
Enough to break even
Insufficient to cover costs
So low as to produce large losses
B
C
D
E
1__
2__
3__
4__
5__
Thinking of competitive success, how important are the following features of the
main products and/or services or your organisation?
Very
important
A
1__don’t know
If you are a private organisation, would you say the gross revenue over the past 3
years has been:
A.
B
C.
D.
E.
8.
1__don’t know
1__don’t know
1__don’t know
1__don’t know
If your organisation is part of a larger group of companies/divisions, etc,
approximately how many people are employed by the whole group?
A.
B.
6.
Manual employees
Clerical employees
Professional/technical
Managers
Somewhat
important
Not important Not
applicable
Price
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Quality
Variety (customising
products services)
Service (availability,
speed of delivery)
Innovation
201
9.
Compared to other organisations in your sector, where would you rate the
performance of your organisation in relation to the following?
Top 10%
A
B
C
D
E
F
10.
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
__1
__2
__3
__4
Profitability
Product to market time
Rate of innovation
Stock market
performance
How would you describe the market(s) for your organisation’s products or
services?
Local
Regional
National
European
World-wide
1__
2__
3__
4__
5__
Is your organisation a member of an employers association?
Yes
2__
No
2__
Same
Is the market you sell into:
1__
202
Not
applicable
Level of productivity
1__
12.
Lower half
Service quality
A.
B
C.
D.
E.
11.
Upper half
Growing
3__
Declining
13.
Has your organisation been involved in any of the following changes in the last 3
years?
A.
B
C.
D.
14.
15.
Acquisition of another organisation
Takeover by another organisation
Merger
Relocation
Is your organisation:
1__
Private
4__
Other, please specify
2__
State owned
3__
Part-state owned
Where are the corporate headquarters of your organisation based. (Please refer to
ultimate parent company if your organisation is part of larger group).
Denmark
France
Germany
Italy
The Netherlands
Portugal
Austria
Republic of Ireland
Spain
UK
Other, please specify
16.
1__
1__
1__
1__
__1
__2
__3
__4
__5
__6
__7
__8
__9
__10
Norway
Sweden
Finland
Czech Rep.
Switzerland
Belgium
Greece
Turkey
Bulgaria
Hungary
__11
__12
__13
__14
__15
__16
__17
__18
__19
__20
Poland
Other Europe
New Zealand
Australia
Japan
Other Asia
USA
Canada
Cyprus
Tunisia
__21
__22
__23
__24
__25
__26
__27
__28
__29
__30
Is your organisation:
A.
B
C.
D.
E.
F.
F.
Corporate headquarters of an International group
Corporate headquarters of a National group
Subsidiary/division of an International group
Subsidiary/division of a National group
Independent company with more than one site
Independent single site organisation
Other, please specify
1__
2__
3__
4__
5__
6__
203
17.
If you are based in the UK, pleases tick your region:
London
South West
Yorkshire
Scotland
__1
__4
__7
_10
Rest of South East
West Midlands
North West
Wales
__2
__5
__8
_11
East Anglia
East Midlands
NE & Humberside
Northern Ireland
18.
If you are based in the Republic of Ireland please tick:
19.
What year was your organisation established?_____
204
__3
__6
__9
_12
__1
1__
don’t know
PERSONAL DETAILS
20a)
Are you the most senior personnel or human resources manager?
1__
b)
Personnel/HR Manager/Director
Specialist (training, pay etc.)
Chief executive, company secretary, senior manager
Other, please specify
Male
Female
1__ not applicable
If you are a personnel/human resource management specialist, how long have you
been working in a specialist personnel/human resources or training job?
___years
24.
2__
How long have you been working for the organisation?
___years
23.
No
Are you:
1__
22.
2__
If No, please give your title:
1__
2__
3__
4__
21.
Yes
1__ not applicable
Do you have a university degree?
1__
Yes
2__
No
If Yes, in what academic field did you study? (tick main one only).
A.
B
C.
D.
E.
F.
G.
H.
Business studies
Economics
Social or behavioural sciences
Humanities/Art/Languages
Law
Engineering
Natural sciences
Other, please specfiy
1__
2__
3__
4__
5__
6__
7__
205
INTERNATIONAL TRAVEL QUESTIONS
This year we would like you to answer two additional questions on issues which have not
previously been dealt with in the questionnaire. If they are relevant to your organisation we
would appreciate your response.
1a.
Approximately how many people in your organisation travel to other countries
frequently (more than once per month on average)?
____people
1__None
1b.
What are the major HRM problems you face with this group?
2.
How many people in your organisation are expatriates (based outside their home
country for more than twelve months)?
___people
1__None
To ensure you receive your copy of the Executive Report please complete the details
below.
Name and Title
Job Title
Organisation
Address
Postcode
Thank you for taking the time to complete this questionnaire
206
Appendix II: Division of Sample into National and Multinational Organisations
In order to divide the dataset into national and multinational organisation the following
procedures were undertaken. Companies answering question 16 of part VI of the questionnaire with either:
• 1 (corporate headquarters of an International group) or
• 3 (subsidiary/division of an International group)
were selected for the „multinational group“, while companies answering this question
with either
• 2 (corporate headquarters of a National group),
• 4 (subsidiary/division of a National group) or
• 6 (independent single site organisation)243
were put into the „national group“. Companies, answering with
• 5 (independent company with more than one site or „other“),
were looked at in more detail, as the answer does not imply whether they are a national
or a multinational company. Therefore, a table was conducted containing information
about the size of these organisations (question s6v2a&b), the number of people employed in the country where the questionnaire was filled out (question s6v5a) and the
number of employees worldwide (question s6v5b). On the basis of this table, the plausibility of the answers was controlled and hence, further companies were added to the
„Multinational group“244. In addition, the following criteria were used to further select
this group of respondents:
All companies:
• answering question 5b with 1 (Don’t know how many people are employed worldwide); or
• not providing information about their number of employees (questions s6v2a&b
and s6v5a&b); or
243
Two cases were deleted, as they mentioned their companies´ headquarters as being outside the country
where the questionnaire was filled out. This answer is not plausible.
244
The selection was is favour of the multinational group only, as the reverse answer to this question does not
imply that the organisation is operating multinational.
207
• with less than 150 employees overall and/or world-wide; or
• with wrong or misleading answers like answering question 5 b (How many people
are employed in the UK) with the same amount of employees as question 5 b (How
many people are employed world-wide, including the UK); or
• where the difference between the number of national and multinational employees
is marginal like 323 employees in the UK and 335 employees world-wide, including the UK; or
• where the answers to the above asked questions do not make any sense (e.g. responr. 101 or 102)
were deleted from the dataset, due to mistakes or possible misunderstandings, it was
impossible to clearly identify them as either national or multinational organisation.
In a next step the group of multinational organisation was further divided into those
having their headquarters in the country where the questionnaire was filled out and
those having their headquarters outside the country. This division was made on the basis of the country variable and question s6v15, asking for the location of the companies’ headquarters. The idea of this further division was to see, whether multinationals
differ depending on the location of their headquarters and hence, due to the impact of
the country of origin and the country of operation. In the following, the first group of
multinational organisations, those with their HQ in the country where the questionnaire
was filled out, are titled as MHQ sample and the second group as MSUB sample. Due
to this selection, the following three sub-samples according to the type of organisation
and their HQ were finally categorised:
• Multinational organisation with their HQ outside the country where the questionnaire was filled out (MSUB),
• Multinational organisation with their HQ within the country where the questionnaire was filled out (MHQ)
• National sample (NAT).
After the database was divided into two main groups of national and multinational organisations plausibility tests were taken. For example, organisations being identified as
national organisations but mentioning their companies´ HQ as being outside their country (question s6v15) were also deleted from the data file. Furthermore, companies with
e.g. no HR department (question s1v1) or with only one employee being employed by
the HR department were as well not considered at all. Additionally, only private owned
companies were taken into consideration, in order to minimise the amount of influence
on the research results.
208
Appendix III: List of Variables
List of variables selected from the Cranet-E questionnaire for secondary analysis (ChiSquare tests). Further variables like country, size of the organisation were also used,
e.g. in order to select or describe the research sample underlying this study, but should
not be listed here.
Variable No.
S1v2b1
S1v2b2
S1v2b3
S1v3
S1v5
Content of Variable
Use of External Provider for C&B
Use of External Provider for R&S
Use of External Provider for T&D
HR director
Background of Senior HR Manager
S1v6a
HR policy for C&B
S1v6b
HR policy for R&S
S1v6c
HR policy for T&D
S1v7b
Corporate Strategy
S1v7c
HR Strategy
S1v8
Involvement of HR department in
Corporate Strategy
Policy determination for C&B
1 or 2 = central (HQ)
3 or 4 = decentral
Policy determination for R&S
1 or 2 = central (HQ)
3 or 4 = decentral
Policy determination for T&D
1 or 2 = central (HQ)
3 or 4 = decentral
Responsibility for C&B policies
1 or 2 = Line management
3 or 4 = HR department
Responsibility for R&S policies
1 or 2 = Line management
3 or 4 = HR department
Responsibility for T&D policies
1 or 2 = Line management
3 or 4 = HR department
Difficulty to recruit management staff
Difficulty to recruit IT staff
Difficulty to recruit professional staff
Difficulty to recruit clerical staff
S1v12a
S1v12b
S1v12c
S1v13a
S1v13b
S1v13c
S2v2a
S2v2b1
S2v2b2
S2v2c
Categorisation of Variable
A or C = Personnel specialist
B or D = Non-personnel
specialist
1 or 2 = yes
3 = no
1 or 2 = yes
3 = no
1 or 2 = yes
3 = no
1 or 2 = yes
3 = no
1 or 2 = yes
3 = no
209
S2v2d
S2v5a1
S2v6a
Difficulty to recruit manual staff
Vacancies are filled for senior
agement staff: internally
Vacancies are filled for middle
agement staff: internally
Vacancies are filled for junior
agement staff: internally
Vacancies are filled for senior
agement staff: consultancy
Vacancies are filled for middle
agement staff: consultancy
Vacancies are filled for junior
agement staff: consultancy
Vacancies are filled for senior
agement staff: newspaper advert
Vacancies are filled for middle
agement staff: newspaper advert
Vacancies are filled for junior
agement staff: newspaper advert
Vacancies are filled for senior
agement staff: word of mouth
Vacancies are filled for middle
agement staff: word of mouth
Vacancies are filled for junior
agement staff: word of mouth
Use of Interview panel
S2v6b
Use of One-to-one interview
S2v6c
Use of Application form
S2v6d
Use of Psychometric tests
S2v6e
Use of Assessment Centre
S2v6f
Use of Graphology
S2v6g
Use of References
S3v3
S3v4a
Analysis of training needs
Training need analysis: Business plan
S2v5a2
S2v5a3
S2v5b1
S2v5b2
S2v5b3
S2v5c1
S2v5c2
S2v5c3
S2v5d1
S2v5d2
S2v5d3
S3v4b
S3v4c
210
manmanmanmanmanmanmanmanmanmanmanman1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 or 4 = yes
5 = no
1 or 2 or 3 = yes
4 = no
Training need analysis: Training audits 1 or 2 or 3 = yes
4 = no
Training need analysis: Line manage- 1 or 2 or 3 = yes
S3v4d
S3v4e
S3v5
S3v6a
S3v6b
S3v7a
S3v7b
S3v7c
S3v7d
S3v8a
S3v8b
S3v8c
S3v8d
S3v8e
S3v8f
S4v1a1
S4v1a2
S4v1a3
S4v1a4
S4v1b1
S4v1b2
S4v1b3
S4v1b4
S4v1c1
S4v1c2
ment request
Training need analysis: Performance
appraisal
Training need analysis: Employee request
Monitor effectiveness of training
Evaluation of training: immediately
after the training
Evaluation of training: some month
later
Evaluate training on the basis of:
Learning
Evaluate training on the basis of: Behaviour
Evaluate training on the basis of: Results
Evaluate training on the basis of: Reaction
Use of Formal Career Plans
Use of Assessment Centres
Use of Succession Plans
Use of Planned Job rotation
Use of High flier schemes
Use of International experience
scheme
Basis pay determination: national level
-management staff
Basis pay determination: national level
-professional staff
Basis pay determination: national level
-clerical staff
Basis pay determination: national level
-manual staff
Basis pay determination: regional collective bargaining – management staff
Basis pay determination: regional collective bargaining – professional staff
Basis pay determination: regional collective bargaining – clerical staff
Basis pay determination: regional collective bargaining – manual staff
Basis pay determination: company
level – management staff
Basis pay determination: company
level – professional staff
4 = no
1 or 2 or 3 = yes
4 = no
1 or 2 or 3 = yes
4 = no
1 or 2 or 3 = yes
4 = no
1 or 2 or 3 = yes
4 = no
211
S4v1c3
S4v1c4
S4v1d1
S4v1d2
S4v1d3
S4v1d4
S4v1e1
S4v1e2
S4v1e3
S4v1e4
S4v2a
S4v2b
S4v3a1
S4v3a2
S4v3a3
S4v3a4
S4v3b1
S4v3b2
S4v3b3
S4v3b4
S4v3c1
S4v3c2
S4v3c3
212
Basis pay determination: company
level – clerical staff
Basis pay determination: company
level – manual staff
Basis pay determination: establishment
level – management staff
Basis pay determination: establishment
level – professional staff
Basis pay determination: establishment
level – clerical staff
Basis pay determination: establishment
level – manual staff
Basis pay determination: individual
level – management staff
Basis pay determination: individual
level – professional staff
Basis pay determination: individual
level – clerical staff
Basis pay determination: individual
level – manual staff
Variable pay
1 or 2 or 3 = yes
4 = no
Non-money benefits
1 or 2 or 3 = yes
4 = no
Incentive schemes: Employee share
options - Management
Incentive schemes: Employee share
options – Professional
Incentive schemes: Employee share
options – Clerical
Incentive schemes: Employee share
options - Manual
Incentive schemes: Profit sharing Management
Incentive schemes: Profit sharing Professional
Incentive schemes: Profit sharingClerical
Incentive schemes: Profit sharing Manual
Incentive schemes: Group bonus Management
Incentive schemes: Group bonus - Professional
Incentive schemes: Group bonus -
S4v3c4
S4v3d1
S4v3d2
S4v3d3
S4v3d4
Clerical
Incentive schemes: Group bonus Manual
Incentive schemes: Merit/Performance
related pay - Management
Incentive schemes: Merit/Performance
related pay - Professional
Incentive schemes: Merit/Performance
related pay - Clerical
Incentive schemes: Merit/Performance
related pay - Manual
213
Appendix IV: Results from the Chi-Square Tests
The following tables summarise the results from the various Chi-Square tests undertaken with one table for each variable analysed. The table is structured as followed
a
b
f
k
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
c
g
l
d
h
m
e
i
n
j
Variable number and content of variable
ALL: includes the whole research sample
MSUB: includes the whole MSUB sample (all multinational organisations of
the research sample with their headquarters outside the country where the questionnaire was filled out)
MHQ: includes the whole MHQ sample (all multinational organisations of the
research sample with their headquarters in the country where the questionnaire
was filled out)
NAT: includes the whole NAT sample (all national organisations of the research
sample)
% of all organisations within the ALL-sample that have the particular strategy,
policy or practice asked for within the question analysed
% of all organisations within the MSUB-sample that have the particular strategy, policy or practice asked for within the question analysed
% of all organisations within the MHQ-sample that have the particular strategy,
policy or practice asked for within the question analysed
% of all organisations within the NAT-sample that have the particular strategy,
policy or practice asked for within the question analysed
Significance of Chi-Square test of the whole sample (ALL) by type of organisation (MSUB vs. MHQ vs. MNAT)
Significance of Chi-Square test of the whole sample (ALL) by country (UK vs.
G vs. DK vs. CH)
Significance of Chi-Square test of the MSUB sample by country (MSUBUK vs.
MSUBG vs. MSUBDK vs. MSUBCH)
Significance of Chi-Square test of the MHQ sample by country (MHQUK vs.
MHQG vs. MHQDK vs. MHQCH)
Significance of Chi-Square test of the NAT sample by country (NATUK vs.
NATG vs. NATDK vs. NATCH)
The variables are in the order as they are discussed within the empirical part of this
study.
Strategies and Policies
S1v7b: Organisation has a corporate strategy
214
ALL
93%
.392
MSUB
94%
.577
MHQ
95%
.152
NAT
91%
.295
.068
S1v8: Involvement of the HR department in the development of the corporate strategy
From
the
outset
Consultative
Implementation
Not
consulted
ALL
50
MSUB
51
MHQ
48
NAT
52
27
10
27
10
29
11
24
10
13
12
12
14
.000
.002
.000
.013
.784
S1v7c: Organisation has an HR management strategy
ALL
77%
.000
MSUB
80%
.207
MHQ
77%
.130
NAT
73%
.008
.087
S1v6b: Organisation has a policy for R&S
ALL
85%
.000
MSUB
88%
.078
MHQ
85%
.000
NAT
80%
.001
.008
S1v6c: Organisation has a policy for T&D
ALL
89%
.645
MSUB
90%
.889
MHQ
90%
.132
NAT
87%
.763
.287
S1v6a: Organisation has a policy for C&B
ALL
90%
MSUB
91%
MHQ
90%
NAT
89%
.662
215
.336
.461
.611
.967
S1v12b: Determination of R&S policies: centralised
ALL
46%
.006
MSUB
51%
.628
MHQ
44%
.001
NAT
37%
.085
.019
S1v12c: Determination of T&D policies: centralised
ALL
49%
.000
MSUB
55%
.144
MHQ
49%
.000
NAT
39%
.023
.005
S1v12a: Determination of C&B policies: centralised
ALL
63%
.000
MSUB
64%
.131
MHQ
64%
.000
NAT
59%
.080
.472
S1v13b: Primary responsibility for major R&S decisions with HR
ALL
46%
.000
MSUB
49%
.000
MHQ
43%
.000
NAT
48%
.000
.249
S1v13c: Primary responsibility for major T&D decisions with HR
ALL
53%
.000
MSUB
56%
.001
MHQ
50%
.000
NAT
53%
.000
.233
S1v13a: Primary responsibility for major C&B decisions with HR
ALL
52%
.000
216
MSUB
58%
.000
MHQ
50%
.000
NAT
53%
.000
.010
S1v3: Organisation has an HR director
ALL
50%
.275
MSUB
60%
.364
MHQ
46%
.757
NAT
45%
.095
.000
S1v5: Background of the most senior HR manager: Personnel Specialist
ALL
68%
.000
MSUB
72%
.000
MHQ
69%
.037
NAT
62%
.000
.015
S1v2b2: Organisation uses external provider for R&S
ALL
64%
.056
MSUB
70%
.376
MHQ
70%
.020
NAT
50%
.219
.000
S1v2b3: Organisation uses external provider for T&D
ALL
76%
.000
MSUB
80%
.000
MHQ
79%
.002
NAT
68%
.000
.000
S1v2b1: Organisation uses external provider for C&B
ALL
25%
.000
MSUB
31%
.000
MHQ
24%
.009
NAT
19%
.137
.001
217
Recruitment and Selection:
S2v5a1: Vacancies are filled internally for senior management
ALL
53%
.000
MSUB
58%
.002
MHQ
55%
.001
NAT
45%
.042
.002
S2v5b1: Recruitment consultants are used for senior management
ALL
72%
.000
MSUB
74%
.008
MHQ
78%
.931
NAT
65%
.000
.000
S2v5c1: Vacancies are advertised in the newspaper for senior management
ALL
34%
.017
MSUB
32%
.033
MHQ
30%
.554
NAT
39%
.284
.026
S2v5d1: Vacancies are advertised by word of mouth for senior management
ALL
12%
.002
MSUB
13%
.206
MHQ
12%
.174
NAT
12%
.020
.862
S2v5a2: Vacancies are filled internally for middle management
ALL
81%
.101
MSUB
81%
.005
MHQ
86%
.511
NAT
76%
.487
.004
S2v5b2: Recruitment consultants are used for middle management
ALL
42%
.000
218
MSUB
52%
.123
MHQ
41%
.008
NAT
33%
.000
.000
S2v5c2: Vacancies are advertised in the newspaper for middle management
ALL
71%
.021
MSUB
67%
.124
MHQ
73%
.001
NAT
74%
.242
.082
S2v5d2: Vacancies are advertised by word of mouth for middle management
ALL
21%
.013
MSUB
22%
.533
MHQ
22%
.621
NAT
19%
.005
.531
S2v5a3: Vacancies are filled internally for junior management
ALL
72%
.005
MSUB
70%
.250
MHQ
75%
.121
NAT
72%
.022
.367
S2v5b3: Recruitment consultants are used for junior management
ALL
18%
.000
MSUB
24%
.000
MHQ
17%
.000
NAT
14%
.000
.001
S2v5c3: Vacancies are advertised in the newspaper for junior management
ALL
68%
.154
MSUB
66%
.081
MHQ
72%
.234
NAT
65%
.051
.105
S2v5d3: Vacancies are advertised by word of mouth for junior management
ALL
32%
.086
MSUB
33%
.609
MHQ
33%
.122
NAT
28%
.668
.317
S2v6c: Organisation uses application form
ALL
MSUB
MHQ
NAT
219
77%
.000
78%
.000
77%
.000
74%
.000
.475
S2v6b: Organisation uses one-to-one interviews
ALL
96%
.394
MSUB
97%
.996
MHQ
96%
.425
NAT
94%
.579
.258
S2v6a: Organisation uses Interview panel
ALL
75%
.003
MSUB
75%
.042
MHQ
78%
.067
NAT
72%
.000
.128
S2v6e: Organisation uses assessment centre
ALL
42%
.000
MSUB
41%
.006
MHQ
47%
.000
NAT
36%
.001
.007
S2v6d: Organisation uses psychometric tests
ALL
56%
.000
MSUB
67%
.000
MHQ
58%
.000
NAT
47%
.000
.000
NAT
11%
.000
.035
NAT
92%
.000
.348
S2v6f: Organisation uses graphology
ALL
10%
.000
MSUB
7%
.000
MHQ
13%
.000
S2v6g: Organisation uses references
ALL
93%
.000
220
MSUB
94%
.000
MHQ
94%
.000
S2v2a: Difficulty to recruit management staff
ALL
37%
.000
MSUB
30%
.006
MHQ
38%
.000
NAT
43%
.001
.007
NAT
52%
.312
.000
S2v2b1: Difficulty to recruit IT
ALL
64%
.304
MSUB
68%
.946
MHQ
70%
.150
S2v2b2: Difficulty to recruit professional
ALL
47%
.000
MSUB
47%
.002
MHQ
47%
.000
NAT
46%
.042
.949
NAT
7%
.202
.070
NAT
29%
.068
.000
S2v2c: Difficulty to recruit clerical
ALL
8%
.005
MSUB
11%
.622
MHQ
6%
.040
S2v2d: Difficulty to recruit manual
ALL
21%
.000
MSUB
14%
.585
MHQ
20%
.000
221
Training and Development:
S3v3: Organisation analyse training needs
ALL
76%
.000
MSUB
76%
.001
MHQ
81%
.010
NAT
69%
.002
.000
S3v5: Organisation monitor the effectiveness of training
ALL
63%
.000
MSUB
65%
.000
MHQ
68%
.000
NAT
56%
.000
.006
S3v6a: Organisation evaluates training immediately after the training
ALL
98%
.058
MSUB
98%
.642
MHQ
99%
.032
NAT
97%
.279
.515
S3v6a: Organisation evaluates training some month later
ALL
89%
.012
MSUB
90%
.090
MHQ
90%
.550
NAT
85%
.287
.177
S3v7a: Organisation evaluates training on the basis of learning
ALL
33%
.000
MSUB
35%
.396
MHQ
33%
.001
NAT
32%
.004
.793
S3v7b: Organisation evaluates training on the basis of behaviour
ALL
74%
.000
222
MSUB
81%
.046
MHQ
73%
.000
NAT
70%
.000
.016
S3v7c: Organisation evaluates training on the basis of results
ALL
63%
.000
MSUB
65%
.149
MHQ
58%
.004
NAT
67%
.006
.148
S3v7d: Organisation evaluates training on the basis of reaction
ALL
88%
.000
MSUB
92%
.590
MHQ
90%
.175
NAT
81%
.000
.001
S3v4c: Organisation uses line management requests for the analysis of training needs
ALL
100%
.574
MSUB
100%
MHQ
100%
NAT
100%
.717
.305
S3v4e: Organisation uses employee requests for the analysis of training needs
ALL
99%
.538
MSUB
99%
.617
MHQ
100%
.669
NAT
98%
.544
.232
S3v4a: Organisation analysis projected business plans for the analysis of training needs
ALL
91%
.008
MSUB
90%
.364
MHQ
92%
.004
NAT
90%
.343
.726
S3v4d: Organisation uses performance appraisal for the analysis of training needs
ALL
93%
.000
MSUB
96%
.000
MHQ
94%
.002
NAT
89%
.000
.008
S3v4b: Organisation uses training audits for the analysis of training needs
ALL
MSUB
MHQ
NAT
223
91%
.000
89%
.001
94%
.097
90%
.000
.082
S3v8b: Organisation regularly uses assessment centre
ALL
25%
.000
MSUB
26%
.010
MHQ
31%
.001
NAT
18%
.002
.000
S3v8c: Organisation regularly uses succession plans
ALL
57%
.000
MSUB
57%
.001
MHQ
61%
.000
NAT
52%
.002
.042
S3v8d: Organisation regularly uses planned job rotation
ALL
29%
.000
MSUB
32%
.034
MHQ
30%
.005
NAT
23%
.001
.028
S3v8e: Organisation regularly uses high flier schemes
ALL
43%
.000
MSUB
49%
.000
MHQ
45%
.002
NAT
33%
.003
.000
S3v8f: Organisation regularly uses international experience schemes
ALL
27%
.000
MSUB
39%
.039
MHQ
33%
.001
NAT
7%
.358
.000
S3v8a: Organisation regularly uses formal career plans
ALL
30%
.000
224
MSUB
33%
.166
MHQ
30%
.002
NAT
25%
.238
.080
Compensation and Benefits:
S4v1a1: Basis pay is determined at national level for management
ALL
6%
.013
MSUB
5%
.019
MHQ
3%
.538
NAT
9%
.612
.001
S4v1a2: Basis pay is determined at national level for professional
ALL
20%
.000
MSUB
15%
.000
MHQ
20%
.000
NAT
24%
.000
.018
S4v1a3: Basis pay is determined at national level for clerical staff
ALL
22%
.000
MSUB
14%
.000
MHQ
22%
.000
NAT
30%
.000
.000
S4v1a4: Basis pay is determined at national level for manual staff
ALL
29%
.000
MSUB
21%
.000
MHQ
31%
.000
NAT
36%
.000
.000
S4v1b1: Basis pay is determined at regional level for management
ALL
2%
.001
MSUB
2%
.123
MHQ
2%
.043
NAT
3%
.211
.436
S4v1b2: Basis pay is determined at regional level for professional
ALL
12%
.000
MSUB
8%
.000
MHQ
14%
.000
NAT
15%
.000
.007
S4v1b3: Basis pay is determined at regional level for clerical staff
225
ALL
14%
.000
MSUB
9%
.000
MHQ
15%
.000
NAT
18%
.000
.002
S4v1b4: Basis pay is determined at regional level for manual staff
ALL
18%
.000
MSUB
12%
.000
MHQ
22%
.000
NAT
18%
.000
.001
S4v1c1: Basis pay is determined at company level for management
ALL
30%
.000
MSUB
36%
.000
MHQ
30%
.000
NAT
23%
.000
.001
S4v1c2: Basis pay is determined at company level for professional
ALL
28%
.000
MSUB
30%
.000
MHQ
28%
.000
NAT
26%
.000
.442
S4v1c3: Basis pay is determined at company level for clerical staff
ALL
27%
.000
MSUB
29%
.000
MHQ
28%
.000
NAT
25%
.000
.336
S4v1c4: Basis pay is determined at company level for manual staff
ALL
22%
.000
MSUB
25%
.000
MHQ
20%
.000
NAT
21%
.000
.249
S4v1d1: Basis pay is determined at establishment level for management
ALL
14%
226
MSUB
16%
MHQ
15%
NAT
12%
.409
.000
.002
.004
.000
S4v1d2: Basis pay is determined at establishment level for professional
ALL
24%
.000
MSUB
26%
.099
MHQ
26%
.005
NAT
20%
.004
.109
S4v1d3: Basis pay is determined at establishment level for clerical staff
ALL
27%
.000
MSUB
30%
.015
MHQ
29%
.000
NAT
22%
.000
.042
S4v1d4: Basis pay is determined at establishment level for manual staff
ALL
26%
.000
MSUB
29%
.006
MHQ
27%
.000
NAT
23%
.000
.248
S4v1e1: Basis pay is determined at individual level for management
ALL
67%
.000
MSUB
63%
.000
MHQ
68%
.000
NAT
71%
.000
.047
S4v1e2: Basis pay is determined at individual level for professional
ALL
41%
.000
MSUB
45%
.082
MHQ
39%
.000
NAT
37%
.000
.068
S4v1e3: Basis pay is determined at individual level for clerical
ALL
29%
.000
MSUB
38%
.004
MHQ
29%
.000
NAT
21%
.000
.000
227
S4v1e4: Basis pay is determined at individual level for manual staff
ALL
14%
.000
MSUB
16%
.004
MHQ
13%
.000
NAT
12%
.000
.370
S4v2a: Organisation uses variable pay
ALL
89%
.000
MSUB
89%
.000
MHQ
89%
.002
NAT
89%
.002
.950
S4v2b: Organisation uses non-monetary benefits
ALL
94%
.001
MSUB
95%
.091
MHQ
94%
.028
NAT
93%
.043
.525
S4v3b1: Organisation offers profit sharing for management
ALL
54%
.000
MSUB
44%
.000
MHQ
62%
.000
NAT
56%
.000
.000
S4v3b2: Organisation offers profit sharing for professional
ALL
37%
.000
MSUB
32%
.000
MHQ
41%
.001
NAT
36%
.074
.049
S4v3b3: Organisation offers profit sharing for clerical staff
ALL
27%
.000
MSUB
24%
.043
MHQ
32%
.000
NAT
26%
.010
.088
S4v3b4: Organisation offers profit sharing for manual staff
ALL
228
MSUB
MHQ
NAT
23%
.000
18%
.003
26%
.001
23%
.073
.040
S4v3c1: Organisation offers group bonus for management
ALL
26%
.000
MSUB
33%
.000
MHQ
26%
.000
NAT
19%
.000
.000
S4v3c2: Organisation offers group bonus for professional
ALL
23%
.000
MSUB
29%
.000
MHQ
24%
.000
NAT
17%
.000
.002
S4v3c3: Organisation offers group bonus for clerical staff
ALL
20%
.000
MSUB
24%
.000
MHQ
19%
.000
NAT
16%
.001
.034
S4v3c4: Organisation offers group bonus for manual staff
ALL
24%
.134
MSUB
22%
.168
MHQ
27%
.632
NAT
23%
.270
.196
S4v3d1: Organisation offers merit pay for management
ALL
61%
.000
MSUB
72%
.009
MHQ
60%
.004
NAT
46%
.001
.000
S4v3d2: Organisation offers merit pay for professional
ALL
61%
.000
MSUB
66%
.000
MHQ
62%
.000
NAT
54%
.000
.011
229
S4v3d3: Organisation offers merit pay for clerical staff
ALL
53%
.000
MSUB
52%
.000
MHQ
57%
.000
NAT
49%
.000
.180
S4v3d4: Organisation offers merit pay for manual staff
ALL
43%
.000
MSUB
34%
.000
MHQ
47%
.000
NAT
49%
.000
.001
S4v3a1: Organisation offers share options for management
ALL
35%
.000
MSUB
33%
.249
MHQ
46%
.000
NAT
24%
.000
.000
S4v3a2: Organisation offers share options for professional
ALL
24%
.000
MSUB
21%
.134
MHQ
31%
.000
NAT
18%
.000
.000
S4v3a3: Organisation offers share options for clerical staff
ALL
21%
.000
MSUB
17%
.051
MHQ
28%
.000
NAT
17%
.000
.000
S4v3a4: Organisation offers share options for manual staff
ALL
17%
.000
230
MSUB
11%
.011
MHQ
24%
.000
NAT
16%
.000
.000
Appendix V: HR Experts and Interview Partners
In the first step information was exchanged (face-to-face or through telephone interviews) with HR experts from various multinational organisations and HR consultancies
regarding the topic investigated within this study. In addition, the author attended
workshops and conferences covering the field of investigation.
In the second step case study interviews were held with HR representatives of the following multinational organisation:
Organisation
1
2
3
4
5
6
7
8
9
10
Main Interview Partner
Information exchange with
additional staff
Global Head of Strategy, Yes, and company documenCompensation and Devel- tation
opment
Global Head of Management Yes, and company documenDevelopment and Training
tation
Yes, and company documenEuropean HR Director
tation
Global HR Director
European HR Manager
Yes, and company documentation
Account Manager
Yes, and company documentation
HR Director
Yes, and company documentation
HR Director for Global Yes, and company documenBusiness
tation
HR Manager International
Yes, and company documentation
Senior HR Consultant
Yes, and company documentation
HR Manager Training and Yes, and company documenDevelopment
tation
With the exception of the last three interviews, all interviews were taped and transcribed. During all interviews notes were taken by the interviewer (the author). The
information gained from the interviews were categorised, e.g. under the following
headlines:
-
Structure of HR department
Responsibility for development and implementation of policies and practices
Relationship between HQ and subsidiaries
Communication and Coordination
Internationalisation strategy
Reasons and advantages of standardisation
231
-
HR policies and practices within Europe
Recruitment and Selection Policies and Practices
Training and Development Policies and Practices
Compensation and Benefits Policies and Practices
Standardisation vs. differentiation of HR policies and practices
Problems at national level and obstacles to standardisation
Stages of Internationalisation
General information about the European Union
Factors of influence in Europe
Reactions of the organisation to the European environment
Main problems in Europe
Advantages and disadvantages of EHRM approach in practice
Ideal EHRM approach and further development of current approach
General comments and advise for practice
232
Appendix VI: Interview Guideline
Interview – Guideline: European Human Resource Management
A
Introduction:
Recent research in the field of EHRM came to the conclusion that European countries exercise a variety of different national HRM practices. No single European HRM approach
exists and HRM vary significantly across Europe. HRM seems to be strongly determined
by the national legal or institutional framework. Therefore, I would like to investigate, how
the EHRM approach of multinational organisations look like which operate on a Europeanwide scale and, hence, are confronted by a variety of different national HRM policies and
practices?
Structure:
1. Please describe the structure of your HRM functions across Europe (organisational
chart)
2. Does your organisation have a European HRM department/manager?
3. Where is the department located?
4. Do you have an HR department/manager within every single country you are operating
in?
5. Please describe the relationship between (European-)headquarters and subsidiaries?
6. How does the information and communication process work between head office and
subsidiaries?
7. Do you have European-wide HR meetings?
Strategy:
1. Please describe your company’s strategy of HRM within Europe?
2. Does your organisation have a European mission statement, corporate strategy, EHRM
strategy? Do all European countries follow the same strategy?
3. Is your HR strategy translated into specific policies and practices?
Standardisation vs. Differentiation
1.
2.
3.
4.
Does your organisation have European-wide HRM policies and practices?
Which are they?
Since when are your current policies and practices in place?
Who is in charge for the implementation of new HR policies and practices within
Europe?
233
5. What sort of practical problems do arise by implementing European-wide policies and
practices?
6. Does your organisation face any resistance at national level concerning European HR
policies and practices?
7. Would you describe the EHRM approach of your organisation as rather integrated
(standardised) or rather differentiated?
8. What areas of HRM are standardised across countries (or across regions) or differentiated and to what degree?
9. Do you see a trend towards standardisation or towards differentiation of HR policies
and practices in Europe?
10. What do you think are the main advantages of a high degree of standardisation across
European countries?
11. Which are the main reasons for standardisation?
Corporate Identity
Cost reduction
Increased mobility
Transparency
Evaluation/benchmarking
(...)
12. What do you think are the main obstacles to standardisation?
National legislations
Cultural differences
Technology
Flexibility
Lack of Communication
Communication in general like language
(...)
13. Do you prefer a more standardised or a more differentiated approach of HRM within
Europe? Why?
14. Which approach do you think suits the European environment best?
15. In general, what are the main factors influencing HRM within Europe?
16. How do you react to these influences?
17. What are the main problems you are facing within Europe in terms of HRM?
Recruitment & Selection:
1. Please describe your European recruitment & selection procedures/process?
2. Since when are your current policies and practices in place?
3. What would you describe as typical European?
4. Do you have one overall European approach or is your r&s organised on national
level?
5. Which policies and practices do you operate on a European-wide scale?
6. Which policies and practices do you differentiate and why?
7. Do you think they suit your current demands and the situation you are facing within
Europe?
8. Where do you think further development is needed?
234
9. Do you think your r&s procedures will change in the near future?
10. How does your ideal European r&s approach look like?
11. In general, how far are your r&s policies and practices standardised or differentiated
across Europe?
A
B
C
high degree of standardisation
standardised as well as differentiated to a certain degree
high degree of differentiation
Training & Development:
1.
Please describe your European training & development procedures/process?
2.
3.
4.
5.
6.
7.
Since when are your current policies and practices in place?
What would you describe as typical European?
Do you have one overall European approach or is your t&d organised at national level?
Which policies and practices do you operate on a European-wide scale?
Which policies and practices do you differentiate and why?
Do you think they suit your current demands and the situation you are facing within
Europe?
8. Where do you think further development is needed?
9. Do you think your t&d procedures will change in the near future?
10. How does your ideal European t&d approach look like?
11. In general, how far are your t&d policies and practices standardised or differentiated
across Europe?
A
B
C
high degree of standardisation
standardised as well as differentiated to a certain degree
high degree of differentiation
Compensation & Benefits:
1. Please describe your European compensation & benefits procedures/process?
2.
3.
4.
5.
6.
7.
Since when are your current policies and practices in place?
What would you describe as typical European?
Do you have one overall European approach or is your c&b organised at national level?
Which policies and practices do you operate on a European-wide scale?
Which policies and practices do you differentiate and why?
Do you think they suit your current demands and the situation you are facing within
Europe?
8. Where do you think further development is needed?
9. Do you think your c&b procedures will change in the near future?
235
10. How does your ideal European c&b approach look like?
European Union and Social Charter:
1. Has your organisation developed an HRM strategy in response to the Single European
Market and Social Charter?
2. How does your organisation keep abreast of EU initiatives and developments?
3. How far is you company effected by the Social Charter directives and how does your
company respond?
Evaluation and Future Perspective – Outlook
1. Do you think your current HR approach suit the demands of your organisation and the
situation you are facing within Europe?
2. What are the advantages and disadvantages of your current HR approach?
3. Would you describe your approach as pro-active and why?
4. Where do you see the main areas for improvement?
5. What do you think should be changed in the near future and why?
6. What changes do you anticipate in the near future?
7. What are the main factors which will influence your EHRM within the near future?
8. What do you think will be important for MO to consider in order to prosper and survive
within the European market?
9. How does your company prepare for the future?
10. How does your ideal European HR approach look like and why?
B
Background Information:
Interview partner:
1. Name, Position, Responsibilities
Company:
2.
3.
4.
5.
6.
7.
8.
-
Name of the company and main products/services
Where is the company’s headquarters located?
Do you have a European head-office and where?
In which European countries do you operate?
How long has the company been involved in European operations?
How many employees do you employ on a worldwide and European-wide scale?
Approximately how many people are employed in the HRM function
At your European headquarters?
European-wide?
236
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