The Oxford Handbook of Contextual Approaches to Human Resource Management 9780190861162, 0190861169

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T h e Ox f o r d H a n d b o o k o f

C ON T E X T UA L A PPROAC H E S TO HUMAN R E SOU RC E M A NAGE M E N T

The Oxford Handbook of

CONTEXTUAL APPROACHES TO HUMAN RESOURCE MANAGEMENT Edited by

EMMA PARRY, MICHAEL J. MORLEY, and

CHRIS BREWSTER

1

1 Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and certain other countries. Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America. © Oxford University Press 2021 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization. Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above. You must not circulate this work in any other form and you must impose this same condition on any acquirer. Cataloging-in-Publication data is on file at Library of Congress ISBN 978–0–19–086116–2 1 3 5 7 9 8 6 4 2 Printed by Sheridan Books, Inc., United States of America

Contents

About the Editorsix List of Contributorsxi

1. Contextual Approaches to Human Resource Management: An Introduction1 Emma Parry, Michael J. Morley, and Chris Brewster

SE C T ION 1 :   T H E OR E T IC A L A N D C ON C E P T UA L   L E N SE S 2. The Cultural Lens Hilla Peretz and Lena Knappert 3. Institutional Approaches to Examining the Influence of Context on Human Resource Management Matthew M. C. Allen and Geoffrey Wood

25

53

4. Critical Contextualized Studies of Human Resource Management Frans Bévort, Lotte Holck, and Mette Mogensen

71

5. The Performance Lens: The Public-Sector Case Paul Boselie and Carina Schott

97

6. Human Resource Management in Emerging Markets: Theoretical Perspectives for Understanding Contexts Frank M. Horwitz, Fang Lee Cooke, and Ken N. Kamoche

115

7. The Context of Terrorism for Managing People in Multinational Enterprises: Toward a Human Resource Management Terrorism-­Response Theory Benjamin Bader and Carol Reade

135

vi   contents

SE C T ION 2 :   R E G IONA L A N D C U LT U R A L C LU S T E R S 8. Human Resource Management in the Anglo-­Saxon Countries Geoffrey Wood and Chris Brewster

159

9. Human Resource Management in the Germanic Context Benjamin P. Krebs, Bernhard A. Wach, Marius C. Wehner, Astrid Reichel, Wolfgang Mayrhofer, Anna Sender, Bruno Staffelbach, and Paul Ligthart

177

10. Human Resource Management in the Nordic Context Frans Bévort and Arney Einarsdottir

209

11. Human Resource Management in the Postsocialist Region of Central and Eastern Europe Michael J. Morley, Andrej Kohont, József Poór, Rūta Kazlauskaitė, Veronika Kabalina, and Jana Blštáková 12. Human Resource Management in the Latin European Context Jordi Trullen and Carlos Obeso 13. Human Resource Management and Industrial Relations in the Latin American Context Wilson Aparecido Costa de Amorim and Antonio Carvalho Neto

239

265

287

14. Human Resource Management in the African Context Frank M. Horwitz and Linda Ronnie

307

15. Human Resource Management in the Middle East Washika Haak-Saheem and Tamer K. Darwish

327

16. Human Resource Management in Asia Fang Lee Cooke, Vivien T. Supangco, and Neil Rupidara

345

17. Convergence in Human Resource Management Wolfgang Mayrhofer, Chris Brewster, and Katharina Pernkopf

367

contents   vii

SE C T ION 3 :   SE C TOR A N D ORG A N I Z AT IONA L I N F LU E N C E S 18. Human Resource Management in the Multinational Context Neil Rupidara

397

19. Human Resource Management in a Public-­Sector Context Peter Leisink, Rick T. Borst, Eva Knies, and Valentina Battista

415

20. Human Resource Management in the Not-­for-­Profit Sector Emma Parry and Clare Kelliher

437

21. Human Resource Management in the Family Business Context Eleni Stavrou

459

22. Human Resource Management within a Trade Union Context Lorraine Ryan and Jonathan Lavelle

479

SE C T ION 4 :   T H E F U N C T IONA L C ON T E X T A N D   AC T I V I T I E S 23. Individual-­Level Rewards and Appraisal: The Influence of Context Paul Gooderham and Wolfgang Mayrhofer 24. Human Resource Development Noreen Heraty 25. Well-­Being in Industrialized Economies and the Case for Firms’ Investment in Employee Learning Olga Tregaskis

503 521

545

26. The Diversity Context of Human Resource Management Robin Kramar and Denise Mary Jepsen

563

27. Human Resource Management Outsourcing Mila Lazarova and Astrid Reichel

583

viii   contents

28. The Profile of the Human Resource Management Director: One Size Fits All? Anna Sender, Bruno Staffelbach, and Wolfgang Mayrhofer 29. Is the Human Resource Management Department Becoming More Strategic? Exploring the Latest Global Evidence Elaine Farndale and Maja Vidovic

605

631

Index651

About the Editors

Emma Parry is a professor of human resource management and head of the Changing World of Work Group at Cranfield School of Management. Her research interests focus on the impact of context on people management, particularly national context, changing demographics, and technological advancement. Michael  J.  Morley is a professor of management at the Kemmy Business School, University of Limerick, Ireland. His research interests encompass international, comparative, and cross-­cultural human resource management, which he investigates at different levels. Chris Brewster is a professor of international human resource management at Henley Business School, University of Reading, United Kingdom. He researches and publishes in the field of international and comparative HRM. Chris has consulted with major international companies and international public-­sector organizations and taught on management programs throughout the world.

List of Contributors

Matthew M. C. Allen is a professor of international business and strategy and head of the Management Science and Entrepreneurship Group, Essex Business School. He has published in leading business journals. He is on the editorial board of the International Journal of Human Resource Management. Wilson Aparecido Costa de Amorim  is an associate professor (human resources management [HRM]) of FEA USP, Sao Paulo, Brazil, and an advisory group member of the Cranet International Research Network and coordinator of this research in Brazil. He is also an invited researcher at the Fudan Development Institute, Fudan University Shanghai, China, and a member of the HRM and Labour Relations Division at ANPAD, Brazil. Benjamin Bader is the deputy head of the Leadership, Work and Organisation Subject Group at Newcastle University Business School and a senior lecturer in international human resource management. His research interests include expatriate management and international leadership, with a special emphasis on people management in hostile environments as well as the future of work. Valentina Battista is a lecturer in human resource management and the director of the master of science program in management and human resource management at Cranfield University. Her interests focus on the impact of technological advancement on work, the work force, and the workplace. Frans Bévort,  PhD, is an associate professor at the Department of Organization, Copenhagen Business School. His research focuses on human resource management (HRM), professions, and management. A special research interest is the tension between management as a professional discipline and other disciplines. Other research interests are comparative HRM (Cranet), critical HRM studies, HRM and artificial intelligence, and HRM as a professional discipline. Jana Blštáková is an associate professor of human resources management (HRM) at the University of Economics in Bratislava, Slovakia. She teaches HRM, organizational behavior, and development of management skills. Her research focuses on HRM in the 4.0 Industry era. Rick T. Borst,  PhD, is an assistant professor at the Utrecht University School of Governance, the Netherlands. His research focuses on the behavior, attitudes, and psychological characteristics of public-­sector and semi-public sector employees, taking

xii   list of contributors into account the role of management and institutional contexts. For an overview of his publications, see https://www.uu.nl/staff/RTBorst. Paul Boselie is a professor and head of department at the Utrecht School of Governance at Utrecht University in the Netherlands. His research traverses human resource management, institutionalism, and strategic management. His research is published in journals such as the Journal of Management Studies and Human Resource Management Journal. Antonio Carvalho Neto, PhD, is a professor of labor relations and human resources management at the Postgraduate Programme in Management of the Pontifical, Catholic University of Minas Gerais, Brazil, since 2000. He has published thirteen books, fortytwo book chapters, and eighty-­one papers in Brazil, Argentina, the United States, Canada, Germany, France, and Italy. Fang Lee Cooke  is a professor at Monash Business School, Monash University, Australia. Her research interests are in the area of strategic human resource management (HRM), knowledge management and innovation, outsourcing, international HRM, diversity and inclusion management, employment relations, migrant studies, HRM in the care sector, digitalization and implications for employment and HRM. Tamer K. Darwish, PhD, is a reader in human resource management (HRM) and the head of the HRM Research Centre in the Business School, University of Gloucestershire. His research interests lie in the areas of strategic HRM, international and comparative HRM, and organizational performance. His research has appeared in leading management and human resource journals, including Human Resource Management and British Journal of Management. Arney Einarsdottir, PhD, is an associate professor at the School of Business at Bifröst University in Iceland. Her research focuses on strategic human resource management (HRM) and its impact on employee attitudes, perceptions, and behavior. She also has interests in HRM and gender equality, downsizing, comparative HRM research between the public and private sectors, and the HRM Nordic context. Elaine Farndale is a professor in human resource management (HRM) and associate director of the School of Labor and Employment Relations at the Pennsylvania State University, where she is also founder and director of the Center for International Human Resource Studies. Her widely published research encompasses the broad field of international and strategic HRM. Paul Gooderham  is a professor of international management in the Department of Strategy & Management at NHH: Norwegian School of Economics, Bergen. He is also an adjunct professor at Middlesex University, London. His most recent book is the coauthored Global Strategy and Management (Edward Elgar).

list of contributors   xiii Washika Haak-­Saheem, PhD, is an associate professor in human resource management at Henley Business School, University of Reading. Her research focuses on the intersection between global migration and international business management, refugee workforce integration, and knowledge management. Her research has appeared in journals such as Human Resource Management Journal, European Management Review, and International Journal of Human Resource Management. Noreen Heraty is a senior lecturer in human resource management and development at the Kemmy Business School, University of Limerick, Ireland, where she teaches across a range of postgraduate, undergraduate, and professional programs. She has coauthored a number of leading textbooks on human resource management, organizational behavior, and training and development. Lotte Holck is an associate professor at the Department of Organization, Copenhagen Business School. Lotte’s research explores the organization of work and collaboration in different organizational settings and cultural contexts. With this as a general framework, her research pursues a critical approach to human resource management, exploring the impact of demographic, professional, and hierarchical differences. Frank M. Horwitz is professor emeritus of international human resource management (IHRM) at Cranfield University, United Kingdom. He is a former director/dean of the Cranfield School of Management and Graduate School of Business University, Cape Town. His research interests focus on IHRM in emerging markets, IHRM in emerging market multinational corporations, the BRICS countries, and the African–Asian nexus in IHRM. Denise Mary Jepsen  is an organizational psychologist and academic at Macquarie Business School, Sydney, Australia. Beyond teaching organizational behavior, human resource management, and research methods, Denise researches and advises on careers and strategic people issues, especially in the aged care sector, where she has a particular focus on attraction and retention. Veronika Kabalina  is a professor of human resource management and academic director of the master’s program in HR Analytics at the National Research University Higher School of Economics, Moscow, Russia. Her numerous publications in Russian and English deal with enterprise and management restructuring, employment relations, employee engagement, human resource management, talent management, and corporate social responsibility in Russia. Ken  N.  Kamoche  is a professor of human resource management (HRM) and organization studies at Nottingham University. He earned his DPhil at Oxford University, where he was a Rhodes scholar. He previously worked at Nottingham Trent, City University of Hong Kong, and Birmingham University. Ken’s research interests include HRM, knowledge management, and Africa–China relations.

xiv   list of contributors Rūta Kazlauskaitė  is a professor of human resource management (HRM) at ISM University of Management and Economics, Lithuania. Her research focuses on employee well-­being and work–life balance, work environment, HRM implementation, responsible HRM, and comparative HRM. Clare Kelliher  is a professor of work and organization at Cranfield School of Management, United Kingdom. Her research focuses on the organization of work and the management of the employment relationship. She has published widely in this field, including recently in Human Resource Management Journal, Human Relations, and Human Resource Management. Her recent books include Work, Working and Work Relationships in a Changing World and Flexible Working in Organisations: A Research Overview. Lena Knappert  is an assistant professor at the Department of Management and Organisation at VU Amsterdam, the Netherlands. Her research interests include international human resource management and workforce diversity and inclusion. Dr. Knappert’s work appears in journals such as Human Resource Management, Journal of Vocational Behavior, and Career Development International. Eva Knies  is a professor of strategic human resource management at the Utrecht University School of Governance, the Netherlands. Her research interests are in the areas of strategic human resource management, public service performance, public leadership, and sustainable employability. Her website lists her international journal articles and other publications (https://www.evaknies.com). Andrej Kohont  is an assistant professor in the faculty of social sciences at the University of Ljubljana, Slovenia. He lectures in human resources management (HRM), organizational behavior, leadership, and strategic HRM. His research focuses on international HRM, talent management, sustainability, competency management, and career guidance. Robin Kramar is an adjunct professor at the University of Notre Dame. She also has a number of roles at the Sydney Metropolitan Institute of Technology, the Leadership Institute, and the Sydney Institute of Commerce and Science. She also serves on the Advisory Research Panel of the Australian Institute of Human Resource Management. Robin has held visiting professor roles at the IGR University of Rennes, the University of Ghent, and Cranfield School of Management, United Kingdom. Benjamin  P.  Krebs  is a research assistant at Paderborn University, Germany. His research interests include international human resource management, talent management, and (corporate) entrepreneurship with a focus on status in organizations, social comparison processes, and goal setting. Jonathan Lavelle  is a senior lecturer in employment relations at the University of Limerick. He is a former IRCHSS Government of Ireland scholar, a IRCHSS postdoctoral fellow, and Marie Curie scholar. His research interests include international and

list of contributors   xv comparative employment relations, with a particular interest in trade unions and employee voice. Mila Lazarova  (Simon Fraser University, Canada) is the Canada research chair in global workforce management. Mila has published on various international human resource management topics in journals such as the Academy of Management Review, Journal of International Business Studies, Journal of World Business, Organizational Science, Journal of Organizational Behavior, and Human Resource Management. Peter Leisink is professor emeritus of public administration and organization science at the Utrecht University School of Governance, the Netherlands. His research covers the areas of management and organization of public service organizations, strategic human resource management, employment relations, leadership, and public service motivation. For his publications, see https://www.uu.nl/staff/PLMLeisink. Paul Ligthart, PhD, is an assistant professor of strategic management in the Department of Business Administration of Nijmegen School of Management, Radboud University of Nijmegen, the Netherlands. His research interest is the nature and impact of technological and organizational innovation configurations in the manufacturing industry (e.g., digitalization) and participatory human resource management policies and practices (e.g., financial participation). Wolfgang Mayrhofer is a full professor at WU Vienna, Austria. He previously has held full-­time positions at the University of Paderborn, Germany, and Dresden University of Technology, Germany, and conducts research in comparative international human resource management and work careers, as well as systems theory and management. Mette Mogensen, PhD, is a research fellow and external lecturer at the Department of Organization at Copenhagen Business School. Her research revolves around critical human resource management studies, the organization and management of the psychosocial work environment, paradox theory, and leadership. She has recently been involved in projects on leadership development and has coauthored a book on paradoxes and paradox management. Carlos Obeso was the head of the Institute of Labor Studies at ESADE Business School until 2018, with the aim of analyzing the labor market and the relations between those taking part in it. He currently serves as ESADE Business School ombudsman. Hilla Peretz is a senior faculty member in the Department of Industrial Engineering and Management, ORT Braude College, Israel. Her research interests concern international human resource management. Dr. Peretz’s work appears in journals such as Journal of Applied Psychology, Journal of Cross-­ Cultural Psychology, and the International Journal of Human Resource Management. Katharina Pernkopf  conducts research in the wider field of organizational institutionalism, convention theory, and (comparative) human resource management. She is interested in how organizations and individuals manage tensions at work, for

xvi   list of contributors example, institutional demands versus organizational rules. She does research on work time regulations, online recruiting, and other future of work issues. József Poór is a professor of management at J. Selye University Komarno, Slovakia, and Szent István University, Hungary, where he teaches a variety of management courses. Previously he was a senior manager at different internationally recognized professional service firms (Mercer, HayGroup, Diebold) and at a private business school for almost two decades. Carol Reade  is a professor at San Jose State University. She researches the effects of societal conflict on OB/human resource management in multinational enterprises and business’s role in fostering sustainable and peaceful societies. Publication outlets include the Journal of International Management, International Journal of Human Resource Management, and Journal of International Business Policy.  Astrid Reichel  is a full professor of human resource management (HRM) at the University of Salzburg. She previously was an associate professor at WU Vienna. She has published on contextual HRM, gender and HRM, and digital HRM in journals such as Human Resource Management, Human Resource Management Journal, and Journal of Organizational Behavior. Linda Ronnie  is an associate professor in organizational behavior and people management at the School of Management Studies, University of Cape Town, where she is dean of the faculty of commerce. She has master’s degrees in psychology (Liverpool) and education, training, and development (Sheffield) and a PhD in education (Cape Town). Linda has been a management educator for over twenty years and consults to private- and public-­sector organizations. Neil Rupidara is an associate professor of human resource management (HRM) and rector at Universitas Kristen Satya Wacana in Salatiga, Indonesia. His research interests are in general and international HRM, leadership, and organizational institutionalism. Neil has published journal articles and book chapters and presented papers at conferences. Neil is the Cranet partner in Indonesia. Lorraine Ryan is a lecturer in employment relations and human resource management at the University of Limerick and a former Government of Ireland scholar. Her research interests include precarious work, collaborative bargaining, trade unions and democracy, and the impact of technology on the future of work. Carina Schott is an assistant professor at the Utrecht University School of Governance. She conducts research in the field of public management at the individual level. Specifically, her research concerns motivational and decision-­making processes of bureaucrats. Her research appears, among other places, in Public Administration and Public Management Review.

list of contributors   xvii Anna Sender, PhD, is a senior researcher, lecturer, and associate director of the Center for Human Resource Management at the University of Lucerne. She is also a lecturer at the Lucerne University of Applied Sciences and Arts. Her research focus includes international human resource management, talent retention, compensation, and nonstandard work. Bruno Staffelbach, Prof Dr, is a full professor for business administration, director of the Center for Human Resource Management, and president of the University of Lucerne. He is a member of the board of the International Committee of the Red Cross, Geneva, 1992–2016, and director of the executive master’s of business administration at the University of Zurich. Eleni Stavrou  is a professor at the University of Cyprus. She received her PhD at George Washington University, where she was director of programs and operations of the Center for Family Enterprise. Her research interests include work-life issues, strategic and comparative human resource management, and intergenerational transitions in family firms. Vivien T. Supangco is a retired professor at the Virata School of Business, University of the Philippines. Her research interests are in the areas of career development and management, comparative human resource management, organization diagnosis, corporate culture, and expatriation. Olga Tregaskis  is a professor of international human resource management at the University of East Anglia and a senior scientist of the United Kingdom’s What Works Wellbeing network and Centre for Climate Change and Social Transformation. Her published works include issues on human resource management and development and change. Jordi Trullen is an associate professor in the Department of People Management and Organisation at Universitat Ramon Llull, ESADE, where he teaches courses in organizational behavior and human resource management (HRM). His research focuses on the areas of HRM implementation and comparative HRM, with a focus on Latin America. Maja Vidovic is an assistant teaching professor of human resource management (HRM) at the Center for International Human Resource Studies, Pennsylvania State University. She earned her PhD from the faculty of economics and business, University of Zagreb, Croatia. She researches HRM in general, with a focus on HRM in multinational corporations and their subsidiaries. Bernhard  A.  Wach  is an interim professor at the University of Applied Sciences Bielefeld, Germany. His research and teaching are in the field of strategic human resource management, international management, and (corporate) entrepreneurship.

xviii   list of contributors Marius  C.  Wehner  is an assistant professor at the Heinrich-­Heine-­University in Dusseldorf, Germany. His research interests include international and strategic management, (international) human resource management (HRM), and (corporate) entrepreneurship. Currently, he is working on projects concerning artificial intelligence and fairness perceptions in the context of HRM. Geoffrey Wood  is Dancap Chair of Innovation, professor of sociology, and head of DAN Management at Western University, Canada, and visiting professor at Trinity College, Dublin. Previously, he served as dean and professor of international business, Essex Business School, and professor of international business, Warwick Business School. He has authored/coauthored over 180 peer-­reviewed journal articles.

chapter 1

Con textua l A pproaches to H um a n R esou rce M a nagem en t An Introduction Emma Parry, Michael J. Morley, and Chris Brewster

The Origins of This Handbook This handbook is the culmination of a sustained collaboration, the foundations of which were laid over thirty years ago with the establishment of the Cranfield Network on International Human Resource Management (Cranet) in 1989 (for more details, see, for example, Brewster, Mayrhofer, & Morley, 2004; Lazarova, Morley, & Tyson, 2008; Mayrhofer, Gooderham, & Brewster,  2019; Morley & Heraty,  2019; Parry, Farndale, Brewster, & Morley, 2020; Parry, Stavrou-­Costea, & Morley, 2011). Launched with five founding member countries (France, Germany, Spain, Sweden, and the United Kingdom), Cranet is now the largest and longest running human resource management (HRM) network in the world, and in the early twenty-­first century, it involves research partners in some forty-­two countries1 collaborating in the ongoing collection of data on HRM policies and practices in their respective countries. The data collection effort and the academic collaboration more broadly afforded by participation in the network are squarely focused on charting key aspects of the landscape of HRM in a diverse range of 1  Australia, Austria, Belgium, Brazil, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Japan, Latvia, Lithuania, Nepal, the Netherlands, New Zealand, Norway, the Philippines, Romania, Russia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

2   Parry, Morley, and Brewster sociocultural contexts and geographic territories. Many of the territories now covered by the network have been historically underrepresented in the academic literature. The motivation for the founding of the network lay from the very beginning in the acceptance of the basic reality that obvious differences exist in the way HRM is conceptualized, institutionalized, and practiced in different contexts and in the understanding that a blanket approach to the transposition of elements from one system onto another was likely to be limited. In developing a collaborative architecture to give concrete expression to this pluralistic reality and engage in the coproduction of knowledge on the nature of HRM in a diverse range of territories, the network was joining a conversation that was emerging among a growing cohort of researchers who argued that scholarship had paid insufficient attention to the influence of context on the nature, direction, and impact of HRM. Through their ongoing collaboration, Cranet scholars were increasingly understanding that context plays a critical role in the preferred approaches to HRM pursued by organizations operating in different locations and facing different situations. These scholars, and others, were gradually and incrementally teasing out distal and proximal factors that accounted for commonalities and differences across contexts. They were also increasingly aware that acknowledging and giving expression to this situational heterogeneity, and its consequences for both our theorizing and our empirics, could make an important contribution to advancing the conversation on the value of a more contextual approach to HRM. As network membership grew, the conversations deepened about universalism versus contextualism. In many instances, those conversations pointed to gaps in the extant literature about what constituted the elemental building blocks of HRM in many territories. This exchange fed a growing collective awareness among an expanding group of collaborating scholars in the network and, beyond that, the very thing that we were increasingly focused on explicating, namely, a contextual paradigm for understanding HRM, had a broad range of meanings in the lexicon of the field internationally, and these demanded fuller treatment. Because of the scale of the task in landscaping those elements and the breadth of territory that needed treatment, a handbook that would give coverage to the multiple dimensions of context seemed like an appropriate way to contribute to this evolving conversation. As editors, our mutually agreed objective therefore became one of conceptualizing and assembling the bricolage of key aspects of context as a phenomenon in HRM scholarship and curating it in a single source reference. We knew this would require compiling a range of conceptual and empirical analyses of diverse elements of context, ones that would give expression to different theoretical platforms or lenses, along with the incorporation of multilevel influences. Its added value, we felt, would lie in enriching the debate on the multiple dimensions of context in HRM and in further expounding the explanatory power of the contextual paradigm as a point of departure for research on the subject. The twenty-­eight chapters that follow are the culmination of our efforts in this regard.

Contextual Approaches to Human Resource Management   3

Context and Human Resource Management Research The fundamental question of the most appropriate paradigm for inquiry in the field of HRM, and indeed in the social sciences more broadly, has occupied a central place in academic discourse for a protracted period. The contrasts and contestations between universalism and contextualism lie at the very heart of this debate. The universalist approach, which seeks to build generalizable knowledge, stands in contrast to the contextual approach, which searches for a fuller understanding of what is contextually unique and why (Brewster, Mayrhofer, & Morley, 2000). The increasing calls for deeper contextualization serve as the fundamental point of departure for us in the preparation of this handbook. These calls are rooted in a belief in the value of different research traditions and the particular explanatory power and utility of the knowledge generated through following those traditions. Scholars working to advance a contextual approach have called attention to its conceptual and analytical benefits, along with the many inherent challenges that accompany its pursuit and execution. From a basic paradigmatic perspective, Rousseau and Fried (2001, p. 1), for example, highlight that contextualization serves to more fully acknowledge that significant contestations and limitations arise when trying to transport “social science models from one society to another” and this accentuates why it is critically important to pay “special attention when exporting scientific constructs and research methodologies across national borders.” From the perspective of theoretical positioning and scaffolding, Minbaeva (2016, p. 95) notes that when properly executed, contextualization can serve as “a novel source of theorizing” in the fundamental framing of the research problem under investigation from the outset. This, she rightly maintains, is a qualitatively different stance from the one merely involving post hoc contextualization. Analytically, Johns (2018, p. 21) emphasizes that contextualization as a tradition “permits integration across research areas and levels of analysis,” while from a knowledge utility perspective, Teagarden, Von Glinow, and Mellahi (2018) underscore that contextualization brings to center stage the important issue of boundary conditions or particular limitations that may apply to the generalizability of the research findings being advanced. The overall complexity of the research challenge involved in generating contextual insights in order to strengthen theory and deepen our appreciation of embedded management practices in more diverse settings is perhaps best captured by Shapiro, Von Glinow, and Xiao (2007, p. 129), when they highlight the importance of adopting stances and employing approaches capable of unearthing “multiple and qualitatively different contexts embedded within one another.” Cappelli and Sherer (1991, p. 56) cogently characterize context as “the surroundings associated with phenomena which help to illuminate that phenomena.” In the HRM domain of interest to us in this handbook, such surroundings, of necessity, comprise a diverse range of macro-, meso-, and micro-­interrelated influences that, in combination, shape practices and outcomes and account for commonalities or differences in the way

4   Parry, Morley, and Brewster these are developed and deployed within regions, nations, sectors, organizations, ­functions, and/or units. While here we classify and unpack these macro, meso, and micro surrounding influences as they apply to HRM one at a time, we stress that it is only by appreciating the interrelated nature of these contingencies that an organization’s preferred HRM practices and postures may be more fully understood and accounted for. Over the past thirty or more years, there has been a growing recognition that context is crucial in understanding the effectiveness of HRM policies and practices, in particular in relation to their impact on organizational performance. Indeed, as far back as the 1980s, the Harvard (Beer, Spector, Lawrence, Quinn Mills, & Walton, 1984) and Michigan (Fombrun, Tichy, & Devanna, 1984) models of HRM, often seen as the founding texts in HRM scholarship, included reference to contextual determinants. Beer et al. refer specifically to stakeholder interests and situational factors, while Fombrun et al. broadly identified economic, cultural, and political forces. Despite the inclusion of context in these two seminal texts, the notion of context in HRM was broadly ignored as the scholarship in HRM developed. Much of this scholarship came from the United States, the home of HRM, where notions of self-­help, independence from external influences, and the primacy of the rights of owners have a long cultural history. In HRM as a field of study, adopting these criteria plays well to a neoliberal audience and is well received by many HRM practitioners who want to feel that they have scope and choice and that their actions will make a difference. Combined with the ever-­increasing pressure in the top journals for “generalizability” of results as a touchstone of management “science,” this led the extensive literature on HRM to take a primarily “universalist” perspective (Brewster 1999), implying that the relationship between HRM practice and organizational outcomes was largely consistent regardless of context and, thus, that adopting particular “best practice” HRM will always result in superior performance (Delery & Doty, 1996). Thus, much of the literature, specifically that which falls under the rubric of strategic HRM, assumes that managers have agency and, in fully exercising this agency, can choose and implement any strategy that they deem appropriate (Wangrow, Schpeker, & Barker, 2015) and that these strategies will have direct and intended consequences. For many years, the largest single topic in the HRM literature (and its often poorly distinguished subcategory of “strategic” HRM) consisted of attempts to show that it was directly related to organizational performance (see, for example, Huselid,  1995; Pfeffer,  1994,  1998) and that specific sets of HRM practices—dubbed best practice— could be identified and would invariably be linked to improved corporate performance outcomes. The fact that such practices tended to look a lot like the espoused practices of large, successful businesses in the United States did not stop proponents claiming that they could be applied in any circumstances—they were generalizable. Despite the widespread focus on universalism in HRM, the understanding that organizations operate in specific contexts and that different contexts will mean the development of different approaches to HRM has persisted in some quarters. For example, Schuler and Jackson (2014, p. 35) highlighted the importance of a “deep understanding of a firm’s external environment” for HRM, while Farndale and Paauwe (2018, p. 203)

Contextual Approaches to Human Resource Management   5 noted that “firms do not operate in a vacuum.” Most scholars will recognize that context will affect what an organization can do in relation to its HRM; however, these authors, and the editors of and contributors to this handbook, believe that the different practices that need to be applied as a result of the different contexts will be more situationally appropriate, more legitimate, and, indeed, in many cases “better” than any one-size-fitsall “best practice” approachThis is the reason that commentators may sometimes see context in HRM as being part of a more critical tradition. In this handbook, therefore, we subscribe to this contextual approach to HRM, believing that the same approach to managing human resources will be likely to have differential effects in different contexts (Stavrou, Brewster, & Charalambous,  2010). What will work well in the giant multinational headquarters of a major consumer goods company in Chicago may be quite different from what will work well in a small family firm offering consultancy services in Slovakia. These contexts operate at or in multiple levels, sizes, sectors, countries, and regions and are characterized by a range of stakeholders such as economic actors, governments, local authorities, trade unions, and communities (Beer, Boselie, & Brewster, 2015). Background factors are also important elements of the context: ranging from distal factors such as the size, geographical location, and weather of a country, through intermediate factors such as economics and politics, history, and the local education system and national religions and cultures, to proximal factors including local and international competition, labor laws, and trade union representation. Alongside the stream of universalistic strategic HRM literature (which, to be clear, is because of the hegemony of the US system, now found around the world), there is a smaller but increasing focus on context, particularly at the national level. Indeed, the late twentieth and twenty-­first centuries saw a growing appreciation of the importance of context and a growth in the amount of academic research in this area. In Europe in particular, efforts were made to develop a more nuanced understanding of how the European context might affect the nature of HRM. For example, Brewster (1995) developed a model of HRM in Europe based on the assumption that the autonomy of firms operating within certain European nations was restricted by those country’s institutions and that the nature of HRM was influenced by factors related to the national context  (e.g., culture, legislation, economic trends, ownership patterns), international context (e.g., European Union), and what he termed the national HRM context (e.g., education/ training, labor markets, and trade unions). This paper supported a line of thinking that moved away not only from universalistic approaches to HRM, but also from contingency theories that focused on internal contingencies such as the organizational strategy (Delery & Doty,  1996). Taking a similar approach, Paauwe (2004) presented his “contextually-­based human resource theory,” arguing that HRM needed to be understood as an element of the firm, which was also part of a broader society or operating context. More recently, Paauwe and Farndale (2017) developed the “contextual strategic HRM framework” that divides context into the competitive mechanisms with regard to how an organization positions itself in the marketplace (e.g., technology, products, or services); the institutional context (e.g., regulatory, social, political, and legal context);

6   Parry, Morley, and Brewster and a heritage mechanism, which is based on path dependency created by how the firm has operated in the past (Farndale & Paauwe, 2018). These are examples of approaches that emphasize the importance of the macro- and meso-­level context in influencing both strategic choices in relation to HRM and the effectiveness of these HRM practices in delivering positive outcomes. The development of these models has been accompanied by a plethora of empirical research that examines the impact of macro-­level context on HRM decision-­making. Generally, this research has fallen into two areas. The first is that of comparative HRM, which compares the use of HRM policies and practices across countries or regions and the reasons (usually seen as aspects of national culture or national institutions) behind any differences (Brewster, Mayrhofer, & Farndale, 2018). The second is the examination of HRM in multinational enterprises and their subsidiaries that must work across these national differences (Stahl, Björkman, & Morris, 2012), with a small stream of research examining the relationship between the two (Brewster, Mayrhofer, & Smale, 2016). This research has demonstrated the complexity in relation to the macro-­level factors driving HRM and supported the idea that HRM is indeed not universal. In fact, it varies in concept, definition, coverage, formalization, attitudes to stakeholders, and what is seen as “good” HRM. Macro or distal contextual HRM research has followed a number of theoretical perspectives, focusing on different aspects of the national context, mainly associated with national culture (Hofstede & Minkov,  2010; House, Hanges, Javidan, Dorfman, & Gupta, 2004) and the institutional environment (Amable, 2003; Hall & Soskice, 2001; Whitley, 1999). The development of these two strands of research on national context and HRM has led to the development of multiple theoretical approaches addressing the impact of institutions (e.g., comparative capitalisms; institutional theory and neoinstitutionalism) and a variety of methods of measuring both institutional characteristics and national culture. The result is that research addressing the impact of national context on HRM has become somewhat fragmented, with most authors focusing on either institutions or culture. We therefore need more research combining these perspectives as well as comparing and contrasting their assumptions and the outcomes of different aspects of theorizing. So, this handbook considers multiple theoretical lenses on context to allow us to understand what each one offers in relation to developing this contextual approach to HRM. Much of the contextualization literature to date focuses on macro context and on (usually cultural or institutional) factors at the regional or national level that might affect the choice or effectiveness of HRM activities. However, casting further light on meso and micro or more proximal contextual influences is also an important part of coming to a fuller understanding of multilevel contextual determinism. Here, for example, a fuller representation and more detailed treatment of industrial sector, organizational size, or ownership, often relegated to controls, is important in accounting for commonalities and differences in HRM recipes. We know much about large, privatesector organizations operating in certain sectors, but much less about other sectors and types. We therefore consider multiple aspects and levels of context to communicate a

Contextual Approaches to Human Resource Management   7 more holistic and multidimensional view of the paradigm and its value and explanatory power in a broader range of settings. For our purposes, context represents an intersection and interaction between the macro level (geographic, regional, and national), the meso level (sector, industry, ownership, unionization), and the micro level (the HRM function, activities, status). Note that, as we are concerned with context, we limit our analysis of the micro level to the organization: We do not examine individual-­level interactions. Our aim in this book is to widen the perspective and understanding of context as a multilevel phenomenon and underscore how these levels and characteristics might intersect to drive HRM policy and practice.

The Shape of the Handbook To address our objectives and explicate the multilevel nature of context, we have divided the book into four sections: theoretical and conceptual lenses, regional and cultural clusters, sector and organizational influences, and the functional context and activities.

Theoretical and Conceptual Lenses The first section offers an in-­depth examination of key established theoretical lenses, along with emerging ones that have served as conceptual platforms examining the influence of different elements of context on HRM. Our decision on what was to be included here was guided by the importance of achieving a balance between dominant established lenses, with their explanatory power in accounting for contextual influences, and newer, emerging perspectives that hold the prospect of opening up new lines of research. To this end, we settled on six such theoretical perspectives, as follows: the cultural lens, the institutional lens, the critical lens, the performance lens, the emerging markets lens, and the terrorism lens. In bringing together these theoretical platforms, this first section of the handbook assembles key elements of the ways in which context has been conceptualized and serves to call attention to the intellectual utility of these platforms as conceptual points of departure chosen by scholars seeking to advance a contextual perspective on HRM. National culture represents an enduring and important part of the context in which organizations operate and in which HRM is practiced. In Chapter  2, Peretz and Knappert examine the provenance and the prominence of the cultural lens as a theoretical platform for explicating contextual HRM. The authors review the literature dealing with the intersection of culture and HRM, focusing on why and how culture accounts for variance in HRM practices and the differing outcomes between organizations operating in diverse cultural settings. It examines how culture is defined and measured and reviews several established frameworks of culture. This is followed by a review of related studies conducted by Cranet members and other established scholars examining

8   Parry, Morley, and Brewster c­ ultural influences on particular HRM practices (i.e., recruitment and selection, ­performance management and performance appraisal, training and development, compensation and benefits, flexible work arrangement, diversity management, and high-­performance work systems) and their outcomes. The chapter concludes with practical implications and suggested avenues for future research. In parallel with the cultural lens, HRM scholars have embraced institutional ideas to understand variations in HRM systems and practices in different settings. Along with the cultural perspective, the institutional lens has allowed researchers to build more pluralist insights and has served as an important theoretical lynchpin in enhancing the contextual relevance of much HRM research. In Chapter 3, Allen and Wood review three related, but distinctive, institutional approaches to HRM policies within organizations. They view institutions, organizations, and their HRM policies as conceptually separate, but ontologically connected. In other words, they view context and HRM as intertwined, meaning that institutions play a key role in constituting what firms are and what HRM is in different contexts. They review work on HRM within different institutional frameworks and call attention to the similarities among, and the differences between, them. They argue that these institutional approaches add value to HRM analyses by explaining key variation among the nature of firms and how that variation influences important HRM outcomes. Chapter 4 focuses on the value of a critical management lens for studying HRM. In this contribution, Bévort, Holck, and Mogensen argue that while mainstream HRM studies accept, without much reflection, that best practice HRM is what is best for management and owners, critical management studies start from the perspective that HRM is always about the exploitation of the weaker stakeholders in organizations. The chapter presents three critical analyses of HRM practices. The first addresses how institutional logics affect the practice of HRM professionals; the second presents alternatives to best practice diversity management; and the third examines a case of meditation practices as expressions of managerial control. The chapter culminates with suggestions on how to advance critical contextualized HRM scholarship. Chapter 5 turns to the performance lens and the intellectual utility it provides in the HRM field. Boselie and Schott take the slightly less traveled road and concentrate specifically on the relationship between HRM and public-­sector performance. The authors adapt the original Harvard model through blending contemporary general HRM insights with public administration and public management literature. The specific adaption centers on highlighting multiple stakeholder interests, situational factors, mediating factors referring to HRM policy choices, and HRM outcomes, as well as longterm consequences from a public-­sector context perspective. They then present an overview of studies on HRM and public-­sector performance. Arising from this review, they identify important gaps in the literature and highlight potential avenues for future research. The emerging markets lens as a particular platform on which to build insights on HRM is of a more recent vintage than either the purely cultural or the institutional backdrops discussed here thus far. Though described as a portmanteau term (Horwitz,

Contextual Approaches to Human Resource Management   9 Budhwar, & Morley, 2015), there is no doubt that interest in, as well as research on, the emerging markets is on a significant upward trajectory. In Chapter 6, Horwitz, Cooke, and Kamoche highlight that the emerging markets reflect an evolving and diverse literature with a series of opportunities, encompassing the purely theoretical through to the methodological and the analytical. They provide an overview examination of approaches useful for unearthing the complexity and diversity of HRM in these contexts, including institutional, cross-­cultural, internationalization, postcolonial, and hybrid perspectives. Another focus of more recent vintage relates to security, conflict, and geopolitical risk, which is a threat to business through a range of “direct and indirect effects” (Czinkota, Knight, Liesch, & Steen, et al. 2010, p. 826). In Chapter 7, Bader and Reade focus on the development of an HRM terrorism response theory. They note that while a number of research studies have been published in recent years dealing with the implications of terrorism for HRM-­related issues, most are focused at the individual level, with the result that a comprehensive theoretical approach at the organizational level relevant to HRM in the context of terrorism is lacking. To address this shortcoming, they examine extant literature on the influence of terrorism on HRM-­related issues, integrate several theoretical approaches that emerge from this literature, and introduce an HRM terrorism-­response theory relevant for organizations operating in countries afflicted with terrorism.

Regional and Cultural Clusters Theoretical perspectives in the treatment of HRM that serve as the lens through which the particular phenomenon of interest is viewed constitute perhaps the most significant difference between HRM scholars. But macro differences vested in aspects of the geographic, the regional, and the national are important too and occasionally mirror theoretical differences. It is not just that HRM policies and practices vary from country to country; so do definitions of the topic, of what is included or excluded, and of what is deemed to be “good” HRM (Brewster, Mayrhofer, & Farndale, 2018). Geography clearly matters in HRM. Paradigmatically, studies of management in general, and HRM in particular, are by an enormous majority dominated by a “proper science,” universalistic approach (Brewster, 1999; Delery & Doty, 1996; Gardey, Alcazar, & Fernandez, 2004). This argues that the task of science is to discover universalist, generalizable rules (laws) that can be applied in all circumstances. Contributions in this tradition occupy most pages in the top business and management outlets. Paradoxically, however, the scientific rules applied to management and HRM studies differ from the rules applied in the natural sciences—as an example, replication studies (the backbone of much research in physics, chemistry, and medicine) are rarely entertained by the top journals in business and management—with the emphasis being on each paper making a “new” contribution. We make no comment on the “meta-­analyses” that then add up all the inevitably “different” contributions to establish general laws. Practically, the limited resources

10   Parry, Morley, and Brewster applied to most academic studies mean that most research is carried out in a single country rather than comparatively, so international differences feature much less prominently. When a comparative HRM agenda is pursued, as evidenced in this section of this book, it focuses on describing and explaining differences and similarities in patterns of HRM across countries or regions of the world (Brewster, Mayrhofer, & Smale, 2016; Kaufman, 2016). The field has typically been driven by empirical observation of difference rather than by theory (Mayrhofer & Reichel, 2009). Early work, often carried out by researchers from the industrial relations tradition where country differences were part of the discourse, focused on description—pointing out differences between countries in their HRM practices (e.g., Begin, 1992; Boxall, 1995; Brewster & Tyson, 1991; Hegewisch & Brewster, 1993). As our knowledge has developed, more attention has been paid to understanding the reasons for and outcomes of the differences, and greater attention is being paid to explaining rather than simply recording differences. Major explanators, both of which contain some truth, are, as noted in the first section of the book, institutional theories (e.g., Wood, Brewster, & Brookes, 2014) and cultural theories (Reiche, Lee, & Quintanilla, 2018). It has been argued that while both may be important, institutional theories may explain more than cultural theories (Vaiman & Brewster, 2015). An unfortunate side effect of the universalistic paradigm, and a reflection of the “dominance” of the United States in our management thinking (Pudelko & Harzing, 2007; Smith & Meiksins, 1995) are the numerous studies attempting to apply etic concepts in clearly inappropriate settings. This is a constant challenge: Journals are always readier to publish research where established constructs are employed, even when the results may simply be immaterial in the setting in which they have been generated. It should be obvious that research into selection criteria in Pakistan, using preexisting scales, will underestimate the effect of Vartan Bhanji; traditional studies of decisions to accept expatriation in Indonesia will miss the influence of parents and parents-­in-­law; high-­performance work systems may not be all that common in Laos, even if people will politely answer questions about them. What we need is more research, emic research, written by people from different countries around the world and applying relevant, legitimate concepts and practices to deepen our understanding of HRM in those countries. This gives the editors of a text like this some serious concerns. Unless this book is going to grow into an enormous encyclopedia, we cannot have a chapter on each of the two hundred or so countries that there are in the world. And even that would be problematic: Is it reasonable to try to encompass HRM in Vanatu with HRM in India, given the very small population of Vanatu and India’s huge population, split between many different states with different languages, institutions, religions, and cultures? But if we cannot have chapters on each country, how are we to address the issue of different geographical contexts in HRM? We decided to go for regional categories. It must be acknowledged that adopting this approach involves trading “within-­systems” depth for “across-­systems” scope and coverage (Garavan, McCarthy, & Morley,  2016). But the

Contextual Approaches to Human Resource Management   11 issues did not stop there. How big were these regions to be? Were they to be based on natural proximity (Africa) or cultural or institutional similarity (the Anglo-­Saxon countries)? In the end, we chose a somewhat inconsistent mix of the two—arguing to ourselves that, apart from the Anglo-­Saxon grouping, there is sufficient similarity within and sufficient distinction between the “proximity” groupings to maintain that as a consistent criterion. In the end, perhaps because the editors are European and more conscious of the differences here than we are of the differences between anglophone, francophone, and lusophone Africa or within India, for example, the groupings we have chosen are the Anglo-­Saxon countries, the Germanic, the Nordic, the postsocialist European states, and the “Latin” European countries, and then Latin America, Africa (concentrating on subSaharan Africa), the Middle East, and Asia. Even this idiosyncratic analysis—and the inevitable lumping together of very different national contexts in the “continental” chapters—illustrates the very different ways that HRM is understood, conducted, and assessed in different geographical contexts. Despite the caveats, an approach of this nature can be valuable in providing contextual insights that can feed into the process of developing theory in HRM and expanding the range of systems examined in the literature. Chapter 8 focuses on HRM in the Anglo-­Saxon countries. Wood and Brewster note that these countries, also termed the liberal market economies, are just about the only example of a country cluster that both the cultural theories and the comparative institutional theorists agree on. They note that culturally, these countries are characterized by low power distance, high individualism, and low uncertainty avoidance, while institutionally, they have shared legal origins (common law) and are characterized by powerful private property rights, lesser rights for other stakeholders, and government being less interested in supporting stakeholder rights, with commensurate suspicion of government involvement and taxation. They debate how cohesive and consistent the AngloSaxon category really is and precisely how the implications for HRM are manifested in each country. Chapter 9 focuses on HRM in the Germanic context. Krebs, Wach, Wehner, Reichel, Mayrhofer, Sender, Staffelbach, and Ligthart examine how cultural and institutional differences within Germanic Europe shape cross-­national variation in the approaches of organizations to strategic integration of HRM and developmental HRM practices. Despite similarities, their comparison of societal cultural practices and institutional approaches reveals dissimilarities within the cluster. Using Cranet data, they show that the institutional and, to a lesser extent, cultural differences within the Germanic Europe cluster mirror the degree to which HRM is strategically integrated. In contrast, they find more similarities among the Germanic cluster countries in relation to a high level of professionalization concerning developmental HRM practices. The findings indicate that cross-­national differences in the strategic integration of HRM and developmental HRM practices are partially time-­invariant as a result of persistent differences in the institutional environment. Chapter 10 focuses on HRM in the Nordic context. Bévort and Einarsdottir discuss how the specific institutional context has impacted the evolution of HRM practices in

12   Parry, Morley, and Brewster the cluster. First, the Nordic social model and HRM ideology are reviewed. Then the limits of the claim that the Nordic countries form a cluster with very similar attributes in relation to HRM are discussed by examining some of the characteristics and differences for each country. Cranet data are used to compare and highlight commonalities and differences characterizing HRM practices in the Nordic countries. The authors highlight that Nordic HRM operates on the back of an existing collaborative labor market and a social model where, compared to most other regions, egalitarian values are to the fore, a context that affects the status of HRM and HRM practices pursued in the five Nordic countries. In Chapter 11, Morley, Kohont, Poór, Kazlauskaitė, Kabalina and Blštáková examine HRM in the postsocialist region of central and eastern Europe. They commence with a background discussion of the evolution of HRM in the region under three key periods, namely, the socialist period, the transition period, and the contemporary period. They then turn to providing a discussion of a selected number of particular historical and contextual factors that account for some of the commonalities and differences exhibited in contemporary HRM in the region. Finally, drawing on Cranet data, they provide a summative account of selected aspects of organizational-­level HRM policy and practice in the region. Chapter 12, by Trullen and Obeso, provides an overview of the HRM landscape in Latin Europe in the early twenty-­first century. Latin European countries are commonly associated with lower levels of active population, weaker systems of social protection, higher rates of self-­employment, and a dualistic labor market. Drawing again on Cranet data, the authors observe significant variance in HRM among the Latin European countries under examination, along with some shared traits. They find that the HRM department typically has a low degree of influence on strategic decision-­making; there is lower investment in training and development and less involvement by line management in the management of employees. The Latin model also reveals a greater level of labor unrest relative to its European counterparts. Aparecido Costa de Amorim and Carvalho Neto focus on the Latin American context with a particular focus on the Mercosur bloc in Chapter 13. They examine key features of both the HRM and the industrial relations systems in operation in the region. In particular, they examine whether the dissemination of HRM practices in an institutional setting that emphasizes hierarchy and market characteristics will also produce some kind of convergence in these practices. They explore the extent to which the rather different national institutional environments generate similar or different HRM practices. They suggest that the framework explored in the chapter could serve as a useful theoretical point of departure for identifying both national and regional contextual influences on HRM and industrial relations in the Latin American context and could open up new lines of inquiry, in particular, on the likelihood of convergence or divergence in HRM in the region. Chapter 14 turns to HRM in the (sub-­Saharan) African context. Horwitz and Ronnie provide a critical overview of the evolving body of research on HRM, labor market developments, insights regarding cross-­cultural diversity, specific HR practices, issues

Contextual Approaches to Human Resource Management   13 pertaining to the efficacy of the adoption of Western and East Asian international HRM, and employment relations in selected African countries. Among other things, they find evidence of increasing research on HRM issues and mergers and acquisitions, on the impacts of privatization on HRM, on knowledge appropriation, on HIV/AIDS policy implementation issues, and on sustainable development. Despite a burgeoning research agenda, they highlight that there are still unexplored issues relating to African management and HRM and that new findings could reshape the research agenda, along with HRM policy and practice. In Chapter 15 on HRM in the Middle East, Haak-­Saheem and Darwish provide a review on the myriad of terms and geographies that have been used to describe the Middle East and highlight the dearth of relevant literature on HRM in the region. They then explore the importance of the Middle East’s unique institutional and cultural context for HRM and the implications of this for theory and practice. In particular, they examine the relative impact of context on HRM in general before looking at a number of specific examples of some of the Middle Eastern countries. This chapter concludes with setting down several important areas for future research. Chapter 16, by Cooke, Supangco, and Rupidara, reviews key characteristics and developments of HRM in Asian countries against the backdrop of their rich historical features and the rapidly changing landscape on many fronts. It takes stock of what has been researched in the HRM field and the theoretical perspectives underpinning it. They highlight the growing trend toward positivist HRM studies of hypothesized organizational conditions and individual behaviors, at the expense of in-­depth qualitative studies of the motivations, actions, and interactions of social groups, and outcomes in specific organizational settings. Set against this development, they argue that the understanding of people management in workplaces in Asia must take into account a range of institutional, cultural, organizational, and individual factors. They suggest that, in order to add social value and extend intellectual horizons, HRM research in Asia needs to more fully engage with real and live issues that are confronting employing organizations and individuals. Finally, in this section on regional and cultural clusters, we address the fundamental issue of convergence. The question of whether HRM systems and approaches are subject to convergence, in particular as a result of a protracted period of globalization and the spread of practices by multinational enterprises (MNEs), is important because MNEs are powerful players in the landscape of international business and serve as purveyors of specific HRM practices. As they spread their influence around the world, as markets become more international, and as money moves around the world at an ever more frantic pace, might we expect there to be pressures on the most expensive element of operating costs for most organizations—the cost of their people—to become more competitive? And might that lead to the most cost-­effective ways of managing people to become more common across the globe? Many years ago, Rosenzweig and Nohria (1994) noted that HRM was the most national of management activities: It is relatively easy to have similar information technology systems or similar marketing campaigns in different countries, but institutional and cultural differences between countries seem to

14   Parry, Morley, and Brewster be keeping their recipes for managing people distinct (Farndale, Brewster, Ligthart, & Poutsma, 2017; Mayrhofer, Brewster, Morley, & Ledolter, 2011; Mayrhofer, Morley, & Brewster, 2004). This is a nuanced picture and depends to a considerable extent on how we define the construct of convergence: It seems that aspects of HRM that are institutionally constrained remain nationally distinctive, for aspects that are less institutionally constrained the rhetoric, at least, and perhaps the practice may be converging. In Chapter  17, Mayrhofer, Brewster, and Pernkopf tackle the debate on convergence in HRM and cast particular light on the role of time and whether it changes the relationship between countries in the way that they manage HRM. The chapter addresses the notion of convergence in three steps. First, it examines a range of conceptual views about what convergence means in different theoretical traditions and discourses. Second, based on that examination, it offers a balanced overview of the conceptual and empirical evidence about how HRM has been developing in different contextual settings over time, teasing out what we know for sure and what is still open for speculation. Third, the chapter outlines some promising options for future research at the conceptual, empirical, and practical levels.

Sector and Organizational Influences One of the key factors that will make a difference to HRM, even within countries, is organizational ownership. Most of what we know about HRM comes from the private sector: THe bulk of the research and publications that form the bedrock of our knowledge about, and understanding of HRM, concern the private sector. There are some studies of the effects on HRM of ownership in the privately owned sector—looking at the effects of different forms of equity investment (Bacon, Wright, Meuleman, & Scholes, 2014) and differences between equity investment from different countries (Guery, Stévenot, Wood, & Brewster, 2017) and in different countries (Bacon, Wright, Demina, Bruining, & Boselie,  2008). Generally, however, the private sector overall has been taken as the ­reference category. In an attempt to explicate sectoral and organizational meso-­level influences on contextual determinism and examine some of the less studied sectors of the economy, our contributors look in some detail at the public and not-­for-­profit sectors (see also Brewster & Cerdin, 2018). We include a chapter on small and mediumsized businesses, specifically family businesses—a category that probably constitutes well over 90 percent of all the organizations that there are around the world and about whose people management (despite some fascinating insights: Patel & Cardon, 2010; Shulz, Bennett, & Ketchen, 1997; Stavrou-­Costea & Manson, 2006; Verreynne, Parker, & Wilson, 2013) we know extraordinarily little. Other chapters in this section of the book examine the issues of trade union contexts and the particularly relevant case of MNEs. With respect to MNEs, Poór et al. (2014) note that the ratio of people employed by MNEs is significantly higher in many transitional economies than in most Western ones, making them powerful, if sometimes “ambiguous” (Cooke, Wood, Psychogios, & Szamosi, 2011, p. 371), actors in these locations, with many MNEs playing a direct part in

Contextual Approaches to Human Resource Management   15 the very construction of the environment of developing country contexts in which they have chosen to locate. In Chapter 18, Rupidara examines HRM in MNEs in one such developing country context, namely, Indonesia. Employing both process and institutional perspectives to understand HRM in MNEs, the author casts light on how HRM systems within subsidiaries of MNEs, particularly in developing country contexts in Asia, are constructed and operate. Through a secondary analysis of published and unpublished materials, he highlights several multilevel contextual factors that influence the practices of HRM in MNE subsidiaries in the developing country context. Chapter 19 explores aspects of HRM in a public-­sector context. Leisink, Borst, Knies, and Battista reiterate the unique contextual features that pertain to the public sector despite decades of reforms in some countries to reorient organizations to private-­sector management principles. They note the lack of evidence on public-­sector/private-­sector differences in HRM practices. Using Cranet data, they examine whether public-­sector institutional characteristics affect the application of HRM practices as theoretically expected. Their results show that, compared to twenty years ago, HRM in public organizations continues to differ in some respects from HRM in private-­sector organizations—but not in others. The traditional belief that public-­sector HRM is not as squarely focused on efficiency and effectiveness still holds, with the prevailing public service ethic and the resilience of collectivized industrial relations being suggested as contributory factors. Conversely, they note that the traditional public-­sector HRM orientation on employee well-­being is less distinctive, a development they suggest may likely affect the position of public organizations in the labor market. Chapter 20 explores HRM in the not-­for profit sector. Here, drawing on Cranet data, Parry and Kelliher examine the use of HRM practices such as recruitment, selection, training, reward, performance management, communication, and diversity in not-­forprofit organizations. In the light of ongoing debates about how the not-­for-­profit sector differs from, or is similar to, the public and private sectors, they compare the findings across sectors. They show that many of the HRM practices used in the not-­for-­profit sector are similar to those used in the public and private sectors, making it difficult to identify a unique not-­for-­profit approach to HRM. However, they also suggest that some elements of the commonly cited “values-­based approach” to HRM in the not-­forprofits remain. Chapter 21 examines the specific case of HRM in the family business context. In this contribution, Stavrou argues that family businesses seem to have unique characteristics that make them different from nonfamily firms in the ways they handle HRM. The author draws on the utility of three key theoretical perspectives, namely, the resourcebased view of the firm, institutional perspectives, and stakeholder analyses, to advance understanding of HRM in family businesses. In exploring the direct relationships between strategic HRM and distal competitive outcomes, Stavrou suggests that the family business context seems to fall short compared to its non–family business counterparts. She notes that family businesses seem to pay special attention to certain stakeholders when compared to nonfamily ones, creating the need to explicate the reasons behind such emphasis. Finally, her analysis reveals that family businesses appear

16   Parry, Morley, and Brewster affected by certain institutional constraints and enablers, necessitating their study in greater depth and the reasons behind their effects. Her chapter culminates with the development of a proposed future line of research devoted to the study of HRM in family businesses. The final chapter in our section on meso-­level context—sector- and organizationallevel influences—focuses on HRM in a trade union context. In Chapter 22, Ryan and Lavelle profile trade unions and their activities across a range of countries. In particular, the chapter focuses on providing contextual information on levels of trade union density (both at the national level and within organizations), levels of trade union engagement (trade union recognition), levels of influence that trade unions have in the workplace, and levels of collective bargaining. Drawing on different data sources, the authors reveal a picture of diversity across countries in relation to trade union activity and collective bargaining, although declining levels of trade union density and collective bargaining coverage are common to many countries.

The Functional Context and Activities In the final section of the book, we focus on the micro-­level context, examining aspects of the HRM function, its activities, and its status. In terms of activities, we examine rewards and appraisals, human resource development, well-­being, and diversity. With respect to the HRM function, we focus on outsourcing, the profile of the specialist leading the function, and whether the function is becoming more strategic. Chapter 23 provides a treatise on individual-­level rewards and appraisal. In this ­analysis, Gooderham and Mayrhofer postulate that individual performance rewards and individual performance appraisals are core tenets of “calculative HRM.” They then review cross-­national studies of the adoption of calculative HRM and observe a substantial influence of national context on its adoption by firms. In terms of how to conceive national context, they observe from research that formal institutional influences are of more salience than informal influences. In addition, they note that recent research on the uptake of calculative HRM perceives context as a constraint rather than as a determinant. While managers have at least some latitude to implement calculative HRM practices, regardless of context, they suggest that their efforts need to be adapted to, and sensitive to, prevailing contextual constraints. Adopting a multilevel and embedded stakeholder approach, Heraty considers explanations of human resource development (HRD) from a variety of perspectives in Chapter 24. Definitional aspects of learning and development at the organizational level are first introduced, followed by a deeper consideration of who the different HRD stakeholders might be at each level and what their priorities might include. Trends in the macro context for HRD are then discussed, before a review of the organizational-­level context. Employing Cranet data, an analysis of HRD investment across the countries surveyed is presented and followed by an analysis of HRD needs identification, targeted investment, and the common evaluation strategies employed.

Contextual Approaches to Human Resource Management   17 In addition to the specific aspects of the work of HRM specialists, we also include a chapter that examines well-­being. The well-­being of workers was one of the long-­term consequences that Beer et al. (1984) said should be the aim of HRM. Although much of the literature on employee well-­being argues that it is important because it leads to valuable outcomes for the employer, the idea that individuals may have a right to well-­being has only been resurrected more recently (Boxall & Macky, 2014; Guest, 2002; Van de Voorde, Paauwe, & Van Veldhoven, 2012). Tregaskis, in her contribution in Chapter 25, argues that the well-­being of employees through employment practices and skills development is gaining greater emphasis in economic growth strategies. She likens it to a new performance lens that challenges the primacy given to financial metrics over social metrics such as health and happiness and brings multiple stakeholder interests into play. This chapter examines the evidence base for employee learning as a pathway to wellbeing, and the case is made for a renewed focus on such learning to enable transformative change that supports individuals, organizations, and society. Chapter 26 is focused on the diversity context of HRM. Kramar and Jepsen highlight that diversity management is composed of demographic, economic, and political considerations as it focuses on managing individual differences. They present models of diversity management and discuss diversity frameworks from strategic management through stakeholder approach, social categorization, social identity theory, and social capital theory. In addition, data on recruitment action programs are presented to demonstrate the varied uptake of particular diversity practices in selected countries. Opportunities for further research are identified. The issue of outsourcing of HRM, or of perhaps the more administrative elements of the  subject, while particularly popular some time ago (Adler,  2003; Gilley, Greer, & Rasheed, 2004; Klaas, McClendon, & Gainey, 1999), perhaps as a result of consultancies trying to build a market for their outsourcing products, remains a prevalent topic in some quarters. The public sector is a particular case in point in this regard. In Chapter 27 on outsourcing, Lazarova and Reichel provide an overview of the current literature on HRM ­outsourcing. They note that there are few reliable sources on the actual extent to which organizations implement HRM outsourcing or on its overall impact. Some studies suggest small positive effects on company performance and mixed effects on outcomes related to the functioning of HRM departments. The authors present empirical data from a comparative HRM study on the prevalence of outsourcing, yielding insights on how widespread it is, and suggest future directions for research in the area in order to open new lines of inquiry. The profile and competencies of HRM directors are crucial in shaping the strategic role of HRM in organizations. Chapter 28, by Sender, Staffelbach, and Mayrhofer, examines their profiles. They provide a comprehensive overview of the role of contextual factors related to both external environment (e.g., national culture, industry) and internal environment (e.g., ownership, the role of the HRM function, performance, employee turnover) for the profile of the HRM director. Then, using Cranet data, they explore differences in the profile of the HRM director across contexts and suggest reasons for these differences. Their analysis points to significant profile differences among HRM directors in relation to education, experience, and gender across contexts.

18   Parry, Morley, and Brewster Our final chapter focuses on the perennial question of whether HRM functions are becoming more strategic. Historically, the role of the HRM function in organizations has been beset by debates about its contribution to and demonstrable impact on the bottom line. In Chapter 29, Farndale and Vidovic unveil the historical development of the strategic orientation of HRM departments in different regions of the world, providing both a theoretical base and an overview of current practices and trends. Their answer to the question, Is the HRM department becoming more strategic? is a qualified yes. In their analysis, the trends over time and across contexts appear to suggest directional convergence in the HRM department achieving a strategic role, though there are obvious differences in the pace at which this is being achieved. They find clear evidence of a connection between how advanced an economy is and the extent to which the HRM department can be more strategic.

Acknowledgments As with all handbooks, the production of this volume has involved a sustained collective effort from a cohort of scholars with whom we have had the pleasure of working. While hard choices had to be made about various aspects of content, our guiding principle revolved around striking a balance between adequate coverage and appropriate depth. The extent to which that balance has been appropriately struck is best judged by you, our readers. As editors, we want to thank some very important people. First, we thank the team at Oxford University Press for their support—and indeed their patience—as we worked to develop this handbook. Our contributors, a highly diverse group of scholars in their own right, have produced insightful summaries of the state of the art on their area and helped us to achieve our aim of offering conceptual and empirical analyses of different elements of context through a range of lenses. Behind our contributors stand an army of scholars and researchers who have provided much of the understanding that we and our contributors rely on. In front of our contributors, as it were, stand you, the readers of the handbook. We want to thank you for looking through it and hope that it is helpful to you. We wish you the best of luck with your teaching and your research, and above all, perhaps, we hope that you enjoy reading some of the contributions in the handbook.

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22   Parry, Morley, and Brewster Stavrou, E., Brewster, C., & Charalambous, C. (2010). Human resource management and firm performance in Europe through the lens of business systems: Best fit, best practice or both? International Journal of Human Resource Management, 21(7), 933–962. Stavrou-Costea, E., & Manson, B. (2006). HRM in small and medium enterprises: Typical, but typically ignored. In H. H. Larsen & W. Mayrhofer (Eds.), Managing human resources in Europe (pp. 107–130). London, UK: Routledge. Teagarden, M.  B., von Glinow, M.  A., & Mellahi, K. (2018). Contextualizing international ­business research: Enhancing rigor and relevance. Journal of World Business, 53(3), 303–306. Vaiman, V., & Brewster, C. (2015). How far do cultural differences explain the differences between nations? Implications for HRM. International Journal of Human Resource Management, 26(2), 151–164. Van de Voorde, K., Paauwe, J., & van Veldhoven, M. J. P. M. (2012). Employee well-being and the HRM–organizational performance relationship: A review of quantitative studies. International Journal of Management Reviews, 14(4), 391–407. Verreynne, M.-L., Parker, P., & Wilson, M. (2013). Employment systems in small firms: A multilevel analysis. International Small Business, 31(4), 405–431. Wangrow, D. B., Schpeker, D. J., & Barker, V. L. (2015). Managerial discretion: An empirical review and focus on future research directions. Journal of Management, 41(1), 89–135. Whitley, R. (1999). Divergent capitalisms: The social structuring and change of business systems. Oxford, UK: Oxford University Press. Wood  G., Brewster  C. & Brookes  M. (Eds.). (2014). Human resource management and the institutional perspective. New York, NY: Routledge.

section 1

T H E OR ET IC A L AND C ONC E P T UA L L E NSE S

chapter 2

The Cu ltu r a l L ens Hilla Peretz and Lena Knappert

Mahatma Gandhi said, “A nation’s culture resides in the hearts and in the soul of its people.” But what is culture? And why is it important to understand culture as a contextual variable? In this chapter, we will answer those questions and discuss why and how culture is an important aspect of the human resource management (HRM) field, as well as how it accounts for differences in HRM between organizations operating in diverse cultural contexts. We note that the study of the effect of culture on HRM policies and practices is not limited to cultural differences at the national level, but also covers organizational (e.g., Aycan, Sinha, & Kanungo, 1999; Taylor, Levy, Boyacigiller, & Beechler, 2008) and individual (e.g., Probst & Lawler, 2006; Stone, Stone-­Romero, & Lukaszewski, 2007) cultural variances. However, this chapter will focus on the role of national cultural differences. In the following sections, we first define culture, elaborate on the origin and development of this concept, and review leading frameworks of culture. Subsequently, drawing on prominent studies in the field, we discuss why and how culture is an important variable for understanding HRM in context, specifically from a comparative perspective. Finally, we discuss the implications for practice, the limitations of cultural perspectives to HRM, and conclude with some directions for future research.

Defining and Measuring Culture The literature contains many definitions of culture. In fact, anthropologists Kroeber and Kluckhohn (1952) once identified over 160 different definitions. They then offered an inclusive definition of culture, namely, “Culture consists in patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional ideas and especially their attached values” (Kroeber & Kluckhohn,  1952, p. 181). Similarly, Hofstede (1984, p. 21) offers his own ­definition, whereby “culture is the collective programming of the human mind that

26   Peretz and Knappert ­ istinguishes the members of one human group from those of another. Culture, in this d sense, is a system of collectively held values.” The roots of the modern term culture can be traced to the ancient Roman Cicero (106–43 bc), who, in his Tusculanae Disputationes, wrote of a cultivation of the soul (see Peabody, 1886). The anthropologist Edward Burnett Tylor (1832–1917) defined culture as “that complex whole which includes knowledge, belief, art, morals, law, custom and any other capabilities and habits acquired by man as a member of society” (Tylor, 1871, p. 54). Alternatively, in a modern variation, culture is defined as “an adaptive system that links groups of people and their adapted behavioral patterns to the ecological systems in which they live” (Hall, 1959), or “a set of parameters that differentiate collectivities from each other in a meaningful way” (Chhokar, Brodbeck, & House, 2008). It has been common to conceptualize and measure culture through various value dimensions (Hofstede, 1980; Schwartz, 1994; Trompenaars & Hampden-­Turner, 1997). Values at a national level are the means by which behaviors and beliefs of members of the larger society can be coherently interpreted. Researchers have made several attempts to define and classify national values (e.g., Aycan et al., 2000; Hofstede, 1991; Schwartz, 1999; Trompenaars, 1993). Common themes in most of these definitions and classifications are that cultural values are typically shared by members of society, are passed from older to younger members, and shape a collective perception of the world (Adler, 2002). Another important differentiation is the emic versus etic approach to defining and measuring culture. In cross-­cultural studies, the emic approach is based on the assumption that at least some cultural dimensions are culture specific and cannot be used to analyze cultures of different societies. Unlike universal cultural dimensions that are used to describe cultures relative to each other, emic studies are unique to specific cultures and are used to describe each culture independently. On the contrary, the etic approach assumes that there is a set of universal cultural dimensions that are equally relevant to all cultures. The described frameworks in this chapter use the etic approach. Although the emic approach (for example, cultural metaphors) was also used in ­several cross-­cultural studies (e.g., Gannon, Locke, Gupta, Audio, & Kristof-­Brown, 2005–2006), the etic approach has dominated the field of cross-­cultural studies. While reducing the concept of culture to a limited number of value dimensions is not without criticism, this approach allows for comparability across cultural studies and provides valid measures for a highly abstract construct.

Models of Culture In recent decades, six rigorous, inclusive frameworks of culture have been developed: Kluckhohn and Strodtbeck (1961), Hall (1976), Hofstede (1980,  1991), Trompenaars (1993), Schwartz (1994, 1999), and the Global Leadership and Organizational Behavior Effectiveness (GLOBE 2004, 2006) frameworks. Recently, a seventh framework of culture has been advanced: Gelfand et al.’s (2011) framework of cultural tightness–looseness. Each framework highlights different aspects of societal beliefs, norms, and values and serves as the starting point for understanding different layers of culture, for testing antecedents of national culture, and for assessing cultural effects on management in general and HRM in particular. Table 2.1 provides a summary.

The Cultural Lens   27 Table 2.1.  Summary of culture frameworks Framework

Based on

Cultural dimension

Core principles

Kluckhohn & Strodtbeck (1961)

Value orientations

Each society creates a dominant ■  Human nature value system in response to ■  Man–nature relationship universal problems ■  Human activity ■  Social relation with people ■  Time sense

Hall (1976)

Dimensions of ■  High context vs. context low context

Hofstede (1980)

Value orientations

■  Collectivism vs. individualism ■  Masculinity vs. femininity ■  Power distance ■  Uncertainty avoidance ■  Long-­term vs. short-­term orientation

The model is empirically driven Based on the assumption that different cultures can be distinguished based on differences in what they value

Trompenaars (1993)

Dimensions of values and personal relationship

■ Universalism–particularism ■ Individualism–collectivism ■ Specific–diffuse ■ Neutral–affective ■ Achievement–ascription ■  Time perspective ■  Relationship with environment

Building on the work of Hofstede Focused on variations in both values and personal relationships across cultures

Schwartz (1994)

Value orientations

■  Conservatism vs. autonomy Cultural adaptations to resolve (intellectual autonomy and basic needs of human beings affective autonomy) ■  Hierarchy vs. egalitarianism ■  Mastery vs. harmony

Culture can be characterized according to communication styles by referring to the degree of nonverbal context used in communication

GLOBE (House Value et al., 2004) orientations

■  Institutional collectivism ■  In-­group collectivism ■  Power distance ■  Uncertainty avoidance ■  Gender egalitarianism ■  Humane orientation ■  Performance orientation ■ Assertiveness ■  Future orientation

Building on the framework of Hofstede Focused on how cultural values relate to organizational practices

Gelfand et al. (2011)

■  Tight vs. loose

Focus on the strength of social norms within societies

Social norms orientation

28   Peretz and Knappert

Kluckhohn and Strodtbeck’s Framework Kluckhohn and Strodtbeck (1961) suggested one of the earliest models of culture that has served as a principal foundation for several later models. They proposed a theory of culture based on value orientations, arguing that there are a limited number of universal problems that are common to all human groups, but for which various human groups find different solutions based on their values and preferences. The universal problems are the relationship with nature, attitudes to time, views of human nature, activity, relationships between people, and space. They suggested that in responding to these problems, any given society creates a dominant value system consisting of five basic value orientations with several subdimensions. The major orientations are human nature (evil, mixed, good), man–nature relationship (subjugation, harmony, dominant), human activity (being, becoming, doing), social relation with people (hierarchical, collateral, individual), and time sense (past, present, future). Although Kluckhohn and Strodtbeck’s (1961) framework has been adopted by some researchers to explain variations in HRM practices across countries (e.g., Aycan, al-­Hamadi, Davis, & Budhwar, 2007; Nyambegera, Sparrow, & Daniels, 2000), this framework has been applied less frequently in HRM research than later models (such as Hofstede’s model and GLOBE) because of its complexity and the existence of overlaps between the orientations.

Hall’s Framework Hall (1976) suggested that cultures are characterized according to communication styles by referring to the degree of nonverbal context used in communication. Hall (2000, p. 37) argued that “the level of context determines everything about the nature of the communication and is the foundation on which all subsequent behaviour rests.” Essential for the understanding of Hall’s concept and the construct of context is a clear definition of the key terms high-­context culture and low-­context culture. According to Hall (1976, p. 101), “high-­context transactions feature pre-­programmed information that is in the receiver and in the setting, with only minimal information in the transmitted message.” Conversely, in low-­context communication, most of the information is vested in the explicit code. Because context use varies across cultures, any transaction transferring meaning can be characterized somewhere on a continuum from high context to low context, with nearly all possible combinations of context and information, but without both extremes (high context: only context; low context: only information) themselves (Hall, 2000). In high-­context societies, the situation, the external environment, and nonverbal cues are crucial in the communication process. Examples of highcontext cultures include Japan, as well as Arab and southern European societies, where the meaning of communication is mainly derived from body language, facial expressions, setting, and timing (Boyacigiller & Adler, 1991). Low-­context cultures, in contrast, appreciate a more clear, explicit, and written form of communication. Anglo-­Saxon and northern European countries are examples of low-­context societies. The implications of

The Cultural Lens   29 these different cultural contexts for management studies are evident. However, this approach fits much better with a generic concept of culture, in the sense of broad cultural communities (e.g., Arabs or Latinos) rather than within the constrained boundaries of a nation-­state.

Hofstede’s Framework Hofstede (1980,  1984,  1991) developed one of the most influential national culture frameworks and the most widely used model of cultural differences in the organizational literature. His model was driven from an empirical study of employees from fifty countries working for a major multinational corporation (IBM) and was based on the assumption that different cultures can be distinguished based on differences in what they value. For example, some cultures have difficulty coping with unanticipated events and value certainty in their life, while others have a greater tolerance for ambiguity and seem to appreciate change. Hofstede argues that it is possible to gain extensive insight into organized behavior across cultures based on value dimensions. Initially, Hofstede (1980) offered four dimensions: collectivism–individualism (the importance of individual vs. group interests); masculinity–femininity (assertiveness vs. passivity or material possessions vs. quality of life); power distance (the appropriate distribution of power in a society); and uncertainty avoidance (the degree of uncertainty that can be tolerated in a society). These dimensions are based on four fundamental challenges society faces: (1) the relationship between the individual and the group, (2) social implications of gender, (3) social inequality, and (4) handling of uncertainty inherent in economic and social processes. Later, Hofstede added a fifth dimension based on his research with Bond (Hofstede, 1991b, Hofstede & Bond, 1988), the dimension of long-­term versus short-­term orientation (importance of tradition and social obligation vs. being able to adapt). Although Hofstede’s framework is one of the most widely used models, the framework is subject to several criticisms, especially in respect to the usefulness of operationalizing culture through a series of numerically measured dimensions, some preferring to use richer qualitative techniques (McSweeney, 2002). Country scores are based on matched samples of IBM employees, which are not necessarily representative of their countries (Javidan, House, Dorfman, Hanges, & Sully de Luque, 2006). Another major criticism surrounding Hofstede’s work is that culture does not equate with nations. Hence, it could not generalize to the culture of a wide range of countries and is reasonable only if human societies are considered isolated from each other (Baskerville, 2003).

Trompenaars’s Framework Trompenaars (1993), building on the work of Hofstede, presented a rather different model of culture, which focused on variations in both values and personal relationships across cultures. It consists of seven dimensions. The first five dimensions focus on how

30   Peretz and Knappert people relate to other people: universalism–particularism (whether there is one best way of doing things vs. changing as a result of unique circumstances), individualism– collectivism (parallel to Hofstede’s definition), specific–diffuse (whether people are viewed in their specific role or as a whole person), neutral–affective (whether people refrain from showing emotional expressions or if this is acceptable and encouraged), and achievement–ascription (whether people are being judged based on accomplishments or status). The last two cultural dimensions by Trompenaars focus on time management and society’s relationship with nature: time perspective (whether people focus on the past or the future in their daily activities) and relationship with environment (the extent to which people believe they control the environment or it controls them). The seven dimensions of this model correspond to major cultural values and appear exhaustive and intelligible. Despite this comprehensiveness, the applicability of the model is low. In fact, Smith, Peterson, and Schwartz (2002) note that the ­model’s dimensions still have not been reliably measured, and Yeganeh, Su, and Sauers (2009) indicate that some of the framework dimensions (such as universalism– particularism, individualism–collectivism, and diffuse–specific) are conceptually overlapping. Further, the framework does not provide a practical approach to measuring culture, and as a result, its applicability in cross-­cultural research is decreased, especially in the case of causal design, which requires conceptually separated constructs (Yeganeh et al., 2009).

Schwartz’s Framework Schwartz (1994, 1999) reasoned that since values are motivational goals, basic human values might be derived by considering the most basic needs of human beings: (1) biological needs as individuals, (2) the need to coordinate our actions with others, and (3) the need for groups to survive and flourish. Hence, the cultural adaptations to resolve each of these needs underscore Schwartz’s framework, which consists of three bipolar dimensions, defining seven national–cultural domains. The first dimension contrasts conservatism versus autonomy (the person is embedded in the collectivity vs. the person is viewed as an autonomous, bounded entity), whereby two types of autonomy are distinguished: intellectual autonomy (the right of individuals to follow their own intellectual directions) and affective autonomy (the right of individuals to pursue their own affectively positive experiences). This dimension resembles Hofstede’s individualism– collectivism dimension. However, while Schwartz’s dimension focuses on the extent to which a society views the individual as either autonomous or embedded in the group, Hofstede’s individualism–collectivism focuses on the contrast between individual goals and group goals. The second dimension contrasts hierarchy versus egalitarianism (the legitimacy of fixed roles and resource allocation vs. equality and social justice). The third dimension contrasts mastery versus harmony (to actively seek, master, and change the world; to bend it to our will and to assert control versus to accept the world as it is,

The Cultural Lens   31 trying to preserve it). Furthermore, Schwartz (1994) provides ratings on the seven domains for thirty-­one countries, basing his framework on the empirical analyses of country-­level responses of large groups of people (mostly students and teachers, however). There is a close match between the definition of the seven cultural domains and the items, and the items were shown to have similar meanings across cultures. Given the strong theoretical foundations of Schwartz’s model, it offers great potential for crosscultural HRM studies (e.g., Snir & Harpaz, 2009).

Global Leadership and Organizational Behavior Effectiveness Framework Building on the framework of Hofstede (1980), the GLOBE project (House, Hanges, Javidan, Dorfman, & Gupta, 2004) offers a comprehensive, nine-­dimension framework to explain cultural similarities and differences. While several of these dimensions have been identified previously (e.g., individualism–collectivism, power distance, and ­uncertainty avoidance), others are unique (e.g., gender egalitarianism, humane orientation, performance orientation, and assertiveness). Gender egalitarianism refers to the degree to which societies or organizations minimize differences in gender roles. Societies low in gender egalitarianism are characterized by more rigid sex roles, higher occupational sex segregation, and lower acceptance of women as decision-­makers or authority figures. Humane orientation refers to the extent to which individuals in societies or organizations encourage and reward individuals for being fair, altruistic, friendly, generous, caring, and kind to others. Societies high in humane orientation are likely to promote sensitivity to all forms of racial discrimination. Performance orientation refers to the extent to which a community encourages and rewards innovation, high standards, excellence, and performance improvement. Societies high in performance orientation value competitiveness, are likely to emphasize training and development, and view feedback as important for performance improvement. Finally, assertiveness is the degree to which individuals are assertive, confrontational, and aggressive in their relationships with others. High-­assertiveness societies are characterized as valuing competition, success, and progress, while low-­assertiveness societies are characterized as valuing cooperation and warm relationships (House et al.,  2004). Moreover, GLOBE explicitly differentiates between societal values and societal practices. The distinction made between values and practices is similar to DeMooij’s (2005) distinction between “desirable” and “desired” values. Desirable refers to social norms that are held in a c­ ulture and by an individual (corresponding to the “should be” on the GLOBE values), whereas desired refers to individuals’ choices (corresponding to the “as is” on the GLOBE practices). Both values and practices are often contradictory in a culture and are therefore seen as paradoxical values, which are found in many cultures. Given the fact that values and practices in a society may be inconsistent and sometimes even contradictory, it is a major strength that GLOBE clearly distinguishes between both levels of cultures.

32   Peretz and Knappert Compared with the previously discussed frameworks, GLOBE presents the most current data on cultural dimensions and it does so for a large number of c­ ultures (sixty-­two cultures). A major limitation of the GLOBE study is its relatively small sample, with an average of only about 250 subjects per culture. A second s­ erious limitation is that respondents were middle managers in corporations. As with the Hofstede study (where IBM employees were surveyed), a single (and small) group within each culture was analyzed and used as representative of the entire country. Transfer to other groups (for instance, consumers) remains speculative and requires empirical testing.

Gelfand’s Framework of Tightness–Looseness Recently, Gelfand et al. (2011), building on the definitions by American Finnish anthropologist Pertti  J.  Pelto (1968), formulated the tightness–looseness framework. Pelto (1968) was the first to suggest that tightness–looseness is an important cultural dimension that could be relevant for comparing societies, arguing that traditional societies varied on their devotion to social norms. He identified the Japanese, Pueblo Indians, and Hutterites as examples of tight societies, in which norms were expressed very clearly and unambiguously and severe sanctions were imposed on those who deviated from norms. By contrast, he identified the Skolt Lapps of Northern Finland and the Thais as loose societies, in which norms were expressed through a wide variety of alternative channels and where there was a general lack of formality, order, and discipline and a high tolerance for deviant behavior. According to Gelfand et al. (2011), societal tightness–looseness has two key components: the strength of social norms, or how clear and pervasive norms are within societies, and the strength of sanctioning, or how much tolerance there is for deviance from norms within societies. More specifically, tight societies are characterized by stronger norms, more restrictions regarding the range of permissible behavior, and stricter punishment of deviant behavior. Tight societies have more authoritarian governments, more media restrictions, fewer civil liberties, and greater use of the death penalty; have much more constraint in everyday situations; and have citizens who exhibit greater prevention focus, cautiousness, impulse control, need for structure, and self-­monitoring ability relative to loose societies. Tight societies have also experienced a greater number of ecological and historical threats, including fewer natural resources, more natural disasters, and a greater incidence of territorial threat, higher population density, and greater pathogen prevalence compared to loose societies. Such threats increase the need for strong norms and the sanctioning of deviant behavior, which help humans coordinate social action for survival. India, South Korea, Norway, and Pakistan are examples of tight societies. In contrast, loose societies have fewer ecological and historical threats and can “afford” more deviant behavior. Israel, Hungary, Estonia, and Ukraine are examples of loose societies.

The Cultural Lens   33

Culture and Human Resource Management Practices In the literature to date, two particular approaches have been employed to inform the relationships between HRM and culture: the international HRM approach and the ­comparative HRM approach. International HRM has been defined as HRM issues, functions, policies, and ­practices that result from the strategic activities of multinational enterprises (MNEs) (Tayeb, 2004). Here, the emphasis is on the MNEs’ ability to attract, develop, and deploy talented employees in a multinational setting and to get them to work effectively despite differences in culture, location, or language. International HRM involves the same ­elements as domestic HRM but is more complex to manage, in relation to the diversity of national contexts and the makeup of the workforce. In particular, international HRM challenges the balance between localization (i.e., an adaptation of HRM to national ­cultures and employment practices) and standardization (i.e., an adaptation of HRM to corporate culture and practices). Comparative HRM, in contrast, is a systematic method of investigation that seeks to explain the patterns and variations encountered in cross-­national HRM (Brewster, Mayrhofer, & Farndale, 2018). Extending sheer descriptions of HRM institutions and practices in single societies, comparative HRM literature analyzes different national business systems that arise from differences in specific historical, cultural, and institutional heritage in certain countries. For example, comparative differences occur as a result of significant historical events, such as the process of industrialization, or as a result of the legacy of premodern forms of social organization. Moreover, the dialogue between HRM and culture can be discussed from at least two angles. On the one hand, culture is described as a predictor of HRM strategies and ­practices, mainly based on contextual theories, which consider the influence of the external context on managerial decisions (Rousseau & Fried, 2001). On the other hand, culture is described as a moderator between HRM practices and outcomes, mainly based on fit theories, which broadly emphasize the importance of the fit between ­organizational practices and the larger social context. Here, the idea is that positive work outcomes result from a high level of fit (Schneider, 2001). In the following sections, we focus on the cultural aspect of the comparative HRM approach, examining how culture shapes managerial choices across national contexts and how these choices may explain differences in HRM. Whereas a range of HRM ­activities are subject to the influence of culture, we limit our review to the following seven key HRM practices: recruitment and selection, performance management and performance appraisal, training and development, compensation and benefits, ­flexible work arrangements, diversity management, and high-­performance work ­systems (HPWS).

34   Peretz and Knappert

Recruitment and Selection Recruitment and selection are crucial HRM activities to attract, select, and retain the talents that will help the company to achieve its goals. While the literature emphasizes in particular the impact of recruitment activities (such as job advertisements versus informal recruitment) and selection processes (such as interviews versus tests) on candidates’ organizational attractiveness (e.g., Ma & Allen, 2009; Walker et al., 2013), the effect of staffing practices on employees’ job satisfaction, commitment, and intent to turnover after joining the company has been discussed as well (e.g., Jiang, Lepak, Hu, & Baer, 2012; Verquer, Beehr, & Wagner, 2003). Given cultural differences, it is likely that candidates and employees across countries respond differently to the various recruitment activities and selection processes that companies can choose from. Yet, some scholars highlight that research on staffing practices across cultures is insufficient (Ployhart, 2006; Ployhart & Schneider, 2012). Indeed, most cross-­cultural analyses in this field have remained at the conceptual level (e.g., Aycan,  2005; Dipboye & Johnson,  2012; Ma & Allen,  2009; Steiner, 2012; Stone et al., 2007) and empirical evidence including more than three country samples is scarce (for an exception, see Ryan, McFarland, Baron, & Page, 1999). In relation to recruitment, organizations in collectivistic societies generally follow a more personal, relationship-­oriented approach and are therefore assumed to prefer informal and network-­based recruitment activities (Aycan, 2005; Steiner & Gilliland, 2001; Stone et al.,  2007). Similarly, based on case studies in the Middle East, Iles, Almhedie, and Baruch (2012) lay out how the value of wasta—which is prominent in the Middle East and refers to connections and networks—often leads to “wasta-based recruitment” through word-­of-­mouth in informal networks. In individualistic societies, however, organizations are assumed to highlight individual skills and competition and are therefore more likely to recruit outside the organization (Dipboye & Johnson, 2012; Ma & Allen, 2009). Collectivism–individualism is also assumed to have an impact on the selection ­methods that organizations choose, such that in collectivistic societies, based on their preference for a more personal approach, organizations prefer selection interviews, while in individualistic societies individual selection tests are more popular. Further, in their survey of 959 organizations in twenty countries, Ryan et al. (1999) found the dimension of uncertainty avoidance to be of importance. In particular, they showed how organizations in high uncertainty avoidance societies not only apply more test types but also use them more extensively. Moreover, they found that these organizations also conduct more interviews when filling a position.

Performance Management and Performance Appraisal In programs for the appraisal and management of employee performance, organizations pursue the goal of developing “techniques that will help employees meet their personal goals (for growth, development and personal success), but which will also help the

The Cultural Lens   35 organisation to function more effectively” (DeNisi & Smith,  2014, p. 128). Hence, ­performance appraisal and performance management are directly tied to the company’s strategy and objectives (Aguinis, 2013; Armstrong, 2009). With performance management being defined as an “extension of performance appraisal” (Lindholm, 2000, p. 45), five key elements of performance management emerge from the literature: appraisal criteria, the actors involved, applied methods, consequences of the appraisal, and the way the feedback is provided (Festing, Knappert, Dowling & Engle, 2012). While previous research has also put substantial effort into understanding best ­practices and universals—“principles that lead to effective performance management regardless of cultural contexts” (Aguinis, Joo, & Gottfredson, 2012, p. 385)—a substantial body of literature points out country-­specific peculiarities and cultural variation in performance management. As Festing et al. (2012) identified in their literature review, the most commonly used dimensions for the investigation of cultural differences in ­performance management are collectivism–individualism and power distance. For example, with regard to the first key element—appraisal criteria—Aycan (2005) proposes that in individualistic societies, appraisals are more likely to be based on individual output. Conversely, in collectivistic societies, team performance and work processes are more relevant for appraisal (Milliman et al.,  1998; Varma, Budhwar, & Singh,  2015). Indeed, in their studies on performance management in highly collectivistic China, Bai and Bennington (2005) found personal relationships to be the most important criterion, while performance management in the highly individualistic United States is often associated with a strong emphasis on results and individual achievements (Schneider & Barsoux, 2003). With regard to cultural variations on the second key element of performance management—the actors—previous literature has predominantly highlighted the important role of power distance (e.g., Aycan, 2005; Festing & Barzantny, 2008; Milliman et al., 1998). For instance, using Cranet data in a study across twenty-­one countries (for more on the Cranet project, see Brewster, Mayrhofer, & Morley, 2004), Peretz and Fried (2012) found organizations in low power distance societies to be more likely to rely on multiple sources of raters (e.g., supervisors, subordinates, peers, and employees themselves) compared to organizations in high power distance societies. Furthermore, their study showed that in low power distance societies, organizations that have more sources of raters as part of their performance appraisal are more likely to have lower rates of turnover and absenteeism than are organizations that rely on fewer sources of raters. Comparatively fewer studies have examined cultural variation in the third key ­element—appraisal methods. However, the cultural dimension that is mainly associated with varying levels of the formality and explicitness of appraisal methods is uncertainty avoidance (Festing et al.,  2012; Snape, Thompson, Yan, & Redman,  1998). Indeed, analyzing the congruence between uncertainty avoidant societies and the prevalence of formal performance appraisal, Peretz and Fried (2012) found that in societies with high uncertainty avoidance, organizations that apply formal appraisal systems show lower organizational absenteeism and turnover rates than organizations without formal appraisal systems.

36   Peretz and Knappert Several studies investigate the impact of culture on the fourth key element—the appraisal’s purposes and consequences, such as career and salary decisions and HRM planning (e.g., Milliman, Nason, Zhu, & de Cieri, 2002; Peretz & Fried, 2012; Shen, 2004; Snape et al., 1998). For example, Varma et al. (2015) highlight the crucial country differences regarding this element, such that in South Korea “the feedback and developmental role of performance appraisal is increasingly emphasised,” whereas in the United States, appraisals “are primarily used for administrative purposes, such as awarding merit raises, and informing promotion decisions, with the use of performance management systems (PMS) for developmental purposes remaining rather limited” (Varma et al., 2015, pp. 414–415). Indeed, when empirically examining the purposes of performance appraisals in ten countries, Milliman et al. (2002) found some support for those patterns, such that, for example, in Korea the administrative purposes of performance management systems (like pay and promotion) were much less appreciated compared to other countries. Peretz and Fried (2012) provided an explanation for those findings, drawing on individualism–collectivism. In fact, they found that in societies high on collectivism, organizations are more likely to focus on broader organizational purposes (such as HRM planning and development) as opposed to individual purposes (such as promotions) and that, therefore, organizations following developmental purposes within their performance appraisal systems are likely to have lower rates of absenteeism and turnover. Finally, the way the appraisal is communicated varies substantially across cultures. In particular, power distance is assumed to have an impact on the openness and direction (top-­down versus bottom-­up) of feedback (Aycan, 2005; Festing et al., 2012), such that, for example, high power distance in Hong Kong was seen to reduce subordinates’ ­participation and involvement (Entrekin & Chung, 2001), while the opposite was found to be the case in the low power distance United States, where through interactive and bottom-­up feedback interviews “the participation from employees’ parts has been institutionalised” (Feng, Foster, & Heling, 2005, p. 19).

Training and Development Organizational training is a strategic HRM function, designed to enhance the ­organization’s competitive position through the continuous improvement of its employees’ performance (Goldstein, 1986; Noe, 1986; Wexley, 1984). Training in organizations is a major managerial tool that utilizes goals in a dynamic organization (Kontoghiorghes, 2001). Although training curricula vary among organizations and are devised for the specific job, place, and career stage, the purpose of training is rather universal: to ­maximize employees’ abilities by imparting knowledge and skills to them. There is widespread consensus in the HRM literature concerning the importance of training for ­organizational effectiveness. Training has received considerable attention in the com­ parative literature in recent years. Some studies have focused on government policymaking, managerial practices, and organizational factors (e.g., Bartlett,  2001), while others focus on the role of culture in training.

The Cultural Lens   37 Cultural variation exists with regard to the importance of training and development, the ways in which training needs are determined, the content and methods of training, and the effectiveness of training methods in different cultural settings. With regard to the importance of training, there is evidence that fatalistic cultures (i.e., cultures that believe that controlling the outcomes of one’s actions and changing one’s destiny are impossible) perceive training and development as less relevant for organizations given the prevalent assumption that employees’ abilities cannot easily be enhanced (Aycan et al., 2000). Peretz and Rosenblatt (2011), in a study of 5,991 organizations and twenty-­one countries based on Cranet data, found that low power distance, high future orientation, and high uncertainty avoidance predicted increased investment in training. Further, in performance-­oriented cultural contexts, training and development are usually used as a tool to improve individual or team performance; however, in collectivistic cultures, training serves an additional purpose: to increase commitment and loyalty to the organization (Aycan, 2005; Sinha, 1997). Wong, Wong, Hui, , and Law. (2001) reported that providing training in Chinese organizations imparted the perception that the ­organization treated employees well. This perception, in turn, encouraged employees to reciprocate the favor by staying committed to the organization. The second issue concerns the ways in which training needs are determined. In low performance-­oriented and high power distance contexts, decisions on who will participate in training are based on criteria other than job performance. Employees who maintain good relations with higher management are selected for attractive training programs as a reward for their loyalty (Sinha, 1997). In collectivistic cultures, there is also in-­group preference based on kinship or tribal ties (Wilkins, 2001). Additionally, in collectivistic and high power distance cultures, training needs are determined by the paternalistic manager in an authoritarian or consultative way, while in low power distance cultures, training needs are usually determined jointly by the employee and the superior (Wilkins, 2001). Regarding methods of training, Savvas, el-­Kot, and Sadler-­Smith (2001) proposed that cross-­cultural variation in cognitive style must be taken into account in designing training. Hayes and Allison (1998) found that managers in developing countries were the most analytical, while those in Anglo, Northern, and Latin European were the most intuitive. The implications for the design and delivery of training across cultures are enormous. Analytical thinkers in high uncertainty avoidance and high power distance cultures perceive the instructor as the “authority” who must provide definitive answers and guidelines: THey hence prefer one-­way lecturing, rather than participative discussions (e.g., Parnell & Hatem, 1999). Indeed, Earley (1994) asserted that individualism–collectivism influences the way in which information was used during the process of training. He found that group-­focused training (focusing on in-­group capability) was more effective in improving performance for Chinese participants (highly collectivistic society), while individual-­focused training (emphasizing personal capability) was more effective for American participants (highly individualistic society). Furthermore, Reichel, Mayrhofer, and Chudzikowski (2009) investigated manager development and found that high uncertainty avoidance and low assertiveness drive managers to pursue internal, systematic, and long-­term orientations in personnel development.

38   Peretz and Knappert Some studies examined the effect of training on organizational outcomes in a crosscultural setting. Based on the Cranet survey, Nikandrou, Apospori, Panayotopoulou, Stavrou, and Papalexandris (2008) found that performance orientation moderates the relationship between training needs analysis and firm performance. The higher the ­performance orientation, the stronger the relationship between training needs analysis and firm performance. Finally, Rode, Huang, and Flynn (2016) described how institutional collectivism moderates the relationship between training (the extent to which ongoing training was emphasized and delivered) and organizational commitment such that the relationship is stronger in high institutional collectivism cultures.

Compensation Compensation refers to the rewards and benefits that employees receive within an employment relationship. Compensation can be further split into basic salary, incentives, and tangible and intangible benefits (Berber, Morley, Slavić, & Poór, 2017; Werner & Ward,  2004). As such, this important HRM activity can have a crucial impact on employee behavior and organizational effectiveness because it “influences the quality of the people who apply, the quality of those hired, the likelihood of job acceptance, the motivation and performance level of the workforce, and the quality of who stays with the company” (Gupta & Shaw, 2014, p. 1). Yet the various elements of compensation practices are valued differently across cultures, leading to inconsistencies in their effects on outcomes such as employee motivation and performance. For example, distinguishing financial and nonfinancial rewards and their specific effects on performance in the banking industry in Finland and Hong Kong, Chiang and Birtch (2011) combined qualitative and quantitative methods with more than five hundred respondents. They found that a financial orientation of reward systems (such as financial rewards and competitive performance) was more aligned with the cultural values of Hong Kong (i.e., masculine, high power distance, and low uncertainty avoidance), while a nonfinancial orientation (alternative work arrangements and training and development) was more aligned with the cultural values of Finland (i.e., feminine, low power distance, high uncertainty avoidance). Accordingly, they reported the effects of nonfinancial rewards on employee performance to be stronger in Finland than in Hong Kong. Earlier studies on international differences in pay practices showed large cultural variations with regard to compensation practices. For example, Schuler and Rogovsky (1998) combined data from Cranet, the International Social Survey Programme, and IBM–Towers Perrin for their analyses across twenty-­four countries. They found that in countries with high uncertainty avoidance, seniority-­based or skill-­based compensation was used more widely, because it offers more certainty. Conversely, they reported share options and stock ownership to be more congruent with low uncertainty avoidance, high individualism, and low power distance. Moreover, they described individual incentives to fit better in countries high on individualism. In a more recent comparative

The Cultural Lens   39 study that also draws on Cranet data, Berber et al. (2017) found power distance and individualism–collectivism to be significant factors in relation to incentive pay practices for managers in central and eastern Europe. Taking this notion a step further, Greckhamer (2015) analyzed chief executive officer (CEO) and worker compensation and the resulting pay dispersion across fifty-­four countries. His results showed that high power distance is consistently linked to high CEO pay (as is a lack of strong collective labor rights and the absence of a strong welfare state), while low power distance turned out to be an important determinant of high worker compensation. Greckhamer (2015, p. 808) concluded that “high power distance facilitates hierarchical compensation systems favoring elites of organisations while its absence is conducive to egalitarian compensation systems resulting in relatively high compensation of lower-­level employees.” In earlier studies (Greckhamer, 2011; Tosi & Greckhamer, 2004), Greckhamer investigated the effect of culture on different compensation levels and the consequences for inequality across occupations (i.e., cleaners, secretaries, mid-­level managers, CEOs/senior managers) and found a particularly strong influence of power distance and individualism on inequality. Finally, in a comparative study of compensation practices across nine countries, Lowe, Milliman, de Cieri, and Dowling (2002) identified several differences between countries and regions. Most important, however, they discovered variations in the differences between “is now” and “should be” scores, that is, the gap between what respondents indicated as current practice and what they wished for. While this gap was the largest for respondents from the Americas, Asian respondents had comparatively smaller difference scores. Lowe at al. (2002) speculated that cultural differences in time orientation were responsible for these findings. In particular, the authors assumed that, given future time orientation in the West, respondents from the Americas emphasize requirements for changes, while past time orientation in Asia leads people to emphasize the status quo and stability in pay practices.

Flexible Work Arrangements As Ollier-­Malaterre and Foucreault (2017) stated in their recent review and synthesis of research on work–life research and flexible work arrangements (FWAs), several gaps remain in our understanding of the role of societal values in relation to global firms’ use of FWAs and the effects of FWAs on employee and firm outcomes. One of these gaps concerns the limited range of national cultural values that have been investigated in relation to FWAs. For example, the individualism–collectivism value dimension, as defined by Hofstede (2001) and refined by House et al. (2004) in their GLOBE project, has been extensively researched in relation to FWAs, but several other value dimensions, such as power distance and performance orientation, which are likely to be important for explaining the implementation and use of FWAs, have been relatively neglected by researchers. These gaps are in part the result of a major limitation of previous studies— their use of samples from organizations that are based primarily in the United States or

40   Peretz and Knappert Europe (see, e.g., den Dulk, Goreneveld, Ollier-­Malaterre, & Valcour, 2013), neglecting the increasing prevalence of FWAs across the world in response to global competition (e.g., Kassinis & Stavrou, 2013; Stavrou, 2005). Flexible work arrangements describe “practices that afford employees control over when, where, or how much they work” (Leslie, Manchester, Park, & Mehng, 2012, p. 1407), such as flexibility with regard to starting and stopping times, home office, or part-time arrangements. The reported benefits of FWAs are, for example, high levels of employee job satisfaction, improved organizational attractiveness, and talent retention (e.g.,  Blair-­Loy & Wharton,  2002; Gajendran & Harrison,  2007). At the same time, country-­level variables influence individuals’ and employers’ experiences of FWAs, requiring a specification of these variables and their effects on individual and organizational outcomes (Ollier-­Malaterre & Foucreault, 2017; Powell, Francesco, & Ling, 2009). Den Dulk et al. (2013) reported, however, that studies on FWAs often missed the opportunity of country comparisons and rather focused on single countries, mostly the United States, the United Kingdom, or Australia. Exceptions to this rule are predominantly studies emerging from the Cranet network (Kassinis & Stavrou, 2013; Peretz, Fried, & Levi,  2018; Stavrou & Kilaniotis,  2010; Stavrou, Parry, & Anderson,  2015; Berkery, Morley, Tiernan & Peretz, 2020; Berkery, Morley, Tiernan, Purtill & Parry, 2017) or other large-scale investigations (e.g., den Dulk et al., 2013, used data from the European Foundation for the Improvement of Living and Working Conditions; Masuda et al., 2012, analyzed data from the Collaborative International Study of Managerial Stress). Whereas den Dulk et al. (2013) described the negative impact of cultural centrality of work (i.e., beliefs of work being an obligation and central to society) on the use of FWAs, other researchers report influences of cultural dimensions such as individualism– collectivism. For example, studying the impact of employees’ perceived work–life balance on their job satisfaction, life satisfaction, and mental health by collecting data from 1,416 employees based in six countries, Haar, Russo, Suñe, and Ollier-­Malaterre (2014) found general support for work–life balance being beneficial for employees from various cultures. However, they also showed how individualism–collectivism and gender egalitarianism moderate these relationships, such that high levels of work–life balance had a more positive effect on job and life satisfaction in gender egalitarian and individualistic cultures and had more potential to reduce anxiety in gender egalitarian cultures. Several studies investigated cultural variance in FWAs across cultural clusters. For instance, in their study with 3,918 managers from fifteen countries, Masuda et al. (2012) explored the availability of FWAs and their impact on managers’ job satisfaction, ­turnover intentions, and work-­to-­family conflict. They reported their results for three cultural clusters: the Latin American, Anglo, and Asian clusters. In particular, they found that managers from the Anglo cluster not only report generally more FWAs but also show more beneficial effects of flextime on the outcome variables compared to the other clusters. An earlier study by Stavrou and Kilaniotis (2010) highlighted that ­turnover in the Anglo cluster may increase with a rise in unsocial hours (such as ­overtime or weekend work). In line with Stavrou et al. (2015), they show that, when ­comparing the Nordic and the Anglo clusters, organizations in the Anglo cluster were less likely to apply FWAs. On a more hopeful note, Stavrou and Kilaniotis (2010) also

The Cultural Lens   41 indicated a decrease of turnover resulting from more FWAs in the Nordic cluster; they explain this finding by emphasizing the more favorable institutional environment in Scandinavian countries (e.g., tighter legislation, stronger union power, collective agreements), but also by pointing to a more “employee friendly culture” in the Nordic cluster. As Kassinis and Stavrou (2013, p. 474) clarified, “In such cases, culture may be a mechanism that complements, even drives, both public policies and legislation.” That is, in culture clusters that score highly on institutional collectivism, people tend to emphasize interdependencies within organizations as well as the collective interests of their members, leading to more use of FWAs that meet employee needs in the Nordic countries compared to the rest of Europe (Stavrou et al., 2015). Finally, in a recent study on FWAs in the international environment, Peretz et al. (2018) confirmed the importance of a “fit” between the use of FWAs and the societal context. They identified high future orientation, performance orientation, gender egalitarianism, humane orientation, and assertiveness on the one hand, and low institutional collectivism, power distance, and uncertainty avoidance practices on the other hand as strengthening the effect of employee use of FWAs on reduced turnover and absenteeism. In explaining these findings, the authors speculated that, in a ­societal context that is supportive of FWAs, employees who use FWAs do so without worrying about potential disapproval by others. Conversely, those who desire to use FWAs that are inconsistent with the larger society’s cultural practices might face ­disapproval by others or conflict, which may eventually result in employee withdrawal behavior.

Diversity Management Diversity management refers to HRM practices that enhance workforce diversity and include employees with different backgrounds and attributes in the organization. Without these practices, the diversity of a workforce would remain untapped or might even lead to negative consequences, such as increased conflict (Konrad, Yang, & Maurer, 2016; Van Knippenberg, de Dreu, & Homan, 2004). While the importance of context for diversity management is largely acknowledged (e.g., Jackson & Joshi, 2011; Joshi & Roh, 2009) and several scholars call for a stronger cross-­cultural emphasis in diversity research (e.g., Ferdman & Sagiv, 2012; Shen, Chanda, D’Netto, & Monga, 2009), most country-­specific and comparative contributions on diversity management focus on its legal aspects (e.g., Klarsfeld, Booysen, Ng, Roper, & Tatli, 2014). As such, the closely related management of equal opportunities is mainly associated with governmental regulations (Cooke, 2015; Konrad & Linnehan, 1995), which also show large variation across countries, yet remain without much reference to cultural perspectives (cf. ÖzkazançPan & Calás, 2016). However, as identified in the GLOBE study, some cultural dimensions are closely related to the values promoted by diversity programs. In particular, gender egalitarianism includes the acceptance of women in positions of authority and less occupational sex segregation, and a humane orientation endorses sensitivity to racial discrimination

42   Peretz and Knappert (House et al., 2004). Indeed, in their study on diversity programs in over five thousand organizations in twenty-­two countries, Peretz, Levi, and Fried (2015) found that diversity programs1 are more likely to be applied by organizations in societies with cultural values favoring diversity (such as gender egalitarianism, future orientation, and performance orientation), while in societies with high power distance, collectivism, and uncertainty avoidance, diversity programs are less common. Moreover, Peretz et al. (2015) reported that in societies with cultural practices that are high in humane ­orientation and future orientation, diversity programs have a stronger impact on ­organizational outcomes such as reduced absenteeism and turnover because of the congruence between organizational practice and national cultural practices. Conversely, diversity programs that are not congruent with the societal culture (which is the case for countries characterized by high institutional collectivism, power distance, and uncertainty avoidance) led to higher rates of employee withdrawal behavior. Other studies investigating the moderating role of culture on the effects of diversity management could, for example, refine what is known about the link between diversity and innovation. Van der Vegt, Van de Vliert, and Huang (2005) conducted a study across twenty-­four countries and 248 organizational locations of one MNE in which they showed that task-­oriented diversity (such as organizational tenure and functional ­background) was negatively related to innovative climate in high power distance countries, but positively related to innovative climate in low power distance countries. Further, analyzing the moderating effect of age on the relationships between job ­characteristics and job satisfaction in Japan, the United States, and Germany, Drabe, Hauff, and Richter (2015) found several generational differences across the three ­countries. For example, older employees in the United States put less emphasis on advancement opportunities and job security, while in Japan they valued independent work and job security less, compared to younger employees. Across generations, ­however, having an interesting job was of less importance for job satisfaction in Japan compared to Germany and the United States, which the authors explain with the ­countries’ differences on individualism–collectivism. Overall, previous literature has highlighted that while “the diversity field itself is not very diverse and has been dominated by US-­centric research” (Jonsen, Maznevski, & Schneider,  2011, p. 35), diversity management has different conceptualizations and ­interpretations across cultures (e.g., Klarsfeld et al.,  2014; Nishii & Özbilgin,  2007). More specifically, the concept of diversity itself is associated with very different understandings and priorities across countries. For example, when it comes to managing peoples’ diversity in organizations, what matters most in Japan and Korea is gender diversity, because ethnic groups are relatively homogeneous, while organizations in the United Kingdom or the United States prioritize ethnic diversity next to gender, but also religion, immigration status, and other diversity dimensions (Cooke, 2015). Based on this 1  The authors measured diversity programs with an index indicating the existence of programs regarding recruitment, training, and career progression, with subitems asking whether the program targeted certain groups, such as ethnic minorities, older workers, women, or people with disabilities.

The Cultural Lens   43 observation and to overcome the tendency of the diversity literature to use preestablished categories of diversity (such as gender, ethnicity, and class), Tatli and Özbilgin (2012) offer an emic approach to researching diversity categories. In their review, they identify “emergent and situated categories of diversity” that are “embedded in a specific time and place” (Tatli & Özbilgin, 2012, p. 180).

High-­Performance Work Systems High-­performance work systems are combinations of HRM practices that are designed to increase organizational performance. Examples of these HPWS are selectivity in staffing, incentive compensation, investments in training, and employee participation (Combs, Liu, Hall, & Ketchen, 2006; Huselid, 1995; Pfeffer, 1994). In other words, HPWS are bundles of practices targeting employee ability, motivation, and opportunity to perform (Appelbaum, Bailey, Berg, & Kalleberg, 2000). While some of these practices have been discussed individually in the previous sections of this chapter, HPWS (1) aim to combine the most effective (i.e., best) practices, (2) are assumed to improve performance universally, and (3) are therewith particularly challenging in the international context. Hence, HPWS are mainly investigated in relation to differences at the organizational level (e.g., Jiang et al.,  2012), such as organizational culture (e.g., Chow,  2012; Lau & Ngo, 2004; Rhee, Oh, & Yu, 2016), while investigations of differences across countries are rare. In fact, in their meta-­analysis on the effect of HPWS on business performance, Rabl, Jayasinghe, Gerhart, and Kühlmann (2014) included 156 studies (representing 35,767 firms) that covered twenty-­nine countries. Yet, none of these studies took more than one country into consideration. Moreover, rather than applying cultural perspectives, the contextual fit of HPWS is more often discussed by drawing on institutional frameworks (e.g., Festing, 2012; Kaufman, 2012; Liang, Marler, & Cui, 2012). However, there are some exceptions of studies that do look at cultural variance in HPWS. For example, in their survey among managing directors and HRM corporate managers in fifty-­eight foreign subsidiaries (twenty-­nine in Europe, sixteen in Latin America, seven in Asia, and six in the United States) of Spanish MNEs, Lertxundi and Landeta (2011) found that HPWS “have a more positive influence on results when they are applied to companies located in countries characterised by strong masculinity and individualism, and with low power distance and low uncertainty avoidance” (Lertxundi & Landeta, 2011, p. 3963). These findings are understandable in light of the historical ­development of the concept of HPWS. Because the concept emerged from the US context, it is likely to fulfill its intended function, particularly in contexts with a cultural profile similar to that of the United States, while it is more likely to fail in countries with values different from the United States. Accordingly, in their meta-­analysis, Rabl et al. assumed that the “best fitting national culture for the success of an HPWS is one low on power distance, low on collectivism (i.e., high individualism), and high on performance orientation” (Rabl et al., 2014, p. 1013). Yet, they found this assumption to be true only for societies with tight cultural norms (Gelfand et al., 2011), while in countries with loose

44   Peretz and Knappert norms, the fit between HPWS and the country’s cultural profile was less critical for ­business performance. On the contrary, in loose cultures, Rabl et al. (2014) found evidence that some firms are successful in implementing HPWS because it does not fit the cultural profile and is therefore difficult to imitate for local competitors. Hence, Rabl et al. (2014) not only highlighted the importance of culture fit for HPWS, but also, in particular, identified tightness–looseness as an important moderator in the HPWS– business performance relationship.

Conclusion and Practical Implications Based on our literature review, it is evident that HRM is highly culture dependent and that employees may respond differently to the same HRM practice depending on their cultural context. More specifically, this chapter highlights the importance of culture as a predictor of HRM, as well as the critical role of the fit between HRM and the cultural context, where culture is conceptualized as a moderator between HRM practices and positive work outcomes. Hence, organizations (must) consider the cultural context when designing and applying HRM practices. These implications concern decision-­makers in multinational as well as domestic organizations. For multinational organizations that are pressured to find a balance between global standards and local responsiveness, this chapter may serve as an overview of where additional room for localization is of particular relevance. For domestic organizations, the literature reviewed here offers some guidance in accommodating the cultural differences of the early twenty-­first-­century multicultural workforce.

Suggestions for Future Research Drawing on the fields of international and comparative HRM, this chapter provides a review of research on cultural variation in HRM from which several avenues for future research emerge. First, some HRM practices clearly dominate cross-­cultural investigations (e.g., performance management and training), while other practices are highly underresearched. In particular, we call for more (systematic) cross-­cultural research on recruitment and selection, diversity management, and HPWS. Second, some cultural dimensions clearly dominate as well. Although we started with summarizing various influential models of culture (i.e., by Kluckhohn and Strodtbeck, Hall, Hofstede, Tromepaars, Schwartz, and the GLOBE study), it appears that only some of these models (mainly those by Hofstede and GLOBE) and, more specifically, only some selected cultural dimensions (mainly individualism–collectivism and power distance) find broad application by scholars, while the potential of other useful cultural c­ onceptualizations remains largely untapped. For example, because the concept of tightness–looseness of

The Cultural Lens   45 cultural norms (Gelfand et al., 2011) is comparatively new, we find only a few studies applying it. However, we see auspicious prospects for explaining conditional effects in cross-­cultural studies, investigating the moderating effect of tight versus loose cultural norms on cultural impact in HRM. Third, and related to the previous comments, we can observe a development from purely descriptive and partly eclectic studies in the early years of cross-­cultural HRM to more explanatory and encompassing investigations in recent years. However, to account for the whole spectrum of contextual differences, we would like to encourage scholars to work toward a simultaneous understanding of cultural and institutional differences and, therefore, put more efforts into conjoining cultural with institutional perspectives when investigating cross-­national variation. Finally, we echo the concerns regarding the US centricity of cross-­cultural HRM research. More truly international studies with diverse teams of researchers are needed to overcome this bias. While we acknowledge the difficulty in setting these studies up, some large-­scale investigations (such as Cranet) leave us hopeful for additional studies that systematically identify cultural variation in HRM.

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chapter 3

I nstitu tiona l A pproaches to Ex a mi n i ng the I n flu ence of Con text on Hum a n R esou rce M a nagem en t Matthew M. C. Allen and Geoffrey Wood

Key institutions, including corporate governance regulations and employment law, govern the constitution of individual and collective actors, such as employees, managers, firms, and unions, and help to shape actors’ interests, potential powers, capacities for action, and, hence, behavior (Jackson,  2010; Kristensen & Morgan,  2018; Streeck,  1997b; Whitley,  1987). Institutions do not, however, determine outcomes, ­creating the possibility for actors, such as managers and employees, to influence ­outcomes (Kristensen & Morgan, 2012). Hence, institutions mold how firms respond to competitive pressures and the increasing internationalization of some product, ­financial, and labor markets. These responses, in turn, have implications for societal and individual outcomes, such as inequality, career prospects, work design, wealth, and health (Allen & Allen,  2015; Judge, Fainshmidt, & Lee Brown,  2014; Wood & Wright,  2015). One mechanism through which institutions shape these societal and individual outcomes is human resource management (HRM) (Busemeyer, 2009; Hall & Soskice, 2001). Following Jackson and Schuler (1995), we define HRM broadly so that it can cover: (1) a range of specific activities, including recruitment, selection, training, and appraisal practices; (2) formal HRM policies that govern HRM practices; and (3) the principles that underpin the organization’s policies and practices and that can, for instance, inform decisions about redundancies, the outsourcing and/or offshoring of

54   Allen and Wood activities that were or could be performed “in house” by employees, and the influence that employees or their representatives have on important company or workplace decisions. In real firms, practices, policies, and principles may not align well, and there may be substantial variation in particular aspects of HRM across groups of employees within the same organization, either by “design” (depending on what the company is seeking to achieve with different workers) or by “accident” (depending on how different managers interpret HRM) (Boxall, Purcell, & Wright, 2007). In addition, multinational companies may adopt different HRM practices in different territories for strategic and/or regulatory reasons (Allen, Allen, & Lange, 2018). According to the Oxford English Dictionary, the word “context” derives from the Latin contexĕre, which means “to weave together, connect.” To us, this suggests an interesting ambiguity when applied to HRM: Is HRM separate from its institutional context or is it constituted by the institutional context? More formally, are context and HRM conceptually and ontologically separate or are they conceptually separate, but ontologically connected? This chapter reviews three related, but distinctive, institutional approaches to HRM  policies within organizations that view institutions and organizations and their  HRM policies as conceptually separate, but ontologically connected. In other words, these approaches do not view the context as something that is distinct from organizations and their HRM, as some research does (Campbell, 2004); rather, context and HRM are intertwined, meaning that institutions play a key role in constituting what HRM is in different contexts. We review work on HRM within (1) the “varieties” approaches of the varieties of capitalism and business systems framework (Hall & Soskice, 2001; Whitley, 1999), (2) historical institutionalism (Hall & Taylor, 1996; Streeck & Thelen, 2005), and (3) the regulationist framework (Amable, 2003; Hollingsworth & Boyer, 1997). We highlight the similarities among, and differences between, these three ­perspectives. We acknowledge that the studies we review do not always fit neatly into one of these three categories. The categories do, however, help us to highlight how the similarities and differences in terms of assumptions and key concerns characterize the analytical focus and key explanatory variables of HRM studies. In the next section, we set out in more detail how key institutions constitute organizations. All three approaches take organizational heterogeneity seriously and seek to illustrate how institutions enable or constrain particular HRM approaches; institutions, therefore, fundamentally affect organizations’ raison d’être, priorities, and capabilities (Jackson & Deeg, 2008; Whitley, 2007). If research does not treat institutions in this way, but views them instead as discrete and wholly separate from firms, a threefold danger arises. First, companies will be assumed to be, more or less, the same (Whitley, 1987, 2010b), leading to results that are very general and that overlook important variation among firms, both within and between national economies (Brewster, Brookes, Johnson, & Wood, 2014; Hall & Soskice, 2001; Lane & Wood, 2009). Second, and important, if research ignores the institutional constitution of firms, it runs the risk of ignoring the main strategic objectives, such as satisfying shareholder demands or political requirements, that organizations are trying to meet with their HRM practices (Cooke, Veen, & Wood, 2016; Goyer, Clark, & Bhankaraully, 2016;

Institutional Approaches to Examining Context   55 Hall & Soskice, 2001; Whitley, 2007), leading to decontextualized findings that, potentially, have little relevance for many other organizations. Finally, it can lead to an assumption that organizations can pursue any HRM approach within all institutional settings (Dobbins & Busemeyer,  2015; Dobbins & Dundon,  2015; Goyer et al.,  2016; Morgan & Kristensen, 2014; Whitley, 1987), downplaying the role that institutions play in enabling or constraining particular forms of HRM (Boxall et al.,  2007; Wilkinson, Dundon, Donaghey, & Townsend, 2014). The third section provides details about the assumptions and characteristics of the three institutional approaches to HRM that we review here; it also reviews some important empirical analyses within each approach. The final section summarizes the key contributions that institutional approaches to HRM have made and how future studies could examine the institutional specificity of firms to explain HRM and organizational outcomes to even greater effect.

Institutions and Organizations We focus here largely on national institutions because they often play a key role in shaping HRM practices in organizations (Hall & Soskice, 2001; Whitley, 2007); however, regional and sectoral institutions can also be important (Allen, 2013; Ebner, 2016). For instance, labor market practices in northern Italy differ from those in southern Italy (Colombo & Regini, 2016). Similarly, institutions can vary between industries as well as between the public and private sectors within an economy (Allen, Liu, Allen, & Saqib,  2017; Ebner,  2016; Schröder & Voelzkow,  2016). These variations can have important HRM implications within organizations and the performance of those organizations, as well as the industries that they constitute (Casper & Whitley, 2004; Streeck, 1997a). Even if practicalities limit the possibility for empirical studies to examine how key institutions constitute firms, all three of the approaches that we review here share, to varying degrees, an assumption that institutions lead to significant differences between companies in terms of their identities, interests, and capabilities (Boyer,  2005; Morgan, 2016; Thelen, 2014; Whitley, 2007; Streeck, 2014). For instance, corporate governance institutions, which differ between countries, influence whether employee representatives can or need to be on company boards, shaping the decisions that boards are likely to take (Goyer, 2011; Whitley, 1999). These differences, in turn, shape how firms manage their employees (Dobbins & Dundon, 2015; Harcourt & Wood, 2007). Indeed, institutions, such as employment regulations, also affect who counts as an “employee” or “worker” and who does not; such distinctions can, in the United Kingdom, for instance, have important implications for the rights of individuals, with employees and workers having more legal rights, such as paid holidays and pension contributions, than do the “self-­employed,” who can, potentially, include delivery drivers and subcontracted plumbers (Grimshaw, Johnson, Keizer, & Rubery, 2017).

56   Allen and Wood Although important institutions constitute organizations and other actors, they do not determine outcomes, meaning that the “presence” of an institution does not always result in a specific outcome (Jackson & Deeg, 2008). In other words, while stressing the importance of institutions in shaping HRM, we do not deny some role for “agency” within organizations. Actors, such as managers and employees both individually and collectively, are not “oversocialized,” so their behavior is not completely prescribed by institutions (Morgan & Kristensen, 2014). The reasons for this are twofold. First, institutions must be “enacted,” meaning that actors must make decisions and implement them in order to produce and “reproduce” institutions (Jackson, 2010; Kristensen & Morgan, 2012). In corporate governance, for instance, institutional investors, who typically have a short-­term perspective (Whitley,  1999; Witt & Jackson,  2016), should, in general, prioritize more immediate financial outcomes and undertake activities that convey their priorities to senior managers in the firms that they have invested in to reproduce this institution. Of course, not all actors or individual institutional investors will behave identically, because they will have different ideas, for instance, about what will generate better financial returns, depending on their training and perspective (Jackson & Deeg, 2008). Second, actors do not operate in situations that they can fully control (Jackson, 2010), meaning that actors’ abilities to pursue and attain their objectives will depend on other factors. At times, these broader situational factors are likely to facilitate actors’ ability to make decisions and take actions that enable them to meet their objectives; at other times, the ­context will inhibit or prevent their capacities for certain actions (Bhankaraully,  2019; Morgan & Kristensen, 2014). Consequently, institutions are likely to be associated with “patterns” of HRM practices rather than close associations with those practices, meaning that the links between a particular institution and a specific set of HRM practices, policies, or principles is likely to be a tendency rather than a “law-­like” relationship (Dobbins & Busemeyer,  2015; Hall & Soskice,  2001; Johnstone & Wilkinson,  2017; Whitley,  2007). Institutions are likely to be associated with certain outcomes; they will not determine outcomes. This has important implications for how research should be designed and the types of analytical techniques that are most appropriate, meaning that analyses of particular companies or sectors and their institutional specificities at certain times using case studies or statistical techniques that can capture that complexity as well as necessary and sufficient conditions are required (Allen, 2013; Baccaro & Howell, 2011; Brewster et al., 2014; Goyer et al., 2016; Kinderman, 2005; Lange, Geppert, Saka-­Helmhout, & Becker-­Ritterspach, 2015).

Three Institutional Approaches: Assumptions, Characteristics, and Empirical Results This section discusses the assumptions and characteristics of the three institutional approaches to HRM that we review; we illustrate our arguments by referring to some

Institutional Approaches to Examining Context   57 important empirical analyses within each approach. Some of the empirical studies that we include here have not explicitly adopted, necessarily, the approach that we have assigned them to; however, we think that their underlying assumptions and analytical focus warrant their inclusion under one of our three categories. Table 3.1 sets out the key similarities and differences between these approaches.

The “Varieties” Approach Although the varieties of capitalism and the business systems framework differ in many respects, we treat them as one category because of their similarities. Both frameworks highlight how institutional differences between countries, such as the corporate governance regimes and labor market systems, influence the types of firms that become dominant in different national economies (Hall,  2015; Hall & Soskice,  2001; Whitley,  2010b). This “institutional structuring” of firms has implications for their strategic priorities and their organizational capabilities (Hall & Soskice,  2001; Whitley,  2007). Consequently, the varieties approach examines how institutions constrain or enable organizations to solve particular coordination problems, such as the recruitment and retention of employees with particular characteristics, that often involve employees and HRM (Hall & Soskice, 2001; Whitley, 1999, 2007). At a broader level, firms’ abilities to surmount particular types of coordination problems influence how well they can pursue specific strategic objectives and competition strategies (Hall, 2015; Whitley, 2010a). A corollary of the emphasis on how institutions can help firms develop their competitive competencies was an assumption of stability within institutional ­ regimes (Hall & Soskice,  2001; Streeck,  2012; Whitley,  1999). If there was change, then that change was likely to come from developments “outside” the institutional system (Hall & Soskice, 2001, pp. 56–60; Whitley, 2010a). For instance, the spread of capitalism to central and eastern Europe opened up the possibility for some European firms to move or outsource some of their activities to the region that offered skilled, and relatively cheap, labor, putting pressure, potentially, on existing home-­country employees. Similarly, advances in computing and telecommunications have enabled some companies to move certain activities to locations with low-­cost workers (Lane, 2005). More recently, however, the varieties approach has recognized the potential for change to come from “within” national institutional systems (Morgan, 2007, 2016), opening up the possibility of analyzing how collective actors, such as firms and unions, engage in debates and contests to change, “remove,” or create institutions. Research has revealed variation in HRM within national economies. For instance, work has found that employees’ direct involvement in shaping company decisions and workplace practices that can form the foundation of a partnership approach between employers and employees varies across Europe. Firms in countries that have stronger rights for unions and employee representatives are more likely to include employees and their representatives in decisions than are companies in countries with weaker rights for

58   Allen and Wood Table 3.1.  Institutional approaches to human resource management  

Theoretical approach

 

Varieties approach

Historical institutionalism

Regulation framework

Assumptions: Key institutions and collective actors separate or intertwined? Ontologically

Intertwined

Conceptually and Often treated as separate, analytically but also increasingly as intertwined

Intertwined

Intertwined

Intertwined

Intertwined

Characteristics Typical analytical focus/seeks to explain

Organizational capabilities; Inequality within competitive advantages; societies innovation

Societal outcomes and global developments in capitalism

Unit of analysis: micro (firm), meso (region or sector), or macro (country) level?

Increasingly micro and meso, but traditionally macro

Macro

Macro

Sources of institutional change

Initially exogenous, but increasingly endogenous

Endogenous and exogenous

Endogenous and exogenous

Emphasis on the implications of the connections between countries for national models?

Limited initial focus on the international embeddedness of national economic models, but more focus recently

Limited initial focus on the international embeddedness of national economic models, but more focus recently

Greater initial emphasis on international embeddedness of national economic models that continues

Typical analytical techniques

Eclectic: “large N” regressions, case studies, “fuzzy-­set qualitative comparative analysis”

Narrative analysis of key sectors and countries

Narrative analysis of key sectors and countries

Reduction in “HRM standards” (especially pay and conditions) for many workers

Typical findings and studies Typical conclusions

Institutions matter, resulting in HRM variation across countries and sectors

General decrease in HRM standards, but also greater dualism (division of workforce into “good” and “bad” jobs)

Typical examples

(Bhankaraully, 2019; Brewster, Wood, & Goergen, 2015; Goyer et al., 2016)

(Baccaro & Howell, 2011; (Boyer, 2005, 2006; Hassel, 2014; Vidal, 2013a) Kinderman, 2017)

Note: HRM, human resource management.

Institutional Approaches to Examining Context   59 unions and employee representatives. In the latter group of companies, more ­“instrumental” forms of partnership, which act as mechanisms to convey managers’ HRM decisions to lower-­level employees, are more likely to exist (Brewster et al., 2014; Wilkinson et al., 2014). However, such research has revealed that more extensive partnership approaches were not confined to “coordinated business systems,” in which unions play a greater role and employment protection tends to be greater (Whitley, 1999); similarly, instrumental approaches were not solely found in “compartmentalized business systems,” in which the “market” is the main mode of economic coordination (Brewster et al., 2014; Johnstone & Wilkinson, 2017; Walker, Brewster, & Wood, 2014; Whitley, 1999). Such studies have revealed that organizational types, sectors, and competition strategies also played a role in shaping the form that partnership took within particular companies (Brewster et al., 2014; Walker, Wood, Brewster, & Beleska-­Spasova, 2018). Related work has revealed that, although quits, both voluntary and involuntary, are more common in compartmentalized business systems than they are in coordinated ones, there is much diversity within national economies (Croucher, Wood, Brewster, & Brookes, 2012). Highlighting the importance of analyzing firms’ strategies (what they are trying to achieve and how they are trying to achieve it) as well as their institutional constitution and the interactions between the two to explain HRM in firms, this work collectively, therefore, reinforces the need to take firm heterogeneity within any institutional system into account when assessing the links between institutions and outcomes, including HRM. Corporate governance regimes shape important HRM outcomes, such as the provision of training for workers. In countries with corporate governance institutions that restrict collective and/or individual redundancies, firms have more of an incentive to invest in training that develops employees’ firm-­specific knowledge and skills compared to countries with corporate governance systems that have fewer restrictions on layoffs (Goergen, Brewster, & Wood, 2009). In more general terms, labor market institutions that facilitate the use of temporary or agency workers as well as workers on “zero-­hour contracts” have a detrimental effect on employees’ commitment and skill development and, as a result, on their productivity (Rubery, Keizer, & Grimshaw, 2016). Institutions, such as those governing the use of temporary workers, often differ between the public and private sectors. Evidence has revealed that such differences, along with broader institutional systems, can account for variation in the use of temporary agency workers in different workplaces. For example, although private-sector workplaces in Europe are more likely, in general, to use temporary agency workers than their public-­sector counterparts, this conceals much important variation between countries. In those countries, such as the United Kingdom, that have relatively weak worker rights, public-­sector workplaces are more likely to use temporary workers than their private-­sector counterparts; by contrast, in other countries, such as Germany, that have greater rights for workers, private-­sector workplaces are more likely than their public-­sector counterparts to use temporary workers (Allen et al., 2017). The influence of institutions also extends beyond the boundary of the legal firm, influencing the

60   Allen and Wood prevalence of “precarious work” in supply chains, as research on public supply chains has revealed (Jaehrling, Johnson, Larsen, Refslund, & Grimshaw, 2018). Studies have revealed how contrasting institutional configurations can be associated with similar outcomes. For example, in France, companies are likely to lay off workers when three necessary conditions are met. These conditions are dispersed firm ownership, owners and controllers who prioritize short-­term financial results over the firm’s long-­term development, and relatively high debt leverage. By contrast, for companies in the United Kingdom, there is only one necessary condition for redundancies, which is that the firm is owned and controlled by a dispersed group of investors; relatively high levels of company debt are, importantly, not necessary for downsizing to occur (Goyer et al., 2016). Similarly, downsizing and wage moderation in Germany are likely to occur when firms have high levels of debt and are owned and controlled by investors who privilege shareholder value (Bhankaraully, 2019).

Historical Institutionalism Historical institutionalism shares with the other two approaches reviewed here an emphasis on how institutions constitute actors. Unlike the varieties approach, historical institutionalism focuses more on macro-­level processes and outcomes, meaning that it does not tend to look at HRM within particular firms, but analyzes how HRM-­related processes occur at the societal (macro) or industry (meso) level. The reason for this is that the approach typically seeks to explain levels of social inequality and social exclusion rather than firm competitiveness, leading to a focus on socioeconomic and sociopolitical issues rather than business and management issues (Crouch, 2012, 2013; Emmenegger & Marx, 2011; Hassel, 2014; Hassel & Trampusch, 2006; Streeck, 2014; cf. Rogers & Streeck, 1995; Streeck, 1997a, 1997b). The focus of this approach may suggest that it does not have any implications for HRM; however, that assumption would be incorrect. By focusing on issues related, for example, to employee representation and collective wage bargaining at the national level, historical institutionalism has implications not just for levels of inequality within society, but also for typical employment policies and HRM within firms (Streeck, 1997a, 1997b). Although analyses can cover individual firms or sectors, the aim is often to explain national-­level outcomes (Crouch, 2012; Emmenegger & Marx, 2011; Kinderman, 2017). Historical institutionalism’s emphasis on societal outcomes makes it more overtly political than the varieties approach; consequently, it has a longer tradition of focusing on potential conflicts of interest between different societal groups, such as employers, on the one hand, and employees and their representatives on the other. As a result, historical institutionalism has focused on institutional change and the dynamism of capitalism itself longer than the varieties approach has (Hassel, 1999; Regini, 2003; Streeck, 2008). Fundamental to historical institutionalism, therefore, is the argument that institutions tend to be established in specific situations and, as

Institutional Approaches to Examining Context   61 economies and societies change, institutions are likely to change to reflect those developments (Benassi, Doellgast, & Sarmiento-­Mirwaldt, 2016; Streeck, 2012). In particular, the dynamism of capitalism and capitalist firms to push, in many instances, for greater marketization of social life is likely to lead to the erosion of institutions that seek to reduce the potentially detrimental impact of capitalism on individuals and the institutions that protect individuals, such as employees, from market vicissitudes (Crouch, 2013; Greer & Doellgast, 2017; Streeck, 2014; Etienne & Schnyder, 2014). Much of the research within historical institutionalism analyzes collective wage bargaining, which typically focuses on the pay as well as the working conditions of those employees covered by the agreement. Such bargaining has implications for organizations’ HRM. For instance, research has revealed how, within the automotive industry, manufacturers use the threat of relocating production to another factory within Europe to gain concessions from employees and their representatives in a ­process known as whipsawing; this process leads to a weakening of institutions that protect workers from reductions in their wages and/or working conditions (Greer & Hauptmeier, 2016). Other research that focuses on more macro-­level trends has revealed how the liberalization of markets, which intensifies price-­based competition, often leads managers (1) to exit collective actors, such as employers’ associations, rather than voice their recommendations for improvement through them and (2) to focus their firms on nonproductive rather than productive activities where, frequently, financial returns are higher and public scrutiny is less (Greer & Doellgast, 2017). Similarly, studies of employer preferences within Germany and Sweden in the 1990s and 2000s have, contrary to the expectations of the varieties approach, found a desire to liberalize employment regulations and welfare policies (Baccaro & Howell, 2011; Kinderman, 2017). Such preferences suggest that, far from upholding labor market institutions, such as collective wage bargaining, employee workplace representation, and employment protection, many employers will seek to weaken them, which will have implications for HRM within companies (Baccaro & Howell,  2017; Kinderman,  2017). Improvements in Germany’s economic performance have scotched these demands for greater liberalization, but not “killed” them (Kinderman, 2017); indeed, historical institutionalists highlight that many policy makers remain wedded to neo-­liberalism, irrespective of the financial crisis that impugned any potential benefits of liberalization (Crouch, 2013). In the area of skills formation systems, which influence access to jobs and career progression, the contests over the appropriate policies seem less fundamental once the system has become established. For instance, research on these systems in Denmark and Sweden has found that, once a critical juncture has been passed and systems are in place, actors accommodate their strategies and preferences to reflect the new institutional setting (Dobbins & Busemeyer, 2015). A study of industrial relations systems in fifteen western European countries found that, despite superficial resilience, all have experienced greater marketization, leading to a weakening of collective wage bargaining and, as a result, greater inequality and less

62   Allen and Wood redistribution (Baccaro & Howell,  2011). Moves to export-­led growth rather than domestic, consumption-­led growth have in some countries, such as Germany, resulted in greater marketization of labor market institutions, leading to wage stagnation for many workers (Baccaro & Benassi, 2017). Other research suggests that the reasons for the undermining of Germany’s collective bargaining system lie in broader developments within capitalism, such as the relatively common vertical disintegration of major employers: As employers outsource work to smaller suppliers or temporary agencies, frequently not covered by collective bargaining, the agreement on wages and working conditions that unions and employers’ representatives negotiate applies to a smaller percentage of employees (Doellgast & Greer, 2007). Other historical-­institutionalist research seeks to explain why collective bargaining institutions in the telecommunications industry are strong in some European countries, but not in others. It argues that (1) institutional loopholes in some countries enabled employers to avoid collective bargaining, and (2) the lack of interunion cooperation accounts for the variable strength of these institutions in different countries (Benassi et al., 2016).

The Regulationist Approach We define the regulation framework in a broad way so that it covers not just those who explicitly use the term to identify their own work, but also others who adopt related, but in some ways distinct, approaches and who use different labels, such as variegated capitalism (Boyer, 1990; Jessop, 2012). The regulation framework is closer to historical institutionalism than it is to the varieties approach. The regulation framework adopts a comprehensive view of capitalist systems to examine how (1) the social and technical division of labor, (2) the influences on individuals’ behavior, and (3) typical patterns of consumption and production are all interlinked and shape economic growth and development (Boyer, 2005, 2011; Jessop, 2014). Therefore, in common with some historical institutionalists, it focuses on consumption and production rather than just production, as the varieties approach largely does (Baccaro & Benassi, 2017; Hall & Soskice, 2001; Streeck, 1997b; Whitley, 2007; Hope & Soskice, 2016). In addition, unlike the varieties approach, but in common with historical institutionalism, the regulation approach has long emphasized the inherently unstable nature of capitalism (Boyer,  2010), drawing attention to the systemic and periodic crises that affect all forms of capitalism and that institutions can only temporarily “fix” (Amable, 2016; Boyer, 2011; Jessop, 2014). As a result, the regulation approach was able to more rapidly and easily address issues relating to financialization than the varieties framework could (Boyer,  2000; Jessop,  2013). Financialization has implications for HRM, such as pay rates and layoffs (Boyer, 2000, 2013b). Furthermore, the regulation approach focuses on analyzing the typical working conditions and consumption patterns of workers, often considered in nationally aggregated terms rather than as either individual workers or groups of workers in particular sectors of the economy. For instance, the approach initially sought to explain

Institutional Approaches to Examining Context   63 the conditions that supported a stable Fordist mode of production and consumption for many years, but then declined. Under the Fordist modes of production and consumption, workers typically performed a narrow range of standardized jobs to produce a limited range of products. This system helped to increase productivity, resulting in a virtuous circle of cheaper products and potentially higher wages, which enabled more consumption, production, and employment. Eventually, however, this virtuous circle came to an end (Boyer, 2013b). In more recent research, the regulation approach has focused on the causes of the current crisis, which is characterized by rising incoming and wealth inequality, precarious employment, and unsustainable growth models, as well as potential institutional remedies to these problems (Amable, Guillaud, & Palombarini,  2012; Becker & Jäger, 2012; Boyer, 2011; Jessop, 2014). There has also been an increased focus on the problems of financialization (Boyer, 2000, 2006, 2013a). Pessimism about the ability of capitalism to resolve the causes of these deleterious outcomes pervades much of this work (Boyer, 2010; Jessop, 2001; Vidal, 2013a, 2013b). Empirical work that draws either implicitly or explicitly on the regulation approach frequently analyzes the nature of work and those work processes that are becoming more prominent in developed economies. This analytical focus ties the empirical work back to the regulation approach’s analysis of the typical patterns of production, which has implications for HRM as well as consumption. For instance, research that examines labor processes in the United States has revealed that over one-­third of jobs there have low autonomy (Vidal,  2013a). Relatedly, comparative research that covers jobs in Germany, the United Kingdom, and the United States reveals that job quality is declining, in general, in all three countries, although there are important distinctions between them (Vidal, 2013b). Other work in this tradition has revealed how, in the United States, the nature of the relationship between employees who “invent” new products has changed as a result of institutional changes, especially those in the area of intellectual property rights, that grant companies ownership of inventions created by workers who are “employed to invent” and a nontransferable license where a worker has not explicitly been employed to invent (Coriat & Weinstein,  2012). These changes have enhanced the power of companies to use inventions as they would like at the expense of individual employees, who no longer have complete control over their intellectual property. Similarly, other work has highlighted how labor power in the Fordist golden era between around 1945 and 1971 was at an unprecedented—and probably never-­to-­berepeated—high (Boyer, 2010). There are several reasons for this. They include internationalization, which has often made workers’ pay contingent on the performance of the firm on international rather than domestic markets, and financialization, which has led to a separation between senior managers and workers within organizations, resulting in downward pressures on employment and working conditions when firm financial performance is weak (Boyer, 2010). Other reasons include the stratification of workers and the “split identities” of workers as wage earners, consumers, pension-­fund holders, property investors, and taxpayers (Boyer, 2010).

64   Allen and Wood

Conclusion Institutional approaches to examining the influence of context on HRM have made a number of key contributions to the literature. First, the approaches reveal the importance of examining the institutional construction of firms because this will affect their strategic priorities and the types of HRM that they are likely to be able to adopt. If institutions are treated as external to the firm, companies are treated the same, leading to an assumption that all firms seek to maximize shareholder value. For firms that are owned and/or controlled by the state, sovereign wealth funds, foundations, and families, this may not be true (Allen et al.,  2018; Goergen, O’Sullivan, Wood, & Baric,  2018; Keizer,  2016; Kristensen & Morgan,  2018). Key institutions, such as corporate governance regulations and the financial system, will condition the types of company that are likely to emerge and survive in different jurisdictions and influence how managers treat different groups of employees as well as the boundary of the firm (Whitley, 1987, 1999). Second, institutional approaches have highlighted the dynamism of capitalism and capitalistic firms (Boyer, 2011; Morgan, 2016; Streeck, 2014), leading to an emphasis on change both within institutions and within organizations. This has implications for HRM, suggesting that studies of HRM should address how and why HRM changes within organizations. For instance, increasing competitive pressures may or may not result in certain forms of HRM no longer being viable in some locations (Etienne & Schnyder, 2014). There are also areas in which institutional approaches could have a greater impact on the study of HRM. For instance, institutional approaches have increasingly highlighted the potential incompatibility or “noncompossibility” of different types of capitalism and, hence, the typical forms of HRM associated with those different types of capitalism. In other words, a capitalist system that ensures high wages and levels of employment protection for all workers may be difficult to sustain in an economy that is increasingly open to foreign competition, overseas investors, and new technologies. This suggests that studies of HRM should increasingly seek to explain and examine HRM in organizations within their national and international settings (Allen et al.,  2018; Jaehrling,  2018; Jaehrling et al.,  2018; Rubery et al.,  2016), because national and international institutional factors will influence the types of HRM that firms adopt and their ability to achieve different objectives in contrasting locations.

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chapter 4

Cr itica l Con textua lized Stu dies of H um a n R esou rce M a nagem en t Frans Bévort, Lotte Holck, and Mette Mogensen

Human resource management (HRM) is often examined with universalistic “best ­practice” approaches (e.g., Brewster, 1999; Huselid, 1995). That is, researchers and practitioners want to identify models and practices that are true, or effective, in all or most cases and produce organizational performance. For example, high-­performance work practices are always (or almost always) seen as better than regular work practices, structured interviews predict performance better than unstructured interviews, and so on. One central point of the mobilization of the contextual approaches described in this handbook is to challenge this kind of assumption. In their most generic form, contextual approaches subscribe to what is called a best fit view. In this view, HRM practices are formed and molded by the contexts in which they have been developed, be they social, industrial, organizational, or other contexts (Boxall & Purcell, 2016). In this sense, the value and results of HRM are seen as (or supposed to be) always relative to the context in which the organization is embedded. In many ways, this is influenced by the classic contingency theory way of thinking (Burns & Stalker,  1961, Delery & Doty,  1996; Woodward, 1958). Contingency theory emphasizes a strong connection between a specific context and a specific organizational form and therefore the need of managers (and other personnel) to accept and act according to that fact. With a critical management studies (CMS) approach, this relativization is taken further. The basic assumption of, typically managerial, rationality is questioned. This assumption is also present in most contingency approaches in the sense that managers can, do, or should seek the “appropriate” fit between what they do and the context of the organization. Critical approaches challenge the feasibility, primacy, and legitimacy of

72   BÉvort, Holck, and Mogensen managerial rationality, which is usually seen as the point of departure of HRM. Also, as a crucial point for the argument in this chapter, the position, interests, and assumptions of the observer are taken into critical scrutiny as part of the context analysis. In this chapter, contextual approaches to HRM are expanded with a critical HRM studies dimension. So, what is the HRM critique and why should we care? Grey (2008), a critical management scholar, has described lucidly the immanent tension of HRM, as well as the spirit of its most ardent critics, in an imagined dialogue between a boy and his father, a human resources manager (pp. 48–49). In the dialogue, Grey presents two alternative plausible answers to the son’s simple question: “What do you do at work?” The father’s first answer, “Exploiting people,” as Grey suggests, will risk giving the boy an unfavorable impression of his father. The second answer, “Helping people,” is the far more acceptable alternative. Furthermore, it mirrors the spirit of the human relations school, which historically and theoretically has laid the ground for HRM. In Grey’s account of human relations theory, however, HRM is presented as a sophistication of the managerial exploitation developed in the preceding scientific management theory (Taylor, 1911), rather than an introduction of humanism to management, as HRM evangelists have purported (e.g., McGregor, 1960). In this sense, the two answers are not presented as alternatives. On the contrary, their coexistence is considered emblematic to the field of people management. They represent the Janus-­faced nature of HRM, the ongoing tension between exploitation and humanism, which is continuously fueling the critical voices of HRM. In line with Grey’s analysis, which seeks to disclose the hypocrisy of the humanistic proponents of HRM, it has been the trademark of critical HRM studies to unveil the exploitation hidden behind seemingly humane practices and good intentions. The managers of HRM might think they are helping people, while in fact they are supporting the subtle exploitation of the resources of human beings. The simple fact that human and management coinhabit the same concept in the HRM acronym therefore tends to stir up feelings and strong sentiments of unfairness. HRM appears one-­sided, because it denotes humans as simple resources to be managed, as the management guru Handy (2019) only recently argued. Following HRM critics, there is reason to question the interests informing HRM. As polemically put by critical scholar Legge (2005), the question is, Who is HRM best practice actually best for? The field of HRM is, in this view, controversial and often ridden with conflict because it involves different and often opposing stakeholder interests. Correspondingly, debates within HRM tend to become highly dichotomous, separating the discussing parties into either mainstream or critical. It becomes difficult not to choose sides: to either accept the managerial mainstream perspective or to go down the CMS road and reverse the perspective, taking sides with “the oppressed.” To be sure, the mainstream view constitutes the majority of HRM research, representing writers who are either explicit proponents of HRM as a normative prescriptive ideology (Huselid, 1995; Ulrich, 1997) or implicitly accept the role of HRM as a more or less efficient management tool in the hands of capital owners and politicians. Unfortunately,

Critical Contextualized Studies of HRM   73 most of the truly critical studies of HRM tend to be only interested in HRM as a “straw man” to exemplify the atrocities of modern managerialism. Alvesson (2009 p. 59), a long-­time signature author within CMS, has put it as follows: “Part of this problem is the shortage of critical studies genuinely interested in what goes on in terms of HRM. Critical studies do not need to be empirical and the ideological and other critiques find targets worthy of their criticism, but there are still important themes around HRM as a social practice that have not, with a few exceptions, been investigated in much depth. The entire critical project appears as one-­sided, narrow and reactive. It shares with the mainstream work a tendency to black-­box HRM.” The tendency for critical scholars to preoccupy themselves with ideology rather than empirical studies of HRM as a specific social practice, so Alvesson (2009) argues, in effect leaves the critical project with little relevance to the field of HRM—or its practitioners. By introducing to critical HRM studies the importance of a contextualized approach to HRM, the ambition of this chapter is to avoid the pitfall trap of falling into either of the two extremes: uncritically accepting either a managerial or an antimanagerial stance, but to investigate HRM critically as a social practice with a view to finding ways of improving the world of work for the involved stakeholders. To do this, the chapter is structured as follows. The following section discusses how it is possible to be critical and practically ­relevant at the same time by introducing the current debates on relevance within CMS, under the labels of “critical performativity” (Spicer, Alvesson, & Kärreman, 2009) and “Reconstructive reflexivity” (Alvesson, Hardy, & Harley, 2008). This is followed by three critical, but equally constructive, analyses of HRM practices: the first addresses how institutional logics affects the practice of HRM professionals; the second presents alternatives to best practice diversity management; and the third re-­evaluates meditation practices as expressions of managerial control. To conclude, the merits of the three ways to perform contextualized critical HRM studies are summed up and discussed, thus setting the scene for how to move forward in critical contextualized HRM scholarship.

Human Resource Management Critique— from Antiperformativity to Engaged Scholarship Having as its default position a reading of HRM as an exploitative and managerial regime, the focus of critical HRM studies, as part of CMS, has been to produce analyses that serve to make evident the ugly face of neo-­liberal capitalism lurking behind the apparent win–win arguments of mainstream HRM rhetoric. Looking across a range of CMS scholars and their attempt to describe the diverse field of CMS, the following

74   BÉvort, Holck, and Mogensen interrelated characteristics can be extracted (see Alvesson,  2008,  2009; Fournier & Grey, 2000; Keegan & Boselie, 2006): 1. An “antiperformative stance” that refrains from means–ends considerations and any input that would serve the creation of more efficient HRM practices; 2. A critical reflexivity aiming to acknowledge the power of knowledge and knowledge production to practice—thus stressing the role of epistemology and the responsibility of the researcher in terms of the versions of reality produced in research; 3. Choosing analytical strategies and theories that aim to defamiliarize us from mainstream HRM theorizing and practice; 4. Taking sides with the underprivileged against dominant ideologies, interests, and institutions; 5. Having an ambition to inspire for social reforms, emancipation, and resistance on behalf of the underprivileged. Among CMS scholars, there are differences in relation to the weight given to these characteristics. Some are more inclined toward the theoretical and epistemological debates, while others are more strongly preoccupied with the latter aspect of producing social change. To some degree, it is possible to place CMS scholars on a continuum, with antiperformativity on one side and social reform on the other. The majority of scholars, it should be noted, are found in the former category. Since the beginning of the 2010’s, there has been an increasing awareness among critical scholars that in order for HRM critique to have relevance beyond its own boundaries, it needs to become more relevant both to HRM theorizing and to practice. In an exemplary comparison of the discursive impact of modernist and positivist texts by Guest and critical texts produced by Legge, respectively, Harley and Hardy (2004) point to the continuous difficulty critical texts have in becoming effective “countertexts” and thus becoming relevant for the development of the academic discourse on HRM. A “cynical distance” is often upheld (Spicer et al., 2009, p. 542); Adler talks of a certain “complacency” within CMS (Adler, 2008), and Koss Hartmann adds to this by pointing to the habitual preferences among critical scholars for philosophical and inaccessible theories and styles of writing as the main problem (Koss Hartmann, 2014). In general, the HRM critique seems to have developed a life of its own, with little interaction with the wider field of HRM (Koss Hartmann, 2014; Spicer et al., 2009; Thompson, 2005). Although critical reflexivity, defamilarization, and ideology critiques ideally serve as invaluable sources of developing academic disciplines, including HRM (Janssens & Steyaert, 2009), apparently critical studies on HRM are missing out on becoming relevant when it comes to the development of both theory and practice. The question is, then, how do we, with the words of Janssens and Steyaert (2009, pp. 143–144) in mind, make sure that critical scholarship is not simply reacting to the mainstream research agenda, but also contributing to setting it (see also Bévort et al., 2018)?

Critical Contextualized Studies of HRM   75

Engaging Critique? Following recent self-­reflexive debates within the CMS community, critical scholars are increasingly considering the current value of the critique produced (Adler,  2008; Mogensen, 2018; Spicer et al., 2009; Wickert & Schaefer, 2015). Doubts and regrets are widely aired with regard to how CMS critique may live up to its inherent ambition of reversing and making an impact on current management rhetoric and practice. Within the CMS community, a need for critical scholars to engage more closely with the management practices under study can thus be identified, which in turn challenges the antiperformative stance traditionally taken (Fournier & Grey, 2000; Spicer et al., 2009). As purported by Alvesson, given the specific interest in a management context, critical management scholars should display “some degree of appreciation of the constraints of the work and life situations of people (including managers) in the contemporary or­gan­i­ za­tional world, e.g. that a legitimate purpose for organizations is the production of services and goods” (Alvesson, 2009, p. 55). Among critical scholars there is thus a tendency toward moderation, to increasingly accept if not embrace “the legitimate purpose for organisations” while at the same time displaying an increased sensitivity toward the reality and everyday lives as experienced by organizational actors. Without this compassion and engagement in the reality of organizational actors’ experience, criticism is left barren and cold. For critique to have the potential to become engaging and practically relevant, and thus feed into the constant and constructive development of HRM as a discipline and practice, two strategies have been prominent in the debate: 1. A distinct kind of reflectivity—R(econstructive) reflectivity (Janssens & Steyaert, 2009); and 2. Critical performativity (Spicer et al., 2009), progressive performativity (Wickert & Schaefer, 2015) 1.  Being a critically reflexive researcher implies being “mindful of the historical and politically situated quality of our reasoning” (Willmott, 1993, p. 708). This means also being critical toward the assumptions one subscribes to. This first strategy thus takes as its point of departure the observation that most critical management scholars make use of a specific kind of reflexivity (Alvesson et al.,  2008), that is, the way in which the researcher approaches the very quality of being critical. The authors propose four kinds of critical reflexivity—multiperspective, multivoicing, positioning practices, and destabilizing reflexive practices (Alvesson et al., 2008, p. 487)—to describe the extant critical management literature. The authors also suggest two tendencies that distinguish the way researchers in practice choose to apply critical reflexivity: Deconstructive reflexivity and Reconstructive reflexivity (p. 497). The first is characteristic of the purely “negative” critique that is often found in CMS. The second implies a form of critique that

76   BÉvort, Holck, and Mogensen engages with practice and tries to reach results that may, in one way or the other, seek to improve existing practices. According to the authors, the two can and should be used in sequence, beginning with the former and ending with the latter. Janssens and Steyaert (2009) point to this approach as key to establishing a critical, as well as relevant, HRM research agenda. 2.  Critical performativity has been coined as another yet similar answer to the general call for engaged scholarship within CMS (Spicer et al., 2009). It aims to break away from the overly abstracted theorizing of CMS, which has tended toward obscuring the practical usefulness of critical HRM research. Playing on the antiperformativity legacy of CMS, it explicitly challenges the normal distance taken, presenting critical performativity as a “more affirmative movement.” Apart from (still) having a critical inclination, aiming at questioning assumptions and minimizing managerial domination, the performative aspect stresses the aim to produce new understandings that may engage with and not least have effect on practice. In many ways, this resonates with the ambitions of the reflexivity approach presented above, yet the call for critical performativity seems to take critique a step further: a step into the organizational and managerial realities under study looking not just for emancipatory effects but also for effects on practical or­gan­i­za­ tional work (Alvesson & Spicer, 2012, p. 376). Spicer et al. (2019) present a range of tactics, which are all about minimizing the previous distance between critics and practitioners: affirmation, which invites researchers to work in close proximity to the object of study and critique; an ethic of care, which calls for taking seriously the concerns of the actors in the field; a pragmatism orientation, which invites the critical scholar to embrace and work with already established discourses in the field; a focus on potentialities, which obligates the researcher in terms of presenting alternatives; and, finally, a normative stance, reflecting on and making clear their own interests and orientations (Spicer et al., 2009, pp. 545–554).

Contextualizing an Engaged Human Resource Management Critique? Taking seriously this move within HRM critique, from an antiperformative, distancing, and primarily “negative” approach toward HRM theory and practice to critical performative, engaged, and with a “positive” ambition to make a difference, a strategy of contextualization of critical HRM research seems like a productive way forward. In the next section, three critical studies of HRM practices illustrate how a reconstructive and critical performative approach may apply to HRM research and add another dimension to the contextual approaches described in this book. The first is a critical analysis of HRM, inspired by new institutional theory. The study directly questions the taken-­for-­granted assumptions about organizations that HRM practitioners hold. Based on a case study of a professional service firm (PSF) and

Critical Contextualized Studies of HRM   77 i­nterviews with HRM executives with careers in PSFs, it is shown that HRM practices are by default calling forward a “bureaucratic” notion of the organizational context, even when implemented in contexts where the inhabitants hold an altogether different understanding of the organizational context. The study discusses the consequences of this approach in practice. The second analysis shows how studies of diversity management need to be taking a much more situated and localized approach if we want to understand how diversity management initiatives affect the involved employees. The remedy proposed is partly to probe deeper into the organizational dynamics and local context to understand how the diversity management initiatives are perceived by the employees at whom they are targeted, in situ. By doing this, a critical HRM approach can bypass some of the structures and cultural constraints that are perpetuating inequality. The third analysis begins by claiming that a classical CMS perspective needs to be amended if we want to understand the complexity of management initiatives. Critical management studies tends to overstate the ability of organizations to implement the ever more sophisticated management tools they choose to control employees and thus becomes “blinded by control,” noting, for example, that control can become self-­control through demands for “authenticity.” In a study of a “meditation aimed at stress prevention” management among Danish probation services, it is shown how this is far from having the (controlling) effect that a typical CMS analysis would find: By bringing work back in to understand how managers and employees are affected, a much more nuanced interpretation is achieved. The three analyses that are rendered at more length below share common methodological, analytical, and practical grounds in the quest to achieve a more contextualized critique of HRM practices, which also outlines the direction for future critical HRM research proposed in this chapter: Methodological: This approach uses qualitative studies such as ethnography, observations, and spending more time with informants as a way of getting close to the organizational context, as well as understanding how organizational actors perceive this context in a richer way. Theoretical: This approach changes perspective, from the typical mainstream HRM interest in managerial discourses and actions to seeing HRM as a complex social practice; “a social practice perspective illuminates a new research path that aims to understand how HRM in a specific organisation or context is produced through connecting and interweaving various discourses, micro-­practices and rhetorical strategies” (Janssens & Steyaert, 2009, p. 150). They apply a theoretical appreciation of the wider organizational context of HRM practices, noting the institutions, discourses, or power relations that HRM practices are structurally embedded within. Practical/normative stance: As opposed to much critical work, this approach suggests alternative paths of action based on academic inquiries that are engaged in, yet also seek to challenge, the assumptions within the field.

78   BÉvort, Holck, and Mogensen All three varieties of analysis aim to criticize the status quo and mainstream HRM assumptions and practices, while still engaging in a constructive dialogue with the HRM research and practice communities to inform alternative practices. In the conclusion of this chapter, the wider potential of these approaches for HRM research in the future will be discussed.

Human Resource Management and Institutionalization in Specific Organizational Contexts From an institutional theory perspective, HRM is a set of management practices that are likely to be strongly institutionalized (see Chapter 3 for an extended discussion of institutional theory and context). DiMaggio and Powell (1983) use personnel practices as an example of management practices in which institutional isomorphism is highly visible in the way the practices are diffused among US companies. According to DiMaggio and Powell, HRM practices can be diffused through coercive, normative, or mimetic isomorphism. The point is that organizations conform to pressures in the environment that are forced by law and regulations, by standards defined by professional practitioner groups, such as HRM professional bodies, or by the peer pressure or bandwagon effects created when many or prominent organizational actors adopt a specific practice. Baron, Dobbin, and Jennings (1986) and Baron, Jennings, and Dobbin (1988) show how HRM functions are developed in US corporations and other organizations as a way to handle the institutional pressures of which specific legislative initiatives are important. Even before that, Meyer and Rowan (1977) used HRM practices (selection) as an example of a “rationalised myth” (p. 344), that is, practices that organizations adopt (at least formally), not because they know they benefit from the practices directly, but because they are deemed appropriate for a formal organization in the industrial environment and because openly not conforming with the practices will affect the organization negatively in several ways, by rendering it illegitimate as a player in the industry or in society. Other examples could be performance management systems or company health policies. Meyer and Rowan noted, “Such institutions are myths which make formal organizations both easier to create and more necessary. After all, the building blocks for organizations come to be littered around the societal landscape; it takes only a little entrepreneurial energy to assemble them into a structure. And because these building blocks are considered proper, adequate, rational, and necessary, organizations must incorporate them to avoid illegitimacy” (p. 345). One way of theorizing the context of HRM, using the new institutional theory tradition, is to understand organizational contexts as determined by the dominant institutional logics within the organization and/or among the members of the organization. It is a common for HRM practitioners in the West to hold rather strong assumptions about

Critical Contextualized Studies of HRM   79 organizations (Bévort & Poulfelt, 2015), often similar to bureaucratic norms of good governance, for example, equal treatment, transparency of responsibility, a division of labor in roles, and a hierarchical structure of command. Many organizations do not conform to these assumptions, which makes for potential conflict when the logics intersect. Next, we elaborate how this type of analysis of clashing assumptions can be used to critically investigate HRM practices and propose new ways to understand and develop HRM practice.

Clashing Institutional Logics in Professional Service Firms The basic premise of a traditional contextual approach is that the properties of the context in which actors act influence their choice of behavior. However, the argument in Bévort and Poulfelt (2015) is based on the idea that context is not something that is defined independent of the actors engaging with it. What “the context is” becomes controversial in the sense that different actors see and interpret context differently, even when they are in the same situation, for instance, an organization. Actors make sense (Weick, 1995) of their worlds in different ways. Although institutional theory takes on this basically phenomenological view, it is not entirely within the discretion of the involved actors to choose how they view and act in their world. Interpretations are bounded by structural arrangements of cognitions and practices—that is, institutional logics (Friedland & Alford, 1991; Thornton, Ocasio, & Lounsbury, 2012). Actors choose from a requisite selection of institutional logics that are present in the situation and to which they have been exposed in their personal and professional history (Bévort, 2012). Bévort (2012) showed how certified accountants, who were appointed as managers, were exposed to—and inclined toward—two logics of organization and management. The two managers, who were part of the same organization and even the same management development program, drew on different logics to inform their management behavior. The study concluded that, comparatively, the manager who was able to draw on the “bureaucratic logic” had a much better chance of sustaining a meaningful identity as a manager and thus performing more efficiently the behavioral scripts required of him (Bévort & Suddaby, 2016). In Bévort and Poulfelt’s (2015) research, the organizational context is similar—PSFs (Nordenflycht, 2010)—and the point is how HRM as a professional practice seems to encounter the same kinds of challenges as the managers mentioned above. In fact, accounts from five human resource managers who have made careers in PSFs show severe incompatibilities in the how HRM professionals view the way organizations work and should work compared with the leading partners who employ them. Bévort and Poulfelt (2015) use the analysis of the institutional logics at play in Bévort (2012) (see Table 4.1). One logic was a professional logic, which adhered to the traditional logic of

80   BÉvort, Holck, and Mogensen Table 4.1.  Contradicting logics of management in professional service firms  

Professional logic of management

Bureaucratic logic of management

Orientation

Outward (client)

Internal

Organizational relation

Autonomy

Interdependency

Roles/competences

Generalist (professional)

Specialized/role specific

Employer–employee relations

Collegial

Manager–employee

Authority

Professional meritocracy (collective decisions in partnership)

Office, position

Quality

Professional standards

Efficiency

Criteria for success

Personal achievement (billing)

Unit goal achievement

Note: Adapted from Bévort (2012).

management in the Big Four accountancy firms. The other logic was a bureaucratic logic, which represented a more managerial understanding of the organization and which was only slowly becoming more salient there and within PSFs in general. The two institutional logics illustrate fundamental differences in the way different actors understand the underlying mechanisms of the organization. The differences are fundamental in the sense that this is a deeply taken-­for-­granted way of understanding that is not open for discussion. The actors are barely aware that other actors may have other ways of understanding the context. Furthermore, it is very difficult to hold, let alone act in accordance with, both logics at the same time. If we consider the first parameter, namely orientation, the client is the most important actor and the center of attention in the organization, which makes everything else secondary: internal meetings, communication, managerial tasks. If we consider the last parameter, namely criteria for success, having billing as the main criterion makes it difficult to support a climate of teamwork and common purpose at all levels of the organization. The reader will appreciate that the professional logic, as described, is the exotic variety reserved for professional organizations, while the bureaucratic logic is the generic, classic ideal of a hierarchical, coordinated organization with a high level of division of labor according to predefined roles. The argument that Bévort and Poulfelt (2015) make is that HRM professionals tend to subscribe, though they are often unreflective of the fact, to a bureaucratic logic as their default standard for appropriate organization and management. Because professional logic dominates the thinking and acting of staff in PSFs, and because most HRM professionals are influenced by bureaucratic logic, they ­understand the same organizational (or industrial) context in very different ways. Bévort and Poulfelt (2015) report that HRM professionals repeatedly think that they are on the same page as their PSF leading partners in relation to the organizational situation and the need for managerial action, but often realize that this is not the case, even several months into the implementation of joint-­consent management initiatives. Even if

Critical Contextualized Studies of HRM   81 PSF ­partners readily engage in a general conversation on management, the intentions discussed are very hard to implement when it comes to the real commitment of time and resources.

Achieving License to Operate across Differing Logics What should HRM professionals do, according to this analysis? This question has no straightforward or definitive answers. Given the present situation, HRM professionals do not hold any “license to operate,” in the sense that the PSF partners (in the PSFs studied) do not entrust them with the mandate necessary to do their assigned job. Bévort and Poulfelt (2015) suggest four actions that HRM professionals may implement to achieve license to operate in PSFs: • Understand the logic governing the PSFs thoroughly. • Speak the language of the professional organization. • Argue for the value of the HRM professional contribution in the PSF context. • Challenge the status quo of management with sound HRM craft. Thus, HRM professionals need to understand the different worldviews at play in the contexts they inhabit and draw on the institutional logics that dominate the specific type of organization. Equally, they must promote the relevant HRM practices that intelligently draw on the insights of how the dominating institutional logic interprets the organizational context.

Lessons from Institutional Logics Analysis in Human Resource Management Research Based on institutional logics, a critical analysis of the challenges for HRM professionals in PSFs opens up constructive action in several ways. First, it challenges the idea that HRM professionals simply possess the knowhow of universal best practices for HRM that they can meaningfully bestow upon any organisation. On the contrary, these HRMprofessionals are likely to be victims of their own preconceived notions of organizations and management—bureaucratic logic—which is not helpful, especially in contexts like PSFs. The analysis conversely shows how the institutional logic dominating PSFs is creating “blind spots” for management, that is, institutionalized ideas of what can and cannot work in a PSF context.

82   BÉvort, Holck, and Mogensen Second, as illustrated in the case example, the clash between different interpretations of an organizational context is not reflexively accounted for. This involves a distinction between organizational reality and perceived organizational reality. On the one hand is an appreciation of how, for example, a bank is organized differently from a PSF; on the other hand, we must accept that actors are “formed” by their perspective. That is, if you place bankers in a PSF, they will try to “rediscover” the bank in that organizational context or even try to recreate it. The so-­called new institutional theory departs from the CMS angle toward HRM. That is, instead of confirming the ever-­rising rationalization of managerial exploitation, it questions economic rationality and adds a broader range of possible rationalizations, as well as introducing the all-­important notion of legitimacy as a measuring rod for contextual success in addition to measures of, for example, profitability and efficiency. In this way, institutional theory offers a number of alternative explanations for why organizations are induced by their context to adopt, at least formally, specific HRM practices. The institutional logics analysis above highlights how actors are inevitably embedded in definite sets of institutional logics. Nevertheless, actors can choose to become more insightful about dominant institutional logics besides the ones they hold from the outset. In the HRM context, this will typically mean that practitioners could profit from being more sensitive about how the “baggage” they carry affects their perceptions of their organizational context.

Human Resource Management and Diversity Management in the Organizational Context The second analysis shows how studies of diversity management must take a more situated or localized approach if we want to understand how diversity management initiatives affect the involved employees. The remedy proposed is partly to probe deeper into the organizational dynamics and local context to understand how diversity management initiatives are perceived by the employees they are targeting in situ. By doing this, a critical HRM approach can bypass some of the structures and cultural constraints that perpetuate inequality. Diversity management has become a major task for HRM departments in most advanced economies. Organizations operate in and with increasingly diverse workforces resulting from demographic changes and mobility across borders (Collings, 2014; Schuler, Jackson, & Tarique, 2011; Scullion & Collings, 2011). This growing diversification of organizations and the workforce makes issues such as employee perception of organizational justice and fairness important for companies (Swailes, Downs, & Orr, 2014). Global trends toward more inclusive HRM (Meyers et al, 2020) and the HRM orthodoxy argue that investing in the company’s human resources and the well-­being of

Critical Contextualized Studies of HRM   83 employees creates better organizational performance (Drucker,  1954), in order to convince companies to invest in diversity and inclusion as a path to a more pleasant working environment characterized by openness, trust, and overall well-­ being (Warren, 2006). However, HRM practices of diversity management have been haunted by best practice presumptions designating one-­size-­fits-­all solutions to problems of organizational inequality and disadvantage based on demographic background. Diversity management often addresses organizational inequality in sociopsychological terms as the effect of (majority) prejudice. Mainstream diversity management research suggests that this must be rectified through universal, generalized HRM best practices, such as objective procedures, training, and mentoring/network activities (Bleijenbergh,  2018; Dobbin, Soohan, & Kalev, 2011; Holck & Muhr, 2017; Janssens & Zanoni, 2014; Qin, Nuttawuth, & Chhetri, 2014; Williams & Mavin, 2014). According to critical diversity scholars, however, these widespread HRM practices of diversity management have generally proved insufficient. In fact, little empirical evidence supports their ability to foster workplace equality (Dobbin et al., 2011; Dover, Major, & Kaiser, 2016; Janssens & Zanoni, 2014; Oswick & Noon,  2014; Zanoni & Janssens,  2015) as social exclusion and economic inequality continue to characterize most organizations (Ferdman,  2017; Janssens & Steyaert, 2019; Nkomo et al., 2019; Shore et al., 2018). One line of critique pinpoints how most diversity research has been conducted at the team and individual levels in controlled, cross-­sectional environments and has introduced artificial situations, for example, lab studies using student samples, rather than organizational studies (Jonsen, Maznevki, & Schneider, 2011). When researchers remain outside the organizational flow and activities and instead rely on archival data, largescale quantitative surveys, and secondary databases as the primary data sources, they tend to make overly broad assumptions. In addition, they are not able to capture the complexities of the social fabric of organizational life. Another line of critique suggests that the inadequacy results from the targeting of cognition rather than the structural dimensions of privilege, domination, and disadvantage (Oswick & Noon, 2014; Zanoni and Janssens, 2015). These critics suggest that such practices might even backfire, resulting in stereotyping and remarginalization (Kalev, Dobbin, & Kelly, 2006). This insistent focus on cognition in a sociopsychological and individual perspective downplays the dynamics of the organizational setting, “leaving organisational structures and routines which reproduce inequalities and normalize the privileges of the dominant group (e.g. white and male employers) unchanged” (Janssens & Zanoni, 2014, p. 2). Disregarding these more subtle, everyday organizational interactions that are (re)productive of organizational inequality structures might partly explain the inability of diversity research to mitigate current diversity challenges in the workplace (Dobbin et al., 2011; Holck, 2016b; Jonsen et al., 2011). Diversity research then loses sight of important organizational dynamics, including the organization of tasks, operations, and situational challenges that are connected to but distinct from the discourses that are often at the fore of HRM diversity literature (e.g., Romani, Holck, & Risberg, 2019; Śliwa & Johansson, 2014; Zanoni & Janssens, 2004, 2015).

84   BÉvort, Holck, and Mogensen The next case study offers an example of how generalized HRM diversity management practices might have adverse effects by paradoxically perpetuating rather than changing organizational inequality. The study draws on extensive ethnographic research obtained through longitudinal two-­year research demonstrating the potency of or­gan­i­za­tionally embedded, qualitative research.

The Interconnectedness of Human Resource Management Diversity Practices and the Organization of Work (Case Study) The case study is a team-­based Danish municipal organization employing international high-­skilled knowledge workers (Holck, 2016a, 2016b, 2018). The organization successfully applies the municipal diversity and equality policy, which almost solely focuses on recruitment strategies aimed at ensuring that staff composition mirrors the demographics of the municipal area. Many of the employees with international backgrounds are employed through various public subsidized labor schemes aimed at improving their language skills, helping them become accustomed with typical Danish workplace culture, or upgrading their professional skills. Hence, international employees are employed in temporary (at least initially) training positions with little access to career mobility. Despite the values of diversity and inclusion, the organization is troubled by poor employee satisfaction because employees, especially those with international backgrounds, express experiences of harassment based on language, skin color, and race. Through interviews and participative observations, the researcher identifies how poor employee satisfaction stems from similarity attraction guiding collaboration based on stereotypical perceptions of minority and majority members’ skills and capabilities. The emerging themes among the employees deal with how an international background is seen as a skill in itself (giving access and legitimacy when dealing with international business partners) and as an inherent deficiency with regard to the required Danishlanguage competence, which makes international employees “difficult to work with.” Digging deeper into employee relations reveals that the organization of work in teams, coupled with ongoing organizational change, actively hampers cross-­racial collaboration. A dual structure of informal teams combined with a formal municipal bureaucratic structure results in an opaque organizational landscape. The dual structural setup encourages peer competition, anxiety, and a lack of orientation and puts minorities in a particularly disadvantageous position (Holck, 2018). These structural features promote similar attraction that guides collaborative patterns and results in numerous divisions among employees, thereby rendering differences petty as opposed to progressive.

Critical Contextualized Studies of HRM   85 Hence, the organization of work in a dual formal–informal hierarchy and ongoing change result in some of the root causes of the employees’ experiences of harassment and sense of unfairness.

Lessons from Contextualized Human Resource Management Research on Diversity Management First, the case illustrates how generalized HRM diversity practices might reinforce rather than reduce organizational inequality. Because the organization predominantly recruits staff with international backgrounds through several integration programs for migrants, the staff are perceived as vulnerable groups in need of help on behalf of the majority to access the labor market. Diversity management then becomes entwined with the logic of corporate social responsibility and becomes a moral obligation of the corporation to care about “vulnerable groups in the labor market” by recruiting and including them in the organization (Holck & Muhr, 2017). By drawing on the values of doing good and helping migrants embedded in HRM diversity programs, managers and HRM professionals actively undermine the competences and capabilities of high-­skilled migrants. Through recruitment practices of corporate social responsibility, an ethnic hierarchy of benevolent-­majority Danes helping “needy” migrants is instilled: THe migrant “other” is seen as vulnerable and—despite being highly skilled—in need of kindness and help from those (majority Danes) who are more fortunate. This reinforces the managers’ and HRM professionals’ actions as acts of generosity, rather than simply recruitment of competent, highly skilled people. Paradoxically, the HRM professionals and managers in charge of recruitment in the organization—despite being committed to diversity and inclusion— actively contribute to the continuation of discrimination. The general tendency of mainstream HRM diversity research to study discrimination from the perspective of the victims—as disadvantaged individuals—misses out on the ability to identify the structural causes of discrimination that might stem from the context, such as the organizational setup or diversity initiatives (see also Romani et al., 2019). Second, the case study underlines how HRM diversity practices must be explored in situ—as embedded in formal and information structures of everyday organizational processes. There is no best way or best practice, only local, situated solutions. This necessitates an approach that moves beyond the stylized typologies and decontextualized approaches that prevail within the current HRM (diversity) management research (e.g., Ahonen, Tienari, Meriläinen, & Pullen, 2014; Ariss, Koall, Özbilgin, & Suutari, 2012; Jonsen et al., 2013; Kalev,  2009; Mamman, Kamoche, & Bakuwa,  2012; Oswick & Noon, 2014; Van Laer & Janssens, 2011). In terms of the practical implications of the case study, the results suggest HRM practitioners should look for situational relevant and customized initiatives to promote organizational equality and inclusion, instead of

86   BÉvort, Holck, and Mogensen proposing generalized HRM diversity management initiatives. Relating to the case study, such initiatives could imply compulsory rotations in teamwork to promote collaboration beyond demographic and educational differences; conflict resolution to ameliorate cross-­cultural and cross-­educational collaboration; and international staffs’ access to crucial information and resources as well as involvement in high-­prestige mainstream tasks. As we will argue, formal HRM practices—such as objective procedures when recruiting, sensitivity training to prevent discrimination, and networking to break with the isolation commonly encountered by employees with a diverse profile— often fail because they are not embedded in a situational assessment of the tacit, organizational “underbelly” of power battles related to privileges, disadvantages, and resistance.

Contextualization of Critique: Bringing the Work Organization Back In In traditional HRM studies, encompassing everything from the cultivation of a common culture to competence development and mindfulness, HRM programs are typically considered rational means by which HRM and management are able to develop and optimize the individual, the group, and the wider organization—to the benefit of all parties. In critical HRM studies, however, the same programs are typically analyzed as more or less sophisticated ways of exploiting employees, as ways of exerting control (see, e.g., Fleming, 2005; Nicholson & Carroll, 2013). Fleming and Sturdy (2009) differentiate between forms of control, depicting at the same time a historic development of the employment relationship: from a classical and bureaucratic, top-­ down oriented approach, which tries to discipline employees from the outside, to an approach working increasingly to internalize the rationale of the managerial programs in the employees themselves, by way of widespread autonomy and self-­management. Human resource management programs are no longer just intended to shape employees to become “organisation men” (Whyte,  1956) in accordance with organizational norms. Rather, new forms of control carry an ambition to foster authenticity, prompting employees to “become themselves” in the name of flexibilization, innovation, and productivity (Cederström & Fleming, 2012; Fleming & Sturdy, 2009; Spicer, 2011). The HRM critique focusing on management programs and their specific forms of control is important and relevant insofar as it reminds us to question one of the most basic and hardwired assumptions within HRM theory and practice: that HRM is a win– win situation—that it is possible to unite concerns for productivity with concerns for employee well-­being, satisfaction, and happiness. However, as pointed out by Ekman (2014), CMS critique is often crafted as a story of “the usual suspects,” which implies that in critical analyses, managers and employees are cast in predefined roles: the exploiters and the exploited, respectively. This predefined role description tends to keep us from valuable insights. As HRM programs always appear in

Critical Contextualized Studies of HRM   87 specific  organizational contexts, attentiveness toward practice and situated social dynamics shows they produce diverse outcomes and consequences for critical HRM analysis as well as practice. A specific way to theorize and mobilize context in critical HRM analyses comes from a focus on the work organization. “Bringing work back in” to organization and management theorizing has been promoted and reinvigorated by several organizational scholars (Barley & Kunda, 2001; Du Gay & Vikkelsø, 2013; Lopdrup-­Hjorth, 2015; Mogensen, 2012) who argue that it offers a much needed contextualization and specification of organization theory as well as the role of management (Du Gay & Vikkelsø, 2012). Focusing on the actual work, work roles, and their mutual coordination situates/contextualizes the study of HRM practices and thus challenges the current basis and assumptions of HRM. As we will demonstrate in the case study in the next section, which focuses on a stresspreventive meditation program within the Danish Probation Services, the effects of the meditation program are inseparable from the specific work and work organization. By situating our analyses in the work organization, HRM programs may turn out to be far less univocal and also far less controlling and powerful than both the official managerial discourse and the usual critical approach of CMS tend to imply.

Meditation as Stress Prevention in the Danish Probation Services (Case Study) This study sought to investigate empirically (qualitative interviews and documents) the ambitions and effects of a meditation program called “Project Peace (of mind)” (Mogensen 2018). The program was initiated by the HRM department of the Danish Prison and Probations Services and supported by external consultants. Participation in the program was voluntary and ran for seven weeks, during which groups were educated weekly in meditation techniques and additionally offered individual healing sessions by the external consultants. The organizational ambition of the program was to prevent stress among employees within the probation services, thus lowering the levels of illness, especially short-­term illness. In the official presentation directed toward local managers and employees, the program was presented as a way to “help employees recreate contact with their inner peace,” as a result creating “greater happiness as well as performance both in their private lives and their work lives.” Keeping with the official presentations and ambitions of the meditation program, it would be an obvious analytical strategy for the CMS scholar to look toward theories of neo-­normative control and critical debates on employee authenticity for inspiration (Cederström, 2011; Fleming & Sturdy, 2009; Spicer, 2011). An analysis along those lines would typically address the formal discourse of the program, seeking to document how the Project Peace program would manage and exploit the employees. Because meditation techniques would help employees connect with their hitherto undiscovered

88   BÉvort, Holck, and Mogensen resources of “inner peace,” under the guise of being relieved from stress, the employees would in fact make themselves accessible to further exploitation by the organization. However, supplementing the focus on the managerial discourse with an analysis of the specific work organization in question—the specific organization of work among and between the participating counselors and administrative staff—thus situating the analysis as well as the critique, produces a quite different story, a story that challenges and displaces (at least two) basic assumptions within CMS: the generic employee identities and the powers of management.

From Generic Identities to Specific Work Roles Critical management studies tends to treat employees as generic, interchangeable identities, which leaves critical analyses unable to appreciate the importance of contextual ­differences in employee responses (Fleming & Sturdy, 2009; Mogensen, 2018). Acknowledging the differences between employees—in this case the participating counselors and administration staff in the meditation program—produces important nuances in terms of grasping the actual effects of HRM programs and thus also a different outset for critique. While the counselors in the probation services worked autonomously, relying on their professional judgment and the ability to plan their work individually, the administration staff was far more dependent. Because they were acting in a supportive role to the counselors, as well as being tied up by fixed office hours for incoming calls and visits from clients, their workdays proved far less flexible. Furthermore, they were working in an open office environment instead of the single offices of the counselors. This may seem of little importance to the analysis of the meditation program; however, it turned out to be decisive. To the administration staff, their specific working conditions made it difficult, if not impossible, for them to keep up with meditation as a regular practice. While counselors could decide for themselves to close their door and take five minutes for meditation, administration staff were inevitably bound to a work setup that simply did not match the prescribed identity of the meditation program. As a result, the administration staff was frustrated, not because they found themselves exploited and caught in an “authenticity trap” (Spicer, 2011), but because they did not have the work autonomy that allowed them to make use of the meditation techniques taught.

From Powerful to Powerless Management In CMS critique, HRM programs are often considered an expression of managerial rationality relating to the story of “the usual suspects,” just as HRM programs are

Critical Contextualized Studies of HRM   89 often treated as a proxy for management. When appreciating an organizational and ­contextualized approach to HRM, however, there might be quite a gap between managerial discourse and actual managers, not least when it comes to their impact and powers in practice. There is a need for greater empirical sensitivity in order to acknowledge that “the ‘exploitation’ of authenticity discourses at work is practiced by employees as much as by management” (Ekman, 2014, p. 304). When it comes to the case of the meditation program within the probation services, there was quite a difference between the discourse among local managers and the official program. While the program was able to facilitate activities and new practices among the employees (at least to some extent), the local managers were more or less excluded from the project. Because the program was run primarily by an external consultancy and because not all employees participated in the voluntary program, in practice the managers had a hard time becoming involved and making the program one of common organizational concern. This left the managers unable to support the ambitions of the program and the participating employees as they would have liked to. This managerial support would have been needed if the administration staff had the possibility to take time out for meditation. In other words, contrary to the traditional HRM critique, the problem was not the powerful role of management, but rather the lack of it.

Lessons from “Bringing Work Back in” to Human Resource Management Critique By introducing classical aspects of work tasks, work roles, and their organization to the critical analysis of HRM programs, important nuances to our critical lens are produced. It invites us to shift our focus from abstract employee identities to the characteristics of particular work roles, as well as the specific work tasks and their organization. Returning to the issue of stress prevention, which was the aim of the meditation program and the main concern among the employees involved, the study showed that the most important issue to be critically addressed was not the introduction of the meditation program in itself. The main concern related to general high work pressures and the uneven distribution of work autonomy between counselors and administration staff. These problems, as we suggest, cannot be addressed by criticizing the meditation program as a matter of subtle managerial control, as would be the predominant strategy of CMS. As the case further illustrates, the relationship between specific HRM programs and specific managers and their managerial powers may be rather feeble. Correspondingly, this suggests a different take when it comes to the usual storyline of power and control in CMS. It calls for researchers to move their attention within critical HRM analysis away from management and management discourse and their implied abstract employee identities. Instead, it invites us to base our critique as well as our possible suggestions for improvement in the work reality of the specific actors involved. It calls for a contextualization that puts work and its specific work roles and organization in the center—if we are to make our critical HRM analysis truly useful in practice.

90   BÉvort, Holck, and Mogensen

Concluding Discussion: Engaged Criticism of Human Resource Management Practices in Contextualized Organization Studies Studying HRM practices as embedded in a complex pluralistic world, with a multitude of stakeholders and perceptions of reality, may seem like a daunting task, with the likely result of reaching inconclusive and impractical results. On the contrary, the view subscribed to in this chapter is that the typical propensity of HRM research to abstract itself from this complexity, by uncritically assuming a unity of interests of organizational actors or by accepting simple causalities between HRM actions and their effects on the involved actors and organizations, is threatening to render it irrelevant to HRM academia and practice alike. In the examples of analyses of HRM as a social practice given in this chapter, the notion of organizational context is expanded with an awareness of how HRM practices and its practitioners are embedded in specific institutional contexts (and how these change), how the local specificity of context can affect the way HRM initiatives are implemented and their consequences, and finally the role of employees as active ­co-producers of organizational reality and not just passive recipients of managerial ­initiatives. In all three analytic examples, a critical perspective on HRM practices is installed by an in-­depth structural, contextualized perspective zooming in on the interplay between generalized HRM practices and their organizational “situatedness.” This perspective does not promote organizations as crude “organigrams” or background information, but as practical tools to tackle the organizational situation at hand (Du Gay & Vikkelsø, 2013, 2014). This advocates for bringing the organization (back) into HRM research and hence to base it on a more thorough assessment of the organization in order to develop adequately “situated” and organizationally relevant HRM practices (Holck, 2018; Romani et al., 2019; Vikkelsø, 2015). As the three case analyses illustrate, a greater awareness of organizational dynamics is necessary to discern what enables and constrains more emancipatory or stakeholder ways of organizing HRM. Methodologically, the three case studies highlight the relevance of a critical ethnographic and qualitative research approach, which enables the researcher to observe and interact with organizational actors and their acts in situ. The purpose of such an approach is not to tell a good story, but to move beyond participants’ experiences to access deep structures of repression and to generate critical awareness of alternative, nonuniversal ways of organizing HRM practices of diversity management or a mediation program (Duberley & Johnson, 2011; Ghorashi & Sabelis, 2013). This challenges the prominence of HRM research based on abstract theoretical assumptions and large-­scale secondary data. Every organizational structure and form potentially both enables and constrains the organization of HRM practices differently, which is a neglected fundamental dynamic that practitioners must take into consideration (Holck, 2018). Accordingly, there is a need to expand the scope

Critical Contextualized Studies of HRM   91 of contemporary HRM research to move beyond stylized typologies and theoretical assumptions by grounding research more firmly in empirical studies of organizations. The three analytical examples support a productive way ahead for critical HRM studies to follow the three approaches offered in the introduction to this chapter: Critical and constructive reflectivity: A distinctive kind of reflectivity aware of the ­different institutional logics at play offering best practices that are often unconsciously reproduced—no matter whether the organization works with professionalization, diversity, or stress reduction. This often goes through the researcher making illustrative negations, deconstructions, or defamiliarization, as suggested by Alvesson et al. (2009), to create organizational awareness of taken-for-­granted institutional logics, stereotypes about different demographic identities, or challenging ideologies of meditation as always being good for employees. A performative critique: Critical performativity aiming to transform “pure critique” into a critique that informs practice. This necessitates insisting on criticizing the organization to make it progress or being aware of the “default” assumption of why HRM initiatives do not have the intended consequences, but with an affirmative gesture of recognizing the organizational history and culture and in appreciation of the constraints of the work and life situations of people (including managers) in the contemporary organizational world, for example, that a legitimate purpose for organizations is the production of services and goods, as mentioned by Alvesson et al. (2009). Contextualized critical HRM studies: Last, but not least, by contextualizing practice we create a genuine awareness of the impact of context and the blind spots of both the best practice and the best fit approaches to studying HRM. Contextualized critical HRM studies presuppose a research strategy that brings the researcher close to the organization and its inhabitants and indicate that it is important to spend time to understand the organization in order to understand how the or­gan­ i­za­tional actors at different levels perceive it. This kind of creating proximity to the phenomenon must be supplemented with a theoretical analysis that goes beyond notions of whether or not a behavior supports managerial objectives. And finally, it takes researchers who have an interest in producing a kind of knowledge that can help the stakeholders of HRM improve their organizations and working lives. Ultimately, the basic argument of this chapter is that contextualized critical HRM studies can contribute to improve HRM research, both in terms of a better understanding of the role and impact of HRM in organizations and society and in terms of the relevance of HRM research for organizational stakeholders.

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chapter 5

The Per for m a nce L ens The Public-Sector Case Paul Boselie and Carina Schott

The relationship between human resource management (HRM) and performance is one of the most popular themes in HRM and management debates since the turn of the twenty-­first century (Guest, 2017). A substantial body of empirical research focuses on the added value of people management in organizations. However, many issues remain unsolved. One of these issues is the relationship between HRM and performance in public-­sector contexts (Knies, Boselie, Gould-­Williams, & Vandenabeele, 2018). Publicsector contexts such as national government, local government, international governmental organizations, nongovernmental organizations, healthcare, military services, and education represent a wide range of service organizations aimed at some kind of public value creation as the “ultimate business goal.” People play a key role in reaching this goal given the labor- and service-­intensive character of public-­sector work (Knies et al., 2018). Put differently, without the many highly skilled and motivated teachers, nurses, and police officers working all over the world, public service delivery would fail. Defining performance is heavily contextualized and highly dependent on both external (for example, political and institutional mechanisms) and internal (for example, workforce characteristics such as the proportion of professionals) mechanisms (Andersen, Boesen, & Pedersen, 2016). Healthcare quality and safety, for example, are heavily contextualized and determined by both legislation and professional norms and standards of medical professional associations. HRM and performance in these publicsector organizations is also highly dependent on the nature of the activities and the multiple stakeholders involved that determine a possible value chain (Van der Wal, de Graaf, & Lawton, 2011). To fully understand the HRM value chain in public-­sector contexts, it is important to take into account the internal and external context of these specific organizations.

98   Boselie and Schott The Harvard model (Beer, Spector, Lawrence, Mills, & Walton, 1984) is one of the most popular models that can be characterized by the specific attention paid to internal and external context, multiple stakeholders, and a multidimensional performance construct. Recently, Beer, Boselie, and Brewster (2015) made a plea for putting the Harvard model in the spotlight again in response to the often one-­sided economic value chains that have dominated both theory and practice since the 1980s. This model is highly valuable because it provides a more nuanced framework for analyzing the HRM–performance relationship (Boselie, Dietz, & Boon, 2005). Public-­sector contexts, however, each have their own complexity, dynamics, and HRM issues that might not be fully captured by the more generic Harvard model. In addition, public-­sector employees have been found to differ significantly from employees working in the private sector in relation to their motivational profiles and the values they identify with (Van der Wal, de Graaf, & Lasthuizen,  2008), suggesting that nuances to the Harvard model may be necessary when being applied in a public context. Wright and Nishii (2013) have proposed a generic value chain model—the HRM process model—outlining the mediating variables in the HRM–performance relationship, thereby presenting a very useful refinement of the Harvard model. To our knowledge, Vandenabeele, Leisink, and Knies (2013) are one of the first to present a public management model for theorizing the HRM value chain in public-­sector organizations. However, they only pay limited attention to the idea that performance is a multidimensional concept, as discussed in the Harvard model. The aim of this chapter is twofold. First, a nuanced Harvard model will be developed that blends contemporary general HRM insights with public administration and public management literature. This refined model will be more meaningful for a public-­sector context because it highlights the stakeholder interests, situational factors, and mediating factors (HRM policy choices and HRM outcomes), as well as long-­term consequences, from a public-­sector context perspective. Second, an overview of HRM and performance findings based on an analysis by Boselie, Veld, and Van Harten (2019) will be presented to show what we already know about the added value of HRM in a publicsector context. On the basis of this literature review, we will identify gaps in the literature, thereby providing a research agenda for the future.

The Harvard Model The Harvard model by Beer et al. (1984) represents a contextualized HRM value chain that recently received new attention as a result of the global financial crisis and the lack of stakeholder perspectives in HRM approaches (Beer et al.,  2015). In the Harvard model, attention of context is threefold. First, there is specific attention for situational factors, including workforce characteristics, business strategy and conditions, management philosophy, labor markets, unions, task technology, and laws and societal values. Workforce characteristics include, for example, the level of education, employee age,

The Performance Lens: The Public-Sector Case   99 employee tenure, and the percentage of female workers. Business strategy and conditions reflect the strategic choice made by top management in combination with the state of the market in which an organization operates, for example, in terms of growth, stability, or decline. Management philosophy represents the core values of an organization and its cultural heritage. The labor market represents the ability of its managers to compete ­successfully with other organizations for human resources. Beer et al. (1984, p. 29) write that “the boundaries that define the labour markets in which a firm competes may vary dramatically from one group of employees to another.” Trade unions (and works ­councils inside an organization) affect HRM-­related issues such as working conditions, formal employee involvement, collective payments (for example, through collective bargaining agreements), and due processes in the case of conflicts. Beer et al. (1984, p. 32) define task technology as “the way equipment (hardware and software) is arranged to perform a task.” Law and societal values vary across countries and even across sectors. They take into account the unique culture or ideology of each country and region. Second, specific attention is paid to stakeholder interests, including shareholders, management, employee groups, government, community, and trade unions. This dimension of stakeholder interests is also known as the multiple stakeholder perspective, in contrast to the shareholder model that mainly focuses on the principals (the owners) and the agents (top management) (Beer et al., 2015). In the original book by Beer et al. (1984, p. 21), the authors describe the stakeholder interest perspective as follows: One way of viewing a company is as a mini society made up of large numbers of occasionally harmonious, occasionally conflicting constituencies, each claiming an important stake in the way the company is managed and its resources are deployed. Central to the HRM approach of this book [Beer et al., 1984] is the assumption that general managers must recognize the existence of the many stakeholders and be able to comprehend the particular interests of each stakeholder. In thinking about various HRM policies and practices, then, the general manager plays an important role in balancing and rebalancing the multiple interests served by the company.

This citation presents the heart of the Harvard model in which not only are multiple stakeholders acknowledged, but also it is pointed out that their interests can be mutual or conflicting and that it is up to managers to continuously find the right balance in the shaping of HRM in an organization. This is where balanced approaches in HRM find their origins, as presented in the work by Paauwe (2004) and Boselie (2014). Finally, the ultimate organizational outcomes or long-­term consequences are defined in relation to organizational effectiveness, employee well-­being, and societal well-­being, reflecting a multidimensional performance construct for HRM value creation. Organizational effectiveness is defined by Beer et al. (1984, p. 16) as “the capacity of the organisation to be responsive and adaptive to its environment.” This outcome is often represented by a combination of indicators such as quality, productivity, efficiency, flexibility, innovation, market share, market growth, sales, and profits. Employee well-­being

100   Boselie and Schott Stakeholder interest Stakeholders Management Employee groups Politicians Community Unions

Situational factors Workforce characteristics Business strategy and conditions Management philosophy Labor market Unions Task technology Laws and societal values

HRM policy choices Employee influences Human resource flow Reward systems Work systems

HRM outcomes Commitment Competence Congruence Cost-effectiveness

Long-term consequences Individual well being Organizational effectiveness Societal well-being

Figure 5.1.  Harvard model. HRM, human resource management. Adapted from Beer et al. (1984), Figure 2-­1, p. 16, Map of the HRM Territory. Used with permission.

refers to the employees’ health (for example, in terms of stress and burnout risk) and perceptions (for example, in relation to job satisfaction, affective commitment, trust, and motivation). Societal well-­being is related to employee security in a broad sense, fairness, social legitimacy of organization’s activities, and industrial democracy ­principles (for example, the right to organize into a trade union and the degree of formal employee involvement in decision-­making) (Beer et al., 1984). The nature of the three-dimensional performance construct itself is asking for contextualization and is (in)directly related to the first two dimensions of stakeholder interests and ­situational factors. In the Harvard model, the stakeholder interests and the situational factors are assumed to affect the strategic choices (HRM policy choices) of managers with respect to the shaping of employment relationships through employee influence, human resource flow, reward systems, and work systems. Beer et al. (2015) are very clear in stating that employee influence is the most important HRM domain. Chapter 3 in their classic book is focused on employee influence. Beer et al. (1984, p. 40) start by writing that an employee’s stake consists of an economic part (for example, efforts versus payment), a psychological part (for example, dignity and meaningful work), and a political part that has to do with power, freedom, and control: The central question in the model toward this factor is, “How can they [employees] act to improve or protect their economic share, psychological satisfaction, and rights?” Human resource flow is very much related to recruitment, selection, socialization, and employee development. It also relates to employee mobility and managing outflow. Reward systems cover all aspects that have to do with pay, salaries, performance-­related pay, bonuses, profit sharing, and the distribution of rewards in an organization. Finally, work systems refer to a particular combination of job tasks, technology, skills, management style, and personnel policies and practices. It is the way jobs are organized, for example, in relation to autonomy, teamwork, job enlargement, job enrichment, rotation, and the degree of self-­regulation. If this is done in the right way, a work system can become a high-­commitment work system, or what is nowadays known a high-­performance work system. The four elements of

The Performance Lens: The Public-Sector Case   101 HRM policy choices in the Harvard model are intertwined and aligned in an ideal situation. The HRM outcomes in the model consist of commitment, competence, congruence, and cost-­effectiveness. The HRM policy choices presented above are assumed to positively affect the HRM outcomes, and these HRM outcomes are assumed to contribute to the long-­term consequences in relation to organizational effectiveness, individual wellbeing, and societal well-­being. Commitment refers to the affection employees have with the organization and their job. Competence represents the necessary knowledge, skills, and abilities of employees for their own employability and the organization’s future. Cost-­effectiveness relates to the costs of given policy in relation to wages, benefits, turnover, absenteeism, strikes, and so on. Finally, congruence represents the state of agreement on HRM policies and practices between management and employees, different employee groups (for example, core versus peripheral), the organization and the community, employees and their families, and within the individual employee. Taken together, the Harvard model is a contextualized HRM value chain, although still rather generic, with limited attention for sector specificities, for example, between private-­sector and public-­sector organizations and the characteristics of the people working in these organizations. In the next section, the HRM and performance chain will be (1) contextualized further on the basis of public administration and public management literature and (2) refined based on insights from recent developments in the generic HRM literature to develop a nuanced Harvard model that is more suitable for the public-­sector context in the early twenty-­first century.

Human Resource Management and Performance: Insights from Public Administration Literature As described, the ultimate outcomes of private-­sector organizations according to the Harvard model are organizational effectiveness, employee well-­being, and societal wellbeing. But what are public organizations expected to deliver? Vandenabeele et al. (2013) have argued that Moore’s (1995) notion of “public value creation” and Jørgensen and Bozeman’s (2007) “inventory of public values” are useful to answer this question, thereby providing meaning to the concept of public-­sector performance. While public value creation is what we expect from public organizations, “the assessment and justification of what public value public organisations create can be understood in terms of public values described by Jørgensen and Bozeman (2007)” (Vandenabeele et al. 2013, p. 41). We agree that value creation and public values help to contextualize performance in a public-­sector context. However, different public values can be conflicting in specific situations. Stimulated by the rise of managerialism (Frederickson, 2005) and economic individualism (Bozeman,  2007), public organizations are increasingly challenged to balance “classical” public values such as integrity, neutrality, and legality, on the one hand, with more “business-­like” values such as efficiency, innovation, and effectiveness on the other (Schott, Van Kleef, & Steen, 2015). Fortunately, value conflicts are not the

102   Boselie and Schott norm because most values are complementary in relation to service outcomes. However, situations also exist where safeguarding one value means trading off another. A telling example can be found in the daily work of medical doctors studied by Jensen and Andersen (2015). Medical doctors can prescribe antibiotics whenever they will have the slightest chance to cure a patient of an illness. However, prescribing antibiotics increases the likelihood of bacterial resistance, a state that eventually renders particular drugs ineffective for future treatment. As a consequence, the question of what we expect from public organizations and public servants becomes difficult to answer. Medical doctors are forced to weigh responsiveness to the individual patient against the public interest. More than a half century ago, Bailey (1964) pointed to the bittersweet character of public policy: “Welfare policies may mitigate hunger but promote parasitic dependence; vacationing in forests open for public recreation may destroy fish, wild life, and through carelessness in the handling of fire, the forests themselves” (p. 267). These examples illustrate that value creation and public values themselves are not sufficient to clarify what performance in a public context means. On the basis of the notion of value creation, we would expect that public organizations contribute to both sides of the coin: enough food for everyone and biodiversity; individual patient health and public health. Because this may not be possible at all times, we need alternative—or at least additional—approaches to clarify the concept of performance in public organizations. One way to reach this aim is to determine who decides what good performance is (Andersen et al., 2016). While in private organizations the authority to define good performance is primarily associated with the owner or owners of the organization, public organizations have stronger relationships with governmental and political authorities. This means that good performance in a public context is about attaining democratically stated goals, which can change over time and may be influenced by professionals who also hold the authority to define what good performance is (Ouchi, 1980). The need to include multiple stakeholders is also central to the Harvard model, as discussed previously. For the public sector, political authorities (politicians) are important stakeholders who need to be included in the model. If we want to study the added value of HRM in a public context, the question of how to measure public-­sector performance needs to be addressed. We have discussed the fact that defining good public-­sector performance is difficult. The notion of value creation is rather abstract and public values—which provide a justification of what value public organizations are expected to create—can be conflicting. This makes the assessment of public-­sector performance difficult, too. De Bruijn (2002) argues that publicsector performance is difficult to measure because it depends on too many factors. Put differently, “the time between effort and its effect may be too long to conduct meaningful research” (de Bruijn 2002, p. 579). Rather than focusing on outcomes, public-­sector performance is therefore often measured by more direct effects, also called “output”: for example, the number of the graduates leaving a university, the number of patients treated by a medical doctor, and the number of fines reported by a police officer. Although frequently used, this focus on output has two important limitations. First, output presents only a partial picture of what we expect from public organizations.

The Performance Lens: The Public-Sector Case   103 Hatry (2015) therefore stresses the need for multiple types of performance indicators. Second, measuring performance by output may prompt game playing. For example, concentrating on the number of students graduating from high school each year can tempt teachers to primarily prepare their students for passing state exams, thereby neglecting their task to raise responsible, social, and independent citizens. Because of these limitations, researchers have looked for alternative ways to measure the added value of HRM in a public context. In the next section, we discuss the findings of a recent review on the relationship between HRM and performance in the public sector.

Situational Factors Situational factors in the Harvard model refer, among other things, to the characteristics of the workforces and conditions for the business strategy. A large body of research has found attitudinal and behavioral differences between public- and private-­ sector employees. We argue that it is important to pay attention to these differences to make the model more suitable for the public context. At an individual level, an extensive body of research has documented higher levels of public service motivation, which can be defined as “an individual’s orientation to delivering services to people with a purpose of doing good for others and for society” (Perry & Hondeghem, 2008, p. vii) among publicsector employees compared to employees working in the private sector (e.g., Andersen, Pallesen, & Pedersen, 2011; Lewis & Frank, 2002). Aggregated results of a systematic literature review by Ritz, Brewer, and Neumann (2016) suggest that public sector–motivated individuals tend to choose public service jobs. An explanation for this finding is that public organizations provide more opportunities to perform public service and societal meaningful work compared to profit-­oriented private organizations. At the same time, public service motivation has been found to be stimulated by specific HRM practices (Giauque, Anderfuhren-­Biget, & Varone, 2013; Schott & Pronk, 2014). This means that public service motivation can also be seen as a public sector–specific HRM outcome. Public sector–motivated individuals are expected to perform better because they perceive their work to be meaningful and rewarding (Ritz et al., 2016). Next to this high level of public service motivation, strong evidence exists that publicsector employees are more intrinsically and less extrinsically motivated than individuals working in the private sector (Bullock, Strich, & Rainey, 2015) and that these two groups of employees differ regarding the values they identify with. For example, a preference for “traditional” public values was found in a Dutch study among public managers, while private-­sector managers seem to consider “profitability” and “innovativeness” more important than “lawfulness” and “impartiality” (Van der Wal et al., 2008). Moreover, public servants tend to be more risk averse (Wildavsky & Dake, 1990) and are more likely to collaborate in situations that demand competition (Esteve, Van Witteloostuijn, & Boyne, 2015). Finally, differences also seem to exist in the “need for closure,” which can be defined as an individual’s desire for a firm answer to a question as compared to confusion and

104   Boselie and Schott ambiguity (Kruglanski,  2004). For example, Franco, Rouwette, and Korzilius (2016) found a higher need for closure among business administration students compared to public administration students. At one organizational level, public organizations are also increasingly held up to higher standards for transparency and accountability (Bovens, Schillemans, & ‘t Hart,  2008). Public organizations differ from private ­organizations regarding their degree of organizational formalization. Private organizations seem to have more red tape and rules than private firms. In particular, sharp  differences about personnel and purchasing rules seem to exist (Rainey & Bozeman, 2000).

Insights from Recent Developments in the Human Resource Management Literature: The Human Resource Management Process Model Wright and Nishii (2013) have proposed a generic value chain model—the HRM process model—outlining the mediating variables in the HRM–performance relationship. The model has been empirically applied and tested in multiple HRM studies, for example, by Knies (2012). The authors make a distinction between intended HRM practices (strategy and policies), actual HRM practices (implementation), and perceived HRM practices. Vandenabeele et al. (2013) integrate the HRM process model into their model of the HRM–performance relationship for public-­sector organizations, thereby presenting a contextualized HRM value chain in public organizations. In this model, the relationship between HRM and performance is realized through “management intentions,” “management actions,” and “workforce perceptions.” The strength of the Vandenabeele et al. (2013) model is the public-­sector contextualization, while its performance rationale, for example, in relation to a multidimensional performance perspective, is less developed. When comparing the Harvard model and Vandenabeele et al.’s (2013) HRM value chain, the relatively restricted approach to performance in the Vandenabeele et al. model is noticeable. At the same time, the Vandenabeele et al. model is much more specific in outlining the causal chain between HRM and performance. For this reason, we decided to develop a slightly nuanced version of the Harvard model for the public sector that combines the best of both models while also taking into account the specific situational factors of the public sector (Figure 5.2). Figure 5.2 represents an adapted version of the original 1984 Harvard model, including the latest HRM insights from the HRM process model by Wright and Nishii (2013), in particular with respect to a further refinement of what Beer et al. (1984) call HRM policy choices into intended, actual, and perceived HRM practices. In addition, the adapted version of the original Harvard model includes contextual insights from the Vandenabeele et al. (2013) model, for example, with respect to the HRM outcomes that are relevant and meaningful in a public-­sector context, such as employee commitment,

The Performance Lens: The Public-Sector Case   105 Stakeholder interest Stakeholders Management Employee groups Politicians Community Unions

Situational factors Workforce characteristics (e.g., professionals) Business strategy and conditions (e.g., red tape) Management philosophy Labor market Unions Task technology Laws and public values

Intended HRM practices

Actual HRM practices

Perceived HRM practices

HRM outcomes Commitment Job satisfaction Public service motivation Stress/burnout Organizational citizenship behavior Trust Perceived justice Intention to leave Absence because of illness

Long-term consequences Individual well being Organizational effectiveness Societal well-being

Figure 5.2.  Adapted Harvard model for public-­sector organizations. HRM, human resource management.

job satisfaction, public service motivation, and job stress. See Figure 5.2 for an overview in which the building blocks of the original Harvard model are maintained. The long-term consequences (threefold outcomes) still hold, while some minor adjustments have been made to the stakeholder interest box (for example, adding politicians) and to the ­situational factors (for example, red tape and bureaucracy, which often characterize public-­sector contexts). It is not our intention to develop a new model. Instead, the model presented in Figure 5.2 is an updated and contextualized version of the original 1984 Harvard model that, in our opinion, still holds and is highly relevant for understanding HRM and performance in a public-­sector context. The model in Figure 5.2 is therefore a nuanced and refined Harvard model. Next, we will look at what we already know about empirical research on HRM and performance in a public-­sector context. The nuanced and refined model will be used as a framework for defining performance.

What We Already Know: Empirical Findings The first part of the chapter is focused on presenting a more refined HRM value chain for public-­sector organizations, building on the generic Harvard model and insights from public administration literature. In this section, the focus is on the second aim of the chapter: providing an overview of HRM and performance findings based on an analysis by Boselie et al. (202019) of what we already know about the added value of HRM in a public-­sector context. Boselie et al. (2019) selected fifty-­six empirical articles on HRM and performance that were published in the period 2000–16 in high-­quality HRM, public administration, and public management journals (e.g., Human Resource Management Journal, International Journal of Human Resource Management, Public

106   Boselie and Schott Administration, and Review of Public Personnel Administration). All articles in the ­analysis are focused on the added value of HRM, providing a rich source for lessons on what is known about the impact of HRM on outcomes in public-­sector organizations. All the organizations in the analyses can be labeled public-­sector organizations, including healthcare, education, government (local, central, federal, provinces), police, military services, and social services. The most popular outcomes used in the fifty-­six articles are job satisfaction (ten articles) and organizational commitment (ten articles) of employees (cf. Gould-­Williams, 2004). This does not come as a surprise because these HRM outcomes also play a key role in the model by Vandenabeele et al. (2013). HRM outcomes (for example, commitment, satisfaction, trust, engagement, emotional exhaustion, motivation, intention to stay, stress, absence because of illness, employee turnover, o ­ rganizational citizenship behavior, and perceived justice) can be found in twenty-seven of the fifty-­six articles, reflecting a dominance of HRM and HRM outcome research in public-­sector contexts. In the overview article by Boselie et al. (2019), specific attention is paid to the two most frequently studied HRM outcomes: job satisfaction and commitment. Table 5.1 provides an overview of these findings to highlight what is already known about these two employee well-­being outcomes. Perceptions of HRM practices and HRM bundles are positively related to job satisfaction and employee commitment. It is notable that all HRM outcomes in empirical research on HRM and performance in public-­sector organizations are generic and not context specific. The same outcomes can also be found in private-­sector research, as presented in the overview by Boselie et al. (2005). This means the majority of HRM outcomes in the fifty-­six empirical articles studying HRM in a public context are employee perception data representing the individual employee in organizations. Organizational performance as a long-­term consequence of HRM is also studied in the articles included in this review (in ten articles), but in most cases the variable is based on subjective input (survey data). Rodwell and Teo (2008), for example, focus on the influence of strategic HRM on perceived performance in health services organizations. Melton and Meier (2016), in contrast, focus on objective performance data in their analysis. Only one article used some kind of societal well-­being outcome variable: fairness, equality, and transparency in the context of talent management (Van den Brink, Fruytier, & Thunnissen, 2013). The ultimate aim of the review performed by Boselie et al. (2017) was to answer the question of whether there is support for the added value of HRM in a public context in the fifty-­six empirical articles included. The answer is that in thirty-­five articles there is support for a positive relationship between HRM and some, but not all, outcomes being studied. Mostafa (2016), for example, finds a positive effect between HRM and workrelated stress plus intention to leave, but only indirectly via person–organization fit. We argue that the positive effects need to be treated with great caution, because the majority of the findings are based on subjective and self-­reported data, in relation to both HRM and outcome measurement. In other words, the main focus is on p ­ erceptions of HRM policies and practices on perceived outcomes rather than ­objective data.

The Performance Lens: The Public-Sector Case   107 Table 5.1.  Human resource management and performance in public-­sector organizations Author(s) and year

HRM

Employee outcome

Melnik, Petrella, & Richez-­Battesti (2013)

+ with actual HRM

Overall work satisfaction

Gould-­Williams (2004) and Gould-­Williams & + with perceived HRM practices Gatenby (2010)

Job satisfaction

Gould-­Williams (2003) and Gould-­Williams et al. (2014)

+ with perceived HRM bundle

Job satisfaction

Kooij et al. (2013)

+ with perceived HRM bundle

Job satisfaction

Mostafa & Gould-­Williams (2014)

+ with perceived HRM bundle

Job satisfaction

Park (2010)

+ with perceived HRM bundle

Job satisfaction

Steijn (2004)

+ with perceived HRM bundle

Job satisfaction

Decramer, Smolders, & Vanderstraeten (2013)

+ with performance management Satisfaction

Gould-­Williams (2004), Gould-­Williams & Davies (2005), and Gould-­Williams & Gatenby (2010)

+ with perceived HRM practices

Organizational commitment

Brunetto, Farr-­Wharton, & Shacklock (2011)

+ with perceived HRM bundle

Affective commitment

Gould-­Williams (2003) and Gould-­Williams et al. (2014)

+ with perceived HRM bundle

Organizational commitment

Kooij et al. (2013)

+ with perceived HRM bundle

Organizational commitment

Mostafa, Gould-­Williams, & Bottomley (2015)

+ with perceived HRM bundle

Affective commitment

Conway & Monks (2008)

+ with satisfaction HRM practices

Commitment to change

Ashikali & Groeneveld (2015)

+ diversity management

Affective commitment

Note: HRM, human resource management.

In summary, in the fifty-­six empirical studies on HRM and performance by Boselie et al. (2017), performance is mostly defined in terms of attitudes. Job satisfaction and commitment are the most frequently studied concepts. Almost all HRM outcomes used in the analyses are context unspecific and are also used in the private sector. A few studies pay attention to organizational performance, a concept that can be linked to organizational effectiveness in the Harvard model. Most studies use some kind of subjective measurement of organizational performance. Societal well-­being in relation to HRM can only be found in one of the fifty-­six studies. These first findings raise several questions about the multidimensional performance construct in the Harvard model in relation to the context specificity of public-­sector organizations.

108   Boselie and Schott

Conclusion The aim of the chapter was twofold. First, we wanted to develop a nuanced Harvard model of HRM and performance in public-­sector organizations using contemporary general HRM insights (HRM process model by Wright & Nishii,  2013) with public administration and public management literature (e.g., the HRM value chain model in public-­sector organizations by Vandenabeele et al., 2013). Figure 5.2 presents an overview of this adapted Harvard model, more nuanced and more refined than the original model from 1984. This adapted model can be used as a framework for studying the added value of HRM in public-­sector organizations. Second, the chapter provides a short overview of empirical research on HRM and performance in the public-­sector context on the basis of an overview conducted by Boselie et al. (9). From the adapted model point of view (see Figure 5.2), the empirical evidence on the added value of HRM in public-­sector contexts is mainly based on employee perception data (surveys). The employee perceptions include both perceived HRM practices and particular HRM outcomes (mostly commitment and satisfaction). The existing evidence shows a general positive relationship between the perceived HRM practices and the HRM outcomes studied. On the basis of this analysis, we identify several gaps that could be the basis for future HRM research on the added value of HRM in the public sector. Our adapted Harvard model will be used to map these gaps and determine directions for future research. First, little or no attention is paid to the different stakeholder interests and situational factors that affect HRM policy choices, in particular, intended HRM practices. How, for example, do politicians affect and influence HRM strategies and policies with respect to payment and diversity management? Pay and diversity are politically sensitive and societal themes if put in a public-­sector context. Civil servant payment, for example, is not just a strategic choice of a public-­sector organization, but also a political and societal issue. Within the Harvard model box outlining situational factors, we would like to highlight at least three aspects that are highly relevant and characteristic of public-­sector organizations: • The workforce often consists of professionals such as judges, teachers, and medical specialists, with each having unique normative and coercive mechanisms that affect the shaping of the employment relationship of themselves and the other workers in their organization; • The bureaucracy and rules, called red tape, are a burden in public administration and often cause serious limitations in the leeway with respect to HRM policy choices and intended HRM practices; • The laws and public values that are not just there, but also visible in the media and public debate, causing issues of transparency and social legitimacy. Second, Table  5.1 shows a dominance of employee data that are labeled perceived HRM practices in the HRM process model (Wright & Nishii,  2013). There is little

The Performance Lens: The Public-Sector Case   109 e­ mpirical research on the strategic decision-­makers and policy makers (intended HRM practices) and the HRM enactors, often line managers (actual HRM practices). The addition of intended, actual, and perceived HRM practices to the Harvard model can help in understanding effective HRM implementation in public-­sector organizations as an essential part of the creation of a contextualized HRM value chain. Moreover, this addition can help to gain a deeper understanding of why HRM implementation does not have the desired effects. The presence of public (HRM) managers with a strong public service ethos may help to explain why HRM practices are not always implemented the way they were intended. Third, employee attitudinal outcomes of “commitment” and “satisfaction” are dominant, leaving room for many other relevant attitudinal as well as behavioral HRM outcomes, such as public service motivation, job stress, burnout risks, organizational citizenship behavior, trust in the organization, trust in management, trust in colleagues, perceived justice, intention to leave, and absence because of illness. These outcomes are relevant indicators that reflect the state of the workforce given societal (for example, labor market shortages) and organizational (for example, stress and burnout as a result of work pressure and performance pressures) challenges. There are many theories, such as job demands–job resources theory, social exchange theory, attribution theory, and public service motivation theory, that can help build innovative and relevant avenues for research in these areas. Fourth, the long-­term consequences in relation to individual well-­being, organizational effectiveness, and societal well-­being need to be taken into account and potentially be contextualized given a certain public-­sector context. We have discussed here that the concept of public-­sector performance is difficult to define and measure. In contemporary HRM research there is, for example, growing attention for potential conflicting outcomes (such as organizational effectiveness negatively related to outcomes such as stress and burnout) and mutual gains (such as commitment positively related to higher service levels of an organization) (e.g., Van der Voorde, Paauwe, & Van Veldhoven, 2012). We argue that insights from this stream of research may help to clarify what the long-­term consequences of HRM in the public sector are and how they can be measured. Overall, there is a need for more research on objective outcomes and organizational performance linked to what in the Harvard model is called organizational effectiveness. Although frequently used (Groeneveld, Tummers, Bronkhorst, Ashikali, & Van Thiel, 2015), the predominant use of self-­reported data is associated with social desirability, which refers to the tendency of respondents to answer items in a way that presents them in the best possible light (Dooley, 2001). This tendency can provide a risk for the validity of research findings. To conclude, our brief review of empirical studies on the added value of HRM in the public sector suggests that perceived HRM matters in relation to the attitudinal HRM outcomes of “commitment” and “job satisfaction.” In contrast, we know little about the effects of intended and actual HRM practices on both HRM outcomes and what they mean for long-­term consequences. By developing a nuanced Harvard model on HRM

110   Boselie and Schott and performance in public-­sector organizations on the basis of contemporary general HRM insights (HRM process model) and public administration and public management literature (e.g., the HRM value chain model), we provide a framework that reveals relevant and remaining questions that need to be answered so that that the full potential of HRM for public-­sector organizations can be evaluated.

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chapter 6

Hum a n R esou rce M a nagem en t i n Em ergi ng M a r k ets Theoretical Perspectives for Understanding Contexts Frank M. Horwitz, Fang Lee Cooke, and Ken N. Kamoche

Thought systems in emerging markets variously include features such as differences in strengths and weaknesses of institutions, cross-­cultural diversity, a relatively strong influence of religiosity and traditional culture in guiding workplace behavior and social relations, the use of symbolism to make sense of the world, and a strong emphasis on family and the immediate community. This importance of social cohesion, family, harmony, and collective solidarity is seen in the network of interrelationships, extended family, and mutual obligations, not dissimilar to the constructs of Confucian social cohesion and paternalism found in Chinese and African firms. In the case of certain African firms, this cultural backdrop results in a sense of communalism and traditionalism (Horwitz, Kamoche, & Chew, 2002; Nzelibe, 1986). This is similar to the above Confucian influence on East Asian culture. Originally coined as a term for a grouping of developing countries that were neither mature market economies nor “Third World” (van Agtmael,  2007), albeit with earlier linked terminologies, emerging markets reflect an evolving and diverse literature with a series of opportunities, encompassing the purely theoretical through to the methodological and the analytical. According to Horwitz, Budhwar, and Morley (2016), “The very term emerging markets represents something of a new frontier for academics and practitioners alike” (p. 470). It reflects an interest for “multiple constituencies built on a series of

116   Horwitz, Cooke, and Kamoche altered insights garnered from several academic fields and multiple levels of analysis” (Alkire, 2014, p. 334). Emerging markets as a context for a sustainable research agenda represent “a heterogeneous group of economies and societies” and an “important testing ground for our existing theories, models and concepts of business and management,” affording those who focus on them as a research location the opportunity for “the development of new theoretical contributions in the field” (Akbar, 2006, pp. 1–2). Given this diversity and heterogeneity, it is therefore not surprising and indeed instructive that human resource management (HRM) in emerging markets may be better understood considering an available array of diverse theoretical and methodological perspectives. This chapter provides an overview examination of such theoretical approaches, indicating where there might be similarities, differences, or advantages to deploying multiple approaches to better understand the complexity and diversity of HRM in these contexts. Examples of research using these approaches are given. The theoretical approaches include institutional theory, cross-­cultural perspectives, emerging market multinational companies (EMMNC) internationalization perspectives, the Afro-­Asian nexus, resource and social capital–based perspectives, the postcolonial approach, and an examination of hybrid models. The latter may include similarities, convergence, and the interplay between one or more of these approaches. Starting with institutional theory, one of the widely used theoretical approaches in international HRM and employment relations (see Chapter 3), it is not the purpose of this chapter to focus on one or two such theories, but rather to provide an overview and indicative context where these approaches are applied.

The Institutional Theory Approach Institutional analysis of particular institutional contexts and associated regulatory regimes (North, 1990), and with different forms of capitalism, is a widely used theoretical perspective in relation to emerging markets and, indeed, in many other contexts, as we have seen in several other chapters through this volume (Asiedu, 2006; Boyer, 2002; Burbach & Royle, 2014; Frynas & Paulo, 2007; Hall & Soskice, 2001; Hancke, Rhodes, & Thatcher, 2007; Streeck, 2011, 2012; Thelen, 2012; Wood, Dibben, & Ogden, 2013; Wood & Frynas, 2006; Wood & Horwitz, 2016; Wood & Lane, 2011). In the emerging markets context, for example, Kamoche and Harvey (2006) argue that for foreign multinational companies (MNCs) to be successful in Africa, they must eschew cultural imperialism and gain a deep understanding of Africa’s institutional context, in particular the regulatory, cultural, and social. This argument is equally pertinent for EMMNCs more broadly. The particular competencies of an EMMNC itself, such as experience in managing large, complex institutional environments and markets and infrastructural development challenges, such as in telecommunications, are important (Gugler, 2008). However, institutional and regulatory theory have been criticized by labor process theorists, such as Braverman (1974), Thompson and Vincent (2010), and Pontusson (2005).

Human Resource Management in Emerging Markets   117 These critiques posit that the dynamic and complex nature of institutions and regulations is neglected in such analyses. In a critical vein, and sometimes using a labor process perspective, are evidence-­based exploratory/investigative analyses (for example, in the International Labour Review and South African Labour Bulletin), focusing on perspectives on labor practices in MNCs and the effects of foreign direct investment on labor standards and minimum wages. Jackson (2014) argues that trade unions in Africa are generally weak, given the lack of institutionalized regulatory processes for collective bargaining, dispute resolution, and suspicion toward them. This enables MNCs to adopt low wage–low cost strategies, which have often been controversial in terms of accusations of foreign exploitation of local workers. This is consistent with Wood and Horwitz (2016). Understanding the context of HRM in EMMNCs is important, particularly because employment relations often reflect the centrality of a social contract with EMMNCs, that is, more of a socioeconomic pact than an overtly politically motived or driven relationship (Horwitz,  2015; Wood,  2015). Economic, rather than political, motives of EMMNCs will likely have a different impact on HRM decision choices. This “pact” seeks the export of Africa’s commodities such as oil, which other emerging markets require, but with a “promise” of social and human resource development, hence a different model from a traditional or pure commercial and instrumental exchange. Following the labor market mode of analysis referred to above, the literature on comparative political economy theory also offers a set of analytical frameworks (e.g., Hall & Soskice, 2001; Wood & Lane, 2011). These analyses are augmented by work dealing with potentially negative institutional and relational impacts, such as the state of trade unions and employment losses affected by in industries such as clothing, textiles, and oil, and the impact of the African Growth and Opportunity Act promulgated in the United States on preferential access for certain African exports effects on employment and working conditions (Power, 2008). This has been followed by trade and investment agreements with Brazil, Russia, India, China, and South Africa.

Institutional Perspectives, Labor Markets, and Human Resource Management Labor market, employment, and human resource effects of regional EMMNC investments are increasingly studied. Researchers such as Adisu, Sharkey, and Okoroafo (2010), Bhorat (2007), Hanson (2008), Jackson (2014), Kaplinsky, McCormack, and Morris (2007), and Wood (2015) critically evaluate these issues. Variously, they found evidence of adverse impacts on wage levels, employment, and skills transfer to the local population. Such trade and investment, for example, squeezes local domestic markets and competition in external markets from export-­oriented EMMNCs with cheap products

118   Horwitz, Cooke, and Kamoche and pricing structures that adversely affect local competitiveness, given the ­considerably larger production base and economies of scale of MNCs from countries like China. A further variable in addition to these economies of scale and lower pricing is the associated lower production costs, including the cost of labor (Tull, 2006; and v­ arious articles in the South African Labour Bulletin, for example). HRM in emerging markets therefore has to consider institutional idiosyncrasies, variations in strength and weakness of institutions, and “institutional voids” in some emerging markets (Doh, Rodrigues, Saka-­Helmhout, & Makhija, 2017) to which MNCs must adapt (Heinsz, 2003). Institutional and regulatory regimes are especially relevant factors in investment decisions by MNCs in emerging markets, where weak institutions may increase transaction costs, often hidden and unanticipated. Intellectual property considerations and legal protections in China have been problematic given weaker institutional regulation and inconsistencies between jurisdictions within the country (Kumar & Gammelgaard, 2016). State-­owned enterprises may hold (unfair) competitive advantage over firms of other ownership forms, including foreign MNCs, in China because of the strong institutional support of the f­ ormer. However, such “competitive” edge may be lost or, indeed, serve as a liability when Chinese state-owned firms seek to expand their global footprints and are confronted by resisting forces from various institutions. These include, for example, host country government protectionism in the name of national security, trade union mobilization to exert pressure on the government, negative media coverage, and campaigns from national firms (e.g., Cooke, 2014; Kragelund, 2009; Nyland, Forbes-­Mewett, & Thomson, 2011). Therefore, the relationship between foreign MNCs and host country institutions, both at national and at subnational levels, is dynamic and interactive. Here, it is important to see MNCs, particularly the large and powerful ones, as a potentially important institutional actor in emerging markets, where they are able to exert influences as the institutional system evolves and jointly shape it to their benefits (Child & Tsai, 2005). Using research case studies and other qualitative research methods, a second area of research considers impacts on local trade unions and domestic firms arising from the lack of skills transfer from foreign EMMNCs to the local workforce, with few positive effects on local workforce development. For example, cheap imported and manufactured clothing and textiles have forced the closure or takeover of local firms in South Africa. Adverse effects on employment standards have been found where long hours of work, pay below minimum regulatory wages, and undercutting local pay rates have reduced employment with little pressure from the host country, such as China and India, on their MNCs (Akorsu & Cooke, 2011). This forms a further argument regarding the relative strength or weakness of local institutions and regulatory regimes affecting the HRM policies and practices of EMMNCs in Africa, Asia, and Latin America, which may influence the degree of autonomy and flexibility these EMMNCs have in relation to local or regional employment relations laws and institutions, that is, the extent to which they may circumvent, ignore, or comply with local legislative regimes. The South African telecommunications EMMNC MTN (discussed later) in Nigeria has, for example,

Human Resource Management in Emerging Markets   119 received a substantial fine for irregularities in relation to local commercial laws. In a special edition of Employee Relations edited by Wood (2008), both thematic and country analyses are made from institutional theory perspectives, with some of this work explicitly evaluating employment relations and HRM in an MNC context.

Dynamic Institutional Contexts As Zheng (2013) argues, existing international HRM models are inadequate in their application to EMMNCs, given that motives for internationalization and different institutional contexts are dynamic rather than static. These dynamic contexts represent an opportunity for scholars to observe whether and how core tenets of HRM are unfolding as part of a wider developmental trajectory, which may be important given that the emergence of HRM in Western contexts has been a source of intense theoretical and empirical foundations debate and practical implications (Horwitz, Budhwar, & Morley, 2016; Morley, Minbaeva, & Michailova, 2012). This variation plays a significant part in the extent to which HRM is adopted and adapted in emerging markets with ­ethnocentric, polycentric, and transnational variation in how HRM policy and practice are diffused in MNCs in these markets. This is underlined by many researchers, for example, Jackson (2016), Khan, Wood, Tarba, Rao-­Nicholson, and He (2018), and Kumar and Gammelgaard (2016), Nkomo, du Plessis, Haq, and de Plessis (2016), and Wood and Horwitz (2016). Kumar and Gammelgaard (2016) find that cross-­cultural negotiations in emerging markets are strongly mediated by the effects of the institutional environment, such as the extent to which agreements are enforced or otherwise politically stable institutions versus uncertain and unstable environments. Further, Scott (1995) found that normative, cognitive, and institutional elements are important in evaluating the context in which negotiations occur in emerging markets such as India and China, with significant sociocultural differences occurring between emerging markets in this regard (for example, Confucian and Hindu belief systems in China and India, respectively). This is echoed in the work of Jackson (2016) on cross-­cultural diversity, including race, ethnicity, and gender impacts on HRM in Brazil, Russia, India, China, and South Africa (also see Nkomo et al., 2016), where variations occur in institutional and legislative regimes dealing with diversity, employment equity, and workplace discrimination. Evidently, the institutional theory approach provides a wide range of perspectives and research avenues for investigating the complexity of HRM. The contribution of this approach has enhanced understanding by scholars and practitioners of how institutional factors influence or mediate human resource policy options for organizations, considering the relative strength or weakness of institutions of both home and host countries and the interplay between institutions, culture, and strategic choices made by firms (Khan et al., 2018).

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The Cross-­C ultural Approach According to Farndale and Sanders (2017, p. 134), cultural tightness, or looseness, focuses on societal-­level cultural values in understanding how HRM systems are perceived by employees (see Chapter 2 for a more detailed discussion of this cultural theory). Tight societies (for example, emerging economies such as Turkey and Pakistan) do not permit contravention of national values with sanctions and rules being imposed, whereas loose cultures (such as Brazil) are more tolerant in regard to the extent of controls exerted over individual behavior (Farndale & Sanders, 2017, p. 140). This has conceptual parallels with the “thickness” and embeddedness of certain “high context cultures” (Meyer, 2015, pp. 34–35, 67–78) constructs such as African ubuntu and national cultures such as Chinese Confucianism (Zhu & Warner, 2017). These high-­context cultures, combined with locally legitimate nuanced approaches to doing business, such as Blat in Russia, wasta in the Middle East (Budhwar & Mellahi, 2016), guanxi in China, and jeitinho in Brazil, can shape certain elements of both the adoption and the adaptation of HRM practices, along with legitimate managerial practices, postures, and negotiating styles (Horwitz et al.,  2016, pp. 471–472). Negotiations, though sometimes difficult, appear less adversarial and more strongly collaborative where social cohesion or group harmony dynamics and a notion of social contracts pertain. This may be considered more important than win–lose adversarial and short-­term legal contract–oriented negotiations in Western societies. There are important lessons for managers in MNCs in this regard that, if not learned, can bedevil effective cross-­cultural diversity, negotiation, and relationship building vital for effective development and implementation of contextually relevant HRM policies and practices.

The Social Capital Approach The home nations of many EMMNCs are relationship-­rich cultures (Contractor, 2013), which in turn calls for attention to the importance of social capital perspectives (Gomez & Sanchez, 2005), cross-­cultural intelligence, and intercultural competence in this arena (Earley & Ang, 2003; Morley & Cerdin, 2010; see also Verberg et al, 1999; and Ward, Pearson, Entrekin, & Winzar, 1999), to relationship and social capital building and the development of trust. This approach offers an emphasis on interactive, relational processes rather than formal win–lose positional bargaining between negotiators from different cultures (Gammelgaard, Kumar, & Worm, 2013). A social capital perspective is an instructive approach in itself for enhancing our understanding of HRM and the crosscultural diffusion of HRM policies and practices (Ahlvik & Bjorkman, 2015; Chiang, Lemanski, & Birch, 2017). It may contain or pertain to mediating variables such as cultural and regulatory factors particularly pertinent in emerging markets. High- and low-context

Human Resource Management in Emerging Markets   121 cultures may also be viewed in relation to Hofstede’s (1980, p. 45) power distance ­construct as a measure of the distributed inequality of institution’s and organizations. Using this approach is pertinent in emerging markets where, for example, high inequality ­levels may occur, as observed in Malaysia, South Africa, Mexico, and Chile. This is consistent with research by House, Hanges, Javidan, Dorfman, and Gupta (2004) and the moderating effects of power distance between high-­performance work practices and employee engagement (Sanders, Yang, Li, & Wang, 2016). Other dimensions of Hofstede (1980), such as uncertainty avoidance, may also be applied as proxies for a national ­culture lens and individual behavior in organizations. Emerging market countries with high uncertainty avoidance include several Latin American countries such as Chile, Mexico, and Costa Rica.

The Emergent Market Multinational Company Approach While it might be argued that the EMMNC approach is not a theoretical construct, we submit that there are theoretical constructs associated with the rationale and strategies of EMMNC internationalization. These constructs are discussed here. They may act as mediating variables in understanding the nature of HRM in their host country operations. Luo and Tung (2007, p. 4) and Luo and Zhang (2016, p. 334) define EMMNCs as “international companies that originated from emerging markets and are engaged in outward FDI where they exercise control and undertake value-­adding activities in one or more foreign countries.” Thite (2016) identifies common features of EMMNCs as including a high degree of adaptability in overcoming uncertainties in the external environment (Gullén & GarciaCanal, 2009); ability to overcome “institutional voids” turning adversity into an opportunity (Khanna & Palepu,  2005); pursuing a “springboard strategy” of simultaneous entry into developed and developing country markets (Luo & Tung, 2007); entry via global alliances and acquisitions (Sun, Peng, Ren, & Yan, 2012); often deploying lowercost advantages (Madhok & Keyhani, 2012) relevant in the African EMMNC context; and building political connections using social networks and government support (Gammelgaard et al., 2013; Wood, 2015). Though grand theory seeking is illusive, there is potential for developing models and conceptual frameworks that recognize and incorporate indigenous human resource systems in studying EMMNCs (Cooke,  2014; Cooke & Lin, 2012; Horwitz et al., 2016; Jackson, 2014; Thite, 2016). According to Wilkinson, Wood, and Demirbag (2014, p. 838), the recent surge of foreign direct investment by EMMNCs and their aggressive market-­entry strategies has triggered a new debate around the rigor of existing theories of internationalization. Madhok and Marquis’s (2013) postulation that business models adopted or developed by EMMNCs are characterized by agility, risk taking, willingness to experiment, and

122   Horwitz, Cooke, and Kamoche responsiveness to change is relevant to South African EMMNCs’ strategies as discussed in this paper. The relative lack of sophisticated institutions in other emerging markets is not unfamiliar to EMMNCs, thus enabling quick entry and adaptation to similar institutional conditions and a local sociocultural context (Deng, 2013). Thite (2016) identifies a number of human resource challenges for EMMNCs. These include developing global human resource competencies, developing innovationcentric mindsets and global leadership pipelines rather than an overreliance on homegrown talent moved abroad as expatriates, developing and managing talent in economies outside of the home country base, increasing workforce capabilities, and managing expectations of employees in foreign operations. Matthews (2006) posits a framework of linkage, leveraging, and learning in this regard. There is an emergent managerial belief in South African MNCs that there are lessons to be learned from Indian, Chinese, and Japanese managerial practices, particularly because they might have potential for adoption or adaptation in the African cultural context (Horwitz, 2017). This may, however, be a somewhat normative belief because there are fundamental differences between them (Horwitz, 2017). Concerns have also been raised about the practices of some Chinese firms in Africa, such as the failure to develop managerial expertise and enduring cross-­cultural differences (Kamoche & Siebers, 2015), the export of poor labor practices from China (e.g., Lee, 2009), and the dispatch of Chinese workers to Africa rather than employing and training local workers in order to overcome language barriers, bypass local labor regulation, and exert more control on the working time (e.g., Cooke, Wang, & Wang, 2017). Thite (2016) argues in this regard the need to move away from static distinctions of convergence and divergence between HRM practices and toward hybrid models (discussed in a later section of this paper) and away from descriptive cross-­cultural adoption and toward within-­cultural variables (Chatterjee & Pearson, 2001; Horwitz, 2017; Jackson, 2001). For example, the literature on HRM in EMMNCs seems to support the Afro-­Asian nexus proposed by Horwitz (2017) for Chinese and Indian MNCs (Cappelli et al., 2010a and 2010b).

Country-­of-­O rigin Approach Allied to the EMMNC and institutional theory approaches discussed above, a further approach is that of “country-­of-­origin effects” as a construct and analytical approach that may mediate both sociocultural and institutional theory perspectives. This approach would both theoretically and empirically have an association with the EMMNC approach discussed previously as a country of origin’s institutions and culture would be mediating variables in EMMNC policy and strategy (see, for example, Khan et al., 2018). However, arguably, the latter would also have greater agency theory utility in individual firm strategic choices, in the sense that cultural high context and thickly embedded home country characteristics could have an important mediating role on their EMMNCs, HRM policy, and conduct abroad, including the degree of flexible

Human Resource Management in Emerging Markets   123 adaptation to the local host country context or the extent to which they are more deeply embedded with little adaptive ability in host country contexts. This is especially pertinent in evolving conceptual frameworks around mergers and acquisitions and international joint ventures between Western and EMMNCs and between EMMNCs themselves from different socio-­cultural and institutional home country contexts (Gammelgaard et al., 2013; Schuler, Khilji, & Ruel, 2016). The notion of home versus host country business systems fit or alignment or the converse may also be potentially associated with the socio-­cultural theorizing and institutional theory previously discussed (see Chiang et al., 2017). This approach considers how home country regulations and legal institutions affect the policies, organizational culture, and business practices of their MNCs abroad, for our purposes, the emerging market context.

An Afro-­A sian Emerging Market Approach Within a cross-­cultural perspective, an expanding body of research has looked at best HRM practices in African and Asian emerging economies and suggests that a strong fit between HRM practices and the Afro-­Asian context within which they operate is required for high effectiveness (Horwitz & Budhwar, 2016, Jackson & Horwitz, 2017). For example, in sub-­Saharan African countries like South Africa, the importance of family and community are seen in the network of interrelationships, extended family, and mutual obligations. This results in a sense of communalism. Some advocate African ubuntu (see Mbigi & Maree, 1995) as a basis for fostering an Afrocentric managerial culture with region-­centric HRM practices (Mbigi, 2000). The notion of ubuntu literally translated means “I am who I am through others,” a value that stands in contrast to the Western belief of cogito, ergo sum—“I think therefore I am.” It is this contrasting of a form of communal humanism with individualism and instrumentalism that has a normative appeal for advocates of an African economic and cultural renaissance and is posited as having the potential to build competitive advantage (Jackson,  2004; ­ Mangaliso, 2001). Jackson (2004, 2016) proposes a typology of Western instrumentalism and African humanism and East Asian attributes as a useful analytical framework. The latter concept reflects values such as sharing, adherence to social obligations, collective trust, deference to rank and seniority, sanctity of commitment, and good social and personal relations. As discussed above, these arguably reflect a conceptual proximity to Confucian humanism and Chinese guanxi, with social cohesion and cooperative rather than adversarial and competitive relations. Jackson (2016) submits that a nascent African management approach with roots in a humanistic tradition could reflect a potentially positive contribution to global HRM. His typology has been extended to identify important HRM dimensions.

124   Horwitz, Cooke, and Kamoche However, there is a danger in presenting both African and East Asian systems in this way. An unrealistic, idealized, or indeed romanticized conception may not have significant empirical or managerial support. Kamoche, Siebers, Mamman, and NewenhamKahindi (2015) argue that any meaningful engagement and transfer of knowledge and practices, for example, between China and Africa, must recognize the significant changes taking place in China, potentially entailing the transfer of a culturally complex system of HRM practices into an equally diverse African context. Second, there is a latent assumption of both homogeneity and unique distinctiveness that obfuscates the reality of inter-­regional, intercountry, and inter-­ethnic diversity. Hence, a hybrid perspective is important. This has led some authors like April and Shockley (2007), Jackson (2004), and Mangaliso (2001) to propose an epistemological shift away from the predominant Western management theories to alternative ones based on Asian and African perspectives in MNCs from these economies. Oppong (2017) and Nakamura (2010) posit the use of indigenous methodologies in which certain emerging markets might reveal some common features (for example, Asian and African countries). These include cultural heterogeneity as a source of mutually beneficial win–win cooperation, a polyocular vision with regard to what constitutes “objective” truth, the mental connectedness the worker shares with group members, and the idea that the individual assumes a relational existence and identity whose raison d’être is located within the community to which they belong.

The Post-­c olonial Analytic Approach Following parallels with cross-­cultural perspectives and institutional theory and conserving the effects of colonial systems on indigenous culture and institutions, Oppong (2017), Nkomo et al. (2016), Kiggundu (1991), Jackson (2016), and others offer perspectives based on the effects of colonialism on management and administrative capabilities of postcolonial societies. This perspective posits that precolonial systems, for example, in African countries, did have organization and indigenous management systems. This is often analyzed in terms of dichotomous Western approaches and indigenous systems (e.g., African approaches with strong collectivist, family, and communal relationships as against the individualism of Western values) (Oppong, 2017). Sometimes this is presented as an imperialist hegemonic discourse in the literature (Jackson,  2016; Oppong, 2017). In their analysis of Chinese management practices in Kenya, Kamoche and Siebers (2015) adopt a postcolonial lens and argue that where ethnocentric practices have an effect of “othering” Africa(ns) and treating the institutional context in stultifying terms as “backward,” a postcolonial ethos in economic and business terms may be inferred irrespective of the preexistence of a colonial political relationship. Dibben et al. (2017) adopt this approach within the context of Portugal’s relationship with Mozambique where the authors argue that abiding institutional legacies from colonialism, inter alia, have meant that the HRM approach has continued to mirror that of

Human Resource Management in Emerging Markets   125 the former colonial power. Some critics of a neo- (or post-) colonial approach argue that it is inappropriate for certain countries such as China in its Sino-­African cooperation to be evaluated from a postcolonial perspective, rejecting the notion that its increased operations in Africa reflect a neo-­colonial ambition (Addis & Zuping, 2018). Many postcolonial societies are in a developmental process including management development and capacity building in MNCs and state institutions, this given the lack of local managerial talent and its development. This approach proposes that postcolonial research methods in the social sciences are contextually more relevant than positivist, instrumental approaches (Jackson, 2016; Jackson, Amaeshi, & Yavuz, 2008; Nakamura, 2010; Nkomo, Zoogah, & Acquah, 2015; Oppong, 2017). The former focus strongly on seeking in-­depth understanding of local contexts from the perspectives of those studied (akin to the phenomenological approaches of Habermas, 1973, for example). Phenomenological and qualitative research using semistructured interviews on management and productivity have occurred in the sub-­Saharan context (Abugre, 2017). Qualitative research methods such as ethnographic research methods, interviews and focus groups, and critical discourse analysis are examples aimed at obtaining indigenous understandings of local contextual experiences in organizations and potential approaches for management development. Though not limited to the postcolonial framework, the use of qualitative methods to study HRM in emerging markets and other high-­context societies is arguably more fruitful in understanding the societal and organizational complexity than quantitative-­oriented positivist research, which has become the dominant trend in the HRM field (Kaufman,  2015; Paauwe, Guest, & Wright, 2013).

Resource-­Based View The resource-­based view has been one of the core theories used in HRM studies. This approach to examining emerging markets might be viewed from two perspectives. The first is as an external resource motivation of EMMNCs associated with their internationalization motives in resource seeking such as commodities (e.g., oil, coal, and other critical resources) by internationalizing their operations to resource-­rich countries: China, for example, with its internationalization to countries such as Angola and Nigeria (see Peng, 2012). The second is that of talent management with a research focus on appropriate mechanisms for attracting, motivating, and retaining talent in international operations (Collings & Mellahi,  2009; Parry, Dickman, Unite, Shen, & Briscoe, 2016; Skuza, McDonnell, & Scullion, 2016). Part of this discourse includes the now quite extensive research on expatriation, including increased focus on models of expatriation between Asian and African countries (Jackson & Horwitz, 2017). This approach also seeks to understand the issues of diversity, in respect to the talent management of local host country talent attraction development, and advancement, in relation to the deployment of expatriates from the

126   Horwitz, Cooke, and Kamoche home country (Jackson & Horwitz, 2017). Mediating factors relevant to this perspective include a multiapproach analysis, for example, cross-­cultural and institutional frameworks of both home and host countries pertaining to the issue of resource management, particularly human resources (see the earlier discussion of these approaches). These include, for instance, institutional regulatory requirements pertaining to indigenous resource development legislation dealing with employment equity and Black economic empowerment in South Africa and the Bumiputras provisions in Malaysia.

Hybrid Models of Human Resource Management As previously referred to, researchers have argued that the much cited dichotomous convergence–divergence debate in understanding HRM systems and practices in different societal contexts is over simplistic (Brewster, Mayrhofer, & Cooke, 2015; Chiang, Lemanski and Birch et al., 2017; Farndale, Ligthart, Brewster, & Poutsma, 2017; Zhu & Warner, 2017). Rather, examining the conditions under which hybrid models are developed in practice in a particular context is more gainful and theoretically and empirically more robust (e.g., Budhwar, Varma, & Patel, 2016; Gamble & Huang, 2009). In this section, we attempt to formulate a rationale for a more critical analysis of the diffusion of practices between two regions. It appears that the adoption of East Asian HRM in southern African firms derives from both increased investment and the consequent influence these firms have in Africa and an emergent managerial belief that there could be lessons learned from Indian and Chinese practices, particularly because they might have a higher likelihood of adaptation or “recontextualization” in other emerging market sociocultural contexts. This argument may, however, be a somewhat normative belief. While there are indeed some similarities, for example, between African and East Asian cultures, there are also fundamental differences. It may be argued that Chinese HRM is not based on the ILO’s notion of decent work, notably in the freedom of association, independent trade union rights, workers’ representation, and a minimum living wage. An enduring theme in the literature on developing countries is the appropriateness of Western management principles and practices. Many authors have challenged the tendency by MNCs, as well as local managers, to adopt practices with little consideration as to the legitimacy, suitability, and relevance of such practices. Some have identified the limitations of concepts formulated in the West, while others have offered empirical evidence on the nature of extant practices, pointing to their appropriateness or lack thereof (Kamoche, Chizema, Mellahi, & Newenham-­ Kahindi,  2012; Kamoche, Debrah, Horwitz, & Muuka,  2004;Mangaliso,  2001; Nzelibe,  1986). This growing critique has highlighted the need to understand the emerging market context as well as the indigenous thought system and in particular the perspective of workers in these diverse economies. The dependence of context in developing and adapting HRM practices where

Human Resource Management in Emerging Markets   127 “hard” scientific management practices, such as lean operational management, may occur alongside “soft” HRM practices based on neoclassical HRM theories, such as empowerment, questions the appropriateness of Western motivation theories in a collectivist culture (Zhu & Warner, 2017, p. 7).

Conclusion In this chapter, we have discussed various intellectual perspectives from which to understand emerging markets as important locales for HRM practices, both within these markets and in EMMNCs in other parts of the world. Each of these theoretical perspectives has its values and pitfalls. Their utility is contingent on the specific context at a given time. Furthermore, the same organizational phenomenon may be interpreted differently according to the researchers’ disciplinary perspectives and fields of research interest. For instance, Cooke’s (2018) study of corporate social responsibility activities in a garment factory, a subsidiary of a Chinese-­funded MNC in Sri Lanka, illustrated that the case can be sensitized from global political economy, strategic management, HRM, and critical management studies perspectives (see Chapter 4 for a discussion of CMS). Combined, these perspectives allow the case to be understood from different (macro, meso, and micro) levels, as well as the respective and interactive roles of institutional actors (e.g., key players in the global value chain, host country government, MNC, managers of the company, employees and their families) and previously referred to institutional shortcomings or voids. We therefore call for more multi-­level, multi-­disciplinary, and multimethod studies in emerging markets to deepen our understanding of how HRM systems, policies, and practices may be underpinned by these diverse and fastchanging political, economic, and social contexts.

Acknowledgments This chapter is based on an invited paper to the Academy of Management Third Human Resource Management International Conference, Dublin, January 9–11, 2019.

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chapter 7

The Con text of Ter ror ism for M a nagi ng Peopl e i n M u lti nationa l En ter pr ise s Toward a Human Resource Management Terrorism-Response Theory Benjamin Bader and Carol Reade

Terrorism has long been present in the global operating environment of the ­multinational enterprise (MNE). However, it has only been in the last 30 years that international business (IB) scholars have focused on terrorism as a critical factor that impacts business effectiveness (Alexander, 2004). Harvey (1993) is generally credited with introducing the topic of terrorism to the IB research agenda with his seminal study on corporate programs for managing terrorist threats published in the Journal of International Business Studies. The topic of terrorism and its impact on business did not gain much traction during that time, and researchers in the IB field were not receptive to it, according to Harvey in a recently published personal reflection (Harvey, Dabic, Kiessling, Maley, & Moeller, 2017). Harvey shares that, during a conference presentation, his peers jeered and commented that he “had lost [his] mind” and that the reviewers who accepted the paper must have been “drinking while writing the review” (Harvey et al., 2017, p. 1). It took the tragic events of 9/11 in New York to bring the topic of terrorism back on the IB research agenda (Czinkota, Knight, & Liesch, 2004; Kotabe, 2005). A trickle of such works appeared over the next several years, and they focused predominantly on the direct effects of terrorism on business, such as disruptions to supply chains, and strategies

136   Bader and Reade for managing those challenges (Suder, 2006). Very little academic work addressed the indirect, psychological effects of terrorism on employee attitudes and behavior, what this might mean for the organization, and how it might be managed (Alexander, 2004; Downing,  2007; Howie,  2007; Mainiero & Gibson,  2003; Reade,  2007). Even at an emerging research frontiers conference of the Academy of International Business that featured papers on terrorism and IB, only one dealt with employee and human resource management (HRM) issues (Reade, 2007). Subsequently, HRM was included as a comdriven terrorism research agenda (Czinkota, Knight, Liesch, & ponent in an IB-­ Steen, 2010). This was a long overdue recognition of the importance of HRM, given that people, not just physical assets, are affected by terrorism when units of the MNE are located in terrorism-­endangered locations. Consequently, empirical work has increasingly been published not only on the effects of terrorism on international business (Oh & Oetzel,  2011; Witte, Burger, Ianchovichina, & Pennings, 2017), but also specifically on HRM issues (Bader, Reade, & Froese, 2017; Bader & Berg,  2013; Bader, Berg, & Holtbrügge,  2015; Bader & Manke,  2018; Bader & Schuster,  2015; Lee & Reade,  2015; Paulus & Mühlfeld,  2017; Reade, 2009; Reade & Lee, 2012, 2016). While these empirical HRM studies make valuable contributions to the literature, there is to date no unifying theory at the organizational level regarding terrorism and HRM. Many of the terrorism–HRM studies are conducted at the individual level. They rely on theories from a range of fields depending on the focal issue, for instance, stress theory (Bader et al., 2017), social identity theory (Lee & Reade,  2015), and social exchange theory (Bader & Schuster,  2015); and provide only  implications for HRM. Further, extant writings on an organizational response to terrorism (e.g., Alexander, 2004), including theory building in that area (James, 2011), do not specifically address HRM in the context of terrorism. Given the heightened incidents of terrorist attacks (Global Terrorism Database, 2017; Institute for Economics and Peace, 2016), the increase in global foreign direct investment (World Bank, 2018), and the continuous rise of MNEs making use of expatriate assignments (Brookfield, 2016), it is timely to develop an HRM terrorism-­response theory that can be applied to future research. The aim of this chapter is to review the extant literature in the field, bring together the various research strands and theories adopted, and propose an organizationallevel theory on the HRM response to terrorism. Following Cornelissen’s (2017) typological style of theory development, we categorize the specific theoretical features of previous research on terrorism and business and offer a two-­dimensional approach to HRM terrorism response, which we propose as a framework for future empirical research in this area. To achieve this, our theorizing first highlights relevant characteristics of terrorism and MNE employees affected, before we turn to integrating individual responses and theories applied and the respective organizational responses. This is followed by a pres­en­ta­tion of our theoretical framework, after which we develop a set of propositions illustrating four generic HRM responses that are central to our HRM terrorism-­response theory. We conclude with implications for research and practice.

The Context of Terrorism for Managing People   137

Terrorism and Multinational Enterprise Employees Terrorism is a phenomenon that increasingly plagues societies around the world. Terrorism can be defined as “the threatened or actual use of illegal force and violence by a non-­state actor to attain a political, economic, religious or social goal through fear, coercion, or intimidation” (Institute for Economics and Peace,  2016, p. 8). While there are many other definitions of terrorism, we adopt the global terrorism index definition because it takes into consideration not only the physical act of terrorism but also the psychological impact on people and society that is highly relevant for individual and HRM responses to terrorism. Terrorists often target economic and business interests to achieve political or ideological goals (Alexander, 2004). For instance, KFC in Pakistan was targeted as an act against the Western lifestyle, while the shooting of editorial staff at Charlie Hebdo in France was claimed as revenge on infidels for demeaning the prophet Muhammad. The  bombings in Mumbai, India’s commercial capital, and the suicide bombings in Colombo, Sri Lanka’s capital and business center, were aimed at crippling economic and business activities as a means to destabilize the government. Terrorism severely affects business activity, such as disrupting global supply chains (Czinkota et al., 2010) and increasing transaction costs (Lutz & Lutz, 2006). In recent years, terrorists have increasingly aimed for soft targets like hotels, restaurants, and other public places (Czinkota et al., 2004, 2010) because hard targets like embassies and military outposts have become more heavily protected. As a result, terrorist attacks have become more unpredictable, indiscriminate, and deadly for the civilian (and working) population (Bader, Schuster, & Dickmann, 2019; Bader, Suder, & Grosse, 2020; Institute for Economics and Peace, 2016; Jain & Grosse, 2009; Reade, 2007), making the HRM response to terrorism an increasingly important consideration for MNEs. In the context of terrorist attacks that affect the business interests and/or employees of MNEs, it is useful to consider the characteristics of terrorism that are particularly relevant for HRM—dimensions and levels of terrorism—and the main categories of MNE employees affected by terrorism, that is, expatriate and local employees. This has a bearing on individual employee responses to terrorism and the appropriate HRM response to the threat of terrorism.

Characteristics of Terrorism Here we examine two characteristics of terrorism that are particularly relevant for HRM—dimensions and levels of terrorism. Dimensions of terrorism help us distinguish whether terrorist acts are predominantly international or domestic in scope

138   Bader and Reade (Beutell, O’Hare, Schneer, & Alstete, 2017; Reade, 2009), while levels of terrorism help us determine the intensity of terrorist acts (Institute for Economics and Peace, 2017).

Dimensions of Terrorism As the earlier examples of terrorist acts suggest, there are different motivations for, and manifestations of, terrorism. We suggest that such examples can be categorized into either a predominately international or a domestic dimension of terrorism (Beutell et al., 2017). The implications for HRM, we propose, will differ depending on whether terrorism is (predominantly) international or domestic in scope. A differentiation is therefore useful. International terrorism refers to terrorist activities that transcend national boundaries (Beutell et al., 2017). Although international terrorism has long existed, it has been on the rise since 9/11 (Global Terrorism Database,  2017). International terrorism is characterized by groups of terrorists with international networks who target the businesses and civilians of primarily Western countries “as a means to undermine or destroy the Western-­dominated international economic order and those who support it” (Bader et al., 2017, p. 5). Whereas international terrorism involves citizens or the territory of more than one country, the picture becomes complicated when nationals engage in terrorist acts in their home country for reasons that are ostensibly aligned with the political and ideological goals of international terrorist networks, such as ­al-­Qaeda or ISIS. For instance, a terrorist attack in London in 2005 was “carried out by four Muslim men, three of whom were born in Britain, and the fourth in Jamaica” (Czinkota et al., 2010, p. 828). It is not known whether al-­Qaeda directed these attacks. There have been many more significant incidents with possible linkages to international terrorist groups. In contrast to international terrorism, which generally targets Western businesses and persons, whether located outside or inside their home country, we refer to domestic terrorism as terrorism that accompanies various forms of ongoing sociopolitical ­violence, armed conflict, or civil war in a specific country context (Hironaka, 2005; Institute for Economics and Peace, 2016). Countries afflicted with domestic terrorism are typically located in the developing and emerging economies of the Middle East, Asia, and Africa and are characterized by political instability, institutional voids, or socioethnic violence, which serves to perpetuate conflict and terrorist activities (e.g., Reade & Lee, 2012; Suder, Reade, Riviere, Birnik, & Nielsen, 2017). Lebanon and Sri Lanka, for instance, experienced long civil wars accompanied by terrorism, while political insurgencies accompanied by terrorism continue in the early twenty-­first century in the Philippines and Thailand. India has experienced a high level of ethnonationalist and Maoist terrorism in recent years. Reade and Lee (2016) have pointed out that global firms, which are increasingly shifting their investments from developed countries to developing and emerging economy countries, need to consider the potential impact of sociopolitical violence, including terrorism, that may be present.

The Context of Terrorism for Managing People   139 Levels of Terrorism When considering the effects of terrorism on international business in general and on MNE employees in particular, the level of terrorism is important. By level of terrorism we mean the frequency and potency of terrorist attacks. The Institute for Economics and Peace calculates terrorism levels based on statistics of past incidents and reports them in their annual Global Terrorism Index (Institute for Economics and Peace, 2017). Objective measures of terrorism levels take into account the frequency of terrorist incidents, the number of people killed or injured, and the amount of property damaged. Thus, countries with high levels of terrorism refer to those countries with a relatively high frequency of terrorist incidents, number of civilian casualties, and/or amount of terrorism-­induced property damage (Institute for Economics and Peace, 2017). The level of terrorism is an indicator of business risk (Institute for Economics and Peace, 2016, 2017). The World Economic Forum regularly assesses the global risk for businesses and found that terrorism was among the four most likely threats for businesses, exceeded only by extreme weather events, natural disasters, and large-­scale involuntary migration (World Economic Forum, 2017). It should be noted that the latter is often caused by violent conflict within a country that may be accompanied by domestic terrorism. Thus, among the top four risks in terms of likelihood of occurrence, two are related to terrorism. Additionally, the World Economic Forum reports in their survey that both terrorist attacks and involuntary migration currently have an adverse impact on businesses, and this impact will likely be even greater in the future. Notably, those surveyed were far more concerned by terrorism than by anything directly related to economic and/or business activity (World Economic Forum, 2017). The level of terrorism is also an indicator of personal safety risk or threat for employees. The relationship between level of terrorism and perceived threat has been substantiated in previous research on expatriates (Bader et al., 2017; Bader & Schuster, 2015). In those studies, it was shown that the higher the level of perceived threat, the greater the negative impact it had on a range of employee attitudes. These studies will be elaborated later in the chapter when discussing the research on responses to terrorism.

Multinational Enterprise Employees Affected The HRM function needs to plan for staffing the MNE’s subsidiaries and also account for the relationship between host country nationals (HCNs) and expatriates (Bader, 2017). In recent years, there has been an upsurge in different types of international assignments and use of nontraditional employee categories (Collings & Isichei, 2017). For the purpose of our theorization, however, we consider two main categories of employees: expatriates and local employees. These categories, which encompass parent country nationals (PCNs), third country nationals (TCNs), and HCNs, play a role in the way an MNE manages its HRM function (McNulty & de Cieri,  2011). For instance,

140   Bader and Reade in terms of staffing a given subsidiary, an MNE needs to decide on the relative mix of local employees (HCNs), people from its home country (PCNs), or those from other units in the MNE’s global network (TCNs). Previous research in a domestic terrorism context suggests that employee and HRM responses to terrorism may be different for local employees compared to expatriates (Reade & Lee,  2012). Therefore, since PCNs and TCNs are generally considered expatriates,1 we categorize PCNs and TCNs together as expatriates and categorize HCNs as local employees. When considering the employee category in conjunction with the dimension and level of terrorism, the following picture emerges. The level of international terrorism, which is deadly but sporadic around the world and targets predominately Western institutions, is likely to be relatively lower than the level of domestic terrorism that targets national groups and accompanies civil wars and other protracted violent conflicts within nation-­states that may go on for years. The implication for expatriates and their businesses, especially those from the West, is that with international terrorism they may be targeted in any area of the world, both in developed countries and in less developed areas of the world “where political instability and weak governance structures provide the opportunity for terrorism to thrive” (Bader et al., 2017, p. 5). At the same time, host country nationals of MNEs operating in terrorism-­endangered areas are affected by domestic and possibly international dimensions of terrorism. Consequently, it makes sense for the MNE to adjust its HRM responses depending on geographic location, taking into consideration the dimension and level of terrorism confronting the organization and the employee category.

Research on Responses to Terrorism We now consider the individual and organizational responses to terrorism. Most research explicitly or implicitly involves the individual and the organization. This is important from the perspective of an MNE faced with terrorism because, to manage the organization effectively, the MNE needs to consider the effects of terrorism on the individual as well as on the organization as a whole. This includes ensuring the well-­being of all affected employees, whether expatriate or local, and ensuring that organizational goals are met. It is in the best interest of the MNE for expatriates to have a successful assignment and for local employees to be motivated and committed to organizational goals. After all, employee attitudes, commitment, and well-­being have significant implications for organizational performance in MNEs (Taylor, Levy, Boyacigiller, & Beechler, 2008). Next, we summarize existing empirical research, briefly outlining the key findings, and derive the respective theoretical lenses and implications. 1  While PCNs and TCNs may be employed in a foreign subsidiary on a permanent basis, that is, not traditional expatriates, we argue that in this regard the nationality of an individual is more important than the individual’s work contract status.

The Context of Terrorism for Managing People   141

Individual Response Especially since the 9/11 terrorist incident in New York, a growing number of empirical studies have been conducted on the impact of terrorism on individuals, including employees. Many of these studies focused on employee attitudes and well-­being in response to what we have referred to earlier in this chapter as international terrorism, an event which at the time was relatively isolated (e.g., Mainiero & Gibson, 2003; Ryan, West, & Carr, 2003). Other studies have been conducted in countries where terrorism has been more prevalent in daily life, sometimes over decades (e.g., Reade & Lee, 2012). We consider the latter research settings to be mainly examples of domestic terrorism, though some studies include countries that can be considered breeding cells of international terrorism, such as Pakistan or Afghanistan (Bader & Schuster, 2015). Such studies have focused on countries in the Middle East (Messarra & Karkoulian, 2008) and countries in parts of Asia (Bader & Berg, 2013; Bader & Schuster, 2015; Reade, 2009; Reade & Lee, 2012). The results of the research we surveyed, representing both international and domestic dimensions of terrorism and covering both expatriates and local employees of multinational business enterprises, reveal at least two areas of commonality. First, commonalities are found in the way both expatriates and local employees view their work and the organization. Employee responses to terrorism include lower work motivation and involvement (Bader & Berg, 2013, 2014; Reade, 2009). This is likely related to other findings that show employees feel less connected with their organization and experience a lack of concentration at work (Mainiero & Gibson, 2003). Employees exposed to terrorism appear to have lower job satisfaction (Mainiero & Gibson, 2003; Reade, 2009) and commitment (Reade, 2009; Reade & Lee, 2012; Vinokar et al., 2011) and higher absenteeism (Byron & Peterson, 2002). There have also been reports of heightened levels of strain (Byron & Peterson, 2002), sensitivity (Reade, 2009; Reade & Lee, 2012), and stress, anxiety, and depression (Bader & Berg, 2014; Canetti et al., 2010; Mainiero & Gibson, 2003), which figure prominently in many of these studies. From a theoretical standpoint, we observe that stress theory, or the stress perspective (Lazarus & Folkman,  1984), is the most widely adopted theoretical approach in the research to date. In brief, the logic behind this theoretical approach is that individuals are surrounded by, and appraise, potential stressors. When a stressor is appraised as “negative,” stress, sensitivity, and eventually strain occur, which in turn impacts several individual outcomes related to work (Bader & Berg, 2013; Reade & Lee, 2012). In other words, this is the mechanism through which terrorism evokes an individual response. Bader et al. (2017) confirmed this notion and related it to another individual response, turnover intention. Expatriates in countries with high levels of terrorism were more likely to show turnover intentions, including a desire to leave the host country. In the case of HCNs, sensitivity to terrorism was found to negatively affect a range of employee attitudes toward the job, team, and organization (Reade, 2009). While most of these studies show negative outcomes connected with terrorism-­induced stress (including the related concepts of strain, anxiety, and sensitivity), at least one empirical study

142   Bader and Reade shows greater employee innovation behavior in the face of employee sensitivity to ­terrorist threat (Reade & Lee, 2016). In sum, stress theory is a useful approach to explain individual responses. Directly related to the stress perspective is the concept of coping. Beutell et al. (2017), for instance, examined the role of fear and respective coping mechanisms in the case of expatriates. The study examined the entire assignment process, that is, accounting for predeparture anxiety to potential posttraumatic stress disorder after repatriation. While coping is a way to deal with stress, it can be considered a second-­order individual response, indirectly triggered by terrorism. In the same vein, research applying organizational support theory in the case of HCNs (Reade & Lee, 2012) found that support by the organization can be a way to help employees cope with their experiences regarding terrorism. This is an extension of the individual coping mechanism in that it serves to link organizational responses. The second area of commonality between the studies concerns employees’ psychological responses to terrorism and the effects of terrorism on interpersonal relationships at work. For instance, social support was found to be important for expatriates in a context of international terrorism (Bader, 2015), while it was also found to be important for local employees in a context of domestic terrorism (Reade & Lee,  2012). Employees exposed to terrorism have expressed feelings of not being supported by colleagues and top management (Reade,  2009). Relationships at work are sometimes strained, with anger and other negative emotions expressed by employees toward supervisors and the organization (Mainiero & Gibson, 2003). Consequently, the social network of expatriates, including the social support they draw from colleagues, friends, and family, has been subject to deeper analysis (Bader & Schuster, 2015). From a theoretical point of view, these studies can be considered in the larger context of social exchange theory (Emerson, 1976) and family systems theory (Minuchin, 1974). These approaches place the individual response to terrorism within a series of interactions between individuals that eventually generate obligations, that is, the core of social exchange theory. For instance, while, for example, Bader and Schuster (2015) employ a social network perspective, the underlying mechanism is social interaction and social exchange such that expatriates increase their well-­being by interacting with their network peers. In the expatriate context this was generally found to be a way not only to receive information but also to reduce uncertainty for HCNs, PCNs, and TCNs alike (Caligiuri & Lazarova,  2002). In the same vein, drawing on social exchange theory, besides interacting with colleagues, Bader (2015) also considered the social exchange with the organization, a phenomenon widely referred to as perceived organizational support (POS) (Eisenberger, Huntington, Hutchison, & Sowa, 1986). Moreover, organizational support theory and the buffering hypothesis were used in a study by Reade and Lee (2012), where POS acted as a buffer between employee response to ethnic-­based terrorism and employee commitment to the organization. Social identity theory (Ashforth & Mael,  1989) and contact theory (Allport,  1954) have been used in domestic terrorism–related research. A study by Lee and Reade (2015), set in Sri Lanka during the ethnic-­based civil war, focused on issues of social

The Context of Terrorism for Managing People   143 polarization and homophily in the workplace brought about by violent ethnic conflict and terrorism in the country. Much of the conflict in the world is intergroup conflict, such as that between ethnic groups and religious groups. Examples of this type of conflict can be seen especially in the developing world (e.g., the Middle East and Maghreb and sub-­Saharan Africa) (Heidelberg Institute, 2017). This affects the MNE in the sense that social dynamics are reflected in the organization and can impact relationships between employees and the way employees are managed (e.g., Reade & Lee, 2020). Thus, social identity theory and contact theory are relevant in contexts of domestic terrorism where communities are split along ethnic or religious lines in intergroup conflict. Social identity theory has been included in the James (2011) model as a theory relevant to terrorism studies because of its explanatory power. The above theories help us to understand the various responses to terrorism at the individual level. As noted earlier, there are complementarities in the responses of local employees (HCNs) and expatriates (PCNs and TCNs) across a wide range of organizational behavior phenomena, in contexts of both domestic and international terrorism. One area of response that may differ is with regard to the intention to remain a member of the organization or to stay in the country affected with terrorism. For instance, Bader et al. (2017) found that expatriates responded to the stress of terrorism by desiring to leave the host country. Typically, this is not possible for local employees. While an expatriate always has the option to quit the assignment and return home, local employees have their roots and their family in the host country and, more important, they do not necessarily have a job opportunity in another unit in the MNE’s global network. Moreover, in the current climate of anti-­immigration in some countries, such as the United States and the United Kingdom, obtaining visas and work permits is becoming more challenging. A study by Reade and Lee (2012), which focused on local employees of foreign-­invested and indigenous firms in Sri Lanka, found no statistically significant difference between employees of the two types of firms regarding the effect of domestic terrorism on employee commitment, which is often correlated with turnover intention. However, only in foreign-­invested firms (including MNEs) was the moderating effect of POS significant for ameliorating the negative effect of terrorism on employee commitment. The authors reasoned that for employees of foreign-­invested firms, POS may ­represent social and career opportunities that extend beyond national borders and shift their attention away from local problems. This may be a psychological coping ­mechanism that does not align with the reality of opportunities to actually leave the country, but it is a factor that the HRM function can consider when responding particularly to local employees in the case of domestic terrorism.

Organizational Response Empirical literature on HRM responses to terrorism at the organizational level is scarce. While an organization may have an inherent interest in reducing or managing external risk and threats, such as terrorism, devising appropriate responses to these

144   Bader and Reade threats is a complex challenge (Oetzel & Getz, 2011). Next, we outline key responses at the organizational level, from which we will derive the theoretical perspectives for HRM as a function. To help employees reduce stress, appropriate coping methods are essential. For instance, in the context of domestic terrorism, Tatar and Amram (2007) investigated strategies of coping with constant exposure to terrorism by Israeli adolescents. While this study is not in a work context, it reveals two important insights that are relevant for MNEs: (1) there are gender differences in coping such that men make more use of nonproductive coping strategies compared to women and (2) individuals rarely seek professional help. Another study, by Beutell et al. (2017), developed a model of coping in terrorism-­endangered countries. While the study is aimed at the individual level, the prescriptions can be easily transferred to the organizational level. For instance, for each phase of the assignment, different coping mechanisms are described, such as proactive coping during predeparture training and problem-­focused coping during assignment. Moreover, they highlight that coping demands resources that organizations can provide, at least to a certain extent. Other research on the organizational response can be clustered around the role of perceived organizational support, stemming from and building on organizational support theory. As noted, POS has been found to help ameliorate the effects of terrorism on employee attitudes and to increase employee commitment of local employees in a context of domestic terrorism (Reade & Lee, 2012). Since POS was also found to increase positive work attitudes of expatriates in terrorism-­endangered settings (Bader, 2015), we conclude that providing support to the workforce, such as effective leadership, plays a critical role in managing employee response to terrorism and is an essential organizational response. Another organizational step for addressing individual responses to terrorism was presented by Posthuma, Ramsey, Flores, Maertz, and Ahmed (2017). They developed a conceptual framework showing how certain HRM practices may be helpful to increase expatriates’ adjustment. While differentiating for the pre- and postdeparture phase is advisable, Posthuma et al. (2017) also stress that continuous communication between HR and the expatriate is essential. Establishing and maintaining such communication is not only useful in terms of showing support but also ensures the capacity to communicate appropriately with expatriates during or in the aftermath of an attack. Technology, especially satellite phones, is helpful for maintaining communication even when regular communication channels (mobile phone networks, landline phones) are disturbed or unavailable.

Toward a Theory of Human Resource Management Terrorism Response Having outlined key characteristics of terrorism and categories of MNE employees, together with the literature on individual and organizational responses to terrorism, we now integrate these literatures and present a framework that we consider the backbone

Expatriates (PCNs and TCNs)

Coordinated domestic response

Local employees (HCNs)

MNE employees affected

The Context of Terrorism for Managing People   145

Purely domestic response

Global response

Level of terrorism

Domestic

Coordinated global response

International Dimension of terrorism

Figure 7.1. Human resource management terrorism-­response grid. HCNs, home country nationals; MNE, multinational enterprise; PCNs, parent country nationals; TCNs, third country nationals.

of our HRM terrorism-­response theory. Figure 7.1 illustrates four generic HRM terrorism responses in a two-­dimensional framework, accounting for the dimension of terrorism and category of MNE employees affected. Level of terrorism is also depicted. The four HRM terrorism responses are derived from theories applied in previous work and are the basis for future empirical testing. Responses are generated from the characteristics shaped by the two dimensions, that is, type of terrorism and MNE employees affected, along with level of terrorism. We suggest that our propositions will apply regardless of the specific country/nation-­state context.

Purely Domestic Response Domestic terrorism affects local employees (HCNs) in a personal way since they are members of the community that is affected by ongoing violent conflict (e.g., Messarra & Karkoulian, 2008; Reade & Lee, 2012). We posit that in the case of domestic terrorism, local employees (HCNs) are more likely to be affected by the terrorism than expatriates (PCNs and TCNs) located in that country. Because of their embeddedness in the community, HCNs are personally involved in the social context and may therefore be direct targets of terrorists. Much of the conflict in the world in the early twenty-­first century is intergroup conflict within nation-­states, which can involve terrorism. An organizational response to domestic terrorism of an intergroup nature, such as ethnic-­based terrorism, would be to follow the prescriptions of contact theory. These might include ensuring diversity in teams and workgroups and promoting social functions where employees and their

146   Bader and Reade families can meet and get to know each other on a personal basis (Lee & Reade, 2015). It  is crucial that the MNE not let intergroup conflict manifest within the company because it could result, for instance, in the conflicting parties sabotaging each other’s work (Reade & McKenna, 2007). An effective HRM response in such circumstances might include devising an in-­house conflict management system drawing on indigenous, consensual conflict management traditions (Reade & McKenna, 2007; 2013), which are historically found in many societies in Africa, Asia, and Latin America (e.g., Merry, 1992; Uwazie, 2011). Perceived organizational support, as noted earlier, has been found to help ameliorate the effects of terrorism on local employee attitudes in the context of domestic terrorism (Reade & Lee, 2012). In highly polarized societal contexts, perceived organizational support would necessarily include leadership styles and HRM practices that bridge differences and fulfill socioemotional needs (Reade & Lee, 2020). This suggests that HRM plays a critical role in managing employee response to terrorism in a domestic context. In addition to providing support for employees through POS and integrating employees though positive contact experiences, engaging employees in collaborative problem solving and innovation has been proposed to build better interpersonal relations and enhance employee well-­being in contexts of domestic intergroup violence and terrorism (Lee & Reade, 2015; Reade, 2015). Regardless of the nature of domestic terrorism, the HRM response needs to be tailored to the specific situation and level of terrorism in a given host country. The higher the level of terrorism, the greater the attention needed by HRM to devise an appropriate response. Therefore, we suggest: Proposition 1:  If the dimension of terrorism is domestic and the employees affected are host country nationals, the MNE should opt for a purely domestic response.

Coordinated Domestic Response Domestic terrorism, while mainly targeting the local population (Messarra & Karkoulian, 2008), can affect expatriates as well, both PCNs and TCNs. For instance, expatriates, while not being direct targets, may accidentally be in the line of fire during a bomb blast at a market. Therefore, the MNE needs to consistently check on the specific situation in the host country. If the level of domestic terrorism is high, such as a high frequency of terrorist attacks, the MNE needs to take action and respond accordingly. Based on organizational support theory, employees personify their organization and feel supported by the organization if it credibly demonstrates care about their well-­being (Eisenberger et al., 1986). A company can demonstrate this by having contingency plans that take into consideration the needs of expatriates in the context of domestic terrorism. This entails a coordinated response involving the HRM functions at both the subsidiary and the headquarters levels of the MNE. It involves coordinating between all

The Context of Terrorism for Managing People   147 units in the host country, since expatriates may be located in different units throughout the host country affected by domestic terrorism. Czinkota, Knight, Liesch, and Steen (2005) highlight the value of contingency variables. While they focused on international terrorism, it is highly relevant in the context of domestic terrorism as well. An appropriate response for an MNE could be to define several contingency steps for a potential escalation of domestic terrorism that could start from heightened security and protection to an eventual plan to leave the country. This includes detailed scenario planning for the actual physical evacuation if airports are shut down or borders closed. Domestic terrorism may involve shifts of power with unpredictable outcomes. Consequently, an MNE needs to coordinate their activities in the host country with those in headquarters to ensure the safety of expatriates. Therefore, we argue: Proposition 2:  If the dimension of terrorism is domestic and the employees affected are expatriates (PCNs and TCNs), the MNE should opt for a coordinated domestic response.

Coordinated Global Response International terrorism generally targets Westerners, their way of life, and their businesses (Bader et al.,  2017). However, HCNs who work for a Western MNC may be viewed by terrorist organizations as “allying with the enemy.” Those working for and with a foreign organization, particularly a Western MNE, may be in the line of fire, particularly if the business is attacked or bombed. In contrast to expatriates, who may live in guarded compounds and, in case of an attack, have the support of their home country’s diplomatic mission (Bader & Schuster, 2015), local employees are generally on their own in their private lives. Even if the company increases the security protection for their local employees, their (extended) families and friends may still be in danger simply by association. There is also the possibility that local employees (and expatriates) can be kidnapped and pressured to reveal sensitive information about the MNE. In such circumstances, the MNE should coordinate its global response activities closely with the given host country and across subsidiaries in different countries. The specific situation and level of terrorism should be taken into account. If the level is high, such as high frequency of attacks, the MNE may want to pare down its local organization to a small group of core HCN employees to maintain basic operations. This may mean giving other local employees time off or redeploying them temporarily to other subsidiaries on short-­term assignment. The HRM function might also make use of various alternative forms of international assignments, such as short-­term rotational assignments and even hiring “nonemployees” or peripheral workers as part of its international HRM strategy (Collings & Isichei, 2017). Bringing in TCNs from a number of subsidiaries, for instance, would help to preserve the benefits of diverse teams of local employees and expatriates (Caligiuri, 2000).

148   Bader and Reade Constant coordination is necessary between headquarters, the host country subsidiary, and other subsidiaries within the MNE global network. Lessons learned from other ­subsidiaries in different countries that have experienced terrorism might be leveraged and applied here (Suder et al., 2017). Therefore, we suggest: Proposition 3:  If the dimension of terrorism is international and the employees affected are HCNs, the MNE should opt for a coordinated global response.

Global Response As noted, international terrorism generally targets Western businesses and persons. Expatriates from Western countries, or non-­Western expatriates affiliated with Western MNEs, may be targeted by terrorist groups such as al-­Qaeda or ISIS. While some countries may be more likely to be affected by international terrorism than others, recent history has shown that attacks can happen anywhere in the world, at any time. That is because terrorist cells emerge throughout the world and their plans are typically clandestine until the day they are executed or the cell is raided by the police or military. Further, international terrorism is a ubiquitous phenomenon that does not affect countries evenly. For instance, countries may differ in the level of terrorism experienced. The globally ubiquitous and unpredictable nature of international terrorism renders an HRM response quite challenging. Governments and law enforcement collaborate globally to fight international terrorism, constantly exchanging relevant information. Such collaboration on a global basis could provide a model for MNEs to engage in some form of “intelligence” gathering, using their subsidiaries to collect information relevant to the HRM function. Relatedly, Suder and colleagues (2017) have proposed that MNEs can utilize knowledge from their subsidiaries located in terrorist-­affected areas to enhance MNE system-­wide organizational learning regarding the HRM response to terrorist threat. They suggest that learning gained through debriefing, exit interviews, and documentation of expatriate experience with terrorist threat can be leveraged across units in the MNE. Accordingly, an MNE should plan and choose its HRM responses on a global scale and align all ­subsidiaries in a headquarters-­driven global response. Perhaps the biggest HRM challenge in responding globally is the unpredictability of attack combined with a psychological contagion effect. The World Economic Forum (2017) survey states that terrorism events are high in likelihood and impact, yet they are extremely unpredictable regarding country, city, and timing (Institute for Economics and Peace, 2017). Moreover, while the actual odds of a particular individual becoming the victim of an attack are extremely low, individuals perceive some risks as being much higher than others, even when those risks are against all statistical odds (Freudenburg, 1996). Consequently, fear and stress may affect an MNEs’ entire expatriate workforce, and their families, in the aftermath of a large attack, regardless of where the expatriate is located. Bader and Schuster (2015, p. 72) found, for instance, that “expatriates in

The Context of Terrorism for Managing People   149 terrorism-­endangered countries [had] to manage the stress of distant family members who hear media reports about terrorist activities” in a given region because of the occurrence of a contagion effect. While the expatriates were not directly affected by an attack, their social network partners heard rumors and were concerned, transferring these concerns to the expatriates. In other words, the fact that expatriates anywhere in the world become the direct target of international terrorism may also cause such a contagion effect on other expatriates. Because terrorist attacks on Western businesses and affiliated persons can occur anywhere in the world, contingency plans for a global response need to consider both developed and less-­developed country contexts. In country contexts with well-­developed infrastructure, contingency planning can rely on the existence of multiple roadways, airports, and other means of transporting expatriates to safe havens. By contrast, countries with less-­developed infrastructure will have fewer roads and perhaps only one international airport, so contingency planning to get expatriates out of the country may be more problematic, similar to the case of expatriates caught in situations of domestic terrorism. Because of these complexities, it is important to adjust the response along a wellcrafted, globally comprehensive contingency plan. At the same time, the MNE should let all expatriates know that such a plan exists, which can again be considered a form of POS (Bader, 2015). Additionally, instead of just reacting after an event, the response needs to cover all phases, pre-, during, and post-attack. Moreover, it also should cover all phases of the assignment process (Beutell et al., 2017). With regard to the level of terrorism, there can be a fine-­tuning; however, the general contingency planning needs to be applied worldwide and in the form of a global response. We therefore argue: Proposition 4:  If the dimension of terrorism is international and the employees affected are expatriates (PCNs and TCNs), the MNE should opt for a global response.

Discussion We have presented a framework that integrates the characteristics of terrorism (dimension and level), categories of MNC employees affected, and the range of literature on individual and organizational responses to terrorism. From this we have derived four HRM responses on an organizational level. By doing so, our model integrates and extends several perspectives on how terrorism research has been conducted in IB and HRM research. We demonstrate how a variety of theoretical angles can be woven into a unifying framework at the organizational level in what we consider the foundation of our HRM terrorism-­response theory. In the following, we discuss how these contributions pave the way for future research and propose an agenda that offers ideas on how to extend our theoretical framework. We conclude with a discussion of the practical implications of our model.

150   Bader and Reade

Implications for Future Research First, and foremost, our theoretical framework needs to be empirically tested. For instance, the differentiation between dimension of terrorism and people affected allows us to also run group comparisons to find out if responses indeed differ, as argued in Figure 7.1. Moreover, while most terrorism-­related research takes place at the individual level, we call for more research at the organizational level. An example for such research could be drawing on the work of Harvey (1993), extending his original survey to include the HRM practices we outlined to be an appropriate response. Second, research could link the generic HRM responses of our terrorism-­response theory with perceptions by individuals. For instance, while we argue for a coordinated domestic response when expatriates are affected in a country suffering from domestic terrorism, empirical research could investigate whether the levels of support provided by the MNE are perceived as sufficient and satisfying by the expatriate. Moreover, empirical research could test the success of company support to cope with terrorism and then relate individual outcomes to corporate success. Third, especially with regard to the abundance of cross-­sectional research in this field, future research should engage in tackling new topics in longitudinal research settings. Doing so would allow us to further investigate causal relationships and control for the variation of terrorism over time. For instance, it is very likely that people surveyed answer differently shortly after a terrorist attack, since they may be more emotionally affected (Messarra & Karkoulian, 2008). In addition, when HRM responses are not fully developed, longitudinal research could follow up on the change in HRM responses over time and connect it to objective data on actual terrorist attacks to see whether MNEs react appropriately. Finally, we encourage additional conceptual and empirical research that helps scholars to fully understand the nature of business in a specific setting, such as in terrorismendangered countries. Terrorism, as a characteristic of the macro context, is an important factor and the impact of this characteristic on employees and HRM is not fully understood. While there are indeed more studies dealing with this important topic now (e.g., Bader et al.,  2017; Dickmann, Parry, & Keshavjee,  2017; Gannon & Paraskevas, 2017; Harvey et al., 2017), they are still quite broad and diverse in their theoretical approach. We therefore hope that our HRM terrorism-­response theory may provide a theoretical umbrella that could serve as the basis for future research avenues.

Practical Implications While our theoretical framework was developed as a basis for empirical testing, it has practical implications. Our framework provides a guide for HRM practitioners to assess their contingency plans, if any, with our recommendations according to four generic scenarios. This allows HRM practitioners to either develop or refine their responses to terrorism in light of the dimension and level of terrorism and MNE employee category,

The Context of Terrorism for Managing People   151 that is, expatriate or local employee. While MNCs are most likely to be aware of the number of people, expatriates and local employees alike, employed in each subsidiary, a useful next step would be visualizing this on a map, coloring countries based on the levels of terrorism and cross-­mapping this with employee categories across subsidiaries. Also, with regard to findings on gender differences (Tatar & Amram, 2007), especially concerning support in coping mechanisms, MNEs could adjust their responses by developing gender-­specific solutions. Finally, our chapter highlighted the manifold emotional and psychological processes that terrorism evokes in individuals. Therefore, instead of purely relying on standard HRM procedures, we recommend MNEs to include the advice of medical doctors and psychologists when specifying HRM responses, since they are trained to help in dire circumstances. This can also be applied in the repatriation phase following international assignments in hostile environments, since repatriation success is an important factor for MNEs (Breitenmoser & Bader, 2016; Breitenmoser, Bader, & Berg, 2018). In conclusion, more attention needs to be paid to both the theoretical development and the practical application of HRM responses to terrorism (Pinto, Bader, & Schuster, 2017; Reade & Lee, 2012). Ultimately, it is people who run the day-­to-­day operations of the MNC, and their emotional responses to terrorism, including stress and fear, need to be met with an appropriate HRM response to ensure employee well-­being and to better support organizational goals.

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section 2

R E GIONA L A N D C U LT U R A L C LUS T E R S

chapter 8

Hum a n R esou rce M a nagem en t i n the A ngl o -Sa xon Cou n tr ies Geoffrey Wood and Chris Brewster

The liberal market/Anglo-­Saxon countries are just about the only example of a category that both the cultural theories and the different strands of comparative institutional theories agree on. Generally speaking (there are many uncertainties and unclear boundaries in both sets of theories), most of the same countries are included in the Anglo-­Saxon category by all the cultural theorists. Culturally, the term Anglo-­Saxon countries covers the United States of America (USA), the United Kingdom, Ireland and three of the ­former dominions: Canada, Australia, and New Zealand, and, in some instances, South Africa as well. The cultural theorists, even if they have not been able to agree on all the dimensions of culture, and even if the measures are inconsistent (Avloniti & Filippaios, 2014), are perhaps more at one in this category than in most of the other categories: THese countries are characterized by low power distance, high individualism, and low uncertainty avoidance. Institutionally, the liberal market (Anglo-­Saxon) model started with Adam Smith and was developed by the Chicago school of economics into neo-­liberalism. These theories draw from (though the messages were not restricted to) the United States of America predominantly, though it is assumed that the other Anglo-­Saxon economies would be similar, reflecting shared legal origins (common law) and specific political systems (first-­past-­the-­post in most instances) (Wood,  2011). These Anglo-­Saxon economies, or “the English-­speaking model” of capitalism (Albert,  1991), have also sometimes been referred to as the “stock market capitalist” countries (Dore, 2000) or “compartmentalised capitalist” countries (Whitley, 1999). In the comparative capitalisms (Jackson & Deeg, 2008) wing of the institutional literature, these countries are now generally termed (Amable 2003; Hall & Soskice, 2001) the liberal market economies

160   Wood and Brewster (LMEs). As with the cultural school, the boundaries of the term and exactly which countries are in or out of the category are somewhat uncertain: In some formulations, for example, Israel is included as an LME (Soskice, 2005), and in others, Estonia is included (Feldmann, 2006). The Anglo-­Saxon countries are generally characterized by powerful private property and business rights, lesser rights for other stakeholders, and a reduced role for government, with commensurate suspicion of government involvement and taxation and a feeling that they should be reduced. Competition is depicted as an unalloyed good, although both the USA and the UK economies have increasingly been associated with powerful oligopolies (e.g., in high-­tech, online retailing, and outsourced state functions). Both cultural theories and institutional theories, then, see these countries as a distinct category, and although human resource management (HRM) is not central to these concepts, both imply similar approaches to management in general and HRM in particular. This is of particular salience because both management and HRM are fundamentally “American” concepts. Although a case can always be made for prior analyses, the popularization of the terminology, the original theories of management and of HRM, and most of the research and much of current thinking in these areas come from the United States of America (Kaufman, 2007). Most of the largest management consultancies have their headquarters there or draw their inspiration from there. Our academic teaching follows US models and our scholars try hard to publish in the top journals based in the United States. The US-­based Academy of Management is the premiere association for academic scholars of management. The popularity of “human resource management” began in the United States of America with the publishing of two books with that term in their title (Beer, Spector, Lawrence, Quinn Mills, & Walton, 1984; Fombrun, Tichy, & Devanna, 1984) and spread rapidly. The diffusion of such ideas has been likened to the influence of the Gulf Stream: “drifting in from the USA and hitting the UK first” (DeFidelto & Slater, 2001, p. 281) and then spreading across Europe and to the rest of the world. Although the universal diffusion of the LME model has been much predicted, the process of convergence has proven uneven, not only because of the revival of the coordinated markets, but also because the open-­ended political crisis in the United Kingdom and the United States has taken much of the gloss off this model (Cumming, Wood, & Zahra, 2020). The fact that most notions in HRM stem from the USA is undeniable. There have, however, been debates about how cohesive and consistent the Anglo-­Saxon category is and precisely how the implications for HRM are manifested in each country. In this chapter, we explore these issues, mainly through analyses using evidence from the Cranet surveys.

The Institutional Perspective We focus on the institutional perspective (see Chapter 3 for more details), partly because we believe that the elements and measures of institutions in relation to HRM are better articulated and more consistent, and partly because managements have more scope to

Human Resource Management in the Anglo-Saxon Countries   161 operate against the cultural norms when they wish. Managers can, for example, recruit a workforce that is culturally nontypical of the country as a whole; it is more difficult to avoid the impact on HRM of the national education system, taxation, health system, or labor market (Vaiman & Brewster, 2015). Again, comprehensive institutional accounts acknowledge the role of culture as one of many institutional dimensions (Donzé & Smith, 2018). We also believe that the cultural theories (see Chapter 2 for more details) have more trouble explaining the continual changes that occur in HRM. However, given the similarities of the cultural and institutional literatures in regard to the Anglo-­Saxon countries, we suggest that there may be similarity in some of the core messages if we had adopted the cultural perspective. In the landmark Varieties of Capitalism volume, Hall and Soskice (2001) argued that the mature economies could be divided into LMEs and coordinated market economies (CMEs), based on shared institutional features and associated firm-­level practices. Each system is coherent and consistent enough to create real wealth on a sustained basis. The CMEs consist of the Rhineland economies, the Scandinavian social democracies, and Japan. The LMEs and CMEs are defined by complementarity and system coordination, with institutional subsystems (such as those governing capital, product, and labor markets) reinforcing each other and shaping systemic evolution (Hancké, Rhodes, & Thatcher, 2007). Other systems will include inconsistent or emergent institutional features that would necessarily be less efficient than either of the two proven mature archetypes (Hall & Gingerich, 2004; Hancké et al., 2007). It has been argued that denser regulatory frameworks and relationships do not always conform to a standardized pattern and that, therefore, the CME category manifestly contains several quite different types of economy (Amable, 2003; Whitley, 2007). However, the same critique has more rarely been made of the LME category (Brewster, Wood, & Brookes, 2006; Konzelmann, Fovargue-­Davies, & Schnyder, 2012; Lane & Wood, 2009). The LME category is broadly accepted, though using different terminology, by, for example, both Amable and Whitley, who otherwise deny the coherence of the CME category. There is obviously, however, room to explore HRM within the Anglo-­Saxon/LME group of countries and the nature and extent of diversity. So, the questions driving this chapter are: What are the key characteristics of the Anglo-­Saxon category of countries? How do they relate to HRM?, And to what extent is this category coherent?

The Anglo-­S axon Countries and Human Resource Management Liberal market economies are characterized by a focus on owners and shareholders, by pervasive competition, with a focus on short-­term financial results, and by a limited role for the state. Hall and Soskice (2001, p. 25) argue that a defining feature of LMEs is weaker interlinking relations and ties between key stakeholders and fluid, more

162   Wood and Brewster “objective”—and, hence, readily substitutable—relations between key actors; relations are about arms-­length transactions, rather than the denser ties encountered in CMEs. The ideal type Anglo-­Saxon/LME nation provides institutional support for owners and shareholders. While the fact that the shareholder is dominant in all legal cases in the United States may be a myth (Stout, 2012), it is a widely accepted myth and one with real power. The ideal type bans anticompetitive groups and collaborative behavior by corporations or collaborative behavior between governments and corporations. There are, indeed, in the Anglo-­Saxon countries laws against such anticompetitive linkages (Wood, 2016); yet, as already noted, a persistent feature of these countries (most notably the United States and the United Kingdom) is of large oligopolies and, indeed, the latter have become more prominent in recent years. Ideal type LMEs are focused on short-­term financial results. It is manifestly the case that the power of the stock market and the ever-­shorter focus of its attention (from yearly reporting to quarterly or even monthly reporting) is now widespread in the USA and the United Kingdom, at least (Baines & Hager, 2020). And the limitations of the role of the state in American politics have become increasingly apparent: Each election brings further promises of low taxes and tax cuts for corporations; state employment remains an internationally comparatively low percentage of total employment; state provision of welfare, education, and health is niggardly in relation to the wealth of the country; wealth disparity is particularly high and public social spending is low (Hein, Meloni, & Tridico,  2019). Politics have been increasingly influenced by large corporate donations and funders of opaque origin; nonmarket strategies have become increasingly de rigeur for some sectors, most notably oil and  gas (Brown,  2018). Similar tendencies are visible in the United Kingdom and Australia. In other words, despite being associated with free markets, there are many features in LMEs that suggest a move away from pure market liberalism (corporations reliant on state patronage, “oligopolization,” etc.); it may be that such economies are actually veering toward greater statism, albeit not in the comforting form of the welfare variety often predicted by proponents of double movement theories (Wood & Wright, 2015). Although the early literature on comparative capitalisms highlighted the pathdependent nature of national economies, it is evident that LMEs have become increasingly extreme. Many accounts have suggested that all economies are liberalizing, so that while CMEs have become more LME-­esque (cf. Streeck & Elsässer, 2016), the LMEs have become even more so, with the result that the same distance lies between these types of economy. However, it is not just LMEs that have veered in unexpected directions; in some CME settings, it has been proven possible to fend off (e.g., Japan) or partially tame (e.g., Germany) activist investors (Buchanan, Chai, & Deakin,  2018; Haberly,  2014). Again, reforms in some areas have made for a strengthening of the existing model in others, such as vocational training (Thelen, 2019). This raises the question as to what really defines national models and what this means for employees and the practice of HRM. More specifically for us here, it raises the question of how these characteristics of the Anglo-­Saxon liberal market economies impact HRM.

Human Resource Management in the Anglo-Saxon Countries   163 The preeminence of owner/shareholder rights is usually visualized as a zero-­sum game, so that such rights are matched by very limited job rights for employees and for their trade unions. In fact, in the United States, employees have few rights beyond health and safety and antidiscrimination regulations. Employers are free to agree, or impose, any contract they wish on employees, as long as they do not infringe on health and safety and antidiscrimination laws. The minimum employment contract requirements in the CMEs in relation to such issues as the information that the employer must provide to the employee, restrictions on hours of work, required holidays, maternity or paternity leave, notice periods on dismissal, or trade union rights, are simply nonexistent in the USA. The importance of competition applies both outside and inside the organization. If existing staff compete for renewal of insecure contracts, high turnover makes for active and highly competitive labor markets (Shapiro, 2019). Yet, once again, there are limits. Proponents of market liberalism are often silent or hostile to the movement of a core resource—labor—across national boundaries (McNulty & Brewster,  2019; Mulvey & Davidson,  2019). This does not mean that this helps uphold decent work, because migrants may be forced into ever more precarious labor and forced to rely on human traffickers, gangmasters, or their ilk. In the Anglo-­Saxon countries, the inside and the outside of the organization are connected by a fluid labor market where employers can take in the labor capacity they need from the external labor market (by recruiting unemployed workers or by “poaching” people working for other organizations) and can dump surplus labor back there. In the United States, the archetypical LME, most employees can be dismissed “on the spot.” In the other LME states, there are more legal restrictions, procedures that must be taken, especially in the case of larger numbers of dismissals, and a time delay (or often a monetary payment to compensate for it) that must be observed—but there are few situations where the employer cannot eliminate employees fairly quickly and no social expectations that they would feel constrained once they had made the decision. This perhaps precludes the categorization of Estonia as an LME; not only is the labor market relatively inflexible, but also there are strong expectations against employers acting in such a manner, given the risks of destabilizing the polity in a small country. Inside the organization, the relationship between employers and trade unions is seen as a zero-­sum game and is also competitive—what one gets, the other cannot have. Unionization rates are well below those of the Nordic states, collective bargaining is decentralized and becoming more so, and coverage is uneven (Hall & Soskice, 2001). Even here, there are important variations, with Canadian unionization rates (at 26 percent) being more than twice that of the USA (10 percent); perhaps more important, union rights are relatively strong under the law in the former country, which has translated into relatively stable union membership rates and collective bargaining coverage over the years (Organisation for Economic Co-­operation and Development, 2020). Although industrial conflict in LMEs has been relatively low in recent years (Amable, 2003), again with the notable exception of Canada (Organisation for Economic Co-­operation and Development, 2020), the Anglo-­Saxon countries have seen relatively

164   Wood and Brewster high levels of stress-­related illnesses (Van de Voorde, Paauwe, & Van Veldhoven, 2012), a  phenomenon particularly pronounced in, for example, the United States. Public expenditures on labor market programs are low for developed countries (Amable, 2003; Hall & Soskice, 2001) but, as noted, “well developed and liquid” labor markets (at least for nationals) encourage high mobility between employers, with capital being allocated via impersonal market competition (Whitley, 1999, p. 61). LME short-­termism also impacts HRM. Research using data from CRANET confirms that this means that firm-­specific human capital development is likely to be constrained (Goergen, Brewster, & Wood,  2009; Goergen, Brewster, Wood, & Wilkinson, 2012), and relatively high job turnover rates (Croucher, Wood, Brewster, & Brookes, 2012; Goergen, Brewster, & Wood, 2013) mean that emerging knowledge and capabilities are, at least theoretically, efficiently distributed across an economy (Thelen, 2001). Other research based on CRANET has shown that the Anglo-­Saxon countries use the widest range of recruitment and selection methods (Wood, Brewster, Demirbag, & Brookes, 2014); have more (though still limited) use of share option schemes, but less use of profit sharing (Croucher, Brookes, Wood, & Brewster,  2010; Pendleton, Poutsma, Brewster, & Van Ommeren, 2002; Poutsma, Ligthart, Veersma, 2006); and make less use of formal systems of communication with employees (Brewster, Brookes, Johnson, & Wood,  2014; Brewster, Brookes, Croucher, & Wood,  2007; Brewster, Wood, Croucher, & Brookes, 2007). While an initial look at training might suggest that LMEs invest more in their people, a closer look reveals rather a different picture: Training spend in LMEs is ­typically quite high, but duration of training is rather low, reflecting the fact that much training is of the basic induction variety necessitated by high staff turnover rates (Goergen et al., 2012). Again, LMEs are more likely to downsize and eliminate employees even in response to quite modest external challenges; in contrast, in CMEs, there is a greater emphasis on alternatives to redundancies, for example, “parking” labor through adjusting the working week (Goergen et al., 2013). Finally, here, the impact of the comparatively limited role of the state in HRM is clear. Public-­sector employment is lower than in other states. The New Public Management initiatives (Christensen & Lægreid, 2016, Leisink & Knies, 2018) downgrade the role of the state as an exemplar employer in favor of efficiency and an aping of private-­sector practice. The state provides fewer services to assist the relationship between employer and employee representatives and fewer services to help potential employees enter the labor market. While many people work for firms providing outsourced public services, a key feature of that business model has been the offering of inferior terms and conditions of service. Whitley, who acknowledges his theory of business systems as a form of comparative capitalisms theory but, unlike some others, pays rather more attention to what goes on within the organization, has summarized the impact of these systemic differences within the organization as relating to interdependence and delegation (Whitley, 1999). Both work in specific ways in the Anglo-­Saxon countries. Interdependence, the extent

Human Resource Management in the Anglo-Saxon Countries   165 and depth of the relationship between employer and employee, will be less, reflected in shorter-­term employment, “efficient” external markets, and ease of transition or change for the employer. Delegation will be reflected in employee voice, which, in the United States, for example, is entirely at the employer’s discretion. As is apparent, the ideal type fits the United States rather well. What about the other Anglo-­Saxon countries (see Table 8.1)?

Differences within the Anglo-­S axon category Although many commentators discuss the Anglo-­Saxon/LME category as if it were a monolith, other voices have been raised critiquing the notion (Konzelmann et al., 2012; Stévenot, Buery, Brewster, & Wood,  2018). There are significant differences between these countries. While the nation-­state remains an important level of analysis, it can be argued that the literature on comparative capitalisms is limited in the notice it takes of variations in state capabilities among and between the mature societies (cf. Walker, Brewster, & Wood,  2014). There are important spatial and social variations in state capabilities (Jessop,  2011), so that economies such as Australia and New Zealand with relatively small domestic markets are assumed to operate similarly to the vast market of the USA. Equally, the US dollar’s (albeit increasingly contested) status as a reserve currency allows for far greater leeway in monetary policy than would be possible in the case of the smaller LMEs. In the Anglo-­Saxon states, the role of the state is by no means consistent, even within one country. For example, in northeastern England, successive governments have been willing to tolerate and sustain more active regional development support (Hudson, 2006); meanwhile, the US high-­technology sector depends heavily on regional government support and defense spending spillovers (Weiss, 2010). Highly competitive regionally based industrial clusters, such as Silicon Valley, are supported via a good pool of graduates with generic tertiary skills, high job mobility allowing for the diffusion of ideas within and across organizations, and a well-­developed venture capital sector (Whitley, 2010). For employees, the risk of organizational failure is offset through the availability of many similar firms in the region: THere is an incentive to invest in sector-­relevant skills. Dore (2008, p. 782) argues that much of the comparative capitalisms literature has taken more account of abstract institutions and behavioral patterns than of the real world: In the Anglo-­Saxon LMEs, much change has been brought about through “hands-­on evangelists,” active fund managers, rather than traditional institutional investors (Stévenot et al.,  2018). Such norm entrepreneurs flout traditional ways of behaving and, if they are successful, they will be copied until the change becomes general.

Table 8.1.  Country comparisons  

USA United Kingdom Canada Australia Ireland New Zealand a

Size (square kilometers)

Population (million)

Gross domestic product USD$ per head

Urbanization (%)

Electoral system

Health (rankings: spenda/ quality)

9,833,517 243,610 9,984,670 7,741,220 70,273 268,838

329.3 65.1 35.9 23.5 5.1 4.9

59,800 44,300 48,400 50,400 73,200 39,000

82.3 83.7 81.4 86 63.4 86.7

Majoritarian Majoritarian Majoritarian Transferable vote Indirect elections Mixed

1/37 13/18 12/30 19/32 11/19 15/41

Spend out of thirty-­five countries in the Organisation for Economic Co-­operation and Development; quality out of one hundred countries.

Sources. CIA World Factbook; Health Care Rankings; Organisation for Economic Co-­operation and Development.

Human Resource Management in the Anglo-Saxon Countries   167 Note, in this context, that the role of active fund managers—and the increased emphasis on speculative investment, rather than sustainable consumer banking—is a process that is more pronounced in the USA and the United Kingdom than in the other Anglo-­Saxon countries (Konzelmann et al., 2012; Stévenot et al., 2018). During the global financial crisis immediately following 2008, New Zealand and Canada experienced far fewer problems with their banking sectors, as a result of more conservative banking models. Another result, and perhaps a more long-­term one, is that in those Anglo-­Saxon countries with more emphasis on shareholder value management, the United States and the United Kingdom, ties to and relationships with labor are more tenuous (Boyer, 2010, p. 349). Other variations in financial systems, with a significant difference between the United States and the United Kingdom on one side and, for example, the antipodean Anglo-­Saxon countries on the other, include the proportion of bonds in the portfolios of institutional investors, the role and development of venture capital, and stock market capitalization (Amable, 2003, p. 147). It seems that the global economic crises that began in 2008 may have reinforced rather than eroded diversity within national archetypes. New institutional practices derive from heterogeneous activity on a spatially dispersed basis (Djelic & Quack, 2010). The process of change involves some decoupling, creating ambiguity and heterogeneity (Boyer, 2010). Defenders of the status quo may veto changes, so that within one country there may be sustained periods of institutional layering and drift (Thelen, 2010). Within both the USA and the United Kingdom, the financial crisis has indeed led both to demands for better regulation and to strong counter-­pressures to maintain the dysfunctionalities of the status quo. Pressures toward and against change are likely to make for at least partial institutional redesign, again reinforcing both difference and drift (Hopner, 2005). Systems develop and hybridize in the face of all manner of disorganizing forces. For new arrangements to become embedded, there must be significant political support; the alternative is disorganized marketization. This would suggest that organized capitalism is a highly political process (Streeck,  2005) which, in turn, is reflected in the differences between Australia and New Zealand on the one hand and the United States and the United Kingdom on the other. Boyer (2010, pp. 351–352) argues that in the latter countries, when unemployment is rising and unions are generally weak it has proven very difficult to promote anti-­crisis programs aimed at the nonfinancial sector: Where it has proved necessary to save banks, it has meant saving bankers and their ideologies. Certain LMEs are relatively statist in some parts of their economies; in addition to the areas noted already, there are strong public/private synergies. For example, in the USA, the large military/industrial complex helps to maintain the competitiveness of civilian sectors within high technology and aerospace; the same could be said of the connections between public universities and pharma. As an example of the blurring of interests between state and market, we note the reluctance of the Federal Aviation Authority to intervene in the case of safety failings of the Boeing Max 737 program until the evidence proved overwhelming. There is a tight coupling between many areas of national security– related programs, ranging from “homeland security” to prisons, and governmental

168   Wood and Brewster support, with closed procurement systems (Weiss, 2010). Indeed, whereas in the United States active industrial policy may be politically demonized and is used as a label with which to attack competitors in other countries, it has become acceptable if it is phrased in security terms. This includes protection for private contractors and for governmental agencies taking on private-­sector characteristics, an example being the CIA acting as an “angel” investor in security-­related projects (Lemieux,  2018). As other examples, the biotech and pharmaceutical industries are dependent on research conducted in the state university sector and by private not-­for-­profit universities and the publicly funded science laboratories of some charities. Federal agencies have played an important role in imposing direction, by a variety of less apparent means such as federal innovation programs or public/private partnerships (Weiss, 2010). One effect of this process has been the appearance of new regional labor market institutions, including sectoral partnerships and regional training consortia (Appelbaum, Berhardt, Murname, & Weinberg, 2005). The reality is that even in the United States a large range of state credits and subsidies are granted to financiers and innovators (in, for example, Silicon Valley), but not to households or normal employers (Boyer, 2010). So, we may note significant differences within the LME camp, particularly between LMEs where the military/industrial complex and related security industries are highly developed and politically powerful (the USA, the United Kingdom) and those where it is less so (Australia, Canada, Ireland, and New Zealand). It might be argued, therefore, that on these grounds alone the USA and the United Kingdom are distinct from other Anglo-­Saxon states because of their highly developed military/industrial and high-­technology sectors. They are also unlike the others in relation to the extreme development of their financial services sector and the extent to which “too big to fail” players have been able to secure open-­ended bailouts (Davila & Walther, 2019). There is more diversity between the state-­supported and non-­supported sectors in the United States and the United Kingdom. This diversity is reflected in HRM terms in the extreme bifurcation in the USA between relatively “good” jobs (high-­paid, with interesting work, good working conditions, and forward prospects), generally in high technology–related industries, and a great mass of usually unskilled, poorly paid jobs with no security of tenure in “sunset industries” such as traditional manufacturing and elsewhere (Wright & Dwyer, 2006). It has been argued that a similar process is at work in the United Kingdom (Yoon & Chung, 2016). More broadly speaking, the United States and the United Kingdom remain significantly more unequal in relation to wealth and income distributions than Canada and New Zealand (and even more so, Ireland), with Australia somewhere in between (Organisation for Economic Co-­operation and Development, 2020). Finally, there are also crucial differences in electoral systems (Pagano & Volpin, 2005). The “classic” first-­past-­the-­post systems found in the United States and the United Kingdom tend to favor conservative parties that more strongly promote property owner rights; this is different from the (various forms of) more proportional systems found in the other Anglo-­Saxon countries. The reason for the different outcomes of electoral systems is that elections under first-­past-­the-­post are typically decided by ideologically

Human Resource Management in the Anglo-Saxon Countries   169 committed voters in a relatively small number of marginal seats (Pagano & Volpin, 2005). Such voters can be swayed by expensive electoral campaigning, which favors moneyed interests. While the USA and the United Kingdom both have almost classic traditional first-­past-­the-­post systems, Ireland (and, intriguingly, Northern Ireland, a region of the United Kingdom) has a “single transferable vote” proportional representation system. So does Australia, although that country also has compulsory voting. New Zealand uses the “mixed member” proportional system. Both these latter systems impart a greater degree of proportionality. While Canada may be closer to the first-­past-­the-­post ideal, the power of the provinces and especially the situation of francophone Quebec forces Canadian politicians to devote more attention to coalition building, which has had the effect of diluting the interests of major property owners. However, the extent to which oil and gas interests have captured the political agendas in the plains provinces has greatly worsened political divisions and forced national governments to direct more and more largesse to suit that industry, in the hope of placating provincial resentment (Adkin, 2016). Yet, unlike the United States and the United Kingdom, there are strong anti-­gerrymandering measures in place in Canada; the business of drawing constituency boundaries is out of the hands of the politicians (MacLeod, 2019). These more proportional electoral systems promote coalition building and hence make it difficult to sustain measures aimed at weakening the power of key stakeholder groupings, such as organized labor (see Pagano & Volpin, 2005). There is also much diversity within the Anglo-­Saxon states in relation to social ­protection. The figures from the USA are distorted by high levels of spending on healthcare and by similarly great distinctions in terms of access thereto (Amable, 2003). The World Health Organization notes that the United States is easily the number one spender per capita on healthcare around the world, with their system costing four times as much as the next most expensive system (Switzerland), but the World Health Organization ranks the quality of healthcare available there as the seventy-­second best in the world. Nor is this difference confined to healthcare. Australia, for example, although ranking well below the United Kingdom in general healthcare, is quite different from the United Kingdom in relation to expenditure on the elderly (Harris & Sharma, 2018). These differences impact the relative desirability of certain jobs, the importance of security of tenure, how people approach retirement, and the relative efficacy of antidiscrimination legislation. Other differences relate to education systems and include the relative regulation of the university sector: THe United States, to take that example again, is characterized by particularly wide variations in curricula and quality (Amable, 2003). How are these differences reflected in HRM? We identify, as an instance, differences in the labor movement and collective bargaining and the related legislative frameworks. Hancké et al. (2007) argue that labor relations is a key dimension defining systems; this includes the extent of centralization of bargaining and security of tenure (Hall & Soskice, 2001; Whitley, 1999). Although the labor movement in the Anglo-­Saxon countries—arguably its original home—is undeniably weaker than, say, the labor movement in the Nordic countries, Canadian unions, as we have seen, are much stronger and

170   Wood and Brewster bargaining is more widespread than is the case in the United States. New Zealand has had a history of comprehensive centralized wage setting, even if this has been followed by rapid union decline (Barry, 2018). Since the turn of the century both Australia and New Zealand have experimented with radical labor market deregulation, which, if not at least partially reversed, would have brought these states closer in line with the USA. However, not only was there mixed evidence that such reforms resulted in performance gains (Barry, 2018), but also they proved so deeply unpopular as, in both cases, to bring about a change in government. In reaction, New Zealand enacted electoral reform to avoid untrammeled power by a single ruling party; however, Australia has gradually drifted to right-­wing populism. Norms determine what constitutes acceptable social inequality (Hicks,  2003): THe United States, in recent years, has been willing to accept greater inequality than the other Anglo-­Saxon states. In turn, higher inequality is associated with the entanglement of wealth and income concentration (Hicks, 2003, p. 286). It could be argued that while there may be quite high tolerances of inequality, declining incomes and increased insecurity may be associated with political blowback; recent work links the diffusion of hard-­line HRM policies with the rise of the populist right in the United States and the United Kingdom (Cumming et al., 2020).

Variations between the Anglo-­S axon Nations in Human Resource Management We have built our discussion on the comparative capitalisms debates, but we do not suggest that the relevant literature there does not see institutions as flexible and subject to periodic renegotiation (Hancké et al., 2007). Change can, of course, take place in the overall institutional architecture without undermining core complementarities (Hall & Gingerich, 2004). Thelen (2010, p. 102), for example, argues that changes in labor politics in different national settings are more a case of “re-­equiliberisation” than convergence toward any particular model. So, while bargaining coverage may shift, systemic fundamentals stay the same. Overall, the Anglo-­Saxon countries share not just a (form of the) language, but also an approach to their economies and therefore to their HRM that is distinct in important ways from the approaches found even in other rich countries. This is not a monolithic bloc, however. Arguably, the United States of America is clearly different from the other countries, importantly in the way HRM is conducted. The United Kingdom is the Anglo-­Saxon country with the most similar approach—to date, it has remained different partly because of the constraints of membership of the European Union. As we write, that is coming to an end, for some time at least. It will be interesting to see how far HRM institutions and practices change as a result.

Human Resource Management in the Anglo-Saxon Countries   171

Conclusion In the end, much of the literature on comparative capitalisms was primarily concerned with identifying and explaining the viability and persistence of coordinated markets (Wood & Allen,  2020). In this context, the LME model was seen as something of a benchmark (even if not necessarily a desirable one), with countries drifting toward or away from this model. However, there are two limitations to these assumptions. The first is that what goes on in the Anglo-­Saxon countries is somewhat conflated with what a country run on ideologically pure neo-­liberal lines should look like. This fails to take account of the extent to which the two largest LMEs are often very far from this ideal. This would include the predominance of oligopolies in core areas of economic activity (sometimes sustained by politicians), the increasing prominence of nonmarket strategies in key sectors (e.g., oil and gas), the existence of large areas of economic activity in spaces that are neither state nor market (e.g., military/industrial and penal complexes; outsourced state services), and “blank check” bailouts. Internal diversity in the Anglo-­Saxon category in part reflects variations in these areas; these states vary substantially in relation to institutions. If first-­past-­the-­post electoral systems help define property owner supremacy, then Ireland and New Zealand clearly have more common ground with CMEs. Again, Canada and Australia have important differences (anti-­gerrymandering in the case of the former and single transferable vote in the case of the latter) from the US and UK electoral systems. Another example is substantial variation in education systems. The school system in Ireland, Canada, and New Zealand is much more equal than that in the United Kingdom, and even more so when compared to the USA: Great inequalities in literacy and numeracy in the United States (and, to an extent, in the United Kingdom) have long-­term implications for individual workers and firms and, eventually, for HRM. Further, union rights vary considerably, with the United States and Canada being at opposite poles. This raises the question as to what really defines an Anglo-­Saxon LME and which institutional features exert particular effects at what point in time. Third, there is the issue as to how permeable the boundaries of the LME camp are. During the years of the neo-­corporatist experiment, Ireland was seen as becoming more CME-­like; the abandonment of this might suggest a reversion to the LME model, and, indeed, like the United Kingdom and the United States, Ireland is quite heavily financialized. However, it is more equal than other LMEs and has a proportional electoral system, encouraging coalition building. Finally, there is the issue of systemic change; all Anglo-­Saxon states are very different from what they were in the 1980s, and not all change has been in the direction of greater marketization. Indeed, there are strong statist and nonmarket tendencies in the United States and the United Kingdom, albeit often pathological and designed to actively support and sustain the interests of an increasingly emboldened oligarchic class. This highlights the extent to which, even among those most committed to neo-­liberalism, there are

172   Wood and Brewster boundaries with regard to how far this ideology will translate into practice. Again, if a feature of the Anglo-­Saxon states is shareholder primacy, this does raise the issue of whether it is a necessary feature of market liberalism or simply one possible dimension; both the USA and the United Kingdom functioned quite well (and, indeed, better) prior to the deregulation of financial markets in the 1980s. More broadly speaking, it highlights the extent to which in no variety of capitalism are institutions perfectly coupled. Undeniably, systemic features may coexist and support each other, but, by the same measure, broad institutional regimes can seemingly take on or jettison features widely seen as defining—yet retain many broad characteristics. There is clear evidence that these comparative capitalisms have significant implications for HRM and that, therefore, HRM in the Anglo-­Saxon LME states is different from HRM in other states. It is also apparent that the leading ideas in HRM have tended to originate in these states and then, at least in terms of the rhetoric, been adopted by other states; these are important differences. It is interesting to note that it is not the HRM policies that differ between the Anglo-­Saxon states and others so much as the underlying institutional base.

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Human Resource Management in the Anglo-Saxon Countries   175 Poutsma, E., Ligthart, P.  E.  M., & Veersma, U. (2006). The diffusion of calculative and ­collaborative HRM practices in European firms. Industrial Relations, 45(4), 513–546. Shapiro, C. (2019). Protecting competition in the American economy: Merger control, tech titans, labor markets. Journal of Economic Perspectives, 33(3), 69–93. Soskice, D.  W. (2005). Varieties of capitalism and cross-national gender differences. Social Politics: International Studies in Gender, State and Society, 12(2), 170–179. Stévenot, A., Guery, L., Brewster, C., & Wood, G.T. (2018) country of origin effects and new financial actors: A comparative analysis of the impact of foreign and French private equity investment on HRM in French firms. British Journal of Industrial Relations, 56(4), 723–750. Stout, L. (2012). The shareholder value myth: How putting shareholders first harms investors, corporations and the general public. San Francisco, CA: Barrett–Koehler. Streeck, W. (2005). Rejoinder: On terminology, functionalism, (historical) institutionalism and liberalization. Socio-Economic Review, 5(3), 577–587. Streeck, W., & Elsässer, L. (2016). Monetary disunion: The domestic politics of Euroland. Journal of European Public Policy, 23(1), 1–24. Thelen, K. (2001). Varieties of labor politics in the developed democracies. In P. A. Hall & D.  Soskice (Eds.), Varieties of capitalism: The institutional foundations of comparative advantage (pp. 71–103). Oxford, UK: Oxford University Press. Thelen, K. (2010). Beyond comparative statics. In G.  Morgan, J.  Campbell, C.  Crouch, O.  Pedersen, & R.  Whitley, The Oxford handbook of comparative institutional analysis (pp. 41–62). Oxford, UK: Oxford University Press. Thelen, K. (2019). Transitions to the knowledge economy in Germany, Sweden, and the Netherlands. Comparative Politics, 51(2), 295–315. Vaiman, V., & Brewster, C. (2015). How far do cultural differences explain the differences between nations? Implications for HRM. International Journal of Human Resource Management, 26(2), 151–164. Van de Voorde, K., Paauwe, J., & van Veldhoven, M. J. P. M. (2012). Employee well-being and the HRM–organizational performance relationship: A review of quantitative studies. International Journal of Management Reviews, 14(4), 391–407. Walker, J.  T., Brewster, C., & Wood, G. (2014). Diversity between and within varieties of capitalism: Transnational survey evidence Industrial and Corporate Change, 23(2), 493–533. Weiss, L. (2010). The state in the economy. In G. Morgan, J. Campbell, C. Crouch, O. Pedersen, & R. D. Whitley (Eds.), The Oxford handbook of comparative institutional analysis (pp. 183–210). Oxford, UK: Oxford University Press. Whitley, R. (1999). Divergent capitalisms: The social structuring and change of business systems. Oxford, UK: Oxford University Press. Whitley, R. D. (2007). Business systems and organizational capabilities. Oxford, UK: Oxford University Press. Whitley, R. (2010). The institutional construction of firms. In G.  Morgan, J.  Campbell, C. Crouch, O. K. Pederson, & R. Whitley (Eds.), The Oxford handbook of comparative institutional analysis (pp. 363–398). Oxford, UK: Oxford University Press. Wood, G.  T. (2011). “Governance, Finance and Industrial Relations.” In K.  Townshend & A. Wilkinson (Eds.), Research handbook on the future of work and employment relations pp. 279–295). Cheltenham, UK: Edward Elgar. Wood, G. T. (2016). Liberal market economy. In A. Wilkinson& S. Johnson (Eds.), Encyclopedia of human resource management (p. 260) . Cheltenham, UK: Edward Elgar.

176   Wood and Brewster Wood, G.T. and Allen, M.M., 2020. Comparing Capitalisms: Debates, Controversies and Future Directions. Sociology, 54, 3: 482–500. Wood, G. T., Brewster, C., Demirbag, M., & Brookes, M. (2014). Understanding contextual differences in comparative resourcing. In G. T. Wood, C. Brewster, & M. Brookes (Eds.), Human resource management and the institutional perspective (pp. 25–38). New York, NY: Routledge. Wood, G., & Wright, M. (2015). Corporations and new statism: Trends and research priorities. Academy of Management Perspectives, 29(2), 271–286. Wright, E. O., & Dwyer, R. (2006). The patterns of job expansion in the USA. In G. Wood & P. James (Eds.), Institutions, production and working life (pp. 275–314). Oxford, UK: Oxford University Press. Yoon, Y., & Chung, H. (2016). New forms of dualization? Labour market segmentation patterns in the UK from the late 90s until the post-crisis in the late 2000s. Social Indicators Research, 128(2), 609–631.

chapter 9

H um a n R e sou rce M a nagem en t i n th e Ger m a n ic Con text Benjamin P. Krebs, Bernhard A. Wach, Marius C. Wehner, Astrid Reichel, Wolfgang Mayrhofer, Anna Sender, Bruno Staffelbach, and Paul Ligthart

In this chapter, we examine the similarities and differences in the strategic integration of human resource management (HRM) and developmental HRM practices within the European Germanic cluster (henceforth referred to as the Germanic cluster) as defined by the Global Leadership and Organizational Behavior Effectiveness (GLOBE) research program (Gupta & Hanges, 2004, p. 191). It comprises Germany, Austria, Switzerland, and the Netherlands. Although both formal institutions, such as laws and regulations, and informal cultural values and norms matter for HRM, formal institutions are considered to follow national culture (Brewster, 1993) and are less stable across time than culture (cf. Licht, Goldschmidt, & Schwartz, 2007) (see Chapter 3 for a discussion on institutional theory). In the typology of Hall and Soskice (2001), the Germanic cluster countries are altogether classified as coordinated market economies (CMEs). However, a more recent study by Schneider and Paunescu (2012) demonstrates that Switzerland and the Netherlands underwent institutional changes between 1990 and 2005 and argues that they should be classified as liberal market economies (LMEs) and LME-­like economies, respectively. Hence, despite the cultural homogeneity (Gupta & Hanges, 2004, p. 191), there might be a divergence within the Germanic cluster that results in differences in the HRM policies and practices used within this cluster. We focus on the strategic integration of HRM and developmental HRM practices that address the increasing competition for skilled labor, which have become increasingly important for organizational growth and performance in recent years (PwC, 2014). Strategic integration of HRM denotes the involvement of HRM in managerial

178   Krebs et al. ­ ecision-­making, the broad purpose of which is to leverage organizational outcomes by d means of managing human resources (Guest, 1990; Vernon & Brewster, 2013). The strategic integration of HRM has been shown to increase HRM performance (Teo & Rodwell, 2007), organizational performance (Bennett, Ketchen, & Schultz, 1998), and shareholder value (Becker, Huselid, Pickus, & Spratt,  1997). Moreover, the degree to which HRM is strategically integrated serves as an indicator of both the strategic relevance attached to human resources and the potential of HRM to leverage human capital resources in a way that generates competitive advantage by means of preventing imitation (Coff,  1997). In addition to strategic integration, organizations’ developmental HRM practices—that is, practices related to the development and retention of skilled employees—play an increasingly important role in terms of competitive advantage. Specifically, demographic changes in developed countries drive up the average age of organizations’ workforces and decrease the size of the labor force, thus intensifying the competition for skilled labor (Bieling, Stock, & Dorozalla, 2015). Since organizations that are responsive to environmental changes in their use of HRM policies and practices should achieve higher performance (cf. Wei & Lau, 2008), we investigate HRM practices related to the development and retention of skilled employees. Importantly, in addition to examining the similarities and differences of the strategic integration of HRM and developmental HRM practices in the Germanic Europe cluster, we use the United States and the United Kingdom as benchmarks. Organizations based in the United States tend to adopt innovative HRM practices and policies earlier than organizations in other countries and, therefore, have previously served as a benchmark for strategic HRM (Brewster, 2004). This phenomenon is not restricted to the United States, but may be attributed to the entire Anglo cluster (GLOBE, 2016a) or the Anglo-Saxon business system (Whitley, 1999) in general (see Chapter 8 for a discussion of Anglo-­Saxon HRM). As an illustration, Ferner and Quintanilla (1998) refer to the “Anglo-­Saxonisation” of or­gan­i­za­tions as a convergence toward behaviors typical of highly internationalized British or US-­American multinational companies. The most prominent and significant development with respect to the strategic integration of HRM since the early days of the strategic HRM movement in the 1980s originates from the human resource (HR) business partner model developed by Ulrich (1997). This model was initially promoted in the United States and the United Kingdom (Caldwell, 2001, 2003) and spread to or­gan­i­za­tions in the Germanic cluster thereafter. Given this time lag, the strategic integration of HRM is an important starting point for examining the status quo of approaches to HRM in the Germanic cluster. We also expect quite different HRM practices related to personnel development between organizations from the Germanic cluster compared to the Anglo cluster. According to the GLOBE study, the Germanic societies stand out with respect to future orientation in relation to societal cultural practices when compared with other cultural clusters. Consequently, organizations in the Germanic cluster should place a comparably high emphasis on planning and investing for the future, such

Human Resource Management in the Germanic Context   179 as investments in personnel development. Therefore, we expect differences in the arrangement of these developmental HRM practices within the Germanic cluster resulting from institutional and (minor) cultural differences, such as differences in employment protection legislation (Organisation for Economic Co-­operation and Development, 2018e). We base our analyses on recent data from the Cranet survey conducted in 2014/15 (Reichel, Farndale, & Sender, 2017). Analyses are restricted to organizations with at least one hundred employees to ensure comparability across countries (Steinmetz, Schwens, Wehner, & Kabst, 2011). A notable exception is Switzerland, for which the most recent data (data collection took place in 2014 for the most recent survey round) were only available for organizations with at least two hundred employees.1

The Cultural Context of the Germanic Cluster The GLOBE researchers group Germany, Austria, Switzerland, and the Netherlands into the Germanic cluster (Gupta & Hanges, 2004, p. 191). Clustering was based on previous empirical studies (e.g., Ronen & Shenkar, 1985), common language, geography, religion, historical accounts (Gupta & Hanges, 2004, p. 183), and statistical tests of the empirical validity of the clustering based on GLOBE data (Gupta & Hanges,  2004, p.  189). With respect to societal cultural practices (“as is”), the Germanic cluster can be characterized as scoring relatively high on performance orientation, assertiveness, future orientation, and uncertainty avoidance (for ­ ­definitions of the GLOBE cultural dimensions, see Table 9.1). This profile reflects the technocratic orientation of Germanic societies (Gupta & Hanges, 2004, p. 199) and indicates an emphasis on competitiveness, rewarding performance, planning and investing for the future, rules and procedures to reduce uncertainty, and more assertive relationships with others (GLOBE, 2016b). On the contrary, the Germanic societies score relatively low on humane orientation, institutional collectivism, and in-group collectivism, suggesting limited cohesiveness within organizations, ­limited  collective distribution of resources, as well as limited pro-­social behaviors such as ­caring and ­altruism  (GLOBE,  2016b). With respect to power distance and gender egalitarianism, scores for the Germanic cluster are in  the mid-­ ­ range ­compared to other clusters (Gupta & Hanges, 2004, p. 193), but are rather high at 1  The standard sampling frame for data collection in Cranet is based on organizations with at least two hundred employees. However, if it is more appropriate for the structure of organizations within a country, network representatives are allowed to collect data on organizations with a minimum of one hundred employees instead (Tregaskis, Mahoney, & Atterbury, 2004).

180   Krebs et al. Table 9.1.  Culture construct definitions Cultural dimension Construct definition Power distance

The degree to which members of a collective expect power to be distributed equally

Uncertainty avoidance

The extent to which a society, organization, or group relies on social norms, rules, and procedures to alleviate unpredictability of future events

Assertiveness

The degree to which individuals are assertive, confrontational, and aggressive in their relationships with others

Institutional collectivism

The degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action

In-­group collectivism

The degree to which individuals express pride, loyalty, and cohesiveness in their organizations or families

Future orientation

The extent to which individuals engage in future-­oriented behaviors such as delaying gratification, planning, and investing in the future

Gender egalitarianism

The degree to which a collective minimizes gender inequality

Humane orientation

The degree to which a collective encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others

Performance orientation

The degree to which a collective encourages and rewards group members for performance improvement and excellence

an absolute level (GLOBE,  2016b). Hence, authority, power differentials, status privileges, and social inequality as well as male dominance and gender inequality tend to be accepted and endorsed within the Germanic societies. As with all clusters and societies, societal cultural values (“should be”) differ ­significantly from actual societal cultural practices (“as is”) in the Germanic Europe societies. Societies in the Germanic cluster show the strongest desire to be (more) gender equal among all clusters and also desire to be (more) performance oriented  and humane oriented (GLOBE, 2016b). Conversely, the Germanic Europe societies desire less power distance, assertiveness, and uncertainty avoidance (GLOBE,  2016b). Despite these commonalities in cultural respect, Figure 9.1 shows that there is variation within the Germanic cluster for all cultural dimensions with respect to practices (“as is”) with the exception of assertiveness. For example, the Germanic Europe societies differ in the degree of enacted cohesiveness in organizations (i.e., in-­group collectivism). The extremes are Austria with relatively high, and the Netherlands with relatively low, in-group collectivism. Moreover, Switzerland and the Netherlands stand out with respect to higher future orientation. Switzerland also has a high degree of performance orientation, which is likely to influence the HRM practices used in Swiss organizations.

Human Resource Management in the Germanic Context   181 7 6 5 4 3 2 1

Assertiveness

Institutional collectivism

In-group collectivism Austria

Future orientation

Germany

Gender egalitarianism

Switzerland

Humane orientation

Performance orientation

Netherlands

Figure 9.1.  Societal cultural practices scores (“as is”) according to the Global Leadership and Organizational Behavior Effectiveness study. from House, Hanges, Javidan, Dorfman, and Gupta (2004); response bias-­corrected scores.

The Economic, Institutional, and Demographic Context of the Germanic Cluster Typical for continental Europe is a corporate governance system structured as a dual board or two-­tier system. The board of directors has executive powers and manages the company, but it is also accountable to a supervisory board, which focuses on the development of the business strategy. The shareholders usually elect the supervisory board. The economies of the Germanic cluster are highly export oriented. In 2018, exported goods and services contributed to 47 percent of the GDP in Germany, 54 percent in Austria, 65 percent in Switzerland, and 83 percent in the Netherlands (World Bank, 2019). While the economy of Germany is characterized by a large manufacturing sector, the economies of Austria, Switzerland, and the Netherlands are dominated by services. All Germanic cluster countries have been originally classified as CMEs by Hall and Soskice (2001), but more recent cluster analyses for 2005 by Schneider and Paunescu (2012) suggest that the economies of Switzerland and the Netherlands shifted toward the LME type. The Germanic cluster countries differ significantly with respect to the share of employees covered by collective bargaining. While almost all employees in Austria are covered by collective bargaining, about 80 percent are covered in the Netherlands, somewhat more than half of employees are covered in Germany, and slightly less than

182   Krebs et al. half of employees are covered in Switzerland. All Germanic countries benefit from a well-­established dual system of vocational education and training (VET), but differ significantly in the share of people between the ages of twenty-­five and thirty-­four who have completed tertiary education. The four countries are among the top twenty in the Global Talent Competitiveness Index (INSEAD,  2018), which ranks countries with respect to their ability to attract, develop, and retain global talent. Nevertheless, the ranks differ significantly between countries (Switzerland first, Netherlands ninth, Austria eighteenth, and Germany nineteenth). Aging populations and, correspondingly, workforces pose challenges for the whole Germanic cluster. In the following sections, each country within the Germanic cluster will be presented in detail with respect to the country’s economic, institutional, and demographic context. Table 9.2 summarizes the similarities and dissimilarities that emerged from this investigation.

Austria’s Economic Context: Governance and Business Structure Austria is a well-­developed market economy closely tied to other European Union economies (especially Germany and Eastern Europe) with large service, sound industrial, and small, but highly productive, agricultural sectors. Similar to Germany, Austria is classified as a CME (Hall & Soskice, 2001). Most of the companies operating in the country (about 330,000 in Austria) are small and mid-­sized enterprises (SMEs): 99.7 percent of all companies employ fewer than 250 employees, and 37 percent are one-­person companies (Bundesministerium für Wissenschaft,  2016). External corporate financing is dominated by debt in the form of long-­term bank loans, while equity and venture capital play a minor role (Task Force of the Monetary Policy Committee,  2013). Although potential entrepreneurs face a highly restrictive legal environment, entrepreneurial activity in Austria is above the European average (World Economic Forum, 2016). This might be partly a result of political initiatives and support programs offered by public organizations, such as the chamber of commerce, in which membership is obligatory for every company, independent of size. Within the Germanic cluster, however, Austria scores slightly higher (ranked fourteenth) than Germany (ranked fifteenth), but lower than the Netherlands (ranked eleventh) and Switzerland (ranked second) on the 2018 Global Entrepreneurship Index (Global Entrepreneurship and Development Institute, 2018). The Global Entrepreneurship Index reflects entrepreneurial attitudes, abilities, and aspirations of national populations, but also the institutional and economic infrastructure (Global Entrepreneurship and Development Institute, 2018).

Austria’s Institutional Context: Employment Legislation and Collective Bargaining The chamber of commerce is one of the main actors in the so-­called social partnership model. Collective bargaining is integrated in this comprehensive system of economic and social cooperation that is an important manifestation of the consensus politics considered the backbone of Austria’s recovery and economic success after World War II. Membership of employers and employees in their respective collective bodies in the

Human Resource Management in the Germanic Context   183 Table 9.2.  Similarities and dissimilarities among the Germanic cluster countries Similarities

Dissimilarities

Economic context: Governance and business structure

Originally altogether classified as CMEs Highly export-­oriented economies Economies dominated by SMEs Dual board or two-­tier system of corporate governance Economies of AUT, CH, and NL dominated by services

CH excels in terms of orientation toward entrepreneurship and entrepreneurial infrastructure, as well as attractiveness for global talent (NL takes a middle position between CH and AUT/GER) NL and CH on the move to being recognized as LMEs Swiss large companies more frequently under family control Large manufacturing sector in GER

Institutional context: Employment legislation and collective bargaining

Collective labor agreements prevalent in AUT, GER, and the NL System of codetermination eminent in AUT and GER

High collective bargaining coverage in AUT and the NL, slightly above 50% covered in GER, slightly less in CH Very liberal employment regulations in CH In the NL, employment protection decreased continuously over the past decades

Institutional context: General education and VET

Enrollment in tertiary education higher in the Primarily tax-­funded free NL and CH public school system in System of dual VET highly recognized in CH all four countries such that relatively few HRM professionals Dual system of VET attractive and directors have tertiary education alternative to tertiary education

Demographic context: Growing, but aging population

Fertility rates below replacement rate Positive net migration But migration does not offset the trend of depopulation and aging populations/workforces

Net migration in AUT particularly high compared to population size

Note: AUT, Austria; CH, Switzerland; CME, coordinated market economy; GER, Germany; HRM, human resource management; LME, liberal market economy; NL, the Netherlands; SME, small and mid-­sized enterprises; VET, vocational education and training.

Chambers of Commerce, Labour and Agriculture is obligatory. Ninety-eight percent of all employees are covered by collective bargaining agreements at the industry level (Organisation for Economic Co-­operation and Development, 2018a) because their employers are all (because of mandatory membership) represented by the chamber of commerce, which negotiates on the employer side. The Österreichischer Gewerkschaftsbund, the largest Austrian trade union, takes on collective bargaining on the employees’ side. Union membership is voluntary and reaches 27 percent of all wage and salary earners (Organisation for Economic ­Co-­operation and Development, 2018f),

184   Krebs et al. although the Österreichischer Gewerkschaftsbund is negotiating on behalf of all employees in the respective industry and although the chamber of labor, in which all employed Austrians are members, offers many services, including legal representation in the labor courts. The main premise behind the social partnership system is that basic aims of economic and social policy can be better realized through cooperation between key actors than by confrontation (Gerlich, Grande, & Müller, 1988). Accordingly, working days lost as a result of strikes are very rare in Austria (e.g., two days per one thousand employees on average between 2006 and 2014) (Wirtschafts- und Sozialwissenschaftliches Institut, 2017). Although the social partnership model as a highly developed form of corporatism is informal and based on voluntary participation of the respective groups, it still is embedded into (and enabled by) a tight net of employment laws and regulations. The level of employment protection is rather high. Indicators from the Organization for Economic Co-operation and Development (OECD) measuring the strictness of ­regulation on dismissals rank Austria twelfth among the thirty-five OECD countries concerning protection of permanent workers against individual and collective dismissals (OECD, 2018e).

Austria’s Institutional Context: General Education and Vocational Education and Training Austria has a free and public school and university system that is tax funded. Only about 10 percent of primary and secondary education institutions are private. For tertiary education, numbers are even lower—the state practically holds the monopoly for university education. Of the USD$17,555 spent per student per year in 2015, only 6.2 percent is private spending (ranks fifth lowest in OECD) (OECD, 2019b,  2019d). Despite no tuition fees for university and other measures taken against social segregation in tertiary education—which actually led to a massive increase in tertiary education enrollment—in 2018 still only 40.5 percent of people between the ages of twenty-­five and thirty-­four had completed tertiary education; the OECD mean is 44.5 percent (OECD,  2019c). This rather low percentage is partly the result of a well-­developed VET system offering good career opportunities for graduates of VET colleges (five years of higher education preparing for university plus VET diploma) and schools (three years VET diploma) and for people ­having completed apprenticeships. Vocational training is well structured and a dual system integrates school-­based theoretical and firm-­based practice learning. The social partners are involved in VET policy design and delivery. Numbers from 2008 show that around 80 percent of each cohort enters a VET pathway after finishing compulsory education, and about half of these take up an apprenticeship (Hoeckel, 2010). Comparably high completion rates in upper secondary education and rather smooth transitions from VET to first employment leave Austria with relatively low  youth unemployment rates  (9.8 percent in 2017; OECD mean, 11.9 percent; OECD, 2018g).

Human Resource Management in the Germanic Context   185

Austria’s Demographic Context: Growing, but Aging Population Austria’s crude birth rate was 1.53 in 2015. Similar to Germany, this was the highest rate since 1980, but still it does not reach the replacement level of approximately two children per woman. Nevertheless, Austria’s population has been constantly growing since the end of World War II, currently reaching 8.7 million. The growth in the past decades can be attributed first and foremost to a positive net migration, which has been quite substantial in recent years (e.g., about 65,000 in 2016 and about 113,000 in 2015) when judged against the relatively small population size of 8.5 million in 2014 (Statistik Austria,  2018). About 22 percent of people living in Austria have a first- or secondgeneration foreign background. Qualification levels and language skills vary greatly among migrants (Austrian Embassy Washington, 2018). Employment market participation overall is fair to middling in this heterogeneous group, with an unemployment rate more than double that among Austrians (Wiedenhofer-­Galik & Fasching, 2015). Despite immigration, the Austrian population is aging. The percentage of people over the age of sixty-­five rose from 15.4 percent in 2000 to 18.5 percent in 2016 (Statistik Austria,  2018). While Austria’s overall employment rate is high and well above the OECD mean, in the age group between fifty-­five and sixty-­four it only reaches 51 percent; this is mostly because of the statutory retirement age for women (sixty years) but also because of a low factual retirement age (fifty-­nine years), whereby measures to decrease early retirements have been successful in recent years (Gumprecht,  2017; OECD, 2018c).

Germany’s Economic Context: Governance and Business Structure The German economy is characterized by a large fraction of SMEs (Institut für Mittelstandsforschung Bonn, 2016). In 2014, 82 percent of companies were classified as micro enterprises (0–9 employees and up to 2 Mio. Euro sales), 15 percent as small enterprises (10–49 employees and up to 10 Mio. Euro sales), 3 percent as mediumsized enterprises (40–249 employees and up to 50 Mio. Euro sales), and only 1 percent as large enterprises with more than 249 employees or more than 50 Mio. Euro sales (Statistisches Bundesamt, 2017, p. 521). However, 67 percent of sales are accounted for by large enterprises and large enterprises also employ 39 percent of the total labor force— nevertheless, the largest part of the labor force is employed by SMEs (Statistisches Bundesamt, 2017, p. 521). The SMEs typically have fewer resources available to employ HRM professionals or to even have a formally institutionalized HRM department (Cardon & Stevens, 2004). The availability of HRM specialists can be assumed to have significant consequences for the role of HRM with respect to strategy development and execution. While the legal environment has traditionally been rather restrictive with respect to starting up a business, reforms—most notably, a reform of the minimal capital required to start up a company with limited liability (“GmbH”)—have meanwhile resulted in a reasonable ranking for Germany in the 2018 Global Entrepreneurship Index. According

186   Krebs et al. to this index, Germany (ranked fifteenth) scores slightly lower than Austria (ranked fourteenth) (Global Entrepreneurship and Development Institute, 2018). However, the start-­up rate has been constantly declining since 2002 (Metzger, 2017) because of high labor demand by established enterprises (a pull factor for entrepreneurial activity) relative to the positive trend in economic growth (a push factor for entrepreneurial activity). Nevertheless, this trend led to a decline in necessity-­driven start-­ups relative to opportunity-­driven start-­ups (Metzger, 2017). The German economy is furthermore characterized by a large manufacturing ­sector based on gross value added (Destatis, 2018) and by a bank-­based system of corporate governance in which firms are financed mainly through long-­term bank credits, whereas financing through equity plays a minor role (Streeck, 1997). Ultimate ownership by a single financial institution (Hausbank) has been shown to be associated with lower rates of productivity growth, independent of a firm’s exposure to product market competition (Januszewski, Köke, & Winter, 2002). This indicates that German privatesector organizations, particularly SMEs, are somewhat buffered from competition, at least in the short run (cf. Randlesome, 1994). This has consequences for HRM, since competitive intensity is commonly assumed to be positively related to “management quality” (Bloom, Genakos, Sadun, & Van Reenen, 2012).

Germany’s Institutional Context: Employment Legislation and Collective Bargaining Firms in Germany have a “narrower scope of choice in regard to personnel management than in the US” (Pieper, 1990, p. 82) because of a high degree of employment protection. Based on the OECD indicators on employment protection legislation for 2013, Germany lies between Austria and the Netherlands with regard to protection of permanent workers against individual and collective dismissals and with regard to the regulation on temporary forms of employment, but is most restrictive (together with Switzerland) with regard to the specific requirements for collective dismissal (OECD, 2018e). Since the introduction of the Mindestlohngesetz in January 2015, German firms must pay a minimum hourly wage of 8.50 Euro (8.84 Euro since January 1, 2017) to their workers, in conjunction with mandatory documentation of working hours by employees. However, critics argue that this seemingly restrictive employment law may be sidestepped by employers because of a lack of control to prevent violations of the Mindestlohngesetz (Pusch & Seifert, 2017). Collective bargaining, which takes place at either the industry or the firm level, as  well as codetermination through works councils, additionally contributes to managers perceiving labor as a quasi-­fixed production factor, which incentivizes them to heavily invest in the skills of workers (Streeck, 1997, p. 241). The German system of codetermination necessitates that employers maintain positive relations with works councils, whose power and legal rights translate into comparably large personnel departments (Brewster, Brookes, & Gollan, 2015). Although trade union density in  Germany has declined from 24.6 percent in 2000 to 17 percent in 2016 (OECD, 2018f), still more than half of the employees in Germany (56 percent)

Human Resource Management in the Germanic Context   187 were covered by c­ ollective bargaining in 2016 (OECD,  2018a). The percentage of employees within a firm that is covered by collective bargaining may vary between 0 and 100 percent, but when employees in a firm are covered by collective bargaining, typically the majority of employees are covered (Fitzenberger, Kohn, & Lembcke, 2013, p. 171).

Germany’s Institutional Context: General Education and Vocational Education and Training Germany has a free public school and university system that is tax funded. Private spending on tertiary education is rather low. Of the USD$17,036 spent per student in 2015, only 15.3 percent is private spending (OECD, 2019b, 2019d). The German dual system of VET combines school-based theoretical with firm-­based practice learning and is generally considered an important contributor to the competitive strength of the (large) German manufacturing sector (cf. Thelen,  2007, p. 247). The system focuses on occupational skills that are port­a­ble across firms and hence stands out from the “general skills” system of the LMEs (Hall & Soskice, 2001) and the “segmentalist,” firm-­ specific skills system to be found, for example, in Japan (Thelen, 2007, p. 247). However, Deissinger (2015) points toward critical challenges for the system and notes that the vocational training landscape is changing in Germany: THe total numbers of apprenticeships declined steadily between 2008 and 2012, reflecting demographic change as well as the educational expansion in Germany. However, despite steadily growing numbers of young people acquiring a higher education, the dual system of VET still seems to be an attractive alternative to tertiary education (Deissinger, 2015, p. 558). Moreover, Germany’s share of twenty-­five-­to thirty-­fouryear-­olds who had completed tertiary education in 2018 (32.3 percent) still ranks at  the lower end of the OECD spectrum (the OECD mean is 44.5 percent) (OECD, 2019c).

Germany’s Demographic Context: Aging and Shrinking Labor Force The fertility rate of Germany recently rose to 1.5 after approximately four decades of rates below this threshold (Destatis,  2013). However, this fertility rate still falls well below the replacement rate, which has severe consequences for the economy in relation to an aging and shrinking labor force (Bujard, 2015). The influx of migrants in recent years has been substantial, yielding a positive net migration from 2010 on, with a peak of 1.1 million in 2015 and still 500,000 and 400,000 in 2016 and 2017, respectively (Destatis, 2019). However, fertile female cohorts have been largely underrepresented among Syrian migrants, which constitute the largest group of migrants moving to Germany, such that the resulting moderate net effect on fertility rates in Germany will not be sufficient to prevent the depopulation and, hence, aging of the German population (Newsham & Rowe, 2019). In particular, the shrinking labor force will have to be counterbalanced by technical progress and capital input to maintain current levels of GDP, while the consequences of an aging workforce are ambiguous with regard to

188   Krebs et al. individual and organizational performance consequences (Bujard,  2015, pp. 147). However, we can expect intensified investments in the training and development of an increasingly older workforce in the time ahead.

The Swiss Context: Political Structure and Critical Contextual Aspects for HRM Switzerland comprises twenty-­six cantons in four language parts: German-, French-, Italian-, and Rhaetian-­speaking, with the German-­speaking part being most populated. Like the Netherlands, Switzerland has been originally classified as a CME (Hall & Soskice, 2001), but more recent cluster analyses classify it as an LME (Schneider & Paunescu, 2012). We identify the following aspects as critical: (1) the international orientation of firms, (2) weak external pressures on corporate management, (3) heterogeneity in terms of regulations, in the cultural environment as well as the labor market, (4) the dual system of VET, and (5) the minor role of collective bargaining.

Switzerland’s Economic Context: Governance and Business Structure First, Switzerland is an export-­oriented country with a positive current account balance (OECD, 2018b). However, Swiss-based companies not only export goods and services (with services contributing most to gross value added; Bundesamt für Statistik, 2017), but also capital. Consequently, Switzerland is ranked eighth worldwide in terms of foreign direct investment outflows and Swiss-­based companies employ close to two million people outside Switzerland (State Secretariat for Economic Affairs, 2016). Given the international orientation of Swiss-­based companies, Switzerland relies heavily on both homegrown talents and those from abroad. Consequently, acquiring talent is the number three priority for HRM professionals in Switzerland (Winkler, 2018), which is also reflected in Switzerland taking first place in the 2018 Global Talent Competitiveness Index (INSEAD, 2018). As a result, individuals in top positions and in HRM often have an international background and a strong international orientation. For example, 45 percent of executive board members in 2017 in the largest Swiss private organizations are not themselves Swiss (Guido Schilling AG, 2017). Moreover, Switzerland ranks second in the world (after the United States) and highest among the Germanic cluster countries in the 2018 Global Entrepreneurship Index, which reflects entrepreneurial attitudes, abilities, and aspirations of national populations, but also the institutional and economic infrastructure (Global Entrepreneurship and Development Institute, 2018). Second, compared to Austria or Germany, Swiss large companies are more frequently under family control (La Porta, Lopez-­ ­ De-­ Silanes, & Shleifer,  1999). Specifically, the share of family firms in Switzerland is estimated at 88.4 percent (Frey, Halter, Zellweger, & Klein, 2004). Additionally, Swiss banks, as creditors and shareholders of some companies (Ruigrok, Peck, & Keller,  2006), traditionally play an important role in corporate governance. And, Swiss pension funds act as passive investors with overall large stocks of assets but only small shares in individual firms. As a

Human Resource Management in the Germanic Context   189 result, external pressures on corporate management in Switzerland can be considered relatively weak (Ruigrok et al., 2006). Third, the Swiss political system (Linder & Vatter,  2001) and cultural diversity (House, Hanges, Javidan, Dorfman, & Gupta, 2004) have two implications for HRM. Specifically, Switzerland is often considered a model case of political integration, consensus democracy, and multinational federalism (Kriesi & Trechsel, 2008). The integrative culture is also observed in Swiss HRM and governance with a relatively high level of integration and inclusion of minorities (e.g., cultural, regional, national). Additionally, because of the heterogeneity of the Swiss population, differences in HRM across regions and industries exist. Although some legal provisions operate on the federal level (e.g., unemployment protection; Federal Department of Home Affairs, 2017), because of the federalist political system, Swiss cantons enjoy substantial autonomy, for example, in relation to tax matters (Feld, Kirchgässner, & Schaltegger, 2004) or family allowances (Federal Department of Home Affairs, 2017). Additionally, research indicates that the German- and French-­speaking regions differ significantly in relation to culture (House et al., 2004). Moreover, although Switzerland belongs to the group of countries with low unemployment rates (OECD, 2018d), in 2017 unemployment was substantially lower in the German- (2.8 percent) than in the French- and Italianspeaking parts (4.2 percent) (State Secretariat for Economic Affairs, 2018). In addition to between-canton variability in industrial relations, substantial differences between industries exist. Collective labor agreements, concluded between employers or their associations and workers’ associations, for example, regulate the notice of termination of individual contracts of employment, which go beyond generally liberal regulations stipulated in the Code of Obligations (International Labour Organization, 2007). The heterogeneity of the Swiss population as well as that of the economic and legal environment shape the HRM function in organizations (Gerhart & Fang, 2005; Sender, Arnold, & Staffelbach, 2017) and result in some differences in the HRM approach across regions and industries.

Switzerland’s Institutional Context: Employment Legislation and Collective Bargaining Fourth, the strategic integration of HRM in Switzerland may be additionally challenging because of the minor role of collective bargaining in Switzerland. Statistics from the OECD indicate that the percentage of employees covered by collective bargaining is 49.2  percent in Switzerland, compared to, for example, 98 percent in Austria (OECD, 2018a). Thus, collective bargaining plays a less significant role in Switzerland than in other countries in the Germanic cluster. Similarly, the statistics on strike days indicate that Switzerland belongs to the group of countries with the lowest number of strike days (Federal Statistical Office,  2017). Importantly, unlike the German Mitbestimmungsgesetz, the Swiss regulatory environment does not automatically require a representation of employees in the supervisory board of larger companies.

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Switzerland’s Institutional Context: General Education and Vocational Education and Training Fifth, Swiss HRM is shaped by the existence of a dual system of VET (Trampusch, 2010). Specifically, because of this dual system, HRM professionals in Switzerland are relatively often educated within this system and do not hold a university degree. Specifically, Cranet data indicate that 61 percent of HRM directors have a university degree compared to 92 percent in the United States or 82 percent in the United Kingdom. Although this educational system may have benefits for the labor market, it results in a lower percentage of individuals with a university degree than in other countries. Given that appropriate education may be an important prerequisite for the strategic integration of HRM (Cohen,  2015; Farndale & Brewster,  2005; Langbert,  2005), a lack of higher education may undermine the role of the HRM director in organizations. However, in 2018, 51.2 percent of Swiss citizens between the ages of twenty-­five and thirty-­four had completed tertiary education, which is significantly more than in Germany (32.3 percent) and Austria (40.5 percent), but comparable to the Netherlands (47.6 percent) (OECD, 2019c)—that is, countries in which the dual system of VET also plays a prominent role. In Switzerland, primary and secondary education are publicly funded. Private schools exist and about 5 percent of pupils complete their primary and secondary education at private schools (State Secretariat for Education and Research, 2006). As in most European countries, public schools dominate higher education; there are no nationally recognized private universities (State Secretariat for Education and Research, 2006).

Switzerland’s Demographic Context: Aging and Shrinking Labor Force Switzerland’s aging population will pose challenges to the Swiss economy in the coming decades. Since as far back as 1970, the birth rates in Switzerland have been too low to ensure replacement of generations (Federal Statistical Office, 2018). The fertility rate in 2016 was 1.5, with 2.1 necessary for generational replacement. One-­fifth of the population is currently at least sixty-­five years old. Migration has slightly reduced the aging of the Swiss population since the 1980s, but migration cannot offset the general trend. In Switzerland, the statutory retirement age is sixty-­five for men and sixty-­four for women.

The Netherland’s Economic Context: Governance and Business Structure The Dutch economy can be characterized primarily as a service economy (Hitzert, Langenberg, & Notten, 2017), with a strong focus on trade, business and financial services, and health and social care services. In 2016, the service industry took up more than 81 percent of the labor force (Centraal Bureau voor de Statistiek, 2020) and contributed 78 percent in gross value added to the Dutch economy (Van Bui, van Dalen, & Notten, 2017). In terms of production, the relatively small manufacturing industry is one of the largest sectors in the Dutch economy, particularly when the related sectors

Human Resource Management in the Germanic Context   191 (e.g., contractors, suppliers) are included. Dutch manufacturing industry is mostly concentrated in the food, chemicals, machine, and electronics sectors. Like Germany and Austria, which can still be considered CMEs, the Netherlands have also been initially classified as a CME (Hall & Soskice, 2001), but the economy has been subject to liberalization from 1990 onwards. Both the manufacturing industry and the service sectors (particularly trading, transportation, and logistics) have a strong focus on export; in 2018, exports of goods and services contributed 83 percent to the GDP of the Netherlands (World Bank, 2019). Most of the exporting (approximately 80 percent, Centraal Bureau voor de Statistiek, 2015) is done by multinational companies operated by a foreign or indigenous headquarters. Although the number of multinationals is low (2 percent, approximately equally divided between foreign and domestic multinationals), the multinational ­companies take care of almost 20 percent of the approximately ten million jobs in the Netherlands (Centraal Bureau voor de Statistiek,  2015). Nevertheless, much of the employment is found in SMEs, of which most are family-­owned companies (Centraal Bureau voor de Statistiek,  2017a). With respect to entrepreneurial activity, the total number of new start-­ups in the Netherlands has returned to pre-crisis levels (Centraal Bureau voor de Statistiek, 2018b). The Netherlands also score comparably high on the 2018 Global Entrepreneurship Index (e.g., higher than Austria and Germany) (Global Entrepreneurship and Development Institute, 2018). The level of employment in the Dutch labor force has shown continuous growth in recent years, facilitated by a steady economic growth of GDP (up to 3.2 percent in 2017, Centraal Bureau voor de Statistiek, 2018a). In 2017, the unemployment level decreased to 436,000 people (4.8 percent of the labor force) (Centraal Bureau voor de Statistiek, 2017b).

The Netherland’s Institutional Context: Employment Legislation and Collective Bargaining Industrial relations in the Netherlands are still characterized by the so-­called poldermodel (Keune, 2016), a tripartite system whereby trade unions, employers’ associations, and government seek consensus regarding social and economic policies. Representatives of unions and employers’ associations, like the VNO-­NCW and the MKB-­Nederland, meet on a regular basis in the Social and Economic Council, together with the in­de­ pend­ent expert appointed by the national government. The Social and Economic Council not only advises the Dutch government and parliament but also is involved in  enforcing (labor) laws, supervising conduct in mergers, and promoting business/ consumer self-­regulation (see Social and Economic Council, 2018). Much of the employment contract is determined by collective labor agreements at the industry or the company level. Labor agreements involve work conditions, such as (minimum) wages, social plan (e.g., in case of downsizing), holiday entitlements, and working conditions (such as health and safety) (see Netherlands Enterprise Agency, 2018). If an agreement has been reached by the unions and employers’ associations, the collective labor agreement can be declared binding by the Ministry of Social Affairs and

192   Krebs et al. Employment. The vast majority of the Dutch workforce (78.6 percent, OECD, 2018a) is covered by a collective labor agreement. Although trade unions play a major role in collective bargaining, only 17.3 percent (OECD, 2018f) of employees are actually union members. If elected by employees, unions also represent employees in the company’s works council, among other elected employee representatives. A works council is mandatory for companies having more than fifty employees. At the collective level, the cohesiveness of the poldermodel is threatened by the shrinking base of the traditional unions in companies and in specific industries (e.g., information and communications technology, financial services), by further fragmentation of the labor market (increase in flexible work arrangements, payrolling, and contracting), by conflicting interests between small/medium and large-­scale enterprises (Keune, 2016), and by market liberalization policies of the national government since the 1990s (see Stellinga, 2012). Since 1990, the Dutch level of employment protection (individual and collective dismissals) has decreased (OECD, 2018e). The liberalization of the Dutch labor market has decreased the proportion of employees with a permanent employment contract relatively more in the Netherlands than in other European countries (Centraal Planbureau, 2016). This proportion has decreased from 73.1 percent in 2003 to 61.4 percent in 2016 (Ministerie van Sociale Zaken en Werkgelegenheid, 2017).

The Netherland’s Institutional Context: General Education and Vocational Education and Training Private and public schools as well as universities are financed by the local and national government (tax funded). After finishing primary school, children at the age of twelve years must choose between a prevocational secondary education or a senior general/preuniversity secondary education. At the age of sixteen, prevocational education is continued at the level of secondary vocational education. The regional education centers also provide courses, training, and apprenticeships (leerbanen) for adults. In the Netherlands, a comparably large share of people aged twenty-five to thirty-­four had completed tertiary education in 2018 (47.6 percent), according to the OECD (2018f). However, referring to the population of twenty-fiveto sixty-­four-­year-­olds, the proportion of citizens with tertiary education is around average compared to the OECD mean, standing at 38.3 percent in 2018 (OECD, 2019a).

The Netherland’s Demographic Context: Growing Population Resulting from Migration In 2017, the Dutch population increased by 100,000 to 17.1 million inhabitants (Centraal Bureau voor de Statistiek, 2017c). Migration contributed most to the growth of the population, while the natural growth (births minus deaths) actually almost halved since

Human Resource Management in the Germanic Context   193 the early 2000s (Centraal Bureau voor de Statistiek, 2017c). Because of the postwar baby boom, the percentage of people over sixty-­five years old increased to approximately 17 percent of the Dutch population (Centraal Bureau voor de Statistiek, 2017c). In the same year, Dutch women had on average 1.77 children. Because the life expectancy of babies born in the period 2013–16 is estimated at 81.5 years, the government will increase the retirement age to sixty-­seven years and three months in 2022 (sixty-­six years in 2018) (Centraal Bureau voor de Statistiek, 2017c).

Human Resource Management and Strategic Integration—on Becoming a Strategic Partner More than two decades ago, Dave Ulrich’s seminal work (1997) on the HR business partner model fundamentally influenced the HRM function in becoming a strategic business partner of top management and line management. Ulrich claimed that the HRM function needs to be involved in the strategic and operational decision-­making of the upper echelons to generate added value and, in turn, increase the competitiveness of organizations (Barney & Wright, 1998). The model is probably the most cited model in the literature on HRM roles (Kuipers & Giurge, 2017). The HR business partner model was originally promoted and disseminated in the United States and the United Kingdom (Caldwell, 2003). The dissemination to continental Europe started at a later time. The diffusion of the HR business partner model was likely impeded by learning effects and adjustment costs. Line managers might be reluctant to implement the model because of the extra effort required to establish new processes. For instance, chief executive officers might suspect more time-­consuming and costly managerial decision processes if the HRM function is involved in these processes (Brandl & Pohler, 2010). Similarly, line managers might fear a loss of decisionmaking authority (e.g., in recruiting key personnel) for the HRM function. Conversely, HR managers are reluctant to fill the various roles of the HR business partner model because of a potential loss of identity (Caldwell & Storey, 2007) or an insufficient anticipation of line managers’ needs (Francis & Keegan, 2006). Besides these frictions, reluctance to adopt the HR business partner model might also be associated with both the cultural context and institutional differences. For example, the codetermination structure in the Austrian and German economies (Wächter & Müller-Camen, 2002) supersedes some of the HR business partner roles. Therefore, we still expect to see cross-­national differences in the use of the HR business partner model between the pioneering Anglo-­Saxon countries and the “follower” countries in Germanic Europe.

194   Krebs et al.

Strategic Orientation and Strategic Integration of Human Resource Management To evaluate the status of the strategic integration of HRM in the Germanic cluster, we adopted three commonly used indicators from previous research (Brewster, Larsen, & Mayrhofer, 1997; Budhwar, 2000; Dany, Guedri, & Hatt, 2008). They are the presence of a written HRM strategy, HRM representation at the top management level, and the stage at which the most senior HR manager is involved in business strategy development. For a partnership between HRM and line management (i.e., strategic integration) to be successful, the most senior HR manager should be represented at the top management level (Wehner, Kabst, Meifert, & Cunz, 2012). Figure 9.2 illustrates that only 49 and 48 percent, respectively, of surveyed organizations in Austria and Germany have an HRM representative at the top management level. Moreover, HRM representation at the top management level has not changed substantially between 2004/5 and 2014/15 in Germany and Austria; rather, we observe a decreasing trend in Germany (2004/5, 56 percent; 2009/10, 50 percent; 2016, 48 percent). Switzerland and the Netherlands have a tradition of comparably high prevalence of HRM representation in the top management team. For the Netherlands, we observe an increasing trend, with the percentage of or­gan­i­za­tions with HRM representation in the top management team increasing from 62 percent in 2004/5 to 71 percent in 2014/15. Currently, the situation in the Netherlands and Switzerland is similar to that in the United Kingdom and the United States, with two-­thirds of organizations having HRM represented in the top management team. The major difference is that UK and US organizations have gained substantially from 2004/5 to 2014/15 in the institutionalization of HRM’s strategic role in this respect—in 2004/5, less than half of HRM representatives were part of the top management team.

90 80

66

70 60 50

79

74 56

49

71 64

64

69

71

55 48

40 30 20 10 0

Austria

Germany

Switzerland

Written human resource management strategy exists

The Netherlands

United States

United Kingdom

Human resource representative part of top management team

Figure 9.2.  Strategic institutionalization of human resources in 2014/15 (percentage). Data from Cranet (2014/15); own calculations.

Human Resource Management in the Germanic Context   195 Another major pillar of the strategic integration of HRM relates to the presence of a written HRM strategy. While most organizations have a written business strategy (Germanic cluster, 86 percent; United Kingdom and United States, 85 percent), between-­country heterogeneity with respect to the presence of a written HRM strategy is large, as depicted in Figure 9.2. In Austria and Germany, a comparably low percentage of organizations has a written HRM strategy (56 and 55 percent, respectively). Swiss organizations excel in this respect, with almost three-­quarters of organizations (74 percent) having a written HRM strategy. This finding indicates that HRM plays a comparably prominent role in Switzerland, most likely because of the high labor costs that necessitate a more efficient use of human resources to produce goods and services compared to other developed countries with lower labor costs. In addition, the international orientation of Swiss-­based companies makes attracting and retaining talented individuals an important factor for organizational success. The percentage of organizations in the Netherlands with a written HRM strategy (64 percent) is comparable to that in the United States (64 percent) and the United Kingdom (71 percent). In summary, a written HRM strategy is common in the Netherlands, Switzerland, and the Anglo-Saxon countries, but less common in Germany and Austria. From a theoretical point of view, translating a businesses’ overall strategy into an HRM strategy is important in two respects. First, the HRM strategy is based on the overall business strategy (Dyer & Reeves,  1995) and has a signaling function within the or­gan­i­za­tion, namely, that HRM is an important driver of gaining competitive advantage over competitors. Second, an HRM strategy aligned with the overall business strategy informs decisions related to HRM practices and policies such that the actions taken by HR managers and professionals contribute to (measurable) organizational outcomes, which, in turn, increase the reputation of the HRM function within the organization (Boxall & Purcell, 2003). These two aspects might explain why we found that the most senior HR manager is involved in the development of a businesses’ strategy at an earlier stage if a written HRM strategy exists and if the most senior HR manager has a place on the board of directors. More specifically, an ordinary least squares regression of a variable reflecting whether the most senior HR manager has been involved in the development of the business strategy right from the outset (3), through subsequent consultation (2), on implementation (1), or not at all (0) on dummy variables reflecting the presence of a written HRM strategy (β = 0.43, p < .01) and whether HRM is represented in the top management team (β = 0.81, p < .01) yielded significantly positive coefficients. These findings apply for a sample of organizations from Germany, Austria, Switzerland, the United Kingdom, and the United States (N = 900). We used cluster-­robust standard errors to account for the nesting of observations in countries and controlled for the log number of employees, the presence of an HRM department, ownership type, country, and main market.2

2  Please note that data for the involvement of the most senior HR manager in the development of the business strategy were not available for organizations from the Netherlands.

196   Krebs et al. Using the same sample of organizations and the same set of control variables, we also tested whether these two associations vary in strength across countries by specifying two models with according interaction terms with country dummies and one of the two predictors at a time. The strength of the association between involvement in strategy development and the presence of an HRM strategy was found to vary between countries— compared to Austria (reference category; β = 0.30, p < .01), the effect was equally strong in the United Kingdom (βinteraction = 0.04, ns) and the United States (βinteraction = 0.1, ns), but significantly stronger in Germany (βinteraction = 0.34, p < .01) and Switzerland (βinteraction = 0.26, p < .01). The strength of the association between involvement in strategy development and HRM representation in the top management team also varied between countries— compared to Austria (reference category; β = 0.85, p < .001), the effect was equally strong in the United Kingdom (βinteraction = –0.04, ns), but significantly stronger in Switzerland (βinteraction = 0.41, p < .001) and significantly weaker in Germany (βinteraction = –0.20, p < .01) and the United States (βinteraction = –0.30, p < .001). Adding the (negative) second-­order regression coefficients of the interaction terms for Germany and the United States to the (positive) first-­order regression coefficients, however, showed that each effect is still positive.

Brief Discussion of Strategic Integration of Human Resource Management in Germanic Europe To sum up the state of strategic integration of HRM in the Germanic cluster, we found that it is less developed in organizations in Germany and Austria compared to the other countries in the Germanic cluster. Moreover, we observe that the central indicators of the institutionalization of HRM have not changed since 2004/5 in Germany and Austria, indicating a divergence between Germany and Austria on the one hand and between Switzerland and the Netherlands on the other hand with regard to the strategic role of HRM. Switzerland traditionally emphasizes strategic HRM, paralleling the country’s high-­performance orientation according to GLOBE (see Figure 9.1), while the situation in the Netherlands has converged toward the level of strategic integration of HRM of the Anglo-­Saxon countries. A possible explanation for the divergence of strategic integration could be the codetermination by works councils in Germany (Wächter & Müller-Camen, 2002), which supersedes some of the HR business partner roles and thereby reduces the need to strategically integrate HRM. To increase the acceptance of HRM, it could be fruitful to recruit managers for senior HRM positions with prior experience from other organizational functions. Crossfunctional work experience might be helpful in better anticipating and understanding the needs of line management, such that “outsiders” might conform more closely to the competencies required by the HR business partner role (Caldwell, 2008, 2010; Wright, McMahan, McCormick, & Sherman, 1998). Interestingly, a large number of HR managers who have previously held positions outside the HRM function is characteristic of Austria and Germany (see Figure 9.3). This could be explained by the lower levels of

Human Resource Management in the Germanic Context   197 United Kingdom

14

United States

23

The Netherlands

20

Switzerland

18

Germany

29

Austria

37 0

10

20

30

40

50

60

70

80

90

100

Figure 9.3.  Professional background of the most senior human resource manager in 2014/15 (percent who previously held positions outside human resources). Data from Cranet Germany, (2014/15); own calculations.

professionalization of HRM in both countries. In Germany, the two major professional associations—the Deutsche Gesellschaft für Personalführung (German Association for Human Resource Management) and the Bundesverband der Personalmanager (German Federal Association of Human Resources Managers)—focus on networking and knowledge exchange rather than being a body for qualification, standardization, lifelong learning, and lobbying. Moreover, findings from bivariate chi-­square tests for each country indicate that only in Austria is the likelihood of the most senior HR manager being part of the top management team higher for “outsiders” (68.75 percent) than for “insiders.” This finding might be explained by occupational gender segregation: In Austria, board members are predominantly recruited from within the organization (Ebner & Grüner,  2014). While women are disproportionately represented at the ­position of the head of the HRM department compared to other departments, from which rank board members might be recruited, it is still relatively uncommon for women to be assigned to the board in Austria (Ebner & Grüner, 2014)—relative to male candidates from outside the HR department.

Developmental Human Resource Management Practices As noted in the section on country-­specific aspects, Germany, in particular, faces a continuously aging and shrinking workforce because of fertility rates well below the replacement rate (cf. Bujard, 2015). It is not therefore surprising that German HR managers most frequently rated shortages of qualified labor (33 percent) and demographic changes (28  percent) among their top three challenges for HRM in the next few years, from

198   Krebs et al. 2014/15 on. Only 9 percent rated digitalization as one of their top three HR challenges. However, many German HR managers look into the near future with confidence: 47 percent of respondents agreed to a (very) high extent that their firm’s HRM is well prepared to face demographic change.

Career Development Practices Shortages in labor supply are particularly severe for the recruitment of highly qualified employees. Indeed, most German organizations (61 percent), which we take here as an exemplary case within the Germanic cluster, state that they engage in activities designed to attract, develop, deploy, and retain talented employees, therewith responding to the need for actively managing highly qualified employees in times of demographic change.3 Of those organizations, 75 percent build on high-­potential programs for career development, but also frequently use special tasks (97 percent), networking (90 percent), coaching (88 percent), and mentoring (81 percent) for career development. Organizations that engage in activities designed to attract, develop, deploy, and retain talented employees, indicating a systematic approach toward managing highly qualified employees, use these practices significantly more often than organizations which state that they do not systematically manage talented employees (according to bivariate chi-­square tests).4

High-­Potential Schemes High-­p otential schemes for career development are at the core of leadership development (cf. Finkelstein, Costanza, & Goodwin, 2018). Longitudinal cross-­country analyses (see Figure 9.4) show that the use of high-­p otential schemes increased in the Germanic cluster countries (and in the United Kingdom) between 2005 and 2010, following the proclamation of the so-­called war for talent by Chambers, Foulon, Handfield-­Jones, Hankin, and Michaels (1998). In the United States, the use of high-­p otential schemes rose at a later point in time—from 30 percent in 2005 and 28 percent in 2010 to 48 percent in 2016. As depicted in Figure 9.4, highpotential schemes still are not common in the United States in comparison to the Germanic cluster. Although we observe that organizations from the United States might well serve as a benchmark with regard to the strategic integration of HRM, US organizations appear to be followers when it comes to the management of highpotential employees. 3  When not stated otherwise, Cranet data from 2015/16 have been used for the analyses reported in this section of the chapter. 4  High-­potential schemes: 75 versus 37 percent among organizations that do not use a systematic approach to managing talented employees, χ²(1) = 36.29, p < .001; special tasks: 97 versus 81 percent, χ²(1) = 19.58, p < .001; networking: 90 versus 64 percent, χ²(1) = 27.35, p < .001; coaching: 88 versus 74 percent, χ²(1) = 8.54, p < .01; mentoring: 81 versus 62 percent, χ²(1) = 11.77, p < .01.

Human Resource Management in the Germanic Context   199 100 90 80 70 60 50

65

60 47

52

52

71 60

74

68 59

57

53

48

41

40

30

30

28

44 29

20 10 0 2005 2010 2015 2005 2010 2015 2005 2010 2015 2005 2010 2015 2005 2010 2015 2005 2010 2015 Austria

Germany

Switzerland

The Netherlands

United States

United Kingdom

Figure 9.4.  Use of high-­potential schemes for career development (percentage). Cranet data from 2004/5, 2009/10, and 2014/15; own calculations. Source: Adapted from Javidan, House, and Dorfman (2004, p. 30).

Performance Appraisal Systems Performance appraisal systems are central to the retention of high-­performing employees, whose probability of turnover has been shown to depend on the strength of the pay–performance link (Trevor, Gerhart, & Boudreau, 1997). Since past performance is still the best readily available predictor for future performance (cf. Schmidt & Hunter, 1998, p. 268), performance evaluations play an important role in identifying  high-­potential employees (see, e.g., Dries, Vantilborgh, & Pepermans,  2012). Therefore, performance appraisal systems are an important feature of firms’ HRM systems when it comes to the development and retention of highly qualified employees. With regard to the prevalence of performance appraisal systems, Germany and Austria stand out from their Germanic counterparts, the Netherlands, and Switzerland, which more closely resemble the United Kingdom and the United States in this regard. As an example, for managers, 89 percent of Dutch and 96 percent of Swiss organizations have a performance appraisal system in place, compared to 64 percent of Austrian and 71 percent of German or­gan­i­za­tions. Performance appraisal systems in general and performance-­based rewards in particular are more in line with the individualistic or “entrepreneurialist” culture of the Anglo-­Saxon countries and Switzerland, while the Netherlands fall somewhere between these two extremes. Besides these cross-­country differences, it is important to note that we observe that organizations, as of 2014/2015, do not differentiate much between employee groups with respect to the use of performance appraisals. In Germany, for example, the percentage of organizations using performance appraisal systems for managers, professionals,

200   Krebs et al. and clerical or manual workers ranges between 69 and 72 percent. This range is largest across the examined countries for Austrian organizations (64 percent for managers vs. 51 percent for workers). In the Germanic cluster, a uniformly high percentage of organizations use performance appraisals to inform the analysis of training and development needs (greater than 86 percent) and career move decisions (greater than 80 percent). These findings indicate that most firms in the Germanic cluster follow a systematic approach toward career development, integrating insights from performance evaluations to inform decisions related to the development and deployment of employees.

Conclusion The countries within the Germanic cluster show similarities, but also differences in their formal institutions, such as laws and regulations, and informal cultural values and norms that influence the strategic integration of HRM and developmental HRM practices. Although Austria, Germany, Switzerland, and the Netherlands belong to the same cultural cluster, Switzerland and the Netherlands show meaningful differences in ingroup collectivism, future orientation, and performance orientation in comparison to Austria and Germany. Similarly, drawing on varieties of capitalism theory, Switzerland and the Netherlands are less clearly CMEs than originally suggested by Hall and Soskice (2001), but have become more liberal. Hence, the strategic integration of HRM in Switzerland and the Netherlands is similar to the progressive benchmark cases of the United States and the United Kingdom (i.e., LMEs), whereas Germany and Austria lag behind their Germanic Europe counterparts. Twenty years after the initial dissemination of the HR business partner model, we can rule out that learning effects still inhibit the diffusion of the strategic integration of HRM. Therefore, we must acknowledge that persistent differences in institutional context and path dependence may ultimately prevent German and Austrian firms from “catching up” with respect to the strategic integration of HRM. In particular, the system of codetermination in Austria and Germany may explain the differences in the strategic integration of HRM because the role of works councils partially supersedes the strategic integration of HRM. Future research should explore the time-­invariant barriers to the strategic integration of HRM in these countries in more detail. For example, researchers could examine whether structural differences in organizational characteristics or institutional factors better explain Germany’s and Austria’s inertia. While there seem to be more differences than similarities in the strategic integration of HRM within the Germanic cluster, the same countries have more in common when it comes to developmental HRM practices. For example, a high percentage of or­gan­i­za­ tions in Germanic Europe use performance appraisals to inform the analysis of training and development needs and career move decisions. Similarly, the prevalence of ­high-­potential schemes for career development increased from 2005 onwards among

Human Resource Management in the Germanic Context   201 or­gan­i­za­tions within this cluster and even beyond the level of prevalence in the United States. Thus, similarities in culture (e.g., assertiveness, institutional collectivism, gender egalitarianism, and humane orientation) as well as common external factors such as labor shortages, high export orientation, and high international orientation seem to influence the awareness of and the need for sophisticated developmental HRM practices in the Germanic cluster. Moreover, similarities in language and the educational system facilitate the mobility of employees within the Germanic cluster. Thus, organizations in Austria, Germany, Switzerland, and the Netherlands face strong competition in the labor market from their competitors within the same country and among the other countries of the Germanic cluster, which ultimately spurs a professionalization of developmental HRM practices.

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chapter 10

H um a n R e sou rce M a nagem en t i n th e Nor dic Con text Frans Bévort and Arney Einarsdottir

The Nordic countries may be seen as extreme cases of what has been termed coordinated economies (Farndale, Brewster, & Poutsma, 2014; Goergen, Brewster, Wood, & Wilkinson, 2012; Hall & Soskice, 2001; and see Chapter 2). A coordinated economy is a market economy in which there are comprehensive regulatory limits to the market, as opposed to a liberal economy, where only basic institutions rein in or direct the functioning of a free market. Hence, in practice, the Nordic countries, that is, Denmark, Finland, Iceland, Norway, and Sweden, all show some of the highest levels of taxation, income redistribution, public spending (averaging approximately 50 percent of the gross domestic product [GDP]: Finland, 54 percent, to Iceland, 42 percent, Organisation for Economic Co-­operation and Development, 2019a), publicly operated free healthcare provision, and educational services. Labor markets are characterized by high levels of union membership (Organisation for Economic Co-­operation and Development,  2019b), even higher coverage of collective agreements (Organisation for Economic Co-­operation and Development, 2019c), and a high levels of women’s participation (Organisation for Economic Co-­operation and Development, 2019d). At the same time, income levels are relatively high (Eurostat,  2019; Organisation for Economic Co-­operation and Development, 2016) and the countries are very competitive economies, relying, in particular, on their ability to sell their different types of goods and services in the global market. Human resource management practices in the Nordic countries have been characterized as “soft” and collaborative, rather than “hard” and calculative in prior studies (Gooderham, Nordhaug, & Ringdal, 1999; Lindeberg, Månson, & Larsen, 2013). The relatively strong trade unions, strong state agencies, and well-­developed welfare systems resolve many tasks that HRM would have to take responsibility for and solve in less regulated economies. This raises an important question about the status and professionalism of HRM in

210   Bévort and Einarsdottir the Nordic countries. For instance, how do organizations make compensation-­related decisions, and what communication tools do they use? It also raises the question of whether the culture for collaboration, as well as the norm of equality, is reflected in the status of HRM and how this translates into the practices used in the Nordic context. In this chapter, we review HRM in the Nordic countries, the diffusion of HRM practices, and their contextual translation. First, we review the Nordic social model and HRM ideology, along with the historical antecedents to HRM. Then we will draw on data from the Cranet survey to highlight commonalities and differences characterizing HRM practices in Denmark, Finland, Iceland, Norway, and Sweden and compare the results to other societies. Furthermore, we discuss the limits of the claim that the Nordic countries form a cluster with very similar attributes in relation to HRM by examining some of the characteristics and differences for each country. Finally, we discuss the benefits of doing comparative research, in the context of the Nordic countries, and what kind of knowledge this yields.

The Nordic Social Model and the Human Resource Management Ideology The Nordic social model has been defined as distinct from that in most other countries and regions of the world. Esping-­Andersen (1990) categorized developed countries’ welfare systems as being of three types: liberal regimes (the Anglo-­Saxon countries), conservative regimes (the Continental and Mediterranean countries), and social democratic regimes (the Nordic countries). In this chapter, we will not describe the other models but focus instead on what characterizes the Nordic model. Sapir (2006), studying European Union countries, developed a two-­by-­two matrix in which one axis is equity and the other is efficiency and claimed that Sweden, Finland, and Denmark (with the Netherlands) are in the quadrant with high equity and high efficiency, that is, a relatively small span in relation to citizen income but efficient economies. The Nordic countries have many historical, social, and political properties in common, and while the Scandinavian countries (Lindeberg et al., 2013) of Denmark, Norway, and Sweden may be even more similar to each other, there is still strong evidence for a social model that has developed in parallel in the Nordic countries. This is placed firmly within what Esping-­Andersen (1990) called the “social democratic regime” and what Sapir (2006) said offers efficiency and more equity. This is because of a social model that combines a high level of social and employment security (unemployment benefits, universal free healthcare, free admission to most education and active labor market policies) with a favorable climate for business and production (efficient public administration, high-­quality labor, strong infrastructure, and competitive taxation). All five countries compete in the world markets, with a high proportion of GDP stemming from exports (Organisation for Economic Co-­operation and Development, 2016).

Human Resource Management in the Nordic Context   211 The underlying structure of the Nordic welfare state is the social democratic compromise between labor and capital. That is, by accepting and institutionalizing the basic interests of business on the one hand and workers on the other, the Nordic countries have developed a unique social model. The Economist (“The Nordic Countries,” 2013) called this the next supermodel and politicians from Europe (e.g., the French president Emmanuel Macron) and the United States (e.g., former presidential candidate Bernie Sanders) use one or more Nordic countries as examples of desirable models of society. The socioeconomic comparison in Table 10.1 indicates a greater equality in the distribution of incomes in the Nordic countries and a collaborative labor market, matched with high levels of wealth and competitiveness on the world markets. Iceland, Norway, Sweden, and Finland take the top four places in the Global Gender Gap Index (World Economic Forum 2019), with Denmark fourteenth. The high levels of labor market participation and female labor market participation support this view. The Nordic welfare and child-­care policy model, with subsidized day care, has, among other things, contributed to gender equality and high female labor force participation (Eydal & Rostgaard, 2011). The labor markets are also characterized by a high level of union membership and collective agreement coverage. Relatively low proportions of the workforce are characterized as low income, average wages are high, and the Gini equality measure indicates high equality in all Nordic countries. Furthermore, GDP per capita is high and export value in proportion to GDP is also relatively high. However, there are differences in relation to unemployment rates: THese rates are relatively high in Finland and Sweden, but low in Iceland. Neo-­liberal critics would say that a country like the United States still performs better as a job and wealth creator, but the view that coordinated economies are underperformers is not supported. Another discussion is whether these numbers are actually covering one social model or whether the differences between the Nordic countries are too great to warrant such a conclusion (Gooderham, Navrbjerg, Olsen, & Steen, 2015). We will revisit that issue later. For now, the interesting question is how such a social context has influenced the diffusion and development of Nordic HRM. Gooderham et al. (1999) identify two kinds of HRM—calculative and the collaborative—and conclude that HRM in Denmark and Norway are of the latter kind. The first relates to a hard approach to HRM, where all HRM activities are calculated in relation to their contribution to business strategy and organizational objectives. Employees are seen as individual resources, like any other resource (Gooderham et al., 1999, p. 510). Collaborative HRM is a soft model, which regards staff as active partners and emphasizes investments in development activities as important for a broader long-­term relationship with the workforce. Additionally, such a model is supposed to create an altogether different relationship with trade unions, which are less likely to oppose this kind of HRM (Gooderham et al., 1999, p. 511). It is this collaborative HRM that covers all five Nordic countries to some degree, as we will substantiate. The compromise in the social democratic model stretches back to before the introduction of modern HRM in the Nordic countries in the 1980s. Human resource management is characterized by the relative strength of the trade unions, a general climate of

Table 10.1.  Socioeconomic comparison between the Nordic Countries, the United Kingdom, and the United States Country/OECD figures

United Kingdom

United States

Denmark

Finland

Iceland

Norway

Sweden

1. Unemployment (%) 2. Labor market participation (%) 3. Female labor market participation (%) 4. Union membership/density (%) 5. Collective agreement coverage (%) 6. Low-­income proportion of workforce (Eurostat 2019) 7. Average wages (USD$ PPPa 2018) 8. Gini-­quotient—equality measurea 9. GDP USD per capita (2018) 10. Exports value in proportion to GDP (%)

4.0 78.3 73.6 25.4 26.3 21.26 44,770 0.357 39,626 28

3.9 73.6 68.2 10.8 12.0 n/a 63,093 0.390 54,708 15

5.0 7.4 2.7 4.2 6.3 79.4 78.0 87.3 78.0 82.9 76.6 76.3 84.5 75.5 81.2 65.4 64.5 80.5 52.5 66.8 84.0 89.3 90.0 67.0 90.0 8.61 5.28 7.54 8.29 2.64 55,253 44,111 66,504 50,956 44,196 0.261 0.266 0.255 0.262 0.282 46,650 40,631 47,852 60,814 46,336 54 36 48 35 43

OECD 5.3 72.4 64.6 n/a 32.2 n/a 44,591 n/a 39,658 n/a

Note: Data retrieved from Eurostat and the Organisation for Economic Co-­operation and Development. GDP, gross domestic product; Organisation for Economic Co-­operation and Development; PPP, purchasing power parity. Sources: Organisation for Economic Co-­operation and Development (2016, 2019b, 2019c, 2019d, 2019e, 2019f, 2019g, 2019h, 2019i); Eurostat (2019). a The lower the more equal.

Human Resource Management in the Nordic Context   213 compromise and mutual trust between employers and employees, and an influential role for the state in relation to welfare issues (healthcare, pension, education, etc.). The Nordic welfare state is therefore a significant contextual factor in defining collaborative HRM (Gooderham et al., 1999). The role of unions and the state raises the question of whether the status and professionalism of HRM may be different, either weaker or stronger, in such a welfare context and whether this context restricts the ability of HRM to use compensation strategically to attract, motivate, and retain employees. Furthermore, the significant trade union presence, equality, and collaboration also bring into question whether employee relations and communication may be different, perhaps restricted by trade unions, in this context. In the next section, we take a closer look at the differences between the five individual Nordic countries as contexts for HRM.

The Individual Nordic Countries Do the Nordic countries represent one model in terms of labor market and HRM practices (Gooderham et al., 2015)? We analyze specific social and labor market aspects distinguishing each Nordic country as a social context for HRM.

Denmark In 2010, exports made up 50 percent of the GDP in Denmark (see Table 10.1). Trade with neighboring Germany (15 percent) and Sweden (12 percent) is most important. Consisting of islands and a peninsula, Denmark has a strong tradition of maritime transportation and recently overtook the United States as the fifth largest shipping nation in the world (Ministry of Industry, Business and Financial Affairs, 2019). The cooperative movement with large groups of independent farmers having joint ownership of a large proportion of the agroindustrial complex remains a strong social and political force. In 1899, the first general agreement, the Hovedaftalen, was established between employers’ associations and trade unions. The agreement defined two basic principles that have secured a more or less constructive collaborative climate in Danish industrial relations ever since. The first main principle is the managers’ “right to manage and direct work” and the other is the employees’ “right to organise and the right to take industrial action,” both principles within certain limits as defined by the agreement. Most aspects of the labor market are regulated by centralized or local agreements between trade unions and employer associations. While this system has recently been challenged by falling levels of union membership and new kinds of employment relationships, it remains by far the dominant employment relations practice in the Danish labor market. What is sometimes called the “Danish model” was legitimized by a

214   Bévort and Einarsdottir tandem of political reforms spearheaded by the Social Democratic and Social Liberal movements, establishing the modern welfare state and a very high level of independent problem solving and decentralized agreements between the labor market social partners— unions and employers associations—nationally and locally. In Denmark, HRM is founded on an institutionalized culture of cooperation and (relative) trust. There was no revolution, but there was the creation of sustainable reforms based on a consensus regarding the general institutional framework. One highly publicized outcome for HRM practice has been dubbed the “flexicurity” model (Madsen,  2004) (see Figure  10.1). A quarter of all employees switch jobs every year (Statistics Denmark,  2019), while employees simultaneously report a high level of employment security. Employers have a high degree of flexibility in relation to hiring and firing of employees, while employees are guaranteed high levels of income security (via unemployment benefits, etc.) and “employability” in terms of reskilling and training options and support. This arrangement is made possible by mutual trust and understanding between the labor market parties. It makes staffing decisions less complicated, especially in an industrial relations climate in which trade unions are powerful. Another feature of Danish HRM is the role of the line manager. This is also a prevalent feature of other Nordic countries, such as Sweden and Norway (Lindeberg et al., 2013). According to Cranet data from 2008–10, the three Scandinavian countries leave greater responsibility for HRM decisions to line managers, while other countries tend to rely on the HRM function. The explanation probably lies in the relatively small company size in Denmark, which also may affect the lower representation of the HRM function on the board of directors (Lindeberg et al., 2013). The Danish model is based on two-, three-, or four-­year general agreements, which are then specified through ongoing negotiations locally between organizations and local union representatives. The system is driven by employers’ need for flexibility and workers who have sufficient negotiating power to make better deals locally than centrally. The effect is a highly collaborative model in which both workers and employers are interested in finding viable solutions that make companies grow and sustain a high level of pay. As a result, managers and shop stewards strike deals at the workplace level that make the wheels turn in the interest of most parties involved. So, three characteristics of the Danish version of the Nordic welfare state (the culture of cooperation, the flexicurity model, and the role of line managers) define limits and starting points for HRM. The flexible labor market model is probably the most controversial. The unions have accepted an “income-­security and employability” rather than a “job security” strategy, which is the case in the other Nordic countries (and most other coordinated market economies). Gooderham et al. (2015, p. 171) write, “So in this regard Denmark is ‘different from that of the other Nordic countries’: that is, in regard to this particular issue Denmark has LME (liberal market economy) traits.” In Denmark, as the data from the 2014 Cranet survey show (Bévort, Larsen, Christensen, & Hjalager,  2014), HRM has become still more professionalized and entrenched, even after the financial crisis in 2008. Interestingly, the Danish collaborative

Human Resource Management in the Nordic Context   215 High level of flexibility Easy access to hiring and firing

High level of income security Unemployment benefits, etc. (e.g., Free universal health and educational provisions)

High level of employment security Reskilling, training, job programs, etc.

Figure 10.1.  The “golden triangle” of flexicurity (Madsen, 2004).

trust-­based labor market model seems to stand the test of time, and in many ways the future role of HRM in Denmark will continue to be as a steward of the legacy of the collaborative tradition (Bévort, Pedersen, & Sundbo, 1992), while developing the means to harness the potential and avoid the pitfalls of the new world of work.

Finland Finland’s population is 5.5 million. Although cultural studies such as Global Leadership and Organizational Behavior Effectiveness (House, Hanges, Javidan, Dorfman, & Gupta, 2004) have shown Finland to exhibit similar cultural attributes to its Scandinavian neighbors, Finland is distinctive in its Finno-­Ugric ethnic and linguistic background and was a Grand Duchy in the Tsarist Russian Empire. After the empire’s collapse in 1917, Finland gained its independence. However, Finland remained a relatively poor, agrarian society. Even in the 1950s, 46 percent of Finnish workers worked in agriculture and only a third of the population lived in urban areas. During the 1960s, around two hundred thousand Finns left the country in search of work in neighboring Sweden. Since the latter half of the twentieth century, Finland has developed into a modern, high-­tech knowledge economy, supported by a well-­coordinated social market economic model (Evans, Smale, & Björkman, 2018). From an HRM perspective, one can attribute a significant part of this economic success story to formal education. In 1972–77, the educational system was reformed, seeking to ensure, from playschool upward, the right to access high-­quality education. Finland regularly comes out first or second in world comparisons of education (United Nations Educational, Scientific, and Cultural Organization, 2000). Having succeeded in building a strong manufacturing base around its core forest and information and communications technology sectors, the Finnish economy also started to attract global attention with the meteoric rise of Nokia, which quickly became a

216   Bévort and Einarsdottir significant proportion of the Finnish economy (Kelly, 2013). Nokia became a synonym for superior management in Finland (Laamanen, Lamberg, & Vaara, 2016). Over the past fifteen years, economic development has seen Finnish companies develop new jobs in high-­tech manufacturing and services, attracting a growing number of people to the cities. Both the success of Nokia and Finland’s recovery from the “fall” of Nokia in the form of new national champions (e.g., Rovio, Supercell) can be seen as evidence of how the main mechanisms of the Finnish industrial relations system are designed to support economic development. One way to understand the cornerstones of the Finnish labor market and industrial relations (in comparison to the other Nordic countries) is to consider what lies behind this. As with the other Nordic countries, one of the hallmarks of the modern-­day Finnish system is strong egalitarian values. In Finland, egalitarian-­driven labor market policies are reflected in many ways (e.g., education, progressive taxation), but not least in ensuring internal openness and equal opportunity. Finland also performs especially well in relation to education, with performance differences between schools among the smallest in the world (Sahlberg, 2015). Finland is furthermore ranked number one in the world for social mobility and leadership opportunities for women (Lanvin & Monteiro, 2019). Another cornerstone is unionization and national collective bargaining. Finland (as well as Sweden) has a greater proportion of organizations that recognize unions for collective bargaining (100 percent) and more joint consultative committees/works councils (over 90 percent) (see Table 10.5 later in the chapter). Finland ranks highly for active labor market policies (thirteenth) and labor–employer cooperation (twentieth), but ranks low in terms of flexibility: ease of hiring (seventy-­sixth) and redundancy (eighty-­fifth) (Lanvin & Monteiro, 2019). The greatest differences between the Nordic countries seem to be found in the area of labor market flexibility. Finland (and Sweden) has a less flexible market compared to Norway, Iceland, and Denmark. After a difficult recession, a period of austerity in Finland has placed much emphasis on economic performance and productivity, which in turn has highlighted the unions’ stronghold in key sectors of the economy. Against the background of strained relations between unions and employers, the government has made significant efforts in recent years to get employers and unions to agree on measures to cut unit labor costs and strengthen competitiveness. Government responses to these challenges have also come in the form of “innovations” that may see Finland take a somewhat different path to its Nordic counterparts. For instance, Finland has just completed trials with basic income and different kinds of so-­called activation modes. The approaches so far seem to combine Nordic elements (e.g., borrowing from the Danish flexicurity model), but also more distinctive elements that would not suggest a simple convergence. Egalitarian values instilled from a young age and embedded throughout Finnish socioeconomic policy have been coming up against one of the latest HRM trends in the form of exclusive talent management (Sumelius, Smale, & Yamao, 2019). This results in Finnish organizations using practices to identify and develop high-­potential leaders,

Human Resource Management in the Nordic Context   217 without communicating this to them explicitly (Björkman, Ehrnrooth, Mäkelä, Smale, & Sumelius, 2013). Anecdotal evidence suggests that this kind of caution (or nervousness) toward utilizing such practices is somewhat unique to Finland and is more cultural than institutional in origin. The HRM profession in Finland continues its steady path toward professionalization and institutionalization, with membership of the one main professional association (HENRY, 2019) having increased steadily over time. The HRM board membership has increased also (currently 78 percent, well above the global average, see Table 10.2), indicating a trend toward higher HRM status.

Iceland Iceland has a population of about 350,000 people and a labor market of about 200,000 (Statistics Iceland, 2019). The largest export industries are tourism, fisheries, and aluminum. Hydropower generation, agriculture, and manufacturing, including high-­tech manufacturing, are also important parts of the economy (Statistics Iceland, 2018). The economy has high levels of free trade, government intervention, and social welfare. Iceland undertook extensive free market reforms in the 1990s, producing strong economic growth, but the country and its labor markets are still subject to high volatility because of their small scale. Limited restrictions regarding employer and employee relations existed until the first labor union, Dagsbrún, established in 1906, demanded restricting the workday to ten hours in 1910, which they gained in 1913 (Hersir & Sigursveinsson, 2006). A demand for a forty-­hour work week was started by the unions in 1930, but not achieved until 1971 (Act on 40 Hour Work Week, 1971). These laws are still active. European Union directives increasingly affect the Icelandic labor market, alongside collective union agreements. There is exceptionally high union density, partly impacted by the priority clauses in union contracts, stipulating that employers hire union members. In effect, this translates into employees automatically becoming union members on being hired. The unions have now started to demand a reduction in the working week from forty hours to thirty-five to thirty-­six hours in their collective agreements. Icelandic labor legislation is built on the Danish model, and in 1938 the first comprehensive labor market legislation was passed. It sets out rules on industrial disputes, collective agreements, shop stewards, strikes, and more (Blöndal,  2019, p. 26). As in Denmark, many aspects of the labor market are governed by centralized or local agreements between trade unions and employers’ associations. However, the Icelandic labor market has more strikes than most other European countries, reflecting continuing labor market conflicts over pay and conditions, now more in the public sector than in the private sector (Jonsson, 2014). Iceland is ranked twelfth of thirty countries on strictness of employment protection by the Organisation for Economic Co-­operation and Development (OECD) (Venn, 2009), below the OECD average. Overall, Iceland is considered high on most indicators

218   Bévort and Einarsdottir of flexibility (Olafsdottir, 2010). Wages are primarily determined by collective agreements between unions and employers’ organizations, but there is no statutory minimum wage. The provisions of collective agreements are automatically applied as a baseline to all employees, whether unionized or not (Friberg, Arnholtz, Eldring, Hansen, & Thorarins,  2014). For professionals, basic pay is increasingly determined through individual contracts, made either on top of a collective bargaining contract or as replacements (Einarsdottir, Olafsdottir, & Bjarnadottir, 2015) (see also Table 10.3). The Icelandic labor market (see Table 10.1) is characterized by very high union density and bargaining coverage rates (Friberg et al., 2014), very low unemployment rates, high labor force participation, and, at above 80 percent, one of the highest women’s labor participation rates in the OECD (Organisation for Economic Co-­operation and Development, 2017). Dual earners/career households are the norm. Gender equality has increasingly been addressed by laws in Iceland. In 2000, organizations were required to develop a gender equality strategy, either stand-­alone or as part of their HRM strategy, though not all organizations fulfill this legal requirement even now (Einarsdottir et al., 2015). Despite being repeatedly ranked at the top of the list for gender equality in the Global Gender Gap Index (World Economic Forum, 2019), the gender wage gap is persistent and was 7.6 percent (after controlling for work hours, job title, age, tenure, and education) in 2015 (Snaevarr, 2015). The latest laws on this came into effect in 2018 and require organizations to acquire an equal wage certification by a third party. This is intended to certify that the value of jobs and the process of wage determination are gender neutral. Overall, there is an increased focus on requiring meas­ur­a­ble proof by the employer (Einarsdottir, Olafsdottir, & Nesaule, 2018). Even though the collaborative and egalitarian spirit of the Nordic counterparts may seem apparent in many respects in Iceland, some have concluded that the labor market may be more adversarial, reflected in a labor market rife with conflict and strikes (Jonsson, 2014). Current and future challenges revolve around immigrants, temporary employment, and self-­employment. A growing number of immigrants, rising from 2.6 percent of the labor market in 2000 to 8.9 percent in 2018, call for specific attention to their integration in the labor market (Olafsdottir, Stefansson, & Einarsdottir, 2019). This more recent development, along with automation and the uncertain future of work, call also for increased attention to diversity management and expanding the concept of equality from gender to other minority groups, within organizations, and in HRM policy provisions.

Norway The population of Norway is 5.3 million. The Norwegian economy was traditionally based on local farming communities, but by 2018 agriculture accounted for less than 5 percent of the economy (Statistics Norway, 2019). Norway has a small, open economy with a free market and generally low trade barriers. A significant share of the Norwegian economy consists of service industries, including wholesale and retail trade, banking,

Human Resource Management in the Nordic Context   219 insurance, engineering, communications, and transport and public services. Norway’s petroleum era started in the 1960s, and the exploration and production of petroleum resources on the Norwegian continental shelf have had a major impact on the Norwegian economy (Regjeringen, 2013). In 2019, the oil industry accounted for 14 percent of GDP and 37 percent of total exports (Norsk Petroleum, n.d.). Norwegian working life is characterized by close collaboration between labor unions, employer organizations, and the state, often referred to as the tripartite cooperation or the cooperation model. The main agreement (Hovedavtalen), which constitutes one component of this model, was established between the labor union and the employers’ association in 1935. This acts as a cornerstone in Norwegian working life and states “the rules of game”—placing regulatory, normative, and cognitive pressures on what actors can and cannot do (Gooderham et al., 2015). Another important historical background to the organization of Norwegian working life was the collaborative project between employers, labor unions, and researchers in the 1960s (Thorsrud & Emery,  1970) to develop democracy in the workplace based around participation. This collaborative project served as a basis for the Working Environment Act (Act on Respecting Workers’ Protection, 1977), which contains provisions on the duties and rights of employers and employees. Like the other Nordic countries, the Norwegian labor market has undergone profound structural changes since the middle of the 1990’s. Although the oil-­based economy of Norway meant the financial crisis hit Norway to a lesser extent than the other Nordic countries (S. K. Andersen, Ibsen, Nergaard, & Sauramo, 2015), there has been a decline in the manufacturing sector and an increase in the service sector. From 1990 to 2010, employment grew sharply both in public and in private services. In 2014, 8.5 percent of employment was in manufacturing and 35.4 percent, a European high, was in the public sector (Dølvik, Fløtten, Hippe, & Jordfald, 2015). These changes in labor market composition have led to major changes in union membership composition and employers’ associations. Like other Nordic countries, Norway ranks among the most genderequal societies. More than half of Norwegian workers are union members (52.1 percent), less than in the other Nordic countries (see Table  10.1). Unlike Denmark, Finland, and Sweden (until the early 2000s), unemployment insurance was not administered through labor unions (Nergaard & Stokke,  2007). After changing this practice, union density fell sharply in Denmark, Finland, and Sweden—making the numbers for the Nordic countries converge. Nevertheless, almost 100 percent of public-­sector employees in Norway are covered by collective agreements (as in Denmark and Sweden), with about 58 percent coverage in the private sector (Nergaard & Stokke, 2007). The Norwegian collective bargaining system is less centralized than the Danish and Swedish systems (S. K. Andersen et al., 2015). In terms of wage regulations, Norway is a mixed model compared to the more autonomous collective-­agreement models in Denmark and Sweden (Alsos & Eldring, 2008). Employment contracts are mainly regulated through legislation. The Working Environment Act (Act on Respecting Working Environment, 2005) states that the main

220   Bévort and Einarsdottir principle is open-­ended employment contracts. Norway exhibits relatively strict rules on individual dismissals from both permanent and temporary work, whereas the legislation governing collective dismissals, associated with economic downturns, is more lenient (Organisation for Economic Co-­operation and Development, 2013). There have been few changes to employment protection legislation since the turn of the century, with the exception of the liberalization of employment agencies (in 2000) and temporary work (in 2015). Although labor market systems in the Nordic countries share similarities, a study comparing multinational companies in Denmark and Norway shows differences that can be tied to the development of flexicurity in Denmark (Gooderham et al., 2015). For instance, regulations governing employment relations in Norway are more stringent than in Denmark. Furthermore, indirect participation is regulated in labor law and collective agreements in Norway, whereas it is governed on the basis of broad agreements in Denmark. Thus, regulations concerning staffing issues and wage bargaining seem to give employers somewhat less latitude in Norway than in the other Nordic countries. Human resource management practices in Norwegian companies have been characterized as soft (Olsen, Gooderham, & Døving,  2017). Participation—including informing employees about strategic plans and the economic situation of the companies—remains widespread (see Table 10.7 later in the chapter). Over this period, the HRM department has gained a strategic position in the private sector as HRM directors are increasingly part of the top management team. By contrast, in public-­sector companies, the tendency is the opposite, indicating a divergent pattern in private and public companies. Last, the HRM departments take a somewhat more active role in recruitment and competence development; however, this role is still divided between line managers and the HRM department.

Sweden Sweden is the largest of the Nordic countries, with a population of 9.6 million citizens and a GDP of USD$560 billion in 2019, making it the twenty-­sixth largest economy in the OECD (Organisation for Economic Co-­operation and Development, 2019a). The country is an influential regional power in Northern Europe and, with a long tradition of mining and trade, Sweden was industrialized earlier than the other Nordic countries. Historically, Sweden has a long tradition of consensus-­driven agreements between political institutions, employer organizations, and the trade unions (T.  Andersen & Hällsten, 2016). One of the most important agreements between employer organizations and the trade unions dates back to 1938: the Salt Lake Agreement (Saltsjöbadsavtalet). The purpose of the agreement was to establish a power balance between employers and trade unions. One prerequisite was a high degree of memberships, of the trade union and the employers’ organizations. This agreement is the foundation for the Swedish model, as a compromise between liberal market interests and social democratic values

Human Resource Management in the Nordic Context   221 (Schön, 2007). One important note is that all parties acknowledged that the agreement contributed to the creation of the welfare state, and the government could therefore accept a transfer of the responsibility for agreements and collective bargaining to the parties themselves. In the 1970s, labor laws were passed that still comprise the basic elements of the labor market, even though minor conflicts sometimes occur between employer organizations and trade unions. Sweden has been considered to have one of the least gendered labor markets in the world (Charles & Grusky, 2004). Over the decades, Sweden has received many labor market migrants, especially from Finland and former Yugoslavia (Knights & Omanovic, 2016). They were seen as a prerequisite for establishing the Swedish welfare state. Many migrants, however, are employed in low-­wage and insecure employment (Knights & Omanovic, 2016), in line with classic migration theories where migrants are recruited to perform jobs in the lower sections of the labor market (Massey & Arango, 1998; Piore, 1979). Consequently, labor markets in Sweden are polarized because ethnic minorities do not compete on equal terms with majority populations (Heath & Cheung,  2007). This challenges Swedish employers and Swedish society to find ­different solutions. The history and institutional setting of Sweden contributes to establishing collaborative HRM (Gooderham et al., 1999) and the way HRM is carried out in organizations (T. Andersen & Hällsten, 2016). Codetermination and the devolution of HRM responsibilities to line managers are examples of the micro setting in Sweden aiming for high commitment and good working conditions (T. Andersen & Hällsten, 2016; Brewster & Larsen, 2000; Hällsten & Tengblad, 2006). Results from the most recent Cranet survey clearly show Sweden’s strength in relation to the status of the HRM specialists, as it stands out in this regard from its Nordic counterparts, with the largest proportion of organizations with an existing HRM department, HRM on the board, and HRM heads recruited based on their HRM competency. One explanation is that Sweden has a very high degree of academically educated HRM professionals (85 percent), in line with the establishment of a university degree in HRM and labor relations in the 1980s (Hällsten, Peixoto, & Wikhamn, 2017). In line with the more individual-­based working culture, Sweden is also influenced by Anglo-­Saxon and US-­based management models (see Chapter 8 for a discussion of the Anglo-­Saxon model). In HRM, the Ulrich model (the three-­legged stool) has dominated HRM practice between 2000 and 2020 (Boglind, Hällstén, & Thilander, 2011, 2013). The Ulrich model for organizing HRM departments in large organizations has been adapted to the local context (Boglind et al., 2011). However, research shows significant challenges in implementing these liberal market rationalistic and cost-­efficient models to the Swedish consensus-­driven and relation-­oriented working life (Boglind et al., 2019). The low hierarchical distance between managers and employees and the focus on developing employees in the organization, in line with soft or collaborative HRM (Gooderham et al., 1999), also explains why Sweden ranks highly on employees’ communications to managers and team briefings (see Table 10.8 later in the chapter). In practice, employees in Sweden expect to take responsibility not only for their daily work,

222   Bévort and Einarsdottir but also for developing team-­ based work practices and their own competencies (Lindeberg et al., 2013). Managers in Sweden expect to support and coach their employees while focusing on the overall development of the organization. Treating employees at the workplace as active and creative actors, not as passive doers, should pay off (Gustavsen, 2012), not only for individual working conditions, but also for the employer brand and business results. The HRM functions have in many Swedish organizations striven to become strategic and value creating. This includes HRM’s involvement in the work environment and occupational health and safety management (Schmidt, Sjöström, & Strehlenert, 2019). Swedish employers are responsible for the work environment and must create safe workplaces through cooperation with employees and safety representatives. However, research indicates that after the HRM transformation already discussed, HRM has increased their involvement in and influence over health and safety management issues. In sum, Sweden has a unique welfare model, which must be seen in a historical and institutional context. To a large extent, the model has contributed to the developments of Swedish society so far. However, political changes in Sweden and different aspects of migration, technological developments, and global competitiveness will challenge the Swedish model in the future. In the next section, Cranet data from the five Nordic countries are used alongside global averages to reflect on whether the countries can still be considered collaborative rather than calculative and to discuss similarities and differences in the ways HRM is practiced in three HRM domains: HRM status in corporate management, compensation, and communication.

Human Resource Management Differences and Similarities in the Nordic Countries To analyze strengths, weaknesses, similarities, and differences in HRM practices between the five Nordic countries, we use data from the 2014/15 Cranet survey. Results from Denmark, Finland, Iceland, Norway, and Sweden are compared against the 6,045 participating organizations in a total of thirty-­five countries around the world.

Human Resource Management Status, Role, and Professionalism Various HRM practices and activities can be used as proxies or indicators of general commitment to, and professional strength of, HRM in organizations. Frequently used indicators are existence of an HRM department, HRM having a seat on the executive

Human Resource Management in the Nordic Context   223 board, existence of a written HRM strategy, whether heads of HRM are hired for their knowledge and expertise in HRM, and whether the HRM director participates from the outset in the development of business strategy (Farndale, 2005; Farndale & Sanders, 2017; Ulrich & Brockbank, 2005; Ulrich, Younger, Brockbank, & Ulrich, 2013). The results in Table 10.2 show the overall greatest strength in Sweden (i.e., Sweden scores above the world average for all indicators). Organizations in Iceland, Finland, and Denmark have a lower rate of HRM department existence than the world average and Norway has a slightly lower one again. The results presented in Table 10.3 suggest that size matters in this area because organizations in all five Nordic countries are on average smaller than in the total Cranet sample. Furthermore, a significant correlation exists, albeit weak (r =.05, p = < .001), between organizational size and the existence of HRM departments. The HRM department is more likely to have a seat on the top management team, the rate being above the average for the total sample in all five Nordic countries, indicating a common characteristic and a Nordic strength. The rate is highest in Sweden and lowest in Iceland. Relatively high proportions of organizations in the Nordic countries have a  written HRM strategy, with the highest proportion in Iceland and the lowest in Denmark. Comparing recruitment of HRM directors from within the HRM department, from HRM specialists from outside the organization, or from nonpersonnel or HRM specialists from outside or inside the organization, a certain weakness can be seen in the Nordic countries, except for Sweden. These results indicate that HRM expertise may not be valued enough when it comes to hiring the top HRM executive in organizations in Denmark, Finland, and Iceland. However, HRM expertise seems to be more valued and better utilized in the Nordic countries than elsewhere, since the specialists are consulted at the outset of business strategy development. However, some differences exist between the Nordic countries in this regard, as the rate of involvement is highest in  Norway and Iceland (about 69 percent) but about 13 percentage points lower in Denmark (56 percent), though still above the global average.

Compensation and Incentives Because union participation is high overall in the Nordic countries (see Table 10.1), it is not surprising to see the extensive usage of national/industry-­wide determination of basic pay, at or above the Cranet average (37.1 percent), in all countries except Norway (see Table 10.3). The results indicate that in Norway the determination may be more at the company/division level and at the establishment/site level. In all the Nordic countries, organizations also use individual-­level pay (even more extensively than the global average). It is used, however, most extensively in Sweden. This indicates that Nordic organizations rely, to a great extent, on national/industry-wide basic pay determined in collective bargaining, supplemented by company/divisionlevel pay and the extensive use of individual-­level pay, probably to attract highly qualified individuals or to reward for performance (see Table 10.3).

Table 10.2.  Mean organizational size and indicators of human resource management status and professionalism

Denmark Finland Iceland Norway Sweden Global

N (org.)

Mean sizea

SDb

Existing HRM department (%)

HRM on board (%)

Written HRM strategy (%)

Recruitment HRM head—specialist (%)c

Involvement in development of business strategy (%)d

206 180 117 196 283 6,045

1,247 1,415 290 915 1,717 2,769

203 180 117 196 280 6,656

83.0 82.2 67.5 89.8 95.4 90.6

71.4 78.0 69.1 69.4 89.0 63.5

71.8 79.6 89.9 73.0 81.3 67.9

57.8 50.3 60.3 N/A 81.3 67.9

56.0 63.4 69.0 69.3 65.8 50.8

Note: HRM, human resource management. a Mean number of employees. b Standard deviation. c Recruitment of HRM head, from HRM department or specialists outside the organization. d Involvement of human resources from the outset of development of the business strategy.

Table 10.3.  Determination of basic pay for professionals—rate of method usage

Denmark Finland Iceland Norway Sweden Global average

National/industry-­wide basic pay (%)

Regional collective bargaining (%)

Company/division-­level pay (%)

Establishment/site-­level pay (%)

Individual-­level pay (%)

52.2 69.6 77.6 33.1 66.7 37.1

14.6 7.3 57.3 16.6 10.5 15.9

21.9 62.5 37.2 55.2 41.1 43.7

24.2 24.1 10.7 26.4 22.1 25.5

53.9 46.8 59.8 66.3 74.0 45.5

226   Bévort and Einarsdottir Table 10.4 analyzes variable pay options. Overall, organizations in the Nordic countries seem to use variable pay to a lesser extent than organizations around the world. This applies to all the Nordic countries regarding ownership-­related pay (share schemes, profit sharing, and stock options) for professionals, except for Norway, which makes more use of share schemes than their Nordic counterparts and organizations around the world (though still not on a large scale). Bonuses based on individual and team goals are also used to a lesser extent in Nordic organizations than the global average, but Finnish and Norwegian organizations are more average users of bonuses based on organizational goals. Only Finland uses nonmonetary incentives as much as the global average, and Danish and Norwegian organizations use flexible benefits as much as the global average. Both Finnish and Swedish organizations use individual performance-­related pay extensively, above the global average. The trend seems to be one of multilevel bargaining when determining basic pay, including the individual level.

Employee Relations and Communication Starting with the trade union influence on employee relations, the results in Table 10.5 show that in the majority of organizations in the Nordic countries, more than 50 percent of employees belong to trade unions, while the international average is 31.3 percent. However, the rate of employee membership in Norwegian organizations is much lower than among their Nordic counterparts. Despite the high membership rate, in Denmark, Finland, Iceland, and Norway less than 50 percent of respondents perceive strong (great or very great) influence of trade unions on the organizations’ HRM practices, even though this is well above the global average (25.4 percent). The greatest influence is perceived in Sweden and the lowest in Denmark. It is not surprising that a very large proportion of organizations in Finland and Sweden do so. Joint consultative committees or work  councils are also used extensively in all the Nordic countries, apart from Iceland (35.2 percent). Table 10.6 shows that the methods used to communicate to employees differ in the Nordic countries compared to the global average. There is extensive communication with employees through union representatives and work councils, except for Iceland, where these two means of communication are rarely used. Information sharing through formal briefings about business strategy, financial performance, and the organization of work is more extensive in the Nordic countries than around the world (Table 10.7). This applies to all three groups of employees—managers, professionals, and clericals/manuals—and all three subjects. The greatest difference, when compared to the global averages, can be seen in the extensive information sharing about financial performance and use of top-­down communication and information sharing even to the lowest level of employees. Organizations in Finland stand out, with the most information sharing to all three employee groups when compared to the other Nordic countries. The most striking difference can be seen in the extensive information sharing about financial performance to the lowest level of employees in Finland (91.7 percent).

Table 10.4.  Use of various types of variable pay and incentives for professionals Ownership-­related pay   Denmark Finland Iceland Norway Sweden Global average

Bonuses based on . . .

Nonmonetary incentives

Performance

Share schemes (%)

Profit sharing (%)

Stock options (%)

Individual goals (%)

Team goals (%)

Organizational goals (%)

Nonmonetary incentives (%)

Flexible benefits (%)

Individual performancerelated pay (%)

7.3 6.7 1.9 14.7 7.3 9.3

6.7 10.9 7.6 14.7 10.3 18.9

4.5 2.3 1.9 4.3 2.7 6.7

33.7 36.6 23.5 25.2 15.7 46.1

21.3 27.8 19.4 16.0 14.2 30.4

24.2 35.4 16.3 35.6 16.9 36.0

31.5 42.0 27.9 16.0 34.1 42.8

29.8 16.1 10.3 33.7 22.6 29.9

36.5 62.1 21.3 36.8 54.0 47.6

228   Bévort and Einarsdottir Table 10.5.  Union membership, influence, recognition, and use of work councils  

Denmark Finland Iceland Norway Sweden Global average

Proportion where more than 50% of employees are members of Union (%)

Proportion where unions influence to a great or very great extent (%)

76.4 81.2 98.1 52.3 82.3 31.3

35.4 37.9 42.2 46.9 51.8 25.4

Proportion that recognizes unions for collective bargaining (%) 86.4 100.0 94.5 83.3 100.0 68.5

Existence of joint consultative committee/work councils (%) 82.5 95.1 35.2 75.3 91.4 52.6

When it comes to methods used for bottom-­up communication from employees (Table 10.8), the Nordic countries, except for Iceland, communicate more extensively through union representatives and work councils. Furthermore, Nordic organizations (including those in Iceland) use regular workforce meetings to a greater extent than their worldwide counterparts. Team briefings are also used extensively in Norway and Sweden, but to a lesser extent in Iceland and Denmark. Nordic organizations do not use suggestion schemes extensively to facilitate bottom-­up communication, but rely to a greater extent than their worldwide counterparts on attitude surveys among employees to listen to employee voice.

Discussion—What Can We Learn from Studying Human Resource Management in a Nordic Context? In the comparisons of the Cranet data, two observations distinguish HRM practices in the Nordic countries from the average of the participating countries in the Cranet survey. First, the high union membership level and coverage of collective agreements are reflected in a number of HRM practices, such as pay determination for professionals and employee communications (top-­down as well as bottom-­up). Second, despite the smaller company size of participants in the Nordic sample, a high proportion of HRM functions are represented in the top management team and involved in developing business strategy, indicating that the collaborative climate in the Nordic countries does not affect the status and professionalization of HRM in a negative way. Furthermore, our five contextual portraits of the Nordic countries confirm the initial notion of a deep commonality in culture, rooted in the way the countries have historically developed. Deep-­seated egalitarian and collaborative values, and a tradition of

Table 10.6.  Top-­down communication to employees  

Denmark Finland Iceland Norway Sweden Global average

Direct to senior managers (%)

Through immediate superior (%)

Through union representatives (%)

Through work councils (%)

Through regular workforce meetings (%)

76.0 86.3 82.4 65.6 65.8 70.0

84.0 90.7 81.3 86.9 94.7 81.4

28.6 28.6 3.8 32.5 27.0 17.7

43.4 47.3 1.0 37.5 41.7 19.0

63.4 74.7 69.4 58.1 83.4 49.7

Team Electronic briefings (%) communication (%) 54.9 67.6 50.0 50.0 81.0 54.4

84.6 95.6 75.9 91.9 79.5 74.3

Table 10.7.  Formal top-­down information sharing to different employee groups  

Managers formally briefed

Professionals formally briefed about

Clericals/manuals formally briefed

 

Business Financial Organization strategy (%) performance (%) of work (%)

Business Financial Organization strategy (%) performance (%) of work (%)

Business Financial Organization strategy (%) performance (%) of work (%)

Denmark Finland Iceland Norway Sweden Global average

100.0 91.7 88.7 99.4 96.8 87.9

99.4 97.2 97.1 96.9 97.5 86.7

99.4 89.0 83.0 94.4 93.7 84.6

89.4 88.2 66.3 86.3 69.3 59.6

82.3 72.6 77.5 77.5 72.1 55.2

88.2 92.3 79.2 80.0 74.9 72.5

69.4 83.6 54.8 75.6 67.8 44.4

65.5 91.7 54.8 70.6 71.7 42.8

68.4 91.4 73.6 73.8 77.0 65.9

Table 10.8.  Bottom-­up communication from employees—to a great or very great extent  

Denmark Finland Iceland Norway Sweden Global average

Direct to Through Through union Through Through regular Through Through Through Through electronic senior immediate representatives (%) work workforce team suggestion employee/attitude communication (%) managers (%) superior (%) councils (%) meetings (%) briefings (%) schemes (%) surveys (%) 37.7 36.3 62.9 57.5 45.9 39.9

74.3 77.8 81.3 92.5 89.0 76.1

41.7 41.8 1.9 78.8 61.3 22.3

40.0 31.3 2.8 55.0 48.0 19.5

45.1 53.3 50.0 50.0 63.7 37.5

37.7 47.8 36.4 52.5 66.7 43.2

9.7 7.8 10.5 13.1 13.1 21.5

43.4 59.1 38.7 51.3 60.4 37.3

39.4 56.9 49.1 48.1 38.7 46.8

232   Bévort and Einarsdottir legitimating the organization of interests in civil society institutions, have created five pluralistic, but also corporatist, societies where the state, employers, and employees (and other interest groups) together create tightly knit, coordinated economies. The kind of harmony of interests that HRM sometimes assumes at the company level is in various ways strived for at the societal level. And while the Nordic countries are coordinated market economies, they are at the same time heavily exposed to world markets (see Table 10.1). This creates a paradox of coordination versus dynamism, because coordination in these countries historically has included a focus on flexible and dynamic markets. One example is the Danish flexicurity model, which has created a labor market that is as flexible as the one in the United Kingdom, without breaking the social contract between unions, employers, and the state (and which Finland has recently been inspired by, as we highlighted previously). While the lack of job protection in flexicurity is controversial, the kind of compromise it represents is typical of the kind of pragmatism found in the Nordic countries. The countries have established these compromises differently and that affects the way labor markets are organized. For example, Iceland is much smaller than the four other countries, and despite its high union density and extensive use of collective agreements, individual contracts are used extensively to supplement collective agreements for professionals, whereas works councils are not used as much as in the other Nordic countries. Finland and Sweden have a more centralized tradition of negotiations and tripartite arrangements, while Denmark has a decentralized labor market regime, in which the state has a less prominent role. In Norway, the state has a stronger role in, for instance, job security legislation. Nevertheless, we contend that these compromises represent the same balancing of interests that broadly supports high levels of social security, income equality, and welfare, while at the same time actively supporting private industry and economic growth. Overall, in relation to “talent competitiveness,” defined as a country’s ability to attract, develop, and retain the human capital that contributes to its productivity (Lanvin & Evans,  2017), the Nordic countries rank highly: In the world in the Global Talent Competitiveness Index (Lanvin & Monteiro, 2019), Iceland ranks first, Norway second, Finland third, Sweden fourth, and Denmark thirteenth. In the Nordic countries, HRM is welcomed provided it can interact with the logic of the social model. That is, for many employee groups, HRM has to be carried out in collaboration with shop stewards and union representatives, as well as work councils, and the constraints of elaborate and extensive local and general agreements have to be taken into account. HRM also has to manage labor market arrangements and social legislation that affect the organization. HRM representatives will, in this social context and as part of management, sometimes experience adversarial relations with employees. However, in other situations they will be a central part of the collaborative model that is the key feature of the Nordic societies. Strategic HRM (Ulrich & Brockbank, 2005) has, nevertheless, had an impact in the Nordic countries. Arguably, the relative success of “strategic HRM” in the Nordic countries is a microrepresentation of the coordination–dynamism paradox mentioned

Human Resource Management in the Nordic Context   233 ­ reviously. The Nordic model needs competitive dynamism to create growth to support p the welfare state. One can therefore argue that strategic HRM is now accepted in the Nordic countries as part of the effort to sustain the competitiveness of the social model.

Conclusion Strategic HRM, of the stakeholder-­oriented variety identified in the Harvard model (Beer, Boselie, & Brewster, 2015; Beer, Spector, Lawrence, Mills, & Walton, 1984), can be seen as a way of balancing interests, with the organization as the core institution. In the Nordic countries, stakeholder interests are in many ways already organized and balanced at the societal level. The task of HRM in these countries is, for these reasons alone, arguably different than the task that HRM faces in US organizations. In the Nordic countries, HRM operates on the back of an already existing collaborative model. Besides managing that model, HRM can arguably focus more on other aspects of HRM that relate to organizational competitiveness, for example, human capital advantage and organizational process advantage (Boxall & Purcell, 2016). The specific Nordic HRM practices that have developed in different industries and types of organizations need to be researched further (see Boglind et al., 2011, for a Swedish example of such a study).

Acknowledgments We acknowledge the contribution of the authors of the country portraits of Finland: Adam Smale, University of Vaasa; Norway: Karen Modesta Olsen and Paul Gooderham, NHH Norwegian School of Economics, Bergen; and Sweden: Per Thilander and Karin Allard, University of Gothenburg.

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chapter 11

H um a n R esou rce M a nagem en t i n th e Postsoci a list R egion of Cen tr a l a n d Easter n Eu rope Michael J. Morley, Andrej Kohont, József Poór, Rūta Kazlauskaitė, Veronika Kabalina, and Jana Blštáková

The countries of central and eastern Europe (CEE) have a range of endowments (Berend, 1996) and show significant variations in their preferred approaches to human resource management (HRM). Such variations arise for an assortment of reasons, including their distinct political, cultural, institutional, and developmental trajectories (Brewster & Bennett,  2010; Kohont & Brewster,  2014; Kohont, Svetlik, & Bogičevic Milikic, 2015). While the socialist system under which these countries operated until the 1990s stretches back to 1917 in the case of Russia, the other countries of the CEE region fell under this governance arrangement after the Second World War and remained within it until after the collapse of communism, the fall of the Berlin Wall, and the opening up of the region in 1989. The transition process toward democracy and free market principles that has been taking place since has been characterized as one of the most significant economic and social processes of recent times (McCann & Schwartz, 2006). As has become apparent through the successive waves of reforms that have taken place, many of the CEE countries have demonstrated a robustness and capacity for change in the face of these difficult reforms. Our interest in this chapter, HRM, has, since the inception of the transition process across the region, had to reinvent itself and, in the process, become redefined according to capitalist principles. Where it has taken hold, the emergence of the modern conception of HRM in CEE can

240   Morley et al. be traced to the broader development of the sustainable, competitive market economy and the desire to achieve a closer alignment between strategy and HRM (Morley, Minbaeva, & Michailova, 2018). Despite their common socialist legacy, each of these countries exhibits unique characteristics. Their distinctiveness is especially reflected in the divergence and heterogeneity that characterizes their current approaches to HRM (Sahadev & Demirbag, 2011). Lane (2007) has suggested that, for classification and analytical purposes, the economies in the CEE region can usefully be divided into three categories, namely, middle, low, and very low income. The first (including, for example, Slovenia and the Czech Republic) are closest to continental European capitalism, reflecting the fundamental requirements associated with joining the European Union (EU) and the need to establish institutional arrangements that complement those of their closest developed trading partners. Others, such as Bulgaria and Romania, are less developed and have moved closer to liberal market–type arrangements. In the case of the low-­income group, their economic status makes the processes of attracting investment and equipping people with the right mix of knowledge and skill increasingly challenging, with the result that the securing and sustaining of a developmental trajectory remains problematic for them (Reymen et al., 2015). The very low-­income category includes countries such as Belarus and Ukraine. In this chapter, we explore several key features relating to the development of HRM in the CEE region and we contextually situate and landscape core aspects of contemporary practice. We commence with a background discussion of the evolution of HRM in the region. In this effort, we identify and describe three distinct sequential phases (Szelenyi & Wilk, 2010; Szirmai, 2015) under which the development of HRM in the region can be situated and understood: the socialist period, the transition period, and the contemporary period. Having set out the contours of these phases of the development of HRM in CEE, we then turn to providing an account of a select number of particular historical and contextual factors frequently referred to by scholars to account for some of the commonalities and differences exhibited in contemporary HRM in the region. Chief among these factors are cultural determinants, variations in the control provisions that operated under socialism, the path to gradual Europeanization, the ownership structure in the economy, along with the shifting fortunes of trade unions in CEE, and noteworthy variations in the levels of managerial competence. Finally, drawing on three waves of the Cranet data gathered between 2004/5 and 2014/15, we provide an evidence-­based account of selected aspects of organizational-­level HRM policy and practice in the region. Our analysis proceeds on a comparative basis whereby we set down the key results for the CEE cluster of countries represented in the Cranet survey in comparison with the results for all participating countries across the globe. Our intention is to provide a succinct overview of certain developments in CEE, allowing the reader to situate and appreciate the commonalities and differences that represent postsocialist countries and to understand the extent to which HRM policy and practice developments in these countries are characterized by unique postsocialist recipes, relative to their counterparts elsewhere.

Human Resource Management in the Postsocialist Region   241

The Evolution of Human Resource Management in the Central and Eastern Europe Region In tracing the evolution of HRM in the CEE region, we focus on three key phases. Firstly, we treat the socialist period which was characterized by the close control of the HR function and its activities by the communist party. We then move to the transition period marked by the collapse of communism and eventual waves of reform and privatization. Finally, we turn to the contemporary period where, in particular, we call attention to the emergence and influence of foreign direct investment on the evolving HR landscape in CEE and the increasing number of skill shortages in certain sectors throughout the region.

The Socialist Period Under socialism, people management in the CEE region has been characterized as being underdeveloped, politicized, and distorted by ideology (Fey, Engstrom, & Bjorkman, 1999). Branded as a “politically oriented decision-­making system” (Garavan, Morley, Heraty, Lucewicz, & Suchodolski, 1998, p. 210), the personnel function and all its associated activities were closely supervised by both the Communist Party and local government officials. The consequence was that the system and the architecture governing it were not favorable to the growth of “more sophisticated value-­adding activities, with the result that there was always going to be significant ground to be made up if the transition economies of CEE were going to be able to support, sustain and expand a developmental trajectory based on free market principles” ( Morley, Poór, Heraty, Alas, & Pocztowski, 2016, p. 74). In the early years of postwar socialism, personnel policy was largely formulated at the state level and was enforced by legislation. In this, the central task of the personnel function was to ensure employment and social standards of workers, to collect and store personal data, and to calculate wages (Letiche,  1998; Zupan & Kaše,  2005). Because personnel issues were under the close control of the Communist Party and the heads of state, personnel functions were routinely staffed by political appointees deemed suitable by state authorities for the key personnel positions available (Koubek & Brewster, 1995). The local Communist Party committee typically had the final say in sanctioning appointments and, indeed, in organizational promotions more broadly. It was considered crucial that the director of the personnel function was a reliable political ally, even if, as was typically the case, they lacked the relevant formal education or personnel-­related experience that might make them more effective. Adam (1995, p. 67) highlights that in the early years, top managers were selected almost solely on the basis

242   Morley et al. of political criteria, with professional competence and likely ability to perform the role only coming to the fore as an important selection criterion at a later juncture. More broadly, access to education, especially at the university level, and appointment to ­positions that were considered potentially influential, most notably those involving working with people such as teachers, foremen, and directors, were filled by those who were viewed as being politically reliable. The selection of specialists and many ­personnel-related decisions, even relatively routine and mundane ones, were influenced by the Communist Party and by government politics and objectives (Pundziene & Bučiūnienė,  2009). Management was not considered a profession, and decisions regarding promotion were not based on performance assessment (Pearce,  1991). Indeed, the absence of any formal performance appraisal system was a characteristic feature. Koubek (2009) postulates four particular reasons for this, namely, the principle of social egalitarianism, which resulted in wage and salary leveling; the full employment policy with the consequence that few were afraid of any negative appraisal because there was little danger of becoming unemployed; the scarcity of labor in poorly planned and managed economies in the region; and the centralized system of compensation, which meant that superior or inferior performance was not taken into account. As in other contexts, in CEE the role of the personnel function in organizations was plagued by debates as to its ambiguity and lack of demonstrable contribution to the bottom line. Pocztowski (2011, p. 14) describes personnel management under communism in Poland as having several characteristics that made it reactive, disorganized, and ineffective. He notes that the personnel function lacked a comprehensive systematic perspective and was characterized by the following features: the haphazard and temporary nature of actions undertaken, politicization and the impact of third parties on personnel-­related decisions, a high level of centralization within organizations, the low competence of the people taking care of HRM issues, insufficient tools used to solve personnel-­related problems, and finally insufficient institutionalization or even its complete absence. The result was a low-­ranking function, characterized by overstaffing, high fluctuation, and limited effectiveness. The socialist period did see relatively rapid industrialization in several countries. Many nations in the Soviet bloc drafted a Petletka, which was essentially a five-­year plan of economic development (Turner & Collis, 1977). These plans led to the creation of new organizations in different locations and resulted in an influx of rural workers into bigger urban centers. National cyclical five-­year plans also led to the creation and bolstering of public services in the fields of education, health, child care, and other sectors. Under these state-­led initiatives, the main task of personnel functions was to ensure the new industrial centers that were springing up had a sufficient labor supply, typically secured through encouraging and facilitating migration from rural areas into zones designated for industrial and urban expansion. The principle of collective distribution of gains from these enterprises, coupled with the principle of equal access to services and support, did result in the satisfaction of basic needs for families, including the provision of basic housing and access to healthcare and primary education, all of which were provided by the state.

Human Resource Management in the Postsocialist Region   243 Among ex-­Yugoslavian countries (e.g., Slovenia, Serbia, and Croatia), the development of the personnel function under socialism was also significantly influenced by the ­shaping influence of the “self-­management system,” which was initiated in 1950 after a dispute between Tito and Stalin resulted in Yugoslavia steering a different course to other countries within the Soviet bloc. By introducing self-­management and social ownership, the governance of organizations was divided between the state and representatives of management and workers’ collectives through a series of joint works councils (Pološki Vokić, Kohont, & Slavić, 2017). Here, some of the most important personnel decisions were made by these works councils. Gradually, various practices in the areas of work design, workload assessment, planning and recruitment, training, health and safety, and employee assistance schemes all began to take hold and occupy much of the time of those working in the personnel function. Nevertheless, despite this newfound expansionary role, even in Yugoslavia the function remained relatively underdeveloped. Once again, a lack of adequate professional education among those leading the function and ongoing close monitoring by the Communist Party served as constraints on development. Throughout the 1960s, rapid industrialization continued in different parts of CEE, although some economies in the region, among them the then Yugoslavia, faced a crisis and sought to engage in economic reforms aimed at introducing more market principles and increasing the autonomy of company directors in charting a more autonomous path for their enterprise. These developments began to signal the emergence of what became known as market socialism in some countries. Of note, some, including Hungary, Poland, and what is now the Czech Republic, were able to retain elements of private enterprise and aspects of entrepreneurial activity during Soviet occupation, a feature that aided the overall industrialization effort in those countries and one that was to prove important in their overall transition after the fall of the Berlin Wall in 1989 (Dirani, Ardichvili, Cseh, & Zavyalova, 2015, p. 358; Horwitz, 2011). Others, such as the then Yugoslavia, combined public and private enterprises and also some early foreign investments that can be traced back to the 1960s to enhance both the quality of production and the inflow of foreign currency (Kohont et al., 2015; Svetličič, 2016). Within the Soviet bloc, countries such as Estonia, Latvia, and Lithuania were considered front-­runners in industrialization and were touted by ruling officials as showcase examples to illustrate what was possible under socialism. There is little doubt that the emphasis placed on these countries by Soviet authorities resulted in their development. They gained a reputation, in particular, for highly qualified workforces capable of supporting light and heavy industry and for food processing (Sippola, 2009). In the case of Russia, industrialization began in the prewar period and continued after the end of the Second World War. The construction of enterprises in remote areas in the Urals, in Siberia, and in the Far East was accompanied by the creation of company towns and a paternalistic model of personnel management. The organizations that located themselves in these regions built, in addition to their own production facilities, important social infrastructure such as hospitals, elder-­care homes, and child-­care facilities, along with cultural facilities. In colocating these amenities with their production facilities,

244   Morley et al. they  became readily accessible for employees working in these factories. Beyond ­immediate workforces, they were also often made available to residents of these industrializing cities more generally. The use of cheap labor from gulags, an elaborate system of labor camps set up in the Soviet Union from 1930 to 1945, often contributed to the emergence of an authoritarian leadership style (Lazarev, 2003). Of note, where trade unions existed, they became part of the broader personnel management system in these setups, resulting in their roles being confined to distributing social benefits and operating the social insurance fund (Ashwin & Clarke, 2002). On the whole, sophisticated workforce planning in organizations in CEE during the socialist period was rare, something that was reflected, for example, in large discrepancies between anticipated and actual employees’ competences. Poor workforce planning often led to overstaffing, as on the one hand organizations were obliged to recruit certain quotas of employees assigned to them by the Petletka, irrespective of their actual labor needs, while on the other hand, organizations were motivated to give a job to surplus employees because they came with additional financial funds (Koubek & Brewster, 1995). As a result of being guaranteed lifetime employment, employees rarely feared being dismissed for underperformance and were seldom motivated to exhibit extra discretionary effort (Zientara & Kuczyński, 2009). More broadly, as a rule, employees did not have much freedom in choosing their employer, but were rather assigned to one, something that again served to undermined overall motivation and performance in the long run (Cook, 1993). Training and development, like other personnel practices, were underdeveloped and, where they existed, by and large limited to on-­the-­job training only. Training interventions were performed more as a formality in response to the requirements made by central authorities to improve education in the society in general, rather than to meet particular organizational needs. Because training and development had no effect on promotion, such interventions were therefore also often regarded by employees as being of little value (Fey et al.,  1999). Employee motivation was also largely ignored and bonuses were rare, with authorities instead favoring the awarding of medals and mementos as a way of recognizing the efforts of employees. Those employed in the personnel function typically came from an economic, legal, or psychological background. In the 1950s, the first specialized training courses in personnel management were developed, followed by the introduction of the first undergraduate programs in the field in the 1960s in Slovenia, Serbia, and Croatia (Svetlik et al., 2010). Nevertheless, the interest of employers in solving personnel problems was small, and there was a lack of experts. During the period of communist rule, the personnel agenda in individual organizations was dispersed into different, relatively in­de­pend­ ent units (Koubek, 2009). In some instances, so-­called personnel departments focused on administrative services largely relating to personnel records. Compensation and work organization were administered by departments of labor and wages or by departments of labor economics. Departments of planning took autonomous responsibility for manpower planning and labor supply, while departments of employee care distributed benefits and organized social activities. In other contexts, two separate units were

Human Resource Management in the Postsocialist Region   245 favored, one focused on dealing with office staff and management and the other dealing with blue-­collar workers. The group dealing with office staff reported to the personnel manager, while the one dealing with blue-­collar staff reported to the finance director (Denisova-­Schmidt, 2011; Poór, Engle, & Brewster, 2017). Regardless of how the activities were divided up, all associated units were highly administrative, and the important personnel policy decisions of organizations remained the preserve of representatives of the Communist Party. Under socialism, the CEE region was also marked by the guaranteed right to employment on the part of the employee and a duty to provide it on the part of the employer, alongside the principles of equality and solidarity. Consequently, overall organizational performance and effectiveness were secondary considerations, relative to the social function of the firm in providing a place of work for citizens. Issues surrounding labor costs and productivity of workers were neglected, and workforce reductions arising from technological advances or as a result of prevailing economic circumstances were not possible. Thus, the economy and overall productive effort were largely regulated by dominant social principles. In many CEE countries, the need for new workers was facilitated through the organizing of migration of workers from rural areas to burgeoning industrializing urban centers. During this period, the works councils and representatives were dealing with issues of wages, social standards, and workers’ rights, while at the same time staffing was agreed at a macro level (for example, in the so-­called social arrangements created by “self-­governing interest communities” in Yugoslavia). Macro agreements related to employment, wages, scholarships, and education aimed at creating common government-­led personnel and employment policies. Pay was characterized by Uravnilovka, a form of wage and benefits egalitarianism (Pološki Vokić et al., 2017), and its range in many countries was limited to 1:3.3 in all organizations (Kohont et al., 2015). Of note, in the Soviet bloc countries, qualified workers could earn more than engineers (DenisovaSchmidt, 2011). Research by Brekić (1983) and Kavran (1976) found that the staffing function was largely administrative, with relatively little professionalism surrounding the staffing of organizations and the training of employees. In the 1970s, the first undergraduate personnel management programs were launched in Yugoslavia, which ultimately contributed to a gradual incremental increase in the power of the personnel function in organizations and an eventual diminution of the role and authority of self-­governing bodies as the developers and purveyors of policy in the human resources field. The professionalization of personnel management education and activities came later for many of the other countries in the CEE region, with the result that the perceived value and relevance of the function to the successful operation of the firm and the actual competence of those working in the function varied significantly throughout the CEE region. Specifically in the case of Russia, for example, the professional education of specialists in the field of personnel management based on the Bologna process was launched toward the end of the 1990s, with the result that specialist bachelor’s and master’s programs are now offered in some 170 highereducation institutions throughout the country.

246   Morley et al.

The Transition Period Economic problems and political conflicts deepened in the 1980s in different parts of the CEE region. The socialist system was becoming increasingly ineffective and there were clamors for economic reforms. Liuhto (2001, p. 15) highlighted that while the transition economies did not necessarily require their own microeconomic theories, it was fundamentally important to understand that organizational change in these economies was more profound and far-­reaching than in the Western context, insofar as almost the entire enterprise population and, indeed, the whole of society more broadly was engaging in an unprecedented transformation to be able to survive in a competitive landscape As a result, from early in the transition process, the performance question, albeit in different guises, formed a central policy agenda and an important aspect of academic enquiry with the emergence and institutionalization of new approaches to workforce management being bound up in the economic transition process (Morley et al., 2018). In organizations, costs were reduced, and many internal activities, such as training and research, were abolished, reduced, or collapsed. In Russia, the old system of vocational retraining largely collapsed, but very little emerged to take its place. The links between vocational schools and organizations in which the students obtained combined professional and firmspecific skills were also broken. The majority of new private employers emerging in the new business landscape in CEE made very little provision for the training of their employees, relying heavily on training provided by previous state employers or on the motivation of their own employees or prospective employees to undertake training on their own initiative, at their own expense, and in their own time. Thus, the availability of appropriate training was limited and it was expensive to access. Nevertheless, research does suggest that those who undertook training did experience significant increases in earnings as the transition process unfolded and took hold (Clarke & Metalina, 2000). The pace and depth of the changes and their impact on society served as additional contextual determinants governing variations among CEE countries in their approach to HRM during the transition period (Havrylyshyn, Meng, & Tupy, 2016). The beginning of the transition period in Poland, for example, can be traced to the early 1980s, almost a decade before the eventual collapse of communism. Reforms introduced in this earlier period in Poland, coupled with the fact that Poland maintained aspects of its entrepreneurial business culture during the communist period, meant that it was better placed than some of its neighbors to engage with the transition process when it eventually came. In contrast, the transitional period in Russia, for example, had a profoundly negative impact on public health, demography, and productivity. In the 1990s, the immediate priority of workers, managers, and organizations was to secure their own existence: THe watchword of the 1990s was “survival” (Clarke, 2007). The historical attributes of Soviet personnel practices continued to be perpetuated in Russian organizations during this time. However, the shortage of young employees and qualified workers for manufacturing enterprises in Russia became a particularly prominent topic from 2000 onward, prompting a requirement for deeper reforms (Gimpelson & Kapeliushnikov,  2013).

Human Resource Management in the Postsocialist Region   247 Unilateral changing of wages by employers was the subject of particular discussion in Russia. Most scholars agreed that a specific system of remuneration has evolved in the country with characteristics that do not exist either in other postsocialist countries or in developed capitalist economies (Clarke, 1998; Gimpelson & Kapeliushnikov, 2013). Here, employees were not laid off, but their wages were adjusted to the economic situation faced by the employer. In the 1990s, the major practice applied by employers was to delay the payment of wages and salaries through recording arrears. These measures were accompanied by temporary layoffs where they were deemed necessary (Gerber, 2006; Gimpelson & Kapeliushnikov, 2013; Kapelyushnikov, Kuznetsov, & Kuznetsova, 2012). Beyond Russia, throughout CEE, many were not prepared for mass layoffs after privatization and the numerous bankruptcies that followed (Redman & Keithley, 1998). These countries’ experiences were marked by the loss of former domestic and regional markets and they had to eke out new markets, which were often more demanding than their experience allowed them to meet. Peiper and Estrin (1998), in an analysis of the emerging situation in Poland, Hungary, the Czech Republic, Slovenia, Romania, and Russia, reported developments in three major areas. First, they observed an effort at modernization of practices and tools in the areas of recruitment and training, with accompanying altered skill and work patterns. They also observed skill shortages and salary and benefit adjustments, and they examined the evolving role of expatriate managers working in these transition economies and the shift from employing expatriates to relying on locals. Despite differences between countries in reform and economic performance, the authors found these particular changes to be surprisingly common across the countries studied. A study of HRM innovations in Polish enterprises revealed that the most widespread innovations of the 1990s were the introduction of confidential wages and individual bonuses for blue-­collar employees (Weinstein & Obloj, 2002). Human resource management representation on boards was found to have grown in around a quarter of the firms investigated and was considerably more common among foreign-­owned firms. The diffusion of HRM innovation was mainly driven by the need to enhance efficiency, by competitive pressure arising from foreign competition in particular, and by the desire to achieve a stronger fit between HRM and business strategy. Overall, during the transition period, the HRM function played an increasingly demanding role. In particular, it had to adapt to a multitude of new legislative provisions and profoundly altered labor market dynamics. Specialists in HRM were at the forefront in managing layoffs, while concomitantly paying increasing attention to expanding the skills and competences of those remaining in employment. Activities in the areas of training and education had to be expanded enormously, with a particular emphasis being placed on the development of managers.

Contemporary Developments Since the late 1990s, waves of ongoing restructuring, increasing productivity, introducing new technologies, and rising exports, along with the concomitant managing of labor

248   Morley et al. costs, have been the hallmarks of the developmental trajectories that the CEE countries have sought to secure. The rise of multinationals in the region has been particularly pronounced and it has been argued that multinational companies have redrawn the labor market map of the former socialist countries in many respects (Lewis, 2005). In particular, it has been noted that the role of multinational corporations (MNCs) in reshaping the characteristics of labor markets and HRM practice has been significant, especially in the securing of foreign capital, the arrival of expatriate managers, and the emergence of mimetic pressures to adopt new practices. Significant growth in the CEE region has been achieved through the securing of foreign direct investment (FDI), and that is playing a role in the emergence of a more strategic approach to HRM (Poór et al., 2020). Among other things, they have abandoned the policy of egalitarianism in reward systems pursued under communism and introduced a basic salary system based on the importance of the type of job executed by the job holder and the performance standard achieved. In the 1990s, with the exception of Hungary, inward FDI in the countries for which we have data grew faster than their outward FDI, indicating that these countries are on a developmental path significantly vested in the inward FDI flows secured (Kalotay, 2017). On the HRM front, new methods and new approaches have been introduced and senior HRM specialists are increasingly operating at more strategic levels and serving as members of the top management teams and boards. Devolution of some activities from the HRM function to line managers has been taking place, along with a broader trend involving the transition from traditional administrative personnel management to more strategic HRM (Lewis, 2005). Kаbalina, Zelenova, and Reshetnikova (2019) suggest that the devolution of decision-­making to line managers in the relevant areas of HRM has increased the variability and flexibility of HRM practices. Kazlauskaitė et al. (2013) engaged in a contextual HRM analysis of selected CEE countries, using Sparrow and Hiltrop’s (1997) sets of factors that account for differences in national patterns of HRM in Europe: (1) HRM role and competence, (2) business structure, (3) institutional factors, and (4) cultural factors. Their analysis suggests that although they share a common past, there are a number of key emerging differences between the countries with respect to the ownership and structure of businesses, the nature of economic development, the levels of education, and overall national culture, which in turn result in significant differences in overall national patterns of HRM in the CEE region, something that we will return to when we present the data from Cranet on selected aspects of HRM in CEE in a comparative perspective. However, work by Holden and Vaiman (2013, p. 134) suggests that CEE domestic organizations continue to employ mainly centralized and administrative HRM practices and continue to neglect more strategic aspects. They note that although “the need to move from purely administrative towards strategic HRM has already emerged, there is still little evidence that this shift has materialised” on a widespread basis. Jankelová, Joniaková, Blštáková, and Némethová (2017) found that in the case of Slovakian organizations, despite their awareness of the importance of having a more strategically oriented HRM function as part of the overall armory of the business in rising to the

Human Resource Management in the Postsocialist Region   249 competitive challenges being faced, a majority remained focused on operational ­matters. In particular, they noted that the key issue that worked against their securing a more strategic orientation lay in the evaluation by many organizations of little strong evidence on the contribution of HRM to the success of organizations’ overall value chains or overall business performance. In the Russian case, Latukha (2015, p. 1057) accounts for this by a lack of core competencies, which limits HRM specialists in their roles, something that may be linked to the relatively young age of the Russian business culture and business education system. An overall competency deficit is found in other research in the postsocialist region (Kazlauskaitė et al., 2013; Kohont & Brewster, 2014). Several factors were thought to account for this, including a long tradition of performing rather traditional administrative tasks, a lack of appropriate educational and professional development programs, a preponderance of lawyers and clerical staff within the function, and a belief among managers that the main role of HRM specialists was to ensure legal compliance (Morley et al., 2018). This latter factor is consistent with findings from other transition economies where, for example, the underlying managerial mindset presents an important determinant of divergence in HRM practices, especially in terms of the ongoing absence of a deeper strategic involvement of the HRM function (Zupan & Kaše, 2005).

Key Contextual Determinants of Commonalities and Differences in Human Resource Management among Central and Eastern European Countries Having examined some key developments in HRM from a temporal perspective under the three key phases of change in the CEE region, we now turn to outlining a number of critical contextual factors occurring at different levels that, scholars suggest, hold significant explanatory power in accounting for commonalities and differences in HRM in the CEE region. We focus on both the macro-­level contextual factors of national culture, state control, Europeanization, and ownership structure, and the meso factors encompassing the role of trade unions in CEE organizations and the competence set of the HRM specialists leading the functions in these organizations. From a contextual perspective, national culture represents a critical determinant of variations in HRM approaches and practices. High power distance cultures in the region, in particular in Slovakia, Russia, and Romania and among the countries of the former Yugoslavia, serve to constrain elements of engagement and workplace empowerment. It has been suggested that employee participation is challenging in the CEE context, employee engagement remains low in relative terms, and managers exhibit a

250   Morley et al. “heroic” style (Michailova,  2002). There is a proclivity for autocratic, top-­down ­management, hierarchical structures, and risk-­averse behaviors (Michailova, 2000), in particular in public-­sector organizations (Zientara & Kuczyński, 2009). This is also one of the reasons that the cost-­effective model still prevails, HRM investments are not sufficiently appreciated, and the use of performance appraisal remains low (Karoliny, Farkas, & Poór, 2009; Letiche, 1998; Zupan & Kaše, 2005). Research by Woldu, Budhwar, and Parkes (2006) concerning the predominant culture in Poland and Russia suggests that changes in individual preferences have become evident during the transition ­process and that there has been a shift from group-­oriented values toward greater individualism. The authors suggest that employees who work in similar organizations in comparable positions show a degree of convergence in cultural orientations. Analyses of organizational cultures in CEE also point to similarities between Bulgarian and Russian cultures deriving from both their geographic proximity and their Greek Orthodox religious roots, along with underlying similarities between the Estonian and Finnish cultures and basic differences between Estonian and Russian cultures, despite Estonia’s protracted period of engagement with the Soviet system (Jarjabka, 2010). Estonia had already experienced democracy and a market economy and enjoyed living standards comparable to Scandinavian nations before its incorporation into the Soviet Union in 1940 (Zamascikov, 1987, p. 226). Another regional contextual factor that accounts for differences in HRM between postsocialist countries and between those countries and their Western counterparts relates to the variations in the levels of control that were exercised by the state and the ruling party during the socialist period. In particular, it is suggested that variations in control resulted in significant differences in the preferred approach to labor market regulation and management (Ignjatović & Svetlik, 2006; Kapelyushnikov et al., 2012). At least three traditions in the management of labor market dynamics in CEE have been identified. First is the ex-­Yugoslavian tradition, which was marked by a relatively high incidence of open unemployment, self-­management, possibilities for freer movement across borders for travel and work, fewer media blockades, and outward FDI, which contributed to a greater openness and a stronger orientation toward Western markets (Pološki Vokić et al.,  2017). Second is the Orthodox Soviet system that operated in Russia, Bulgaria, Estonia, Lithuania, and Latvia, which was marked by a strong emphasis on rules and the absolute power of the Communist Party. And third is a more moderate intervention model that was found in the Czech Republic, Slovakia, Poland, and Hungary. These earlier variations in approaches to the management of the labor market are still reflected in, for example, the much stricter labor legislation in Slovenia and Russia in comparison with Poland and Hungary (Groux, 2011). The particular nature of the path toward gradual Europeanization among CEE postsocialist countries, along with the timing and the manner through which this occurred, also serve as an important contextual determinant of variations in HRM practices and preferred approaches in the CEE region. Gurkov and Zelenova (2009, p. 278) highlight that for most CEE countries, despite the differences in the point of departure of their transition journey, there was an identified point of destination, namely, to “re-­join the

Human Resource Management in the Postsocialist Region   251 wider Europe, to re-­establish normal economic and social relations, to reach the European level of economic and social welfare.” They note that while in the case of East Germany this leap happened virtually overnight with the reunification of Germany, other CEE countries traced their own trajectories in joining the EU family. The first wave of EU expansion to CEE saw membership extended to the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia in 2004. These countries were followed by Bulgaria and Romania, which became members in 2007, and subsequently by Croatia, which became an EU member state in 2013. Europeanization has been characterized as “a process of reorienting the direction and shape of politics to the degree that the EC political and economic dynamics become part of the organizational logic of national politics and policy making,” culminating in eventual membership of the EU (Ladrech, 1994, p. 69). In relation to the impact of this process on HRM, this orientation contributed to the harmonization of labor legislation with EU rules and to an increase in the free movement of citizens between countries, especially among migrants from new member states seeking labor market opportunities in others. Because of the prevailing economic differences, marked by higher incomes and gross domestic product rates in Western countries, the labor mobility from CEE to EU countries with higher wages rose significantly. The result was that CEE countries began to experience a significant brain drain, with several countries being challenged by the consequences of this loss of skill and knowledge, particularly in services, transport, and construction (Stachova,  2013). Arising from this process of Europeanization and integration, labor markets in CEE postsocialist societies are now much more regulated, compared to the situation during the earlier transition phase in the 1990s, with the result that expectations concerning prevailing HRM practices and standards have risen and scholars have suggested that many organizations in CEE have re-­evaluated the role and the place of HRM as a key shaping determinant of organizational performance (Stacho & Stasiak-­Betlejewska, 2014). The prevailing ownership structure and industry mix existing in these economies also hold particular explanatory power when accounting for variations in the nature of HRM. Many countries’ ownership structure was highly marked by waves of significant denationalization, as in the case of Croatia and Slovenia, for example, and to a lesser extent in Poland (Stirböck, 2001), or by a high degree of privatization involving the transfer of significant assets to oligarchs in the particular case of Russia (Gurkov & Settles, 2013). In addition, in postsocialist countries, waves of FDI during the transition process have become an important part of the armory of development in these economies and, in many instances, as the critical mass of foreign multinationals grew, they began to change the framework for HRM and to create the conditions under which conservative, administrative personnel and HRM practices and policies began to be jettisoned in favor of more strategic approaches (Berber, Morley, Slavić, & Poór, 2017; Poór et al., 2014, 2017). Importantly in this regard, the scale and density of FDI differ significantly among postsocialistic countries. Poland, Hungary, and Slovakia are the leading host countries in the region for FDI, while countries in the Western Balkans, such as, for example, Serbia, Romania, and Bulgaria, have received comparatively less FDI, partially as a result of their

252   Morley et al. perceived economic and political instability (Estrin & Uvalic, 2016). A more gradual, incremental transition process, as in, for example, the case of Slovenia, may also be a structural condition impacting the shape of HRM (Ignjatović & Svetlik, 2006). The nature and role of trade unions in the CEE region have also been noted as holding particular explanatory power in accounting for the manner in which HRM developed. In the socialist period, union membership was close to 100 percent (in the Soviet bloc countries it was obligatory); however, unions performed a social and welfare role rather than dealing with employee relations matters per se (Sippola, 2009). The political role and overcentralized structures operated by the trade unions during socialism, together with the overall poor regard for trade unions (Solidarnosc in Poland being an exception), resulted in a diminution of their status and skepticism concerning their role posttransition (Dimitrova & Petkov, 2005). Given this heritage, unions were not prepared for a new role in the postsocialist period and were neither popular nor active. The result was a significant drop in trade union density in the region, and low density rates are now characteristic of many of these countries (Cooke, Wood, Psychogios, & Szamosi, 2011; Groux, 2011; Karoliny et al., 2009; Psychogios et al., 2013). Estimates of union density in the region range from lows of approximately 10 percent in Estonia and Lithuania to highs of 27 percent in Slovenia and 35 percent in Croatia. Thus, while there is little doubt that in some countries trade unions still have an important partnership role (Milikić, Janićijević, & Cerović, 2012) and a stronger power base in organizations, as in, for example, Slovenia and Croatia (Kazlauskaitė et al.,  2013; Pološki Vokić et al.,  2017; Stanojević, 2017), the weakening of the industrial relations framework has been a key regional development. Morley et al. (2018) suggest that, on the whole, the unions were ill-prepared for the new political and economic realities that emerged as part of the ­transition process. They suggest that “the majority of workers were minded to escape from the constraints of union membership and the payment of membership fees,” with the result that “with the exception of traditional industries and the public sector, the level of unionisation dropped” (p. 80). In addition, the transition process saw the emergence of a new management authority at the firm level that was not sympathetic toward the unions (Aguilera & Dabu, 2005). Finally, scholars have also called attention to HRM specialists’ competencies in the region as an important determinant of the nature and direction of the development of HRM, in particular around planning, change management, and dealing with internationalization (Kazlauskaitė & Bučiūnienė,  2010; Kazlauskaitė et al.,  2013; Kohont & Brewster, 2014). It has also been argued that this professional competency gap is accompanied by an ongoing lack of continuous professional self-­development, something that is likely to serve as a continuing constraint in the securing and maintaining of a wellequipped professional managerial cohort against the backdrop of significant environmental dynamism (Latukha,  2015). Multinational corporations, relative to their domestic counterparts, are especially aware of this managerial competency deficit (Holden & Vaiman, 2013). As a result, they are, in comparative terms, investing more in HRM to develop a cadre of professional managers and assist in overcoming legacy elements of the socialist tradition.

Human Resource Management in the Postsocialist Region   253

Organizational-­L evel Empirical Evidence on Selected Aspects of Human Resource Management in the Central and Eastern European Context We now turn to some empirical evidence on the nature of HRM in the CEE region in which we draw on three waves of organizational-­level data collected under the aegis of Cranet. In the 2004/5 survey round, a total of thirty-­two countries participated, six of which were from the CEE region (Bulgaria, Estonia, Hungary, Czech Republic, Slovenia, and Slovakia). In the subsequent 2009/10 survey round, again a total of thirty-­two countries participated, with nine of those from the CEE region (Serbia, Russia, Bulgaria, Hungary, Czech Republic, Slovenia, Slovakia, Estonia, and Lithuania). Finally, in the most recent survey round for 2014/16, a total of thirty-­five countries participated, ten of which were CEE countries (Serbia, Russia, Romania, Croatia, Hungary, Slovenia, Slovakia, Estonia, Lithuania, and Latvia). For the purposes of benchmarking, we have created three comparative samples as follows: 1. The global sample of organizations that have participated in the particular survey round. 2. The non-­CEE sample of organizations that have participated in each survey round. 3. The CEE sample of organizations that have participated in each survey round. By way of sample characteristics, organizational size, which was measured by the size of the workforce in each case, confirms that the distribution of the entire sample in all three survey rounds is similar to the vast majority of the surveyed organizations (80, 74, and 72 percent, respectively) with than one thousand employees. The proportion of respondent organizations with over one thousand employees in the three CEE samples (14, 12, and 17 percent in each round) is lower than in other parts of the world (Figure 11.1). With respect to ownership, in the global sample slightly more than two-­thirds of the respondents (67, 74, and 70 percent, respectively) were private-­sector organizations in each of the three survey rounds, while nonprofit organizations and those with mixed ownership feature much less commonly among respondents (between 7 and 8 percent in each of the three survey rounds). In the CEE subsample, in each of three survey waves, the proportion of private-­sector respondents at 72, 77, and 72 percent, respectively, is slightly higher than in the total sample (Figure  11.2). Conversely, the not-­for-­profit cohort in the CEE subsample is slightly lower. In terms of the industry-­related distribution of the sample, the largest share is represented by industrial and manufacturing companies in all three periods (32, 28, and 24 percent, respectively). Globally, in each of

254   Morley et al. 120

100

80

Below 100 101–250 251–1,000

60

1,001–2,000 2,001–5,000

40

Above 5,000 Total

20

0 Glob

Non-CEE

CEE

Glob

2004/5

Non-CEE

CEE

Glob

2009/10

Non-CEE

CEE

2014/15

Figure 11.1.  Distribution of the sample by number of people employed (percentage). CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

120 100 80

Private sector

60

Public sector

40

Nonprofit

20

Total

0

Mix (public and private sector)

Glob Non CEE Glob Non CEE Glob Non CEE -CEE -CEE -CEE 2004/5

2009/10

2014/15

Figure 11.2.  Distribution of the sample by ownership (percentage). CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

Human Resource Management in the Postsocialist Region   255 Table 11.1.  Presence of human resource management department (percentage) 2004/5

2009/10

2014/15

HRM department

Glob.

Non-­CEE

CEE

Glob.

Non-­CEE

CEE

Glob.

Non-­CEE

CEE

All organizations Private sector Public sector 1,000 Employees Total

90.5 90.8 89.6 80.8 95.1 99.0 91.2

90.9 91.2 90.1 81.0 95.3 99.0 91.6

87.4 87.6 84.2 79.0 93.6 99.2 88.4

83.7 85.2 80.9 65.3 93.1 98.0 83.7

88.5 91.0 83.7 74.2 93.4 98.2 88.6

65.1 63.3 70.1 47.0 91.2 96.4 65.0

90.7 92.8 84.7 79.0 94.4 98.4 90.6

93.9 95.9 88.9 85.4 95.9 98.3 93.7

81.6 84.5 74.3 67.4 89.7 99.0 81.5

Note: HRM, human resource management; CEE, central and eastern Europe sample; glob., global ­sample; non-­CEE, non–central and eastern Europe sample.

the three survey waves, the sectors with the lowest proportion of respondents in the sample are represented by the agricultural sector (2–3 percent), energy (3–4 percent), construction (4–5 percent), and education (4–6 percent), respectively. Turning to HRM structural and functional mechanisms, the number of organizations reporting the existence of a specialist function is obviously one important bottom-­line indicator of the nature and role of HRM within respondent organizations. A majority of organizations in each survey round report the existence of a HRM department. However, compared with other parts of the world, the percentage of CEE respondents reporting the existence of a dedicated HRM function is slightly lower. This disparity was more pronounced during the global financial crisis, though the decline in the existence of specialist functions arising from the impact of that financial crisis is not confined to the CEE sample (Table 11.1). Most large organizations in all three samples have a dedicated HRM department. The most significant differences can be observed in organizations employing fewer than 250 people. The existence of a written HRM strategy has long been taken as one proxy indicator of the extent to which the function operates at a more strategic level in the organization. In the case of CEE, while previous research from studies conducted throughout the 1990s and early 2000s pointed to a predominantly administrative orientation within the function, there is some evidence of an emerging, more strategic orientation involving the specialist function playing roles and engaging in activities rather different from those traditionally pursued, one particular indicator of which is the existence of a written HRM strategy. In our data, on average between 56 and 68 percent of all participating organizations in the three survey rounds have a written HRM strategy. Notwithstanding, CEE respondents do consistently report a slightly lower incidence of the existence of such written strategies. This gap is most significant for smaller enterprises, while larger organizations more broadly compare favorably with their counterparts elsewhere (Table 11.2). The uptake of human resource information systems, defined as a technology-­based system used to acquire, store, manipulate, analyze, retrieve, and distribute pertinent

256   Morley et al. information regarding HRM in the organization (Tannenbaum,  1990), has provided increased opportunities for the integration of strategic planning, HRM planning, ­performance management, training and development, reward management, and risk and compliance management and serves as an additional indicator of a more strategic approach to HRM. Among the global sample of respondents in our data, access to HRM information systems was available among approximately 80 percent of respondents in the 2004/5 and 2009/10 survey rounds, while, once again, this figure is slightly lower in the case of CEE respondents. In the case of larger organizations, the differences across the three clusters with respect to the use of information systems are minimal (Table 11.3). The use of external service providers occurs most commonly in the domain of training and development. This is followed by recruitment and selection, which emerges as

Table 11.2.  Written human resource management strategy (percentage) 2004/5

2009/10

2014/15 Glob.

Non-­CEE

CEE

67.6 68.1 67.5 60.2 67.2 78.1 68.0

69.9 69.8 72.7 65.2 67.2 78.3 70.2

61.0 63.5 54.3 50.7 67.1 77.2 61.6

HRM strategy

Glob.

Non-­CEE

CEE

Glob.

All organizations Private sector Public sector 1,000 people Total

56.4 53.5 63.1 46.7 56.7 68.2 56.1

57.2 53.9 64.7 48.4 56.9 68.1 56.9

49.7 50.7 44.7 36.6 55.2 70.0 49.6

53.1 52.0 59.7 43.1 53.2 66.2 52.7

Non-­CEE CEE 56.1 54.6 64.5 47.8 54.9 67.1 56.1

41.2 41.9 39.2 33.2 43.7 58.4 39.2

Note: HRM, human resource management; CEE, central and eastern Europe sample; glob., global ­sample; non-­CEE, non–central and eastern Europe sample.

Table 11.3.  Access to human resource management information systems 2004/5

Human resources information system

Glob.

All organizations Private sector Public sector 1,000 people Total

80.2 79.1 83.7 68.6 83.9 89.2 80.1

Non-­CEE CEE 80.4 79.2 84.0 69.0 83.7 88.8 80.2

78.4 78.4 80.1 66.2 85.6 93.4 78.7

2009/10

2014/15

Glob. Non-CEE CEE

Glob. Non-­CEE CEE

81.8 81.1 85.5 68.5 87.0 94.1 81.9

84.1 83.9 87.9 72.2 86.5 94.0 84.2

73.2 70.7 75.8 61.0 90.0 94.9 73.2

70.8 70.1 72.2 55.1 73.3 85.0 70.8

72.1 71.5 73.7 55.8 71.3 85.5 71.6

67.3 66.4 69.0 54.0  79.1  82.2  68.6 

Note: CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

Human Resource Management in the Postsocialist Region   257 the second most commonly outsourced area. Of note, the trends in outsourcing of HRM activities observed among CEE respondent organizations broadly mirror developments in the other clusters examined (Figure 11.3). Finally, in contemporary workplace relations in CEE, trade union recognition remains an issue of significant debate. In particular, there is considerable evidence of increased management opposition to unionization in recent years, particularly among MNCs and in indigenous smaller firms. Writing on the nature of workplace relations in CEE, Festing and Sahakiants (2010) suggest that the lack of a strong institutional environment at the national level, the weak position of trade unions, and the absence of strong institutional pressures on the part of the EU have led to a situation where the main features of socialist  employment relations retain a certain relevance. As indicated earlier, during the socialist period, there were notional rates of 100 percent unionization, with the unions playing an active role in the Communist Party and in the implementation of statemandated goals at national, sectoral, and organizational levels (Alas, 2004). By 2004, things had changed. In each of the three waves of the Cranet survey, the largest proportion of organizations in the CEE countries had no trade union membership (Figure 11.4). In the case of the public sector, this ratio was much smaller (Tables 11.4 and 11.5). In nearly 60 percent of smaller businesses, there is no trade union in this region. Of course, there are differences between countries. For historical reasons, as alluded to earlier, the influence of trade unions in the former Yugoslavia, for example, is much greater than in other CEE countries. Overall, while the future of the union movement in CEE will be determined by many factors, Morley et al. (2016) suggest that, above all, the nature of the variety of capitalism that becomes institutionalized in the region will become a critical determinant of any renewed legitimacy that may be secured. 70 60

2009/10

50

2009/10

40

2009/10

30

2014/15

20

2014/15

10

2014/15

rm

io n

Se lec t

en t tm ui

io n

ur ce

in

fo

Re cr

n io at

ce

Pe ns

sy s

uc re d

te m

n tio

en t pm kf re so

an

H um

O

ut

pl

ac

em

Tr

en

ain

in

t/w

or

ga

nd

or

de

ve lo

Be

Pa

yr

ne fit

ol

s

l

0

Figure 11.3.  External providers covering human resource management functions (percentage).

258   Morley et al. 120 100 0%

80

1–10% 11–25%

60

26–50% 51–75%

40

76–100% Total

20 0 Glob

Non-CEE 2004/5

CEE

Glob

Non-CEE

CEE

Glob

2009/10

Non-CEE

CEE

2014/15

Figure 11.4.  Trade union membership—all countries (percentage). CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

Conclusion Overall, it is apparent that there are significant structural, institutional, and configurational differences, along with significant practice differences, in HRM among CEE countries and between the CEE region and other regions. Prior to the fall of the Berlin Wall in 1989 and the subsequent wave of political, social, cultural, and administrative transitions that this major development heralded, the key elements of HRM policy and practice in CEE operated under strict state control. Such control and political interference resulted in the emergence of an underlying ideational legacy in HRM with little emphasis on performance and motivation, resulting in ineffective compensation systems, ambiguous responsibilities, and hiring and promotion based on political loyalty and connections rather than performance and competence (Koubek, 2009). Awareness of this legacy, Horwitz (2011, p. 432) suggests, is especially important for foreign MNCs operating in CEE to give proper consideration to the “lingering effects of the previous institutional environment and state directed political economies that retain influence on the type of HRM practices adopted.” Since the commencement of the transition proc­ess, contextually among the things that unites these countries in the recent past is the rapid change in culture and political and economic systems, with research on cultural aspects suggesting that there has been a rise in individualism and a concomitant diminution in power distance in the region (Dirani et al., 2015).

Human Resource Management in the Postsocialist Region   259 Table 11.4.  Trade union membership: Private-­sector organizations (percentage) Proportion union 2004/5 membership— Glob. Non-­CEE private sector

CEE

Glob.

0% 1–10% 11–25% 26–50% 51–75% 76–100% Total

41.7 8.0 7.5 14.9 19.3 8.6 100.0

37.2 14.1 8.7 12.2 13.0 14.7 100.0

29.3 15.6 10.9 12.5 15.7 15.9 100.0

27.6 16.7 11.4 12.2 15.2 16.9 100.0

2009/10

2014/15 Non-­CEE CEE 31.1 15.9 9.2 12.4 14.2 17.2 100.0

59.4 7.9 6.8 11.8 8.6 5.5 100.0

Glob.

Non-­CEE

CEE

30.0 23.9 11.5 12.1 11.4 11.1 100.0

26.5 25.8 10.9 12.1 12.0 12.7 100.0

38.7 19.1 12.9 12.3 10.0 7.0 100.0

Note: CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

Table 11.5.  Trade union membership: Public-­sector organizations (percentage) Proportion of union membership—public sector 0%

2004/5 Glob. 7.7

Non-­CEE CEE 6.6

2009/10

2014/15

Glob.

Glob.

Non-­CEE CEE

Non-­CEE CEE

19.9

15.6

13.5

23.9

8.9

8.8

9.1

1–10%

6.4

6.6

3.5

8.7

7.2

14.8

13.0

11.6

16.1

11–25%

10.0

10.0

10.6

5.1

4.5

7.4

10.8

8.5

16.4

26–50%

14.1

13.4

22.7

8.9

8.0

12.5

12.4

10.3

17.5

51–75%

16.6

15.6

27.7

15.9

15.2

18.8

21.3

21.5

21.0

76–100% Total

45.1 100.00

45.8 100.0

51.5 100.0

22.7 33.5 100.0 100.0

39.2 100.0

19.9 100.0

47.8 15.6 100.00 100.00

Note: CEE, central and eastern Europe sample; glob., global sample; non-­CEE, non–central and eastern Europe sample.

Specifically in the HRM sphere, differences may be observed between the levels of development in the HRM practices of different postsocialist countries, variances that may be attributed, among other things, to distinct traditions, disparities in levels of economic development, and deviations in the underlying levels of centralization applied in the previous economic and political systems (Erutku & Vallee,  1997; Kazlauskaitė et  al.,  2013; Tung & Havlovic,  1996). The shift that occurred since 1989 in the HRM domain has variously been characterized as one from a unitarist toward a pluralist system, from an administrative toward a more value-­adding model, and from a lowlegitimacy function to one now characterized by increasing power and legitimacy. Considering that it was only after the fall of the socialist regimes throughout CEE that

260   Morley et al. modern HRM as we have come to understand it in the Western context started taking hold in the discourse of management thinking and in emerging practice, it is clear that in the intervening thirty years, differences in HRM between CEE and other countries have narrowed significantly. The overall effect, Pundziene and Bučiūnienė (2009) suggest, is organizations making more significant investments in HRM systems and practices in the face of dynamic and radically altered labor markets and a new competitive reality.

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chapter 12

H um a n R e sou rce M a nagem en t i n th e L ati n Eu rope a n Con text Jordi Trullen and Carlos Obeso

This chapter provides an overview of the current human resource management (HRM) landscape in Latin Europe. We start by providing a brief rationale for the term Latin Europe and define what we understand by it. We then go on to explain the features that characterize labor markets in Latin Europe. As we will see, Latin European countries are commonly associated with lower levels of active population, weaker systems of social protection, higher rates of self-­employment, and a dualistic labor market clearly distinguishing employees with fixed-­term contracts from the rest (Davoine, Erhel, & Guergoat-­Lariviere, 2008). After reviewing the labor market, we investigate, on the basis of the 2014/5 Cranet project dataset, the extent to which we can also talk of an idiosyncratic Latin European model in relation to HRM. Like previous analyses (Filella, 1991; Stavrou & Papalexandris, 2016), we observe significant variance in relation to HRM among Latin European countries. At the same time, however, there seem to be some distinguishable traits, especially with regard to the role of the HRM department within the organization, the significance of trade unions, and the levels of investment in training and development of employees. We conclude by comparing our findings to those obtained by Filella (1991), who first analyzed the state of Latin European HRM a quarter century ago, even if he concentrated only on a subset of countries for which data were available at the time (i.e., Spain, France, and Italy). While formalization of HRM in Latin European countries has advanced and there are trends toward convergence, several challenges remain that are idiosyncratic for the Latin European context.

266   Trullen and Obeso

Latin Countries: A Complex Reality There is no political entity that encompasses the term Latin countries. However, it is possible to refer to a geographical and cultural environment (with imprecise limits) that can be described as “Latin” and whose cohesive elements are the “Latin” languages derived from original Latin that accompanied the expansion of the Roman Empire. Portugal, Spain, France, and of course Italy are commonly included in this group. We can deduce that when a language is imposed and endures (with multiple derivations), this is also the result of a broad and extensive process of political, cultural, and economic domination. Such control implies a certain homogenization of the political and social structures. This homogenization can be seen in the legal systems of Latin countries— which are based on Roman law. Moreover, with the exception of Portugal, sharing a common sea, the Mediterranean, with much more benign sailing conditions than the Atlantic, but also especially the relative proximity between its shores, has enabled centuries of trade and cultural exchanges that also partly explain the possibility of talking about north coast Mediterranean countries (e.g., Greece, Cyprus) with similar structures that go beyond language. While Greece and Cyprus—which were, nonetheless, also romanized—cannot be considered Latin countries in strictu senso (their language not being Latin based), when we use the term Latin Europe in this chapter we include them in the category because of the cultural and social similarities they share with the rest of the Latin Mediterranean nations (Stavrou & Papalexandris, 2016). In any case, this theoretical homogeneity cannot hide the development of different socioeconomic and demographic conditions in Latin Europe from the early Middle Ages and especially during the eighteenth, nineteenth, and twentieth centuries, with the decline of the Spanish and Portuguese Empires, the rise of the French Empire (that would reach its peak during the nineteenth century), and the late unification of Italy (previously fragmented into a multitude of weak states). So the region has enough of a common history, together with the geographical reality of an easily navigable sea, giving rise to a socioeconomic cluster that we can call Latin, with features that differ from other European clusters or nations. The results of our empirical analysis affirm that we can speak indeed of a Latin cluster with some differential features.

A Latin European Welfare State Model In his 1990 influential book titled The Three Worlds of Welfare Capitalism, the Danish sociologist Esping-­Andersen (1990) described three models of welfare states: the liberal (United States), the conservative corporatists (Germany), and the universalist social

Human Resource Management in the Latin European Context   267 democratic (Sweden). After living for long periods in Italy and Spain and studying these countries in more depth, he added a fourth model, the “southern European,” which included Italy, Spain, Portugal, and Greece, all of them within our Latin Europe cluster. The southern European model of Esping-­Andersen was mainly characterized by low levels of social protection (Ferrera, 1996), which gave families a crucial role in relation to support structures. As. Ferrera says (2010, p. 622), “The family has historically been the cornerstone of South European societies, functioning as an effective ‘social shock absorber’ and welfare broker for its members and responding to a wide range of risks  and needs: from childcare to unemployment, from care for the elderly to disabled housing.” Martin (2015) highlights that the consequences of this model in the labor market are evident on a number of fronts: THe first consequence is that the model of “familialism by default” or “unsupported familialism” (Saraceno & Keck, 2010) affects female employment and thus female social citizenship. It is a model that puts care obligations and the care work/burden on the shoulders of women, which also means that it is a model based on the male breadwinner–female housewife contract. The consequences include low rates of female employment (especially in Spain, Italy, and Greece) and also partly explain the dramatic decline of fertility among women sandwiched between onerous home duties and unfriendly labor markets. The second consequence is the configuration of a dualistic work model with a clear opposition between overprotected insiders, or regular white-­collar staff (public employees and the labor force of large companies), and outsiders, or irregular workers (in the traditional services and agriculture sectors, but also female and young workers). In summary, the consequences include strongly gendered labor markets and a substantial shadow economy with a large role for the informal labor market. Martin (2015) also calls attention to the fact that the social assistance schemes are minimal precisely because of the role played by the family, with care for children and the elderly generally being provided by family members as unpaid work by women. The resulting labor market segmentation creates gaps and inequalities in both employment and social protection, and unemployment benefits and vocational training programs tend to be underdeveloped. We must, however, be cautious when trying to explain the origins of the model. It would be an error to believe that the weak implementation of social welfare models in southern Europe (and its reflection in the labor market) are the result of family structure (with remote historical explanations) and its active role as a “shock absorber.” There are at least two alternative, and possibly more robust, explanations for this weak implementation. The first would be the low level of proletarianization in the southern nations— together with the significant level of self-­employment and small farms during the emergence and growth of capitalism in Europe. The rise of industrialization, starting in England, moved along the countries of central Europe and northern France, with later expansion to the east. There was little impact in southern nations, except for specific areas (suppliers of coal or iron). The consequence is that the southern nations had low levels of proletarianization (because of low levels of industrial development), a tendency

268   Trullen and Obeso that was reinforced by the major migrations from the south toward central and northern Europe in the 1950s and 1960s (Andreotti et al., 2001). This fact is important because the adoption and development of welfare models in Europe is not so much the consequence of a certain ideology, but a response to the effects of industrialization on expanding working classes (Polanyi, 1957). Second, and of equal importance, is the wide expansion of Roman Catholicism in the southern countries (with its orthodox transformations), which decisively influenced the economic and social structures of the Latin European cluster (Kersbergen & Manow, 2009; Manow, 2015). While for some authors (Gal, 2010) there is a (modernized) survival of the Latin model, the evidence shows significant sociocultural changes since the entry of these countries into the European Union (for example, in the concept of marriage and the role of women). According to Moreno and Marí-­Klose (2013), the incorporation of new cohorts of bettertrained and less tradition-­bound generations has generated new attitudes, expectations, and practices. Between 1998 and 2009, the marriage rate per thousand inhabitants fell sharply in Spain, Portugal, France, and Italy, and slightly in Cyprus—and only maintained its previous level in Greece. Marriage is beginning to lose its role as a fundamental pillar of society—with implications for the role of women who gain individual freedom at the cost of a certain loss of family protection. To maintain their “individuality,” these women need access to the labor market on equal terms men. Cultural norms do not change overnight. Latin family-­centeredness has very deep historical roots and although new generations are breaking with that cultural framework, the family will continue to play a fundamental role as a social shock absorber for a long time, stepping in where the state fails to provide. Even in the early twenty-­first century in Latin countries, intergenerational solidarity remains very strong and this has limited the impact of the crisis. In addition, and as we will see later, if the mindset changes, but the economic structures and procedures do not adapt at the same pace, then little real change will occur. For example, if there are no subsidized public day-­care centers, then the emancipation of women becomes difficult, even if women want it. Despite the economic changes, and especially the social changes that the Latin countries have experienced, the effects on the model of social protection have not been substantial. Table 12.1 clearly shows how Portugal and Spain are below the EU-­28 average for social spending per capita (in purchasing parity), as well as Cyprus, while Greece and Italy appear slightly above the average. In this aspect, France differs from the other Latin countries.

Characteristics of the Labor Market in Latin Europe The Latin social welfare model is affected by and affects the composition of the labor market and the active population (a key indicator of the capacity of an economy to

Human Resource Management in the Latin European Context   269 Table 12.1.  Total spending on social services per inhabitant (2016)   EU-­28 France Denmark Italy Greece Germany Portugal Spain Cyprus Romania

Percentage of gross domestic product 19.1 24.4 23.4 21.1 20.7 19.3 18.0 16.8 13.8 11.6

Source: Eurostat (2016).

generate jobs). Latin countries have a smaller proportion of the population in the labor force than the EU-­27 average (Eurostat, 2016) and much smaller labor forces than the countries of central and northern Europe. At the same time, the informal economy continues to be an important element in the cluster. Although lower than that found for some newer EU members—such as Lithuania, Estonia, Latvia, Romania, and Bulgaria—it remains far above the percentages of the countries in central and northern Europe (Schneider, 2013). The relatively small active population affects the expansion capacity of the systems of social protection and consequently hinders the incorporation of labor into the market—especially women. The active female population in Latin countries (except France and Portugal) is below the European average and very far from that of the countries of central and northern Europe (Eurostat,  2016). Nevertheless, growth in female participation in labor markets (except in Greece) shows that the tendency is toward a convergence with men. Italy and Greece still maintain a significant differential, whereas Spain is already at the European average. Portugal is a separate case because it has always had, in relative terms, a high percentage of female participation in the labor market, a result of historical reasons linked to greater male emigration. A significant percentage of the active population in the Latin cluster are self-employed. Spain, Portugal, France, and Italy are in the range of 20 percent self-employment, with Greece reaching 30 percent. Significantly, this structure of employment, which has been a characteristic feature of the Latin labor market, is not currently an especially desired option in these countries. In effect, the countries of the Latin cluster are below the average in relation to self-­employment if one looks at whether the decision to become self-employed is freely adopted rather than forced (Marthijn, 2017). It is an obvious sign of changes in the preferences of a population dissatisfied by the socioeconomic model. Another characteristic of the labor market concerns the quality of work in these countries, including aspects such as earning quality, labor market security, and quality

270   Trullen and Obeso of the work environment. On the basis of a variety of job quality indicators, Davoine et al. (2008) found up to five clusters in the twenty-­eight EU member countries—including a “southern cluster” of Spain, Italy, Portugal, Greece, and Malta. These countries are below the European average and well below the average of the central and northern European countries in relation to job quality, with Greece occupying the last place in the quality ranking. They are also characterized by low rates of training and education provision (especially in vocational training), standing in contrast to the Nordic and continental clusters (Davoine et al., 2008). France is an outlier on this issue. The southern cluster also shows the greatest difference in the gender gap, revealing the difficulties that women face when entering the labor market (a differential that is less extreme in the new EU countries). The percentage of temporary contracts is high compared to other clusters, while the number of part-­time contracts is lower than for other clusters (it is assumed, although with many nuances, that part-­time contracts facilitate female participation in the labor market). The southern cluster is also remarkable for the impact of the labor market on parenthood, which is much lower than for other clusters. Finally, two other aspects are worth highlighting. The first is the large number of early school leavers—which is very high compared to all the other clusters. The second is the relatively low number of children attending preschool (Davoine et al., 2008). In sum, Latin European countries (mainly Portugal, Spain, Italy, Greece, Cyprus, and, to a lesser extent, France) reveal specific and differential features in their labor markets. These differences include structures that are sometimes evidently preindustrial, such as the proportion of the population working in the informal economy, that contrast with increased training levels and run contrary to the desires of populations who are “European” in their outlook. Women suffer the most from the tension between their increasing desire to enter the labor market and the difficulties of working normally in that market because of low investments in social assistance programs, even if the gap with other European regions has been closing. Finally, quality of work remains below that of their central and northern European partners.

Human Resource Management: Is There a Latin European Model? We have seen in the previous section that Latin European countries share several features in common, along with obvious variation in others, a number of which—such as the low levels of social protection and a dualistic labor market—may partially explain the difficulties these countries have experienced in overcoming the economic crisis that began in 2008. An important question that arises is whether these countries share features in common with respect to the management of human resources. To explore this

Human Resource Management in the Latin European Context   271 question, we use data from the latest 2014/15 Cranet survey and, whenever possible as a comparative element, Filella’s (1991) study, which used data from the first Cranet ­survey conducted in 1989 to investigate the existence, or otherwise, of a “Latin model” in the context of the then incorporation of southern nations into the European community. According to Filella (1991), catching up with northern neighbors was then the challenge—we dare say this remains so in the early twenty-­first century. Following our introductory comments to this chapter, to carry out our analysis we include data available from Spain, France, Italy, Greece, and Cyprus. We also include Germany, the United Kingdom, and Denmark to be able to illustrate potential differences with other European regions. Below, we summarize the data, which, arguably, show the consolidation of a model that differs from that found in the Nordic or AngloSaxon countries. In particular, we focus our attention on: (1) the role of HRM in the organization (its structure, strategic importance, etc.); (2) the role of trade unions (both generally and paying special attention to internal communication and salary negotiation); and (3) training and development. The analysis of HRM policies could be extended with data from Cranet to areas such as recruitment sources, selection tools, performance evaluation, or incentive management. However, we did not find any pattern in the data in these areas that could justify setting Latin European countries apart from the rest. The lack of a clear pattern in the data does not mean that all countries are converging toward the use of the same policies, but rather that differences among countries vary depending on the types of practices (Farndale, Ligthart, Brewster, & Poutsma, 2017), without significant levels of intracluster similarity (Walker, Brewster, & Wood, 2014). We further reflect on this point later in concluding the chapter.

Role of the Human Resource Management Department Starting with a basic question, we explore the proportion of firms in Latin European countries that have an HRM department. The answer shows the degree of commitment of companies to people management—beyond mere administrative management. Table  12.2 shows that most of the selected countries (Latin, central, and northern European) companies have HRM departments—with the lowest rates found in Cyprus (70 percent), probably because of Cyprus being a smaller country with fewer large firms with established HRM departments—and Finland (85 percent). Latin countries therefore reveal a high degree of specialization and professionalization. It does not automatically follow, however, that people management is a priority, in the same way as marketing and finance, for example, in these organizations. The question is whether the presence of a dedicated HRM department means we can assume that HRM is seen by companies as strategically important. To answer this question, Filella (1991) cre-

272   Trullen and Obeso Table 12.2.  Percentage of companies with a human resource management department Does your company have a human resource management department? Spain 99

France 96.8

Italy 100

Greece 89.9

Cyprus 77

United Kingdom 97.6

Germany 98.5

Finland 85

Sweden 94

Source: Data from Cranet survey, 2014/15. Table compiled by the authors.

3.5 3 2.5 2 1.5 1 0.5 0

Spain

France

Italy

Greece 1991

Cyprus

United Kingdom

Germany Denmark

2014

Figure 12.1.  HRM department influence ratio. From Cranet survey (1991, 2014/15).

ated an indicator called the “influence ratio,” which results from dividing the ­percentage of firms in which the human resource specialist is involved in the development of business strategy from the outset by the percentage of firms in which the human resource specialist is on the board. This ratio aims to assess the effectiveness of an HRM manager on the board in framing company policy. Ratios of less than 1.00 may indicate that the presence of an HRM specialist does not translate into an active commitment in setting policy, while ratios above 1.00 suggest that the HRM specialist is actively involved in setting company policy. Figure 12.1 shows the influence ratio for various nations for 1991 and 2016. The “anomalies” of Italy and Germany in 1991 reflect the low number of companies that claim to have an HRM board director (Italy, 18 percent, and Germany, 19 percent) and the influence in the earlier years of the “worker director” in Germany, although these few directors have considerable influence (hence the data). The data for both 1991 and 2014/15 show that the presence of an HRM director on the board does not automatically

Human Resource Management in the Latin European Context   273 imply an equivalent amount of participation in framing HRM policy. Firms in countries with the highest presence of an HRM manager on the board in 2014/15, such as Spain (85 percent) and France (88.4 percent), show proportionally little influence exerted. The data from Spain and France, among others, point to some ambivalence about the role of HRM departments, because—and the question seems obligatory—why would a company have an HRM manager on the board without involving them in framing company policy from the outset? A likely explanation may be that in Latin European countries, every department has to see its head on the main board, but decisions are made in a smaller grouping, which often excludes the main HRM person (Larsen & Brewster, 2003). Whatever the answer, it is clear that during the almost thirty years since 1991, the influence of the HRM department in strategic decisions remains relatively low in all the sampled nations—which corresponds with the United Kingdom, Germany, and Denmark. Within the Latin countries, Italy appears to be the country where the influence of the department is greatest.

Academic Specialty of Human Resource Management Managers Another interesting aspect linked to the role played by HRM departments and HRM professionals in organizations has to do with their academic background. In our case, and using the Cranet data, we have grouped those origins into four groups: (1) business administration and economy, (2) social sciences and humanities, (3) engineering and similar, and (4) law. Figure 12.2 presents the results.

80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Spain

France

Business & economics

Italy

Greece

Cyprus

Social science & humanities

United Germany Denmark Kingdom Engineering & sciences

Law

Figure 12.2.  Academic origin of senior human resource management specialists. From Cranet survey (2014/2015).

274   Trullen and Obeso The larger presence of law graduates in Latin countries, mainly Spain and Italy but also France, is notable given that such graduates are a small minority in other nations. This is probably because of the greater weight of legislation as a regulator of social activity in these countries (a legacy of Roman law) and the concomitant high standing of the legal profession. The legal background as a route of entry to HRM may also be a function of the institutional rules and their codification. Because of this, individuals with a legal background are valuable. In addition, it may also be a consequence of a history of ideologically radicalized clashes between “capital” and “labor,” reflecting a view of the relationship between employers and employees as conflictive rather than consensual. Finally, it is also worth noting the reduced presence of business and economics graduates in Spain and Italy (but not France) when compared to the rest of the countries. This is a possible reflection of the lesser strategic importance given to people management in those countries.

Existence of Human Resource Management Strategy Having a specialist department is a sign of the importance that a company gives to a function, and so is the degree to which a company publishes its policies in writing—to the extent that this involves a process of structured strategic thinking and explicit commitment. By focusing on HRM, we analyze the degree to which companies publish their generic and functional strategies. Figure  12.3 presents this information for the Latin cluster. The data reflect some unanimity, but with nuances. Up to 80 percent of companies have published their corporate mission and strategy and, to a lesser extent, their training policy. In contrast, the publication of a HRM strategy drops, on average, to 65  percent. Spain remains above this figure and, to a lesser degree, so does Greece. In comparison, and although it is not reflected in Figure 12.3, Sweden and Finland are at around 80 percent. The other nations are below average. Corporate social responsibility policies are only published by 50 percent and diversity policies by 40 percent of companies. Publication of these policies is generally less common in Cyprus. Consequently, with the exception of Spain, the degree of commitment to published HRM policies in Latin European countries is relatively low.

Implementation of Human Resource Management Strategy In line with analyzing the strategic importance of the HRM department, we study the role that the department assumes in HRM policies by investigating where these policies are made and how they are implemented. This is because the locus of control is an important indicator of the importance of the HRM department within an organization. The data we offer show where the locus lies: namely, with line managers, with the HRM department, or shared between both (Brewster, Brookes, & Gollan, 2015). We first analyze the “locus of control” in the area of labor relations, because this domain varies ­significantly across institutional contexts and also because traditionally relationships

Human Resource Management in the Latin European Context   275 100

83.9

90

83.0

80

65.8

70

68.6

59.9

60

53.3

50

44.4

40 30 20 10 0

Mission statement

Business strategy

HR strategy Recruitment strategy

Spain United Kingdom

France Germany

T&D strategy

Italy Denmark

CSR statement Greece Average

Diversity statement Cyprus

Figure 12.3.  Degree of mission, corporate strategy, and human resource management policy publication. CSR, corporate social responsibility; HR, human resource; T&D, training and development. From Cranet survey, (2014/15).

80 70 60 50 40 30 20 10 0

Spain

France

Italy

Line manager responsibility

Greece

Cyprus

Shared responsibility

United Kingdom

Germany

Denmark

Human resource responsibility

Figure 12.4.  Human resource management department locus of control in labor relations. From Cranet survey (2014/15).

276   Trullen and Obeso with trade unions have been one of the most significant responsibilities of HRM departments. Figure 12.4 shows the locus of control in the management of labor relations. Figure 12.4 shows that the management of labor relations in Latin countries is the core activity that determines the function of the department, especially in France and Italy, but also in Spain (53.6 percent), where line management plays no role. We must refer here to the academic origin of those responsible for HRM (analyzed in another section), where law graduates predominate, these being the skills and knowledge necessary for such institutionalized environments. Next, Figure 12.5 shows the average for the HRM department having sole responsibility in a variety of HRM domains (including compensation and benefits, recruitment and selection, training and development, workforce reduction or expansion, and labor relations). In agreement with the previous partial results, we find that in Latin countries, and especially in France and Italy, the role of the department is especially relevant as sole implementer. This greater responsibility was clear in 1991 and became more manifest in 2014/15. In contrast, the role of line management is less relevant than in other countries, which confirms a trend that was already clear in 1991. Scandinavian countries are more consistent in relying on line management for the implementation of HRM policies. In sum, we find that in Latin countries HRM departments generally play a more decisive role than in central and northern Europe. This is probably partly explained by the higher level of training that line management receives in central and northern Europe, a reflection, in turn, of the delay that Latin countries have suffered in the introduction and development of vocational training plans. A complementary explanation may lie in cultural differences. Latin cultures are traditionally high power distance cultures, where one would expect more centralized control of HRM activities and less delegation. 40 35 30 25 20 15 10 5 0

Spain

France

Italy

Greece

Cyprus

United Kingdom

Germany

Denmark

Figure 12.5.  Country average for human resource management (HRM) department having sole responsibility for decisions in all HRM domains. From Cranet survey (2014/15).

Human Resource Management in the Latin European Context   277

Role of Unions Next, we analyze the presence and influence of unions in companies in the Latin cluster. The degree of union membership in the companies surveyed is a crucial point and is illustrated in Figure 12.6. This highlights the percentage of firms in each country with different levels of union membership (from 0 to 100 percent affiliation). Spain and France clearly stand out for zero membership (15 and 16 percent, respectively, report being nonunion) or low levels of membership (51 and 65 percent of companies report that between 1 and 10 percent of their workforces are covered by trade unions). Italy presents a more balanced model, while Greece reveals both extremes, with membership of up to 100 percent in 20.2 percent of companies, but also with 36.3 percent of companies without trade union members. Finally, Cyprus stands out as a very unionized country, with clear differences vis-­à-­vis the rest of the Latin European countries. In theory, these data should reflect the degree of perceived influence of unions in companies, but is this the case? Figure 12.7 presents data on perceived union influence. Perhaps the most interesting observation is that influence and membership are not necessarily linked. Spain and France have low levels of membership, but union influence is perceived as high or very high in 27.2 and 22.4 percent of companies, respectively. In the case of Italy and Cyprus, levels of influence seem consistent overall with levels of membership, while in Greece, where almost 30 percent of firms show union membership levels above 50 percent, the influence of unions is perceived as very low. The United

70 60 50 40 30 20 10 0

Spain

France 0%

Italy 1–10%

Greece 11–25%

Cyprus 26–50%

United Kingdom 51–75%

Germany

Denmark

76–100%

Figure 12.6.  Union membership in organizations (as a percentage of total staff). From Cranet survey (2014/15).

278   Trullen and Obeso 80 70 60 50 40 30 20 10 0

Spain

France

Italy None

Greece Low

Cyprus

Medium

High

United Kingdom

Germany

Denmark

Very high

Figure 12.7.  Union influence. From Cranet, (2014/15).

Kingdom stands out for the low perceived influence of unions, and Germany does as well, to a lesser extent. Denmark shows high levels of membership and influence. Despite the low levels of membership, companies in Latin countries perceive that unions have a greater influence than in countries such as the United Kingdom or Germany. Denmark is representative of the Nordic countries, where unionization and union influence are strongest.

Union Role in Employee Communication Accepting that the concept of union influence refers to the degree of bargaining power of the unions, which is their traditional role, we also ask about their role as partners or mediators between the company and workers at an individual or group level. We estimate this through an analysis of the communication channels used between companies and employees. We look at three categories (direct communication through electronic media, communication through supervisors, and communication through trade union representatives and work councils) and explore the frequency with which each of these channels is utilized. The results are shown in Figure 12.8. In Latin European countries, with the exception of Greece, trade union representatives are used more frequently as communication channels than in the United Kingdom or Germany. Conversely, in some Latin countries (namely, Spain and Italy, and to a lesser extent also France), communication through middle management is lower than in central and northern Europe and the United Kingdom. Finally, direct communication tends to be high in all countries, although the United Kingdom and Germany are the highest ranked in that respect.

Human Resource Management in the Latin European Context   279 70 60 50 40 30 20 10 0

Spain

France

Italy

Through electronic communication

Greece

Cyprus

United Kingdom

Through immediate superiors

Germany

Denmark

Through trade unions

Figure 12.8.  Forms of communication between companies and employees (top-­down). From Cranet, (2014/15).

70 60 50 40 30 20 10 0

Spain

France

Italy

Electronic communication

Greece

Cyprus

United Kingdom

Through immediate superior

Germany

Denmark

Throught trade unions

Figure 12.9.  Forms of communication between employees and companies (top-­down). From Cranet, (2014/15).

Communication between employees and companies reveals different but also interesting patterns, as shown in Figure 12.9. Direct communication through electronic media is much less used in a bottom-­up fashion in all countries. Interestingly, as in the case of top-­down communication, middle managers are significantly less frequently used as intermediaries in Spain and Italy than in the other countries. In terms of trade unions, we also find a similar pattern as in

280   Trullen and Obeso Figure 12.8, since employees in Latin countries (with the exception of Greece) seem to use trade unions more frequently to voice their opinions than is the case in the United Kingdom or Germany.

Trade Union Role in Setting Wages Salary negotiations for different categories of employees (managers, professionals, and administrative staff) through collective external agreements, company agreements, or individual negotiation reveal interesting differences—which likely reflect the different models of labor relations in European countries. Starting with the managers, and looking at Figure 12.10, it is interesting to see how individual salary negotiations predominate in the United Kingdom, Germany, and Denmark, but not necessarily in Latin European countries. On the one hand, company agreements play a key role in Spain, Greece, and Cyprus, as well as France. On the other hand, collective bargaining is indeed still broadly applied for managerial ranks in countries like France and Italy. Company agreements also play a very important role in the United Kingdom, a possible inheritance from productivity agreements of the 1980s. Compared to 1991, the data provided by Filella (1991) show that individual-­level bargaining has generally been gaining in importance, reflecting a widespread trend in Western countries (and others) toward nonunionization and individualized employment relations. Collective agreements become more prevalent across nations when looking at professionals (Figure  12.11) and, even more so, when focusing on clerical employees (Figure  12.12). However, we can still observe differences between Latin European 100 90 80 70 60 50 40 30 20 10

Collective bargaining

l ‘9 1 an di na vi a‘ 91

nt ra

‘91

Sc

Ce

La tin

Ki ng do m G er m an y D en m ar k

Un ite d

Cy pr us

ce Gr ee

ly Ita

Fr an ce

Sp ain

0

Company agreements

Individually

Figure 12.10.  Payment agreements: managers. From Cranet, (1991; 2014/15).

Human Resource Management in the Latin European Context   281 100 90 80 70 60 50 40 30 20 10

Collective bargaining

1 an di na vi a‘ 91

nt ra l ‘9

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La tin

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Ki ng do m G er m an y D en m ar k

Cy pr us

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Fr an ce

Sp ain

0

Company agreements

Individually

Figure 12.11.  Salary agreements: professionals. From Cranet, (1991; 2014/15).

120 100 80 60 40 20

Collective bargaining

1 an di na vi a‘ 91

Sc

Ce

nt ra

l ‘9

‘91 La tin

Ki ng do m G er m an y D en m ar k

Un ite d

Cy pr us

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Fr an ce

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0

Company agreements

Individually

Figure 12.12.  Salary agreements: clerical and manual. From Cranet, (1991; 2014/15).

c­ ountries and the rest, with France and Italy (as well as Spain, in the case of clerical employees) showing significantly higher levels of collective negotiations and, hence, a stronger influence of trade unions in wage setting. At the same time, company agreements that result from internal negotiation processes also play a more relevant role in Latin countries than they do in Germany or Denmark. Although trends in Latin Europe have not changed much since 1991 (with collective agreements and company agreements remaining at the top), individual agreements have gained increasing importance.

282   Trullen and Obeso

Training and Development Training and development is another area of core HRM activity and represents an important indicator of the approach to HRM. We limit our remarks here to the training budget, which is calculated as the proportion of annual salary spent on training. Figure 12.13 shows spending on training. All countries in the Latin cluster, except France (where legislation forces companies to spend at least 1.2 percent on training), spend less than their counterparts in the central and northern European nations. In the Latin European countries, more than 40 percent of companies spend less than 1 percent of wages on training, which stands in contrast to the United Kingdom and Denmark, where fewer than 20 percent of organizations spend less than 1 percent of wages on training annually. The exception is Germany, with its highly developed public training system. However, even in Germany, some 42.6 percent of companies spend more than 2 percent. These figures are similar to those from 1991, as shown in the study by Filella (1991), who highlighted that central and northern European countries spent more on training than Latin countries, even when no specific legislation existed. This in turn confirms our claims that line management in central and northern countries is better prepared to implement HRM strategies.

70 60 50 40 30 20 10

1% or less

Between 1 and 2%

l ‘9 1 an di na vi a‘ 91

‘91

Sc

Ce nt ra

La tin

Un ite d

Ki ng do m G er m an y D en m ar k

Cy pr us

ce Gr ee

ly Ita

Fr an ce

Sp ain

0

More than 2%

Figure 12.13.  Percentage of annual salary spent on training. From Cranet, (1991; 2014/15).

Human Resource Management in the Latin European Context   283

Conclusion Does a Latin European HRM model exist? If we pay attention to the type of HRM policies in large companies in Latin European countries, then the answer may be no. The fact that we could not find any distinguishable Latin European pattern in areas such as recruitment and selection, performance appraisal, or incentive systems (especially for managerial employees) suggests that large firms in these countries tend to adopt the same types of “best practices” that are found in other countries. Having said that, it is also true that a more detailed analysis of the labor markets in which companies operate, as well as the role played by the HRM departments and trade unions, shows significant differences relative to countries in other clusters—such as the Nordic or Anglo-­Saxon clusters. In this sense, Latin countries feature a dual labor market with large differences between male breadwinners and other employee cohorts such as women, the young, and migrants. Latin European countries offer little social assistance compared to other European countries, and unemployment benefits and vocational training are underdeveloped. This lack of development in the labor market is also reflected in the less strategic role for HRM, since although most of the companies surveyed report having an HRM department, it has a low degree of influence on strategic decision-­making, a relatively low tendency to publish HRM strategies, and little training for HRM specialists. The Latin model also reveals a greater level of labor unrest visà-­vis continental Europe—for example, in relation to average days not worked because of industrial action (European Trade Union Institute,  2018)—which gives unions a prominent role in decision-­making (with special emphasis on pay) and results in the primary objective of the HRM department being labor relations. Finally, the low levels of investment in training in Latin countries also means less involvement of line management in the management of employees—because they are not trained with the needed skills for carrying out their HRM responsibilities—which reduces the strategic role of the HRM function. In retrospect, if we look back at Filella’s (1991) original portrayal of Latin European HRM, we observe some changes, but also high levels of inertia and stability. On the one hand, the increasing formalization of HRM strategy and policies in Latin Europe does not resemble the highly informal nature of HRM depicted by Filella in the early 1990s. Similarly, it seems that this formalization paired with the increased variety in the types of recruitment, appraisal, and compensation practices being introduced, which resemble those of other European regions—seem to have minimized the prevalence of word of mouth in recruitment and personalized deals in compensation that were common in the past, as a result of a more paternalistic culture. While these changes seem to point toward convergence in Latin HRM, many traditional features of HRM systems in these countries remain more or less unmodified. For instance, in 1991 there was a growing recognition of HRM departments by top management, along with serious doubts about its capacity to positively contribute to a company’s growth in ways similar to the departments of

284   Trullen and Obeso ­ arketing or finance. Our data seem to indicate that although HRM managers sit on the m boards of Latin firms, this does not necessarily translate into direct influence. Similarly, Filella (1991) found in Latin countries greater centralization of HRM functions (that is, less devolution to the line), lower levels of investment and training and development, and lower union affiliation levels coupled with strong union power, all of which are patterns that apparently repeat themselves almost a quarter of a century later. In sum, while a Latin European HRM model per se may not exist, there seems to be enough evidence, both in relation to labor markets and in some aspects of the HRM function, that justifies taking the Latin European context into account when carrying out HRM research in these countries. Several factors such as isomorphic pressures from multinational corporations operating in Latin European countries (Quintanilla, Susaeta, & Sánchez-­Mangas, 2008), as well as ongoing changes in the cultural values of citizens in these countries (Moreno & Marí-­Klose, 2013)—for example, more emphasis on gender egalitarianism or performance orientation—make us think that convergence forces will remain strong in these countries. However, if we look at what has happened since Filella’s (1991) study, we can expect these changes to take place only very slowly, supporting directional convergence arguments (Mayrhofer, Brewster, Morley, & Ledolter, 2011).

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Human Resource Management in the Latin European Context   285 Gal, J. (2010). Is there an extended family of Mediterranean welfare states? Journal of European Social Policy, 20(4), 283–300. Kersbergen, K. van, & Manow, P. (Eds.). (2009). Religion, class coalitions and welfare states. Cambridge, UK: Cambridge University Press. Larsen, H. H. & Brewster, C. (2003). Line management responsibility for HRM: what is happening in Europe? Employee Relations, 25 (3), 228–244. Manow P. (2015). Workers, farmers and Catholicism: A history of political class coalitions and the south-European welfare state regime. Journal of European Social Policy, 25(1), 32–49. Marthijn, W. (2017, October 26). The many faces of self-employment in Europe. Eurofound. Retrieved from https://www.eurofound.europa.eu/publications/blog/the-many-faces-ofself-employment-in-europe Martin, C. (2015). Southern welfare states: Configuration of the welfare balance between state and the family. In M. Baumeister & R. Sala (Eds.), Southern Europe? Italy, Spain, Portugal, and Greece from the 1950s until the present day (pp. 77–100). Frankfurt, Germany: Campus Verlag. Mayrhofer, W., Brewster, C., Morley, M. J., & Ledolter, J. (2011). Hearing a different drummer? Evidence of convergence in European HRM. Human Resource Management Review, 21(1), 50–67. Moreno, L., & Marí-Klose, P. (2013). Youth, family changes and welfare arrangements. European Societies, 15(4), 493–513. Polanyi, K. (1957). The great transformation: The political and economic origins of our time. Boston, MA: Beacon Press. (Original work published 1944). Quintanilla, J., Susaeta, L., & Sánchez-Mangas, R. (2008). The diffusion of employment practices in multinationals: “Americanness” within US MNCs in Spain? Journal of Industrial Relations, 50(5), 680–696. Saraceno, C., & Keck, W. 2010. Can we identify intergenerational policy regimes in Europe? European Societies, 12(5), 675–696. Schneider, F. (2013, January). Size and development of the shadow economy of 31 European and 5 other OECD countries from 2003 to 2012: Some new facts. Retrieved from https://www.researchgate.net /publication/268185661_Size_and_Development_of_the_Shadow_Economy_of_31 _European_and_5_other_OECD_Countries_from_2003_to_2012_Some_New_Facts Stavrou, E., & Papalexandris, N. (2016). Mediterranean HRM: Key trends and challenges. In M.  Dickmann, C.  Brewster, & P.  Sparrow (Eds.), International human resource management: Contemporary HRM issues in Europe (3rd ed.). Abingdon, UK: Routledge/Taylor & Francis. Walker, J. T., Brewster, C., & Wood, G (2014). Diversity between and within varieties of capitalism: Transnational survey evidence. Industrial and Corporate Change, 23(2), 493–533.

chapter 13

H um a n R esou rce M a nagem en t a n d I n dustr i a l R el ations i n the L ati n A m er ica n Con text Wilson Aparecido Costa de Amorim and Antonio Carvalho Neto

This chapter seeks to discuss and characterize key features of human resource ­management (HRM) and industrial relations systems (IRS) provision in Latin America. We focus on five countries, namely, Brazil, Argentina, Uruguay, Paraguay, and Chile, to illustrate the nature and contours of HRM and IRS in the region. Brazil, Argentina, Uruguay, and Paraguay form the Mercosur economic free trade bloc, which allows for movement of labor between these states. Established in March 1991 under the Treaty of Asuncíon (in Paraguay), the subsequent Treaty of Ouro Preto (in Brazil) signed in 1994 formalized a customs union. Bolivia, Chile, Colombia, Ecuador, and Peru are associate members, a status that provides for their joining of free trade agreements while remaining outside the customs union. Negotiations to incorporate Chile as a full member were suspended after it signed a free trade deal with the United States in 2002. Venezuela was accepted into membership in 2006, pending ratification by the other member states, but so far, Paraguay has not ratified Venezuela’s full membership, citing concerns regarding its democratic credentials. Nor does Mexico belong to the bloc, having joined the North American Free Trade Agreement with the United States and Canada in 1994. We start by “landscaping” the industrial relations (IR) characteristics of these five countries, because we believe the IR macro context and the institutional provisions that operate within the systems serve to condition the HRM policies and practices pursued at the organizational level. Subsequently, we consider the HRM policies and practices

288   Aparecido Costa de Amorim and Carvalho Neto that are commonplace in Mexico, Colombia, and Peru to provide a broader Latin American framework. This initial characterization serves as a starting point to provide a more detailed account of the HRM policies and practices pursued by organizations operating in the region. We use a comparative capitalisms approach (Jackson & Deeg, 2008) to frame our thinking and to explain commonalities and differences in the preferred approaches to HRM and IR in the countries under examination. Hall and Soskice (2003) focused on varieties of capitalism to identify and differentiate current models of economic organization and institutions within a set of developed countries, arguing that complementary spheres of relationships, separately and between them, define the ideal-­type models of either Anglo-­Saxon liberal market economies or the Rhineland countries (plus Japan’s) coordinated market economies. In particular, they compared five sets of relationships between firms and their characteristics and/or problems: the IRS, professional training in the country, corporate governance, relations between firms, and relations between employers and employees. We present the main characteristics of the varieties of capitalism model in Tables 13.1 and 13.2. Based on the key characteristics of the relationships of interest, the varieties of capitalism model identified two basic types of capitalism among countries: liberal market economies and coordinated market economies, as shown in Table 13.2. While the classification is not exhaustive, importantly, it does allow countries to be positioned in situations that are intermediate to those of the two varieties of capitalism ideal types (Wood, Brewster, & Brookes, 2014). Schneider (2009) offers a comparable analysis with respect to Latin America. Here, five relevant institutional domains are identified: labor relations (the IR macro systems context); education/training for work (skills training, the HRM micro context); ­corporate governance (the HRM micro context); the relationships between national firms (the IR systems macro context); and the relationship between multinational corporations (MNCs) (another part of the IR systems macro context). The model advanced by Schneider has features distinct enough to conform to what he calls hierarchical market economies. Latin America has a history, culture, and economic background rather different from that of other regions, with characteristics and dynamics different from those recorded and reported in developed countries. Schneider (2009) acknowledges the diversity that exists among Latin American countries. Nevertheless, he identifies common characteristics in these economies, such as the prevalence of family-­owned as well as more diversified national business groups, the strong presence of MNCs, a low-­skilled labor force, and atomized workplace relationships. According to Schneider (2009), the combined presence of large MNCs and national business groups with family roots produces a business environment often comprising a set of complementarities that negatively impact local development. Characteristic features such as the low skills of the workforce (HRM micro context) and low levels of trade union representation at the organizational level often result in high income inequality in the region. This, in turn, constitutes an obstacle to the development of local markets.

HRM and Industrial Relations in the Latin American Context   289 Table 13.1.  Complementarities and economy subsystems Domain area

Challenges for the firm

Industrial relations arena

Organize and coordinate negotiations on wages, working conditions, etc., with unions and other employers.

Training and human resource development

Organize and coordinate efforts to ensure an adequate supply of workers with appropriate skills. This coordination can result in gains for firms and workers.

Corporate governance

Organize and coordinate efforts to ensure access to low-­risk sources of finance (for funders).

Relationships between firms Workplace employee relations

Organize and coordinate relationships with and between suppliers and customers. Ensure that employees have the necessary skills and also cooperate with each other to meet the firm goals.

Source: Adapted from Hall and Soskice (2003).

Table 13.2.  Key features of varieties of capitalism Variety Liberal market economy

Features

Firms coordinate activities using hierarchies and competitive market arrangements Market relations are characterized by the extent to which goods and services are exchanged Actors respond to prices established by the market to adjust their supply and demand Actor behavior more effectively coordinated by the market The balance between supply and demand arises from the competitive market Coordinated Nonmarket relationships are key to firms being able to market economy coordinate their efforts with other actors and grow their managerial skills Networking conveys information and a more cooperative exchange of experiences resulting in the building of managerial skills Nonmarket modes of coordination outline incomplete relationships and contracts Market balance results more from interactions among actors

Country examples United States, United Kingdom, and Australia

Scandinavian countries, Germany, and Japan

Sources: Economic Commission for Latin America and the Caribbean (2017); World Bank GDP Ranking (2016); IBGE (2018).

290   Aparecido Costa de Amorim and Carvalho Neto As to the management of organizations (the HRM micro context), Schneider (2009) points to the prevalence of hierarchy as the guiding corporate governance mechanism. The lack of dialogue with stakeholders outside organizations, or indeed within the closest circle of business owner groups, often results in a management style that is less open than both the more competitive negotiations of the liberal market economies model and the more socially structured negotiations of the coordinated market economies model. Specifically relating to HRM and to the policies and practices characteristic of the region, there is a lack of detailed research evidence. Elvira and Davila (2006) note that it is somewhat surprising that there are so few studies of HRM specifically focused on the region, given the overall economic significance of Latin America. Those studies that have been completed usually involve the development and presentation of case studies of national firms that are to be taken as broadly representative of the national approach to HRM. Furthermore, there are relatively few sectoral studies within countries and even fewer comparative studies focused on the Latin American region. Of particular note also is that relatively few of even the limited number of comparative studies conducted have focused on countries that comprise the Mercosur bloc. A bibliometric search involving journals with an impact factor equal to or greater than 1.3 combining the search strings “HRM” or “SHRM” and involving all or any of the countries of this bloc—Argentina, Brazil, Paraguay, and Uruguay—yielded only five relevant articles (Arrau, Eades, & Wilson, 2012; Bello-­Pintado, 2015; Cristiani & Peiró, 2015; Friel, 2011; Ugarte, 2017). Despite the paucity of academic research and the very modest number of empirical studies on HRM in the region, there is a vibrant HRM practitioner community operating in all of these countries. The presence and visibility of these five countries, along with Peru, Colombia, and Mexico, in international rankings regarding the quality of HRM  management and/or job satisfaction would certainly suggest so (“Best Workplaces,” 2019).

Background and Context Latin America comprises a vast area of about 13 million square miles (21.1 million square kilometers) on the American continent and has approximately 648 million inhabitants. This territory, characterized by geographical and economic diversity, comprises forty-­eight countries (including the Caribbean region). Many are Spanish-­speaking countries, whereas Brazil is Portuguese speaking (Economic Commission for Latin American and the Caribbean, 2019a). The economies of the region vary greatly in size. Many emerged from colonialism in the nineteenth century and remained underdeveloped or were under development throughout the twentieth century. As a characteristic common to the entire region, inequality has been one of the main obstacles to the development of their countries (Economic Commission for Latin American and the Caribbean,  2019b). Currently,

HRM and Industrial Relations in the Latin American Context   291 against the backdrop and the dynamics of globalization, from an economic perspective, these forty-­eight countries oscillate between periods of greater and lesser economic growth. In almost all of these countries, the production of commodities is the fundamental basis of economic activity. Brazil and Mexico, as two of the larger economies, are an exception in this regard, because they are more economically diversified (Economic Commission for Latin American and the Caribbean, 2019a, 2019b). Much of Latin America has historically had a strong economic relationship with the United States and we can observe the presence of European and US MNCs in the business landscape. Recently, there has been a growing Chinese presence in investment and trade flows in the region (Economic Commission for Latin American and the Caribbean, 2015). On the one hand, these neighboring countries differ in geographic, linguistic, population, and economic terms. While Argentina, Paraguay, Uruguay, and Chile suffered from colonization by Spain, Brazil was colonized by Portugal. As the economic powerhouse of the Mercosur bloc, Brazil’s gross domestic product (GDP) (the ninth in the world) is more than three times that of Argentina, six times that of Chile, and more than thirty times that of Paraguay and Uruguay (see Table 13.3). Table 13.3.  Key economic indicators of Mercosur countries (2015, 2016, and 2017) Characteristics

 

Brazil

Argentina

Paraguay

Uruguay Chile

Population (millions)

 

207.7

44.7

6.8

3.5

18.9

Gross domestic product (GDP)—annual growth rate (%)

2015 20162017

–3.5 –3.5 0.9

2.6 –2.2 2.9

3.0 4.0 4.0

0.4 1.5 3.0

2.3 1.6 1.5

Per capita GDP—annual growth rate (%)

2015 20162017

–4.4 –4.3 0.1

1.6 –3.2 2.0

1.6 2.8 2.8

0.0 1.1 2.6

1.2 0.5 0.5

Consumer prices—annual growth rate (%)

2015 20162017

10.7 6.3 2.7

27.5 38.5 22.9

3.1 3.9 4.9

9.4 8.1 6.0

4.4 2.7 1.9

Urban unemployment rate—annual average percentage (%)

2015 20162017

9.3 13.0 14.5

6.5 8.5 9.0

6.5 7.7 8.7

7.8 8.2 8.4

6.4 6.8 6.9

Current account balance (millions of US dollars)

2015 20162017

–59,434 –23,530 –11,938

–17,170 –14,533 –26,853

–301 415 –802

–395 888 1,661

–4.670 –3.574 –4.425

GDP ranking value (millions of US dollars) GDP ranking—position among 200 countries

2016

1,796,186

545,476

27,424

52,419

298,231

2016

9

21

98

78

41

Source: Economic Commission for Latin America and the Carribbean (ECLAC, 2017); World Bank GDP Ranking 2016; IBGE, (2018).

292   Aparecido Costa de Amorim and Carvalho Neto On the other hand, all of these countries are encompassed by a shared Latin culture. In addition, Brazil, Argentina, Paraguay, Uruguay, and Chile have also experienced, at various points throughout their history, long periods of dictatorship, populism, and caudilhos, a deadly local mixture of dictatorship and populism, which were accompanied by dramatic and punishing economic shocks. The longest dictatorship among these four countries occurred in Paraguay. The caudilho Alfredo Stroessner was the supreme dictator for thirty-­five years, until 1989. In 2018, his Colorado Party, the main political force in Paraguay for the past seventy years, elected Marito Abdo as leader, a liberal-­oriented politician who is the son of an earlier politician from Stroessner’s close circle. In Argentina, for most of the second half of the twentieth century, strong ties existed between the trade union movement and the state, which was ruled by the Peronist Party, a populist party led by the caudilho Juan Perón for several decades. The adoption of neo-­liberal policies eventually disrupted this dominant political system, leaving the trade union movement in a fragile state from the 1990s onward (Levesque et al., 2015; González & D’Urso, 2018). In Brazil, similarly strong ties between the trade unions and the state prevailed from the beginning of the twentieth century under the dictatorship of the populist caudilho Getúlio Vargas (1930s to 1945). The nineteen subsequent democratic years were dominated by populists (among them Vargas, who served as interim president from 1930 to 1934 and constitutionally elected president from 1934 to 1937) who were attached to official trade unions, eventually culminating in the union movement becoming heavily dependent on the state (Carvalho Neto, Amorim, & Fischer, 2016). The military dictatorship that followed repressed the labor movement, including some of the major trade unions. Following the end of the military dictatorship, the trade unions in Brazil experienced a golden decade of revitalization and achieved a significant rise in political and bargaining power. As in Argentina, the eventual adoption of neo-­liberal policies resulted in a weakening of the trade unions during the 1990s. However, since the early 2000s, a political left turn in Argentina (Levesque et al., 2015) and in Brazil (Carvalho Neto et al., 2016) resulted in the enactment of numerous labor policies dealing with income distribution, social security, and legal protection, which were favorable to the labor movement and to the trade unions. The left turn brought the unions back to prominence in Argentina (González & D’Urso,  2018) and in Brazil (Carvalho Neto et al., 2016). Brazil, Argentina, and Uruguay (and Paraguay for a comparatively shorter period) experienced political changes toward greater regulation in the economy under “neo-­developer” governments that sponsored more state intervention on economic labor relations matters. From 2000 to 2015, these four countries experienced a dramatic improvement in their economies, with a significant accompanying drop in unemployment rates and a strengthening of trade unionism (González & D’Urso, 2018). Since 2015, Brazil and Argentina have once again been experiencing liberal governments, after the impeachment of President Dilma Roussef and the election of Maurício Macri, respectively. In Uruguay, the left front remained in power, winning new elections, with Tabaré Vázquez succeeding the charismatic José Mujica. In Paraguay, for at least fifteen years a liberal economic policy has been maintained, and it has not been modified,

HRM and Industrial Relations in the Latin American Context   293 even during a brief rise to power of the left for a few short years (the liberals are now ruling Paraguay again). In both Argentina and Brazil, following the coming to power of the Macri and Temer liberal governments after 2015, the trade union movement has faced enormous challenges. In Argentina, extremely high inflation and the liberal shock to the economy, coupled with the inclusion of labor rights flexibility and the establishment of wage increases below the inflation index, have posed enormous challenges for trade unions, which, even if weakened in relation to the previous situation, managed to organize mass popular protest demonstrations (González & D’Urso, 2018). In Brazil, the approval by the national congress of the greater flexibility of workers’ rights in the past seven decades represented a hitherto unthinkable and enormous defeat for the trade union movement in the private sector, and the policy of curbing state spending has had a significant negative impact on public-­sector employees. In Chile, Salvador Allende’s socialist-­oriented government was overthrown in 1973 and was succeeded by the dictatorship of Augusto Pinochet, which lasted until 1990. During this period, the governance of the country resembled a field experiment of ultraliberal and monetarist economic policies. Among the main changes in this period in the country were the privatization of state companies, the reduction of social security provisions and labor reforms focused on increasing the flexibility of hiring, decentralizing collective bargaining between companies and unions, and the reducing of labor conflicts (Edwards & Edwards,  2000). The restoration of democracy in Chile provided opportunities for both socialist governments (Ricardo Lagos, 2000 to 2006; Michele Bachelet, 2006 to 2010 and 2014 to 2018) and liberal-­conservatives such as Sebastian Piñera (2010 to 2014 and 2018 to 2022). As with other countries in the region, since the early 2000s, Chile has experienced a period of economic growth based on the commodity boom. With respect to its IRS and the labor movement, trade unions are generally organized on a company basis and therefore engage in decentralized negotiations. While the unions do have some ties to political parties, unlike Argentina, Brazil, and Uruguay, they have less influence on the general political landscape. More recently, under Bachelet’s second government, new labor reforms were proposed and approved in 2014, giving unions greater bargaining power (Ramires, 2015; Slattery, 2016).

Economic and Labor Market Features of Brazil, Argentina, Uruguay, Paraguay, and Chile A common economic characteristic of these four countries is that they are all commodity exporters, having relatively high international trade exposure in goods and services with emerging markets such as China, India, and Russia. They are not as dependent on industrialized economies in western Europe and the United States as other Latin

294   Aparecido Costa de Amorim and Carvalho Neto American countries (Izquierdo & Talvi,  2011). Table  13.3 presents recent economic indicators covering the period 2015 to 2017. The labor markets of Argentina and Uruguay during the past twenty years have moved from being dominated by intensive manual work to more professional activities. The adoption of robotics permits the substitution of manual labor in certain tasks (Apella & Zunino, 2017). Brazil, as the main, most complex, and most developed economy among these four countries, had moved in this direction sometime earlier. Brazil is the key economic driving force of the Mercosur bloc, and as the ninth largest economy in the world, it is easily the largest in Latin America. Following a deep recession in 2015 and 2016, there are signs that the contraction in Brazilian GDP has ended, with an annual growth of 0.9 percent in 2017 (see Table 13.3). Inflation has significantly reduced (to 2.7 percent) and continues to decline, leading to a substantial reduction in the nominal basic interest rate. However, it would be somewhat premature to speak of a sustained improvement. Despite fiscal adjustment efforts, the public deficit remains high. Consumption and investment are still lower than the levels seen in 2014, before the global financial crisis, and public investment has decreased sharply. The unemployment rate also remains stubbornly high (Economic Commission for Latin America and the Caribbean, 2017). The GDP in Uruguay has been growing over the past fifteen years, as is also the case in Paraguay. The unemployment rate in Uruguay has remained at approximately 8 percent. Despite that, real wages rose significantly. The GDP grew by about 3 percent in 2018 as a result of the continuation of the favorable conditions that fueled growth in output and because of the recovery of public infrastructure investments (Economic Commission for Latin America and the Caribbean, 2017). Uruguay is the only country among those included for discussion here that continues to be led by a long-­term left-­leaning government. In the aftermath of a significant economic crisis, GDP in Argentina expanded during 2017 as a result of increasing public social spending and rising investment. The turnaround may also, in part at least, be associated with the recovery in the Brazilian economy because the economy of Argentina is substantially intertwined with that of Brazil. Nevertheless, the inflation rate remains high. Unemployment is high and growing (see Table  13.3). The fiscal and the current account deficits were financed by a marked increase in external borrowing in 2017, which also underpinned an increase in international reserves. The account deficit widened in 2017, standing at 4.2 percent of the GDP in the first half of the year (Economic Commission for Latin America and the Caribbean, 2017), a situation that in 2018 culminated in the return of the country as a debtor of the International Monetary Fund. The GDP in Paraguay has been growing steadily during the past fifteen years, at a rate of 4.5 percent per year. Since 2003, poverty has dropped from 50 percent to 28 percent. According to the Economic Commission for Latin America and the Caribbean (2017), soybean exports and the maquila industries, which mirror the Mexican model of operating largely duty-­free and tariff-­free, and which, in the case of Paraguay, are oriented to the Brazilian and Chinese consumer markets (foodstuffs, textiles and

HRM and Industrial Relations in the Latin American Context   295 apparel, paper, chemicals, and base metals), have played an important role in this recovery. In addition, Paraguay’s role in serving as a financial haven for Brazilian and Argentinian capital investors, coupled with having a cheap and compliant labor force, have proven to be important contributors to the economic recovery. The Chilean economy, as well as the rest of Latin America, benefited greatly from the global commodity boom in the first ten years of the twentieth century. The country is highly dependent on its copper exports and agribusiness. In the past three years, despite the improvement of the international environment, the Chilean economy grew only slightly, with rates of 2.5 and 1.6 percent recorded in 2016 and 2017, respectively. Given its more liberal economic regime compared to its neighbors, Chile tends to have a more positive image vis-­à-­vis global financial markets. Only recently has there been greater integration of its activities with those of its neighbors (Economic Commission for Latin America and the Caribbean, 2017). Overall, at the macroeconomic level, the IRS features of the Mercosur countries, along with Chile, show some convergence, though there are significant economic differences between the countries. All of these countries are commodity exporters and have strong ties with China. This common characteristic makes them less reliant on industrialized economies from western Europe or on the United States than are other Latin American countries. Throughout their recent history, Brazil, Argentina, Paraguay, Uruguay, and Chile have experienced periods of similar political turmoil: dictatorships, populism, and caudilhos, along with dramatic and often far-­reaching economic shocks. Beginning in the early 2000s, left-­wing governments in Argentina and Brazil instituted numerous labor policies favorable to workers, a move that, in turn, reinvigorated the trade union movement and its legitimacy. However, with the return of liberal governments in Brazil and Argentina in 2015 and the implementation of policy provisions less favorable to workers’ rights or the trade unions, along with cuts to public expenditure on social programs, the pendulum has swung once again, resulting in the trade unions facing enormous challenges in both countries. There has been a sharp increase in unemployment and a raft of funding cuts. In contrast, GDP in both Uruguay and in Paraguay has been growing steadily over the past fifteen years. The leftist political party that has been in charge in Uruguay is pragmatically market oriented but maintains social and developmental programs, while in Paraguay the liberal governments have resulted in a highly deregulated economy. The key economic indicators drawn on for comparative purposes highlight that Brazil and Argentina have experienced acute economic crises, with Argentina experiencing even bleaker circumstances than Brazil, while Uruguay, Paraguay, and Chile have, in relative terms, been living through a decade and a half of economic growth. At the end of 2019, after fifteen years ruling Uruguay, the left-­wing government was defeated by liberals. Concomitantly, Argentina elected a left-­wing government against the liberal President Macri, while Chile faced an almost nationwide movement of popular unrest that has forced the liberal-­conservative government to negotiate a new constitution. Similar movements challenging the liberal economic agenda have become a common feature of the political landscape in both Colombia and Ecuador.

296   Aparecido Costa de Amorim and Carvalho Neto

Labor Regulation, Union Role, and Collective Bargaining in Selected Latin American Countries: Hierarchical Market Models in Turmoil? Building on the more general macroeconomic framework we have presented, Table 13.4 gives the general characteristics of these five countries over the recent period. The elements of the framework focus on the role of unions, the general characteristics of collective bargaining, and key issues related to the legal and institutional regulation of labor relations. The final column lists important recent changes in the general rules of these systems. A first key observation is that recent changes in the contextual and economic ­environment of Brazil, Argentina, Uruguay, Paraguay, and Chile have had consequences for the labor relations arena. As outlined in Table 13.4, in all countries, developments designed to alter or rearrange labor contracting occurred at both the individual and the collective levels, following similar patterns emerging in various other countries around the world (Adascalitei & Pignatti Morano, 2015). In Argentina, Brazil, and Uruguay, left-­wing governments, more closely aligned with the trade unions as political actors, produced at least two concomitant phenomena, namely, the growth and expansion of union action and the reinforcement of the role and importance of labor relations in society. In the case of Paraguay, given the historically weaker presence of the unions operating on the national scene, the evidence for this shift is more limited, with the result that the overall IR system would appear to be less impacted. Another important issue of note is that the two largest countries in the region have experienced significant changes since 2014 in the regulation of hiring and in labor relations in a more general sense. Argentina and Brazil, through different paths, experienced the change of their political orientation from 2016 with the beginning of the Macri and the Temer and Bolsonaro governments, respectively. Thus, while the smaller countries of the region—Paraguay, Uruguay, and Chile—maintained the general characteristics of their IR systems, Argentina and Brazil underwent important changes in labor legislation. In Chile, although three left-­wing governments have been in power over the past twenty years, it was only under Bachelet’s government between 2014 and 2018 that there was a change in labor legislation resulting in more favorable conditions for the trade union movement. In Argentina, the balance of power shifted strongly to the employers’ side through the more interventionist actions of the state, including redefining the national minimum wage, establishing limits to collective bargaining wage clauses, and the imposition of greater restrictions around strikes organized by the trade unions (González & D’Urso, 2018). In the case of Brazil, the changes were more radical and altered more than one hundred laws of the old Brazilian labor code of law stretching back to 1943

Table 13.4.  Mercosur and Chile: Key features of the industrial relations systems  

Argentina

Brazil

Paraguay

Uruguay

Chile

Unions’ role

Centralized representation of workers in collective bargaining; strong interaction with political parties

Representation of workers by professional category and geographic region; low union presence at company level; interaction with party parties intensified (2003–14)

Fragmented representation at company level; competition between unions

Collective bargaining with companies; participation in forums with companies; participation in national tripartite negotiations

More common: company trade unions (mining, construction, infrastructure: higher level of unionization) Less common: intercompany trade unions

Collective bargaining

Centralized collective bargaining and increasing number of agreements in the private sector until 2014

Collective bargaining covers all formal contracts in the private sector

Only reaches 4% of private-­sector workers

Reaches 75% of private-­sector workers

Collective bargaining agreements: mainly at company level; low application in the overall employment market

Labor regulation (law and institutions)

Reorganization of legislation (2004) revitalizes centralized collective bargaining and labor rights (National Council of Salaries)

Labor regulation (1943) defines labor rights and the way trade unions and labor relations operate; flexibilization began in the 1990s

No protective labor legislation for union action

Neo-­corporatist tripartite system (National Wages Council)

Main recent changes

Institutional reforms of liberal bias and flexibilization of industrial relations; initiatives to weaken trade unions

Labor reform (2017): liberal bias, flexibilization of hiring rules, reinforcement of individual forms of hiring, weakening of trade unionism

A general strike happens for the first time in 2013; social dialogue begins to be practiced

Labor reform (2005) strengthened trade unions and collective bargaining

No prior authorization issued by public authority is required to form a union (required number of employees by the law) Recent changes (2016) strengthened trade unions and collective bargaining

Sources: Cristiani and Peiró (2015), LO/FTF Council (2014), Gonzáles and D’Urso (2018), Carvalho Neto, Amorim, and Fischer (2016), Liberman (2019).

298   Aparecido Costa de Amorim and Carvalho Neto (Krein, 2018). The labor reform provisions put in place included a broad spectrum of measures regulating flexible forms of hiring, restricting forms of union financing, reducing the scope of labor justice, and shifting labor legislation provisions such that the employment relationship is more akin to a common exchange ratio in the market. Looking at the IR systems of the region through Schneider’s hierarchical market economy model, it is possible to comparatively summarize the various changes that have occurred and their impact. As in Hall and Soskice’s (2003) approach, in addition to analyzing the institutional aspects of the countries, it is important to observe the complementarities among them. Table 13.5 shows the hierarchical and market characteristics in each country. In addition, from a longitudinal perspective, the complementarities possible from the changes in the respective IR systems are also presented. Table 13.5 highlights that the recent changes in the IR system of Argentina and Brazil have reinforced the hierarchical and market aspects enumerated by Schneider (2009). This is partly because the reforms carried out, especially at a time of economic crisis, have shifted the balance of institutional bargaining power strongly in favor of the employers (Brazil) or in the direction of the state itself (Argentina), to the detriment of the unions as social actors. In this way, the reforms carried out in the two countries reinforced the market features normally associated with the functioning of labor markets in Latin America, as well as the hierarchical traits associated with the ­institutions in their more general sense. It follows from this picture that the complementarities expected in these two countries also accentuate the negative bias observed by Schneider. This negative bias is heightened by the fact that the prevalence of a market logic without a counterweight or attenuation of the hierarchical profile of societies is strongly inducing social inequality and income concentration. With regard to the other three countries—Uruguay, Paraguay, and Chile—it is interesting to note that they have experienced a positive economic period. In the case of Uruguay, the observed complementarities have a positive bias since, at least in terms of per capita income, the country’s trajectory has been positive. In the Paraguayan case, per capita income growth has also occurred, but at a pace that is systematically lower than that found in the country’s economic growth, with the result that the reduction in inequality has not occurred in any significant way. In Chile, economic growth was also observed, but with ongoing and persistent inequality remaining a feature of the ­landscape. Recent popular demonstrations of protest in the country indicate that the long-­term effects of the privatization of welfare, even during military rule, resulted in the further impoverishment of the older portion of the population. Chile’s ultraliberal economic policy seems to have resulted in deepening social inequality, a development that is at the root of the huge wave of protests the country has experienced in the recent past. Because there are significant differences in the size of these economies, the basis for aspects of the comparison may be weakened. Focusing specifically on the cases of Argentina and Brazil, which allows for the preserving of more specificities, there is broad alignment between their labor relations environments in terms of an increase in flexibility in the hiring of labor.

Table 13.5.  Mercosur: Recent changes and institutional complementarities  

Argentina

Brazil

Paraguay

Uruguay

Chile

Hierarchy

State interferes by creating barriers to union action or limits to negotiated contents

Reinforcement of the position of the companies in the labor market, reduction of protection to union activity by the Labor Court

Companies in a position of predominance in the definition of forms of hiring labor

Less hierarchical labor relations because of the existence of coordinated negotiation spaces

Hierarchical: Company-­level bargaining in companies with trade union (very low influence of company trade union on human resource policies and practices)

Market

Flexibilization of labor rights

Flexibilization of labor rights, reinforcement of the individual hiring of labor

Recent changes are insufficient to attenuate market orientation in labor relations

Retirement system pressures workers to stay in labor market

Complementarities (positive/negative)

Commoditization of labor, fall of workers’ income, concentration of income

Commoditization of labor, more sudden adjustments in the labor market, concentration of income

Persistent economic growth, but with persistent concentration of income

Recent changes have introduced more mechanisms of economic coordination (decreasing market-­oriented relations) Persistent economic growth is accompanied by per capita income growth

Persistent economic growth followed by per capita income growth, but persistent inequality

300   Aparecido Costa de Amorim and Carvalho Neto

Latin America: Evidence of Divergence and Convergence A closer examination of the conditions under which the IR systems of Latin American countries operate would require more space than this chapter allows. However, from the data presented, it can be noted that while the countries of the region have made economic progress in the past twenty years, they remain linked to the very strong structural characteristics of their history and development, which continue to impact their capacity to secure and maintain the socioeconomic trajectory sought. None of the five countries has overcome a commonly occurring situation in the region, namely, subordinate international insertion into the global financial system and international trade. Even Brazil, which experienced a global repositioning from its designation as one of the BRICS countries (Brazil, Russia, India, China, and South Africa) and a growth and expansion of its regional role in Latin America up until 2014, can now be seen to have retreated from these roles in recent years. This results in a situation where US, European, and Asian MNCs operating in this region have a strong capacity to influence local economies as they enjoy support from home governments. This phenomenon of the rising influence of foreign-­owned MNCs is not restricted to the countries studied here and has also been observed in Mexico, Colombia, and Peru. In addition, it must be acknowledged that there has been a significant expansion of Latin American–owned MNCs in the region, with Brazilian- and Mexican-­originating MNCs in particular now having a significant presence throughout much of the continent. Ongoing research indicates that, in general, MNCs—either originating in Latin American or elsewhere—have HRM departments that are broadly controlled by and subject to strong direction from their respective headquarters. Such levels of centralization and control being exhibited by MNC headquarters facilitate the importing and reproducing of HRM practices from abroad into the region. Of note in the case of Brazil, Argentina, Uruguay, Paraguay, and Chile is that it is more difficult to identify the presence of international consultancies committed to establishing HRM best practice rankings (“Best Workplaces,” 2019). The prevalence and the impact of these consultancies, engaged in the institutionalization of so-­called best practices, seems to occur more commonly in less complex economies such as Paraguay, the Dominican Republic, and Honduras. Drawing on recent Cranet data collected in Brazil, Table  13.6 highlights the key characteristics of the human resource departments in the country. The institutionalization of HRM areas within organizations has advanced because of its proximity to the instances and/or processes that define the strategic actions of companies. In particular, the data indicate the presence of an HRM department in almost all organizations. Furthermore, there is a significant proportion of organizations in which the HRM manager is a member of the companies’ board and is also involved in the processes initiating strategic decisions in respondent organizations (Cranet Brazil, 2015).

HRM and Industrial Relations in the Latin American Context   301 Table 13.6.  Brazil: Strategic characteristics of the human resource management department Indicator

Data (%)

Percentage of organizations that have an HRM department

99

Percentage of organizations in which the person responsible for HRM sits on the board of directors or equivalent body in the upper echelon of executives

64

Percentage of organizations in which the person responsible for HRM is involved from the beginning in the company’s strategic development process

60

The HRM department is primarily responsible for decisions about HRM policies, either alone or in consultation with the line manager

66

The line manager is primarily responsible for decisions about HRM policies, either alone or in consultation with the HRM department

34

The HRM department was involved in the initial phase of defining organizational change processes Decisions about human resources policies are made at the organizations’ national headquarters

56 49

Note: HRM, human resource management. Source: Cranet Brazil (2014/15).

However, against the backdrop of what might be considered “normal” HRM practices for MNCs, or indeed for indigenous companies, there is one overriding contextual challenge to this regional “normality” and likely future development trajectory, namely, political instability. From time to time, the region faces the limits imposed internally and externally on its economic and social development and is institutionally tested by either more gradual (left or right) government transitions such as those in Chile and Uruguay, and to some extent in Mexico, or more abrupt transitions, as in the case of Brazil, Colombia, Ecuador, and Bolivia. While on the one hand these political shifts may be considered part of the natural effort to consolidate democracy in the region, on the other hand they also fuel a certain degree of social instability as a by-­product of the significant political swings characteristic of several countries in the region. With rare exceptions, such as Uruguay, the periods of economic growth in the countries of the Latin American region typically occur without bringing about any significant reduction in social inequality. The result is often social discontent, which leads to social unrest and political instability—culminating in frequent government changes. Thus, political instability serves as an important institutional constraint on the IR systems of Latin American countries and, by extension, in the performance of companies and their HRM practices in the Latin American space. Proof of this is found in the various radical changes since the beginning of this century in the labor and social security legislation provisions that have been put in place by several countries in the region. As a result, it is not uncommon to find that the HRM practices that have taken hold in Latin

302   Aparecido Costa de Amorim and Carvalho Neto America are MNC based and are often derived from headquarters abroad. The result is that they frequently do not adhere to local labor market conditions at play in the ­different countries in the region.

Conclusion Having looked at some of the key institutional features operating in the Latin American context, an important question that arises is, What are the consequences of these institutional characteristics for HRM in these countries? The available evidence points to an ongoing dissemination of HRM practices throughout Latin America (Bello-­Pintado, 2015; Elvira & Davila, 2005). The ever-­stronger presence and influence of external MNCs in the region clearly serves as an important conduit for the spread of particular HRM approaches. As reported in the literature, MNCs are strong drivers of the dissemination and standardization of HRM policies and practices (Elvira & Davila, 2005; Friel,  2011). Mimetic isomorphism is resulting in a situation where even indigenous companies that restrict themselves to their local markets in the region are engaging in the uptake of particular HRM practices. Historically, MNCs operating in the region were largely US and UK owned. More recent years have witnessed the arrival of MNCs from Spain, Portugal, and, most significantly, Asia, particularly China. As discussed previously with the economic features, China has increasingly been a major economic and commercial partner of Brazil and Paraguay. In another recent turn, there has been a rise of Latin American–owned MNCs operating in the Mercosur region. Hence, Brazilian-, Argentinian-, Chilean-, Colombian-, and Mexican-­owned MNCs have gradually become a more common feature of the business landscape of the region (Arrau et al., 2012; Economic Commission for Latin America and the Caribbean, 2018; Fleury & Fleury, 2016). As mentioned earlier in this chapter, additional evidence of the spread of HRM policies and practices in the Latin American region can be found in the growing presence of rankings of corporations organized according to the quality and quantity of their best HRM policies and practices. These rankings attest to at least the existence of a knowledge market about HRM policies and practices between the companies that operate in the region. The simultaneous presence of some of these MNCs in the rankings of best places to work in the five countries reinforces this perception. There are several issues that arise from the topics discussed in this chapter that merit investigation. A critical issue requiring examination is whether the dissemination of HRM policies and practices in an institutional setting that emphasizes the hierarchical and market characteristics of labor relations will also produce some kind of convergence in these practices. For example, in Brazil and Argentina, two countries that are experiencing drastic changes related to the flexibilization of labor legislation and a reduction in the level of state protection afforded to the union movement or to the right to engage in industrial action, an important question that arises is whether HRM produces more

HRM and Industrial Relations in the Latin American Context   303 diverse or similar policies and practices. A second important question is whether the rather different institutional environments existing in, for example, Paraguay and Uruguay would generate diverse or similar HRM policies and practices. A third relevant question concerns the extent to which there might be a mimetic influence in the spread of practices. Thus, for example, since Paraguay has pursued liberal market policies, with relatively few labor protections for several decades, what is the likelihood that Brazil and Argentina will follow the trend of liberalization pursued by Paraguay? Overall, our analysis leads us to conclude that the elements isolated for examination in the frameworks that we have discussed in the chapter could serve as a useful theoretical point of departure for identifying both national and regional contextual influences on HRM and IRS. In addition, they may serve to ignite interest in comparative analyses in the Latin American context. As alluded to earlier in the chapter, accounts of HRM in the Latin American context, along with comparative analyses of specific countries in the region, are significantly underrepresented in the literature. Furthering national comparative research on HRM policies and practices of organizations in the Mercosur region could open up new lines of inquiry on the likelihood of, and limits to, convergence in the Latin American context.

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chapter 14

H um a n R esou rce M a nagem en t i n th e A fr ica n Con text Frank M. Horwitz and Linda Ronnie

This chapter aims to address the paucity of published work on human resource ­management (HRM) in transitional economies (Zupan & Kase,  2005). Much of the extensive literature on international HRM practices focuses predominantly on the developed economies of the “West” and the emerging economies of the “East,” with the African context being the least studied on HRM issues (Adeleye, 2011; Ellis, Nyuur, & Debrah, 2016; Jackson, 2002a; Kamoche, 1997). Although there is an increasing number of research outputs on HRM in Africa (Budhwar & Debrah, 2001; Ellis et al., 2016, Kamoche, Debrah, Horwitz, & Muuka, 2004), this body of knowledge pales in comparison with the volume of material dealing with the West and with Asia (Kamoche, Chizema, Mellahi, & Newenham-­Kahindi , 2012). Kamoche et al. (2012, pp. 2525–2827) therefore argue that the field of HRM is no longer uncharted territory and any claim purporting that “literature on human resource management (HRM) and management in general in Africa is ‘scarce/ scanty/ sketchy,’ is largely untenable today.” Notwithstanding, the business environment of African countries is, in several cases, experiencing gross domestic product growth based on the increasing inflow of investments and management systems from different regions. This is coupled with the changing values of the increasing educated and diverse workforce of more than fifty countries on the continent. Encouragingly, Amankwah-­Amoah (2017, p. 511) finds that “an accumulated body of research indicates a sign of growing self-­confidence in African management research that must be maintained and revitalized.” He argues that both indigenous and comparative dimensions of management research are important. This chapter provides a critical overview of the evolving HRM research context, labor market developments, insights regarding cross-­cultural diversity, HRM practices, issues pertaining to the efficacy of adoption of Western and East Asian international HRM, and employment relations in African countries. Given the influence of multinational

308   Horwitz and Ronnie corporations (MNCs) on the diffusion and development of HRM in African countries, issues pertaining to their influence are critically evaluated; however, we note that the chapter is not primarily about MNC HRM policy and practice.

Research Context Empirical studies on African management or HRM are often country specific, occasionally comparative, and variously suggest that HRM practices follow the convergence perspective, the “cross-­convergence” perspective, or divergence perspectives. Additionally, there are still unexplored issues relating to African management or HRM and new findings could reshape the research agenda (Ellis et al., 2016). Though it is often country or regionally focused, there is evidence of increasing research on HRM issues and mergers and acquisitions, impacts of privatization on HRM, knowledge appropriation, emerging market MNC HRM policy and practice, diversity and cross-­cultural management, HIV/AIDS policy implementation issues, sustainable development and corporate social responsibility, and impacts of the institutional and regulatory environment on HRM and employment relations (Newenham-­Kahindi, Kamoche, Chizema, & Mellahi, 2013). The multicultural, multilingual, multiethnic, and multiregional nature of the African continent is characterized by diversity on several dimensions reflecting the colonization legacy; the level of social, political, and economic development; the state of institutions; the cultural and ethnic groupings; and religious affiliations (Adeleye, 2011; Ellis et al., 2016; Nkomo, du Plessis, Haq, & du Plessis, 2016). This diversity and complexity impact the kind and effectiveness of HRM practices employed in organizations. With fifty-­six countries, Africa is subdivided into two distinctive regions, North Africa and subSaharan Africa. The continent is also home to indigenous Africans, Arabs, Indians, and all nationalities in the world from the east, west, central, and south and has over two thousand languages and ethnic groups (Ellis et al.,  2016). While some countries are commodity rich, for example, Nigeria, Angola (oil), Guinea (bauxite), South Africa (gold, diamonds, coal), and Zambia (copper), many countries, like Ethiopia and Malawi, have few natural resources and are predominantly agriculture-­based economies. Politically, almost all of the countries have gone through some form of political transformation and policy developments since independence. In several countries, for example, Ghana, Malawi, Algeria, and Botswana, among others, economic policies have been developed to implement a more liberal stance in relation to attracting foreign direct investment to ensure business growth and survival (Ellis et al., 2016). The resultant contexts create a potentially exciting yet challenging environment for organizations and their human resources. Although most African economies are quite volatile, with an annual growth rate of some 5 percent since 2010, Africa has been observed to be the second-­fastest-­growing region in the world (Lund & Van Wamelen, 2012). Ellis et al. (2016, pp. 395–396) further note that “economies such as Ethiopia, Ghana, Kenya, Nigeria, Uganda, and Tanzania

Human Resource Management in the African Context   309 are growing strongly while others including South Africa have faltered in their gross domestic product growth in the past three years, but are slowly advancing toward the rank of transition economies.” However, the onset of the Covid 19 pandemic in 2020 contributed to lower even negative growth rates and government debt in several African countries. Previously, even when Africa’s growth was hit hard—along with the rest of the world—by the global economic crisis, it rebounded within a year. It was predicted that the economic growth of countries such as Nigeria, Angola, and Ethiopia, accompanied by Ghana, Côte d’Ivoire, Kenya, Uganda, South Africa, and Tanzania, will be uneven, but sustained (“Africa’s Rise,” 2013; World Bank, 2012). Although the poverty rate has also declined at about 1 percent per year, unemployment remains high in countries such as South Africa, at over 25 percent (Statistics South Africa, 2017), and in most African countries wages are around a third of those in newly industrializing countries, such as Vietnam and Bangladesh.

Labor Markets and the Human Resource Management Function in Africa As noted earlier, although unemployment remains high in many countries, levels of education are slowly improving. There is an increasing number of educated workforce members with skills and capabilities for a growing market for businesses (Pennisi, 2013). This have contributed to the gradual increase in the number of foreign-­invested enterprises in Africa. Foreign investment has been on the increase, from USD$7 billion in 1998 to USD$18 billion and USD$56 billion in 2003 and 2009, respectively (United Nations Conference on Trade and Development, 2005, 2008, 2009). The World Bank (2011) argues that the continent’s growth could be faster and more widespread if Africa could address its most fundamental challenges: the effective development and deployment of its human resources, appropriate organizational HRM practices, and infrastructural development. These issues reflect important concerns about the way people are managed in Africa. They also reflect what impediments managers must overcome before HRM can come of age. Multinational corporations in Africa, through their local managers, are increasingly adopting contemporary management ideas and HRM practices (Horwitz, 2017). Data from the Cranet survey of employers on HRM (a large international comparative study) indicates a marked increase in the prevalence of formal HRM departments in South African organizations since 2004/5 (Table 14.1). (The Cranet survey does not collect data from other African countries). Further, Table 14.2 indicates an increasing proportion of organizations that have a written HRM policy and strategy. The latter concern the contribution of HRM to organizational strategies and performance. Human resource management is increasingly seen as a business alignment

310   Horwitz and Ronnie Table 14.1.  Increase in prevalence of human resource management departments (South Africa) 2004/5 54% (n = 378)

2009/10 86% (n = 191)

2014/15 96% (n = 121)

Source: Cranet (2004/5, 2009/10, 2014/15).

Table 14.2.  Organizations with a written human resource management strategy (South Africa) 2004/5 61 n = 378

2009/10 69 n = 191

2014/15 84 n = 121

Source: Cranet (2004/5, 2009/10, 2014/15).

­ roc­ess potentially contributing to better performance outcomes and competitive p advantage (Schuler & Jackson, 1999). The nature of African society is variously characterized by strong masculine and patriarchal elements, collective decision-­making considerations, and extended family. Adaptation of modern HRM practices is expected therefore to contribute to achieving organizational objectives. As African workplace practices tend toward more collectivist than individualist cultures, HRM practices such as team working based on group and collective behavior and norms operate effectively, especially if reward systems are designed for group or team performance. Migration and the flight of knowledge workers from Africa or between African countries has become critical as more African countries seek to attract, develop, and retain key skills to grow their economies and compete both domestically and globally (Horwitz, 2007a; Kamoche, Debrah et al., 2004). In Africa, the main labor-­receiving countries are Botswana, Mauritius, and South Africa. An allied issue is the widespread move toward labor market flexibility and an increase in subcontracting and outsourcing as work is externalized. The informalization and casualization of the labor market are increasing, even in countries with more regulated legal regimes such as South Africa, with the notion of “decent work” having low prevalence in many areas especially in lower level skills work (Webster & Ludwig, 2020). Numerical and temporal flexibility and even pay flexibility have a profound effect on employment security, the psychological contract, and workplace arrangements of professional staff. Research has found that increased casualization of the workforce, employment of Chinese labor by Chinese MNCs, and use of flexible labor regimes has led to increased precarious employment (Wegenast & Schneider, 2017).

Human Resource Management in the African Context   311 Good working conditions, career opportunities, and competitive pay are vital. For example, well-­trained African nurses have been lost to hospitals in developed countries such as Britain, resulting in serious shortages in South African hospitals. Other paramedical occupations such as occupational therapists, as well as engineering skills, are being lost as better opportunities occur abroad. Estimates are that over thirty-­four thousand additional engineers, technologists, draftspersons, and technicians will be required in South Africa over the next five years (Young, 2010). Budget constraints, together with poor HRM practices and, in some instances, poor application and unintended consequences of employment equity measures, have made retention problematic. Yet these problems are reversible with progressive policies, implementation of good HRM practices, and senior leadership commitment.

Diversity and Inclusion in Africa Commentators tend to make broad generalizations about management and culture in Africa, ignoring the unique features in each country (Horwitz, 2007a; Nkomo et al., 2016). The diversity of Africa cuts across many dimensions: ethnically, with some two thousand different ethnocultural communities; historically, with effects going back to whether the country is a former colony of Britain, France, or Portugal, for example; politically, with dictatorships and democracies; and, economically, with several highincome countries amid a poverty-­stricken majority. It is erroneous to assume homogeneity within specific countries too, since many African countries have diverse ethnocultural communities struggling to establish an identity as a nation-­ state (Kamoche, Debrah et al., 2004, p. xvi). In countries like Zambia and Ghana with extensive privatization of state-­owned enterprises, the HRM landscape has been reshaped in significant and enduring ways. Many Zambian state-­owned enterprises, for instance, have been bought by South African companies, whose managers apply employment practices based on those of the parent company. The Southern African region (in particular, Botswana and South Africa) has emerged as a catchment area for talent from other parts of Africa, in particular East and Central Africa. Political-­historical factors such as apartheid and colonialism have seen postindependence governments promoting policies variously referred to as Africanization, localization, indigenization, and employment equity, for which employer compliance is required (Nkomo et al., 2016). The goal remains to transform the representation and power of the different race, ethnic, and gender groups, not only in terms of employment but also in terms of business ownership (Habib & Bentley, 2008). As a case in point, this indigenization process was found to be strongly mediated by Ghanaian cultural and institutional factors. In some countries, the constitution permits policies aimed at the redressing of past discrimination based on race, culture and ethnicity, and gender. South Africa has employment equity legislation promulgated in 1998 and a more recent strong focus on broad-­based Black Economic Empowerment to enhance share ownership. Industry charters are

312   Horwitz and Ronnie developed, setting targets for Black Economic Empowerment in sectors such as ­insurance, mining, oil, and energy. The basis of these policies is to redress employment skills and access to managerial and professional career opportunities by majority groups previously denied these opportunities by discriminatory colonial and apartheid regimes (Stoermer, Hitotsuyanagi-­Hansel, & Froese, 2017). The effects of ethnicity are not well documented regarding impacts on HRM and employment relations in Africa (Almhdie & Nyambegera, 2004). Managerial styles, HRM practices, and preferences for particular types of conflict resolution may be mediated by ethnic factors, including the degree of cultural ethnocentrism, and tolerance or intolerance of diversity. Firm-­level employment practices in some countries like Kenya and South Africa have in some sectors reflected preferences for particular ethnic groups or family members of an ethnic group. In most African countries where such policies and practices occur, they focus on the setting of targets or quotas, timetables for special measure pro-­proactive recruitment and selection, and review of employment practices regarding potentially unfair discriminatory aspects. These tend to focus on numerical change to enhance representation at all levels of an organization. Qualitative changes in workplace attitudes, institutional culture, and managerial and leadership styles are less evident but also vital. More organizations have diversity training aimed largely at promoting cross-­cultural understanding and tolerance, though these have been criticized as unwittingly promoting cultural stereotypes. In South Africa, the work of Nkomo et al. (2016) indicates that, despite the wideranging legislation research, public debate, and statistics, progress toward employment equity has been incremental and slow. Trend data in South Africa indicate that the national, provincial, and local levels of government perform much better compared with private-­sector employers (Commission for Employment Equity, 2017). Progress on Black Economic Empowerment has been less than planned and has been described by scholars as incremental and less successful in transforming equity ownership of businesses in South Africa (Horwitz & Jain, 2011). Significant progress has been made in the representation of women in parliament (45 percent), with close to the same representation in ministerial positions (Nkomo, 2012). However, representation in private-­sector management positions has grown more slowly (Business Women’s Association, 2017). In other countries, such as Namibia, employment equity progress has been somewhat more successful, although only 29 percent of executive director positions are held by racially disadvantaged persons (Republic of Namibia Employment Equity Commission Report, 2018). Cumulatively, the available research on diversity management in African organizations suggests the dominant approach to diverse identities in the South African workplace has been along the lines of what Thomas and Ely (1996, pp. 79–89) labeled the “discrimination-­and-­fairness perspective.” However, some multinational companies do position diversity as a competitive advantage. A large-­scale study of twelve South African organizations across several sectors revealed minimal focus on diversity management but a primary emphasis on compliance and reaching numerical targets as a response to the Employment Equity Act of 1998 (Steyn & Kelly,  2010). Zulu and

Human Resource Management in the African Context   313 Parumasur (2009) examined managerial perceptions of the management of cultural diversity and workplace transformation in three production companies and reported that while there had been significant change in the political and economic spheres in the country, similar progress had not been realized in the labor market. Despite the efforts of some organizations to implement valuing diversity interventions, practical stumbling blocks, including the lack of skilled and experienced black candidates and resistance to affirmative action, often impede progress (Motileng, Wagner, & Cassimjee,  2006; Vermeulen & Coetzee, 2006; Zulu & Parumasur, 2009). Some studies (Nkomo et al. (2016) can be found on internation diversity in Africa. Nkomo et al. refer to South African Breweries, which grew from being a dominant local brewer to become SABMiller, now the second largest brewer in the world (Bluen, van Kralingen, & Hirschowitz, 2013). While the company focuses on equity initiatives and diversity initiatives that fit the national context of South Africa, lessons learned have informed localization and diversity initiatives across its operations in Africa. In respect of staffing its multinational operations, given the general talent scarcity and expatriate skills required, most SABMiller expatriates recruited into markets like South America were drawn from SABMiller Europe, rather than South Africa (Bluen et al., 2013). The company has adopted what Nishii and Özbilgin (2007) refer to as a top-­down, multidomestic global diversity strategy. Standard Bank, in its initial multinational strategy into markets in various African countries, relied on deploying South African expatriates, which highlighted cultural obstacles (Morris & Zinn, 2013). However, more recently the bank has stressed localization of talent as a means of capacity building and improving cultural adaptation to business demands and the managing of diversity.

Adoption of Human Resource Management Practices Research in Ghana highlights how localization effectiveness depends on how localization of various HRM practices, such as recruitment and selection, training and development, performance and reward management, is rolled out in the subsidiary operations of MNCs in Africa (Adams, Nyuur, Ellis, & Debrah , 2016; Azungah, Michailova, & Hutchings, 2018). Ellis et al. (2016) provide an instructive overview of recruitment and selection, training and development, and reward and performance management systems in a thematic evaluation of HRM practices in African countries. They note that practices such as performance management have become a critical part of administrative reform in many African countries (p. 408). They find that various types of performance management systems occur with varying degrees of effectiveness. On this point, research in Uganda and South Africa underlines the need for performance leadership to directly shape employees’ perceptions of the efficacy of performance management (Magoola & Horwitz, 2010).

314   Horwitz and Ronnie The adoption of HRM practices does not exist in a vacuum. It is important to ­ nderstand special contextual circumstances within which managers in Africa operate, u the sort of challenges they face, and how they respond to those challenges. An enduring theme in policy debates in developing countries is the appropriateness of Western management principles and practices. Many authors have challenged the tendency by MNCs as well as local managers to adopt practices with little consideration as to the suitability and relevance of such practices (Horwitz, Nkomo, & Rajah, 2004; Nkomo et al., 2016). Some have identified the limitations of concepts formulated in the West (Jackson, 2002a,  2016; Kamoche,  2000; Kamoche, Debrah et al.,  2004; Nkomo et al.,  2016; Nzelibe,  1986), while others have offered empirical evidence on the nature of extant practices, pointing to their appropriateness or lack thereof (Kamoche, 2000; Jackson & Horwitz,  2017). This growing critique has highlighted the need to understand the African context and indigenous thought systems and, in particular, the perspective of the African worker. Jackson (2002a,  2016) argues that in Africa there are often paradoxical value systems—Western instrumental and individualist versus humanistic systems with their roots in tribal and rural communities. However, elements of both often constitute the framework within which the African indigenous thought system occurs. This thought system includes features such as a high degree of social cohesion and collectivist orientation and use of symbolism and metaphors to make sense of the world. The importance of extended family (in relation to the Western notion of the nuclear family) is seen in the network of interrelationships, extended family relations, and mutual obligations not dissimilar to the paternalism found in Asia (Kamoche, 2000). This results in a sense of communalism and traditionalism (Nzelibe, 1986), which is not unlike the Confucian influence on Asian cultures. An advantage of this approach is that team-­based practices are possible, as are group incentive systems. A disadvantage may arise in some countries through a high degree of group conformism and sometimes nepotism in hiring, promotion decisions, and practices. Nonetheless, this has led some authors (Kamoche, Debrah et al., 2004; Mangaliso, 2001; Nkomo et al., 2016) to propose a shift away from the predominant Western management theories to alternative ones based on African perspectives. These include cultural heterogeneity as a source of mutually beneficial, win–win cooperation, a multicultural vision considering the mental connectedness the worker shares with group members, the idea that individuals assume a relational existence and identity whose raison d’être is located within the community to which they belong. But HRM strategies should not be assumed to be identical across different managerial functions, and a blind application of a narrowly regional approach should be avoided. Arguably, the African notion of ubuntu is not widespread in organizational behavior in many parts of modern Africa. The precepts of African ubuntu tend to equate with African values as a basis for fostering an Afrocentric managerial culture with aligned HRM practices (Mbigi, 2000). Ubuntu, literally translated, means “I am who I am through others”; this is in contrast to the Western tenet of “cogito, ergo sum—“I think therefore I am.” It is this contrasting of a form of communal humanism with individualism and instrumentalism that has a normative appeal for

Human Resource Management in the African Context   315 advocates of an African economic and cultural renaissance. Caution is, however, ­necessary in potentially confusing a desired future vision with current empirical reality. The socio-­economic context of management therefore differs across African countries, most of which have high levels of unemployment, poverty, and illiteracy. At the same time, there is a high need to develop people (Kamoche, 2000). Although Western managerial practices have prevailed for decades in African countries, there is an increase in southern African firms adopting Japanese and East Asian practices (Faull, 2000; Horwitz, 2017; Horwitz, Kamoche, & Chew, 2002). This is particularly evident in the use of lean manufacturing, just-­in-­time methods, and other operations management measures to reduce product defects, stock holdings, inventory, and waste. Quality and productivity improvement measures have sought to benchmark international standards in the South African hospitality multinational Sun International. These measures have also increased in the manufacturing sector, in which firms have introduced kaizen, kanban methods, Nissan-­type green areas, lean and total quality management, and quality improvement teams since 2000 . The ideas of lean thinking gained currency in African firms such as Bell Equipment, Nampak–Metalbox Management Services, SABMiller, Shatterprufe Windscreens, Sasol Polymers, and Joel Goldmine. The motivation for adopting these measures is primarily productivity and work process improvement. However, widespread adoption of East Asian work practices is seen by many as unworkable. Many firms believe that Japanese work philosophies are rooted in a different cultural context and cannot therefore be copied in African countries. Effective HRM diffusion thus requires adaptability and sensitivity to the African context.

Afro-­A sian Influences, Culture, and Human Resource Management Practices in Africa Although Western management has been proffered as the answer to Africa’s management challenges (Jackson, 2004, 2016), it has often failed to provide appropriate solutions because the instrumental, transactional assumptions of Western HRM have not aligned well with the more collectivist, humanistic values in certain African communities. While Western international management scholars have shown a keen interest in the study of other cultures, for example, in Chinese management since the early 1990s (Child, 1994), Jackson (2016) finds that less is known about African management and diversity, including that of values and management organization. The perception is that Africa has been regarded as less interesting by management scholars despite the large presence of Western companies and notwithstanding the significant Chinese investment in the continent over the past decade and longer. Jackson (2016) refers to cultural “Third Spaces” (after Bhabha, 1994), which are being socially constructed given a tripartite

316   Horwitz and Ronnie interaction among the West, Africa, and China and through the power dynamics and geopolitical relations of these regions. A key research question stemming from this nexus is the possible implications for HRM policy and practice at the organizational level. Jackson (2016) notes that there are critical conceptual frameworks for North–South relations, including postcolonial theory (Bhabha, 1994; Said, 1995) and dependency theory (Frank, 1969), but little to conceptualize South–South relations and power dynamics. Jackson (2016) further argues that we are beginning to construct conceptual categories to analyze colonial, modern Western and embryonic indigenous African influences on people management in Africa that can be used to understand other emerging regions. Concepts such as HRM cross-­vergence and hybridization can then be utilized to understand what types of organization and management emerge (Jackson, 2004). Ip (2009), for example, identifies what a Confucian firm might look like, and this may be useful as an ideal-­type analytical category for understanding the possible nature of Chinese influence on organizations in Africa. This may well be one stream of influence on Chinese organizations and HRM Africa, but not the only one. Gelb (2005) asserts that South–South resource-­seeking investments may embody business models that are less corporatized and more informal than Western models. This conclusion is supported by Kamoche and Siebers (2015), who found that there is little understanding about cross-­cultural, HRM, employment, and expatriation issues in their study of Chinese management practices in Kenya. Jackson (2016) further highlights that research is needed to investigate evidence of indigenous knowledge and management systems and how this representation may be associated with geopolitically dominant knowledge systems. He posits that organizational-­level HRM cross-­vergence theory, together with an integrated concept of how global power relations operate, can be used to analyze the different influences on HRM policy and practice at the organizational level in Africa. This considers approaches to HRM honed in the home country that seek to balance a people and results orientation. This is well represented in contemporary HRM literature (e.g., Kamoche, Debrah et al., 2004). Yet people, within this instrumental conceptualization of HRM, are still seen as “resources.” Jackson (2002b, 2002c, 2016) has observed that when more mature systems of HRM are exported to (or imported into) emerging or developing countries, they can revert back to a “harder” form of instrumental people management. Despite two decades of structural adjustment programs, liberalization of economies, and influences of Western MNCs and of management education, Western management systems transferred into African organizations have not, according to Jackson, provided widely acceptable or legitimate HRM models. Hence, the cultural construct of ubuntu management has been much debated in southern Africa (Jackson, 1999, 2016), popularized, among others, by Mbigi (1997) and experimented with in some of the larger companies and public enterprises, amid a focus on empowerment and employment equity. This represented an emphasis on the humanity of people working in organizations and a move away from seeing people as a resource in an instrumental way. This shift represents a perception that African communities and

Human Resource Management in the African Context   317 attendant HRM policies and practices differ from Western ideas of an intrinsic value of human resources as people rather than instrumental resources, a value in their own right. Ideal-­type management or HRM systems are not often found in any pure sense in organizations in Africa, although researched cases such as Afril and First Bank in Cameroon might have come close, argues Jackson (2016). In the more general crosscultural management literature, “collectivism” is seen as target specific: THat is, in-­group and out-­group members are treated differently (Hui, 1990; Triandis, 1990). Yet it has been argued that ubuntu principles and the communalism of Africa might not necessarily only pertain to in-­group members (Jackson, 2016; Mutabazi, 2002) in studies in subSaharan countries. In the area of HRM, Shen (2007) suggests that although home-­country practices are a strong influence on what international companies do abroad, a simple transfer of systems and practices cannot be assumed because of political, legal, economic, and sociocultural differences. In HRM issues, the local situation plays a key role in determining the practices of Chinese MNCs among the companies investigated. Hence, they paid higher rates than the market average in developed countries to compensate for the lack of training and development opportunities and a lack of employee participation and involvement, while subsidiaries in developing countries, including those in Africa, are paid low wages with poorer working conditions, in contrast to the generally good working conditions they operated under in developed countries. Despite this localization, Shen (2007) also asserts that the lower labor standards in African and other developing countries were influenced by similar standards in China and the generally negative attitudes of senior Chinese managers toward trades unions. Jackson (2004,  2016) has pointed to the need to focus on decision-­making within the complex context of Africa and the wider involvement of stakeholders in dealing with environmental uncertainty. The nature of corporate governance, the inclusion of a wider stakeholder base, and the implications for concepts and measures of appropriateness are all aspects that are little known about HRM in Chinese organizations in Africa and need to be further investigated. For example, an approach could identify the synergies between Chinese values (perhaps through Confucianism) and Africa community values (such as ubuntu) and better inform both Chinese and African stakeholders. In a comparative analysis with East Asian and African HRM, researchers found that practices from certain Asian countries such as Japan and China are being increasingly diffused into more developed and investment-­attracting organizations in African countries (Horwitz et al.,  2002; Luiz,  2007). Managerial styles reflect organizational and national cultural patterns. In South Africa, while achievement is valued, group and organization conformity are also important. While there is a paucity of empirical research on managerial culture in southern African firms, a masculine dominance is evident across ethnic groups underlined by individualist values and a relatively large power distance between groups. This supports Jackson’s (2002a) framework and is based on historical racial and ethnic disparities. However, an emergent Black middle class has begun to occupy decision-­making roles. Class mobility is likely to have an impact on managerial culture and inform strategic

318   Horwitz and Ronnie choices about appropriate organizational culture, business, and HRM practices in the African context. There is some evidence, therefore, for elements of an African renaissance approach. Managerial ideologies also tend to reflect unitarist ideas—the organization as a “happy family” or cohesive team emphasizing loyalty and conflict avoidance, notions similar to the Japanese notion of “industrial familism.” However, organization and national culture in many African countries tend to reflect considerable diversity and pluralism, with procedural regulation of conflicts in South Africa particularly. The latter lends support for the postinstrumental model in Jackson’s framework. The advent of democracy, especially in South Africa, and the glasnost effect of global competition begs the on-­going question as to the inevitability of high-­performance work practices convergence and the global hegemony of “best practice” over local exigencies. In practice, hybrid models appear more likely.

Employment and Industrial Relations African countries are not monolithic in their HRM, employment, and industrial relations systems (Maree,  2016, Wood & Brewster,  2007). The contiguous sub-­Saharan African countries differ in levels of infrastructural development or acquisition for expanding wage employment and industrial sectors. Unevenness in this regard widens when comparing regional faster-­growing and more rapidly industrializing South Africa with other African countries like Ethiopia (Matanmi, 2000). As noted earlier, industrial relations in Africa are often rooted in past regimes of colonialism or apartheid (Horwitz,  2016), which created wage work in the exploitation of primary natural resources such as gold and diamonds and in emergent manufacturing sectors such as clothing and textiles. Political independence expanded wage-­ employment sectors (largely public, but also private sectors), creating legislative frameworks legitimizing trade union rights to varying degrees. According to Hayter, (2018, pp. 16–18), “In South Africa social dialogue has played a more important role in wage policy and protective labor standards (e.g. minimum wage policy) and endeavours towards the notion of ‘regulated flexibility.’ South Africa adopted a tripartite declaration in 2017 on Wage Inequality and Labour Market Stability that introduced a minimum wage and measures to promote collective bargaining and address protracted violent strike action.” Yet as previously mentioned, “decent work” with above minimum wages and fair conditions of employment remain elusive in certain sectors (Webster & Ludwig, 2000). With often weak or variable institutional and regulatory capacity, “a plurality of institutional contexts and political interests” (Cooke et al., 2015, pp. 3–4), employment relations regimes in Africa are relatively new and evolving. The International Labour Organization (ILO), for example, has a number of advisors working with African country governments to establish industrial relations systems, legislative frameworks, collective bargaining, and dispute resolution systems based on ILO conventions. Since its launch in 2000, the ILO Project based in Pretoria has made considerable progress in

Human Resource Management in the African Context   319 initiatives to strengthen social dialogue in six South African Development Community countries—South Africa, Namibia, Lesotho, Botswana, Swaziland, and Zimbabwe— through seeking to create tripartite forums and designing industrial relations and dispute resolution systems (Anstey, 2004, p. 59). The regulatory and institutional context of employment relations in Africa varies considerably (Maree, 2016, Wood & Horwitz, 2016) but also needs to be examined from broader international perspectives rather than a dominant national or regional pattern in labor market regulation (Klerck, 2019). There is a substantial body of work in these systems, their challenges, and their reforms. Foreign investors often rely on this body of knowledge in considering investment decisions. Human resource management in Africa has been affected by multifaceted themes (Ellis et al., 2016; Horwitz, 2017). The first is the impact of structural adjustment programs where, except for Libya and South Africa, most countries assessed here have implemented World Bank and International Monetary Fund economic reform measures. Employment and industrial relations have felt the brunt of these market-­led reforms. Liberalized economies with privatization and deregulatory measures have seen a drop in formal employment and deterioration of labor standards. The issue of privatization and its effects on HRM and employment in Africa have been found to be complex and often problematic, with research in countries such as Mozambique finding adverse effects on employment security and remuneration levels and a shrinking pool of “good work” (Dibben & Wood, 2013). While there is some evidence of a concomitant rise in industrial relations institutions such as collective bargaining and dispute resolution, as democratization occurs, strong independent trade unions not linked to the state or employers are rare. Positively, however, tripartite corporatist engagement is not uncommon, for example, in South Africa. There is, therefore, a vital need for institution building in African countries to strengthen HRM and employment relations systems and practices. This underlines a need to extend the human capital agenda to the arguably most important challenges facing Africa, namely, human resource development, building managerial capacity, investing in training and development, and sound HRM practices. As previously discussed, the second key development is that of rising Chinese investment in African countries and a preference of these organizations to prefer home country rather than host country employment standards impacts on employment, employment and health care costs, and union membership decline. A third theme is that of HIV/ AIDS and most recently COVID-­19, where in sub-­Saharan Africa the ­former especially has had devastating effects on lives. These diseases have a deleterious effect on absenteeism, training, career, and succession planning, with adverse effects on state- and unionnegotiated medical schemes. A fourth theme is significant change in labor market policy and structures, with both the state and employers in many countries either promoting or turning a blind eye to ineffective monitoring of legislative protective and collective agreements, as increased cost reduction and flexibility are sought, with a consequent deterioration in employment standards, social protection, and rising informalization and casualization in labor

320   Horwitz and Ronnie markets. Examples include the decline of regional, centralized bargaining structures in the building and construction industry in South Africa. Bahadur (2004) notes a relationship between the African Growth and Opportunity Act and sweatshop conditions. The African Growth and Opportunity Act is a US act passed in 2000 offering preferential access for certain African exports. It reflects a philosophical shift in the United States’ approach to Africa stemming from a policy of “trade not aid” (Bahadur, 2004, p. 39). Some thirty-­seven sub-­Saharan African countries qualify to export to the United States under the act. One result is a switching of Malawian exports, previously destined predominantly to South Africa, to the United States. In a number of cases, working conditions have deteriorated, for example, increased overtime up to twenty-­seven hours weekly in Lesotho and repression of trade union rights and, with little enforcement of labor laws with high unemployment in sub-­Saharan Africa, the bargaining power of unions in this sector is compromised. In South Africa, over sixty thousand retrenchments have occurred in the clothing industry, a result largely of cheap imports from lower-­cost producers in Asia. A well-­organized and soundly led union, the South African Clothing and Textile Workers Union, has struggled to fight this trend. One initiative that has some employer support is a “buy South Africa” campaign to try and preserve jobs. These industry examples reflect the increasingly precarious nature of employment and flexible labor markets in most African countries. This is important for HRM. Even in South Africa, arguably with a strongly protective Labour Relations Act (1995), institutionalized Labour Court, and statutory Conciliation Mediation and Arbitration Commission, as well as minimum standards legislation in the form of the Basic Conditions of Employment Act (1997) and arguably the strongest union movement on the continent, precarious, non-­standard work has increased while formal standard work has declined (Du Toit & Ronnie, 2014). The combined effects of globalization, trade policies, new technology, capital mobility, new managerial practices, in some cases hostile labor market policies, and poorly implemented labor relations legislation have served to place trade unions in Africa largely on the defensive, even as ILO initiatives seek to establish dispute resolution machinery in several African countries. Kalula (2003) argues in this regard that labor laws in southern Africa do not consider the social realities of countries in the region, with their changing labor markets. He submits that labor law reflects Western models “borrowing and bending” legal reforms seeking adherence to ILO standards, sometimes transplanting inappropriate legal precepts focusing on formal-­sector standard employment, ignoring the bigger reality of a dramatically increasing informal sector. He states that “the vast majority are left out,” arguing that “labour law is a sharp instrument of social policy. Labour market regulation must strive to influence work beyond the formal sector narrowly defined. Mutual rights and obligations in the workplace remain important, but employment law must be part of an agenda for alleviating poverty” (Kalula, 2003, p. 57) and developing human capital for the continent. According to the Cranet survey (Table 14.3), employers state that negotiations with trade unions have

Human Resource Management in the African Context   321 Table 14.3.  Negotiations with trade unions (South Africa) 2004/5 24% n = 378

2009/10 74% n = 191

2014/15 87% n = 121

Source: Cranet (2004/5, 2009/10, 2014/15), South African data.

increased since 2004/5 in South Africa. As in other countries, union density increases have tended to be stronger in the public sector. In Africa, the HRM and industrial relations agenda will have to increasingly concern itself not only with managerial–working class relations, but also with a growing and socially excluded underclass, along with the impacts of new digital technology (Horwitz, 2016). Traditional trade union contestation and power-­conflict models may be inappropriate, as are traditional distributive forms of collective bargaining based on an adversarial tradition. In Africa, union and employer strategies will need to increasingly focus on human resource development. Joint collaboration in the workplace will be vital for effective competition in the marketplace.

Conclusion There is a need to go beyond a narrow confine and examine organizational HRM strategies and responses to privatization, globalization, and regionalization. Adams et al. (2016, pp. 1–2) note, “With the exception of compensation and industrial relations practices which are largely localised, HR systems of MNCs in African countries such as Ghana are transferred to subsidiaries with minimal adaptation to contextual realities.” It is necessary to extend cross-­national/comparative research both within Africa and in other emergent or developing economies. There is a need for practical research on pertinent issues such as (1) the changing nature of the psychological contract as the labor market becomes increasingly segmented between standard and nonstandard employment patterns; (2) organizational justice; (3) trust, organizational, and work commitment and workplace cooperation; (4) HRM practices and service delivery in changing markets; and (5) HRM strategies for attracting, motivating, and retaining talent. An examination of the relationships between these issues and employee work outcomes is necessary in view of the impact of international competitiveness on African organizations and (6) how HRM policies and practices are recontextualized and adapted when transferred from Western or regional MNCs to their operations abroad. Further empirical work on normative socio-­cultural constructs such as ubuntu and complex emerging tents of African management approaches, their diversity, and their efficacy are particularly worthy of exploration. The rapidly advancing new technologies

322   Horwitz and Ronnie of the gig economy also represent an enormous research and practical challenge for managers and unions with regard to the changing nature of work and how this affects policy choices and HRM practice. Potential impacts on the structure of labor markets, trade union influence, workplace flexibility, and precarious work on a continent with high unemployment, a paradoxical oversupply of unskilled labor, and a shortage of skilled labor are critical. Equally, this poses large challenges to governments and organizations in the area of human resource development, which is fit for purpose and effectively aligned with emerging trends in new technology and workplace change. Africa is certainly not immune to the effects of the changing world of work and offers a veritable social laboratory for HRM and social science research.

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chapter 15

H um a n R esou rce M a nagem en t i n th e M iddle E ast Washika Haak-­S aheem and Tamer K. Darwish

This chapter focuses on human resource management (HRM) in the Middle East. We review the myriad lists of terms and geographies that have been used to describe the Middle East region (e.g., Middle East, Middle East/North Africa, Southwest Asia, Arab world) and compile a broad definition of the Middle East. This was not an easy task because there are no specific borders that specify the Middle East region in particular, since the latter refers to a sociopolitical and cultural area (Zahra, 2011). To begin, we eliminated what the Middle East is not. Therefore, we decided not to include the Maghreb nations and societies of non-­Arabic racial descent. For the purpose of the overall focus of this chapter, we offer the following societies as our exhaustive list of the Middle East: Bahrain, Egypt, Kuwait, Iraq, Jordan, Lebanon, Oman, Qatar, Palestine, Saudi Arabi, Syria, and United Arab Emirates (UAE). Table 15.1 summarizes some of the economic, cultural, and demographic characteristics of the region. Although the Middle East context enjoys great geographical and economic significance, coupled with a unique institutional setup, there is limited literature on HRM in the Middle East. The context has been largely overlooked in prior work and there are few comprehensive and systematic reviews (however, see Metcalfe, 2008, Haak-­Saheem & Festing, 2020). This chapter seeks to explore the importance of the Middle East’s unique institutional and cultural context for HRM and its implications for theory and practice. To do so, we first examine the relative impact of context on HRM in general, before looking at several examples of some of the Middle Eastern countries. The chapter concludes with a number of important areas for future research.

Table 15.1.  Key demographic, cultural, and economic characteristics Country

Population

Government type

Percentage of immigrants to total population

Ethnic groups

Labor forces, by occupation

Language

Religion

Gross domestic product per capita

Bahrain

1.5 million

Constitutional monarchy

48% (mainly economic migrants, e.g., expatriates)

Bahraini 46%, Asian 45.5%, other Arab 4.7%, African 1.6%, European 1%, other 1.2%

Agriculture: 1% Industry: 32% Services: 67%

Arabic (official), English, Farsi, Urdu

Muslim 73.7%, Christian 9.3%, Jewish 0.1%, other 16.9%

$49,000

Egypt

99.4 million Presidential republic

0.3%

Egyptian 99.7%, other 0.3%

Agriculture: 11.7% Industry: 34.3% Services: 54%

Arabic (official), Arabic, English

Muslim 90%, Christian 10%

$12,700

Kuwait

3 million  

69% (mainly economic migrants, e.g., expatriates)

Kuwaiti 30.4%, other Arab 27.4%, Asian 40.3%, African 1%, other 9%

N/A

Arabic (official), English widely spoken

Muslim 74.6%, Christian 18.2%, other and unspecified 7.2%  

$65,800

Iraq

38.6 million Federal parliamentary republic

N/A

Arab 75–80%, Kurdish 15–20%, other 5%

Agriculture: 21.6% Industry: 18.7% Services: 59.8%

Arabic (official), Kurdish (official), Turkmen

Muslim 95–98% (Shia 64–69%, Sunni 29–34%), Christian 1% other 1–4%

$16,700

Jordan

10.8 million

30% (mainly migrant workers and refugees)

Jordanian 69.3%, Syrian 13.3%, Palestinian 6.7%, Egyptian 6.7%, Iraqi 1.4%, other 2.6%

Agriculture: 2% Industry: 20% Services: 78%

Arabic (official), English (widely understood among upper and middle classes)

Muslim 97.2%, Christian 2.2%, Buddhist 0.4%, Hindu 0.1%, Jewish