UNIVERSITY OF LEICESTER CENTRE FOR LABOUR MARKET STUDIES STEFAN AGIUS MSc HUMAN RESOURCES DEVELOPMENT & PERFORMANCE

MANAGEMENT THE PRESSURES OF GLOBALISATION MEAN THAT INCREASINGLY THERE IS ONE BEST WAY OF MANAGING AND DEVELOPING HUMAN RESOURCES. CRITICALLY DISCUSS.

The statement is made that globalisation is inducing organisations to follow one best way of managing (HRM) and developing (HRD) human resources: this paper will argue that this is not yet the case and there is no clear indication that this will be so in the near future. It will do so by first discussing the impact that globalisation is having on economic, social, and cultural aspects, thereby putting new pressures on organisations. The importance of focusing on both the local and global aspect is one of these. The paper then moves on to discuss how this global context and mindset is effectively leading HR to have to deal more and more with acculturating employees and directing their behaviour towards the accomplishment of organisational missions and objectives; subsequently achieving competitive advantage through HRM/D. The paper then discusses the significant role that the convergence and divergence debate is playing in the ability, or not, of disseminating HRM/D policies and practices globally. It argues that Multi National Corporations (MNCs), institutional as well as market forces are putting pressure on countries to converge on several aspects, including their HRM/D. However it is also argued that the local embeddedness of organisations and people is acting as a stumbling block to this convergence perspective, given the substantial influence of culture. Even though MNCs are acting as instigators in changing indigenous HRM/D, differences are still evident in a number of policies and practices across countries, even within the EU. The transferability of HRM/D policies and practices across countries, and the creation of hybridisation management systems are then discussed. A particular focus will be given to the recruitment practice. It is argued that whilst a strong element of cultural embeddedness is present in this practice, the selection criteria and tools that form part of it are much less embedded. A brief overview of investment banking recruitment is given arguing that employees in this sector might be culturally convergent. The paper concludes by supporting the view that directional convergence is evident in HRM/D. It is thus easier for policies and strategies to take a globalised form, however when these are transformed into practices, an element of localisation is needed. Given the competitive advantage that HRM/D provides, and the distinctiveness that institutional and cultures forces give to each organisation, it is very difficult to envisage that one best way of HRM/D will be effective in responding to this distinctiveness.

Globalisation Globalisation, according to the World Bank, is the growing integration of economies and societies around the world (Asongu, 2007). The shift from productive to finance capital, primarily through the liberalisation of exchange rates, was a big impetus for this to happen (CLMS, M3 U1:19). However, focusing solely on the economic part will not do justice to the wider view that sees globalisation as one involving flows of goods, services, ideas, technologies, cultural forms, and people (Kellner, 2002:3). Political, economical, legal, and technological factors play key roles in the rapid pace of globalisation (Asongu, 2007) with their impact affecting different countries, organisations, and people at different levels and in different ways (CLMS, M3 U1:32). The increasing shift from authoritarian to capitalist economies and societies; the creation of global markets; and the creation of a global village are all such examples. This effect is being seen as positive by some but negative by others (Sacks, Capra cited in Asongu, 2007). However it is probably the growth of producer -driven and buyerdriven commodity chains (CLMS, M3 U3:19), in the case of production and retailing respectively, that has publicized globalisation across various countries, making it more tangible for people to visualise. Probably the Big Mac is the most famous example of them all. The creation and growth of MNCs is one of the most tangible elements stemming from globalisation. Today, more than 82,000 MNCs with 810,000 foreign affiliates employ 77 million people. They account for a third of world exports and two-thirds of international trade (Unctad, 2009; Subasat, 2008). With this stature, MNCs are having a profound effect across the board, not just from an economic but also from a political and social perspective. The biggest MNCs can be seen as both the strongest driving force and biggest beneficiaries of globalisation, given that as they grow larger, their political, economic, and strategic influence increases, even in bodies such as the World Trade Organisation and European Union (Understanding Global Issues cited in Subasat, 2008:24; Jain et al.,1998:3). Essentially, the rationale and strength of an MNC is that of creating a competitive advantage by distributing its activities across several countries. Inevitably, the transformation from a national to a multi-national entity brings new and additional pressures. The ability to blend in well with the local institutional and cultural environment is probably one of the biggest. A direct link with globalisation and HR can be made here, given the challenge is to then identify

the optimal fit between organisational practices on one hand, and the various tangible employee behaviours as well as intangible values and assumptions on the other. HR through HRM/D has a major role to play in this process.

The Role of Human Resources With the international expansion of several organisations in the 1950s and 60s, International Human Resource Management (IHRM) came to the forefront, primarily focusing on personnel management. Towards the end of the 1960s, there was a shift towards a more strategic and holistic HRM (SHRM), focused on integrating globalised organisational objectives with globalised policies and practices (CLMS, M3 U2:17). Within this new global context, HRM started acting as a control system that ensures acculturation of the organisations members and directs their behaviour toward the accomplishment of organisational mission and objectives (Eneroth and Larsson cited in Wright et al., 2000:3). This positively affects both employee commitment (Taylor et al., 2008), as well as productivity, performance, and profits (Patterson et al., cited in Marchington and Grugulis, 2000:2). Thus employees and HRM/D are becoming more and more a source of competitive advantage for organisations (Braun and Warner cited in Zhu et al., 2008:16; Chan et al., 2004). Unfortunately, given the task at hand, it seems that HR could be lagging in its progress of developing structures, policies, and practices that support globalisation, unlike other areas such as operations, sales, and marketing which have been more responsive (Rioux et al., 2000). Given this, HRM/D has an even more fundamental role to play for HR to progress rapidly within this globalised context. The search for a balance between global systems and local context, in alignment with organisational strategy, is probably the biggest bone that HR within this globalised environment has to deal with. This search for balance is not just attributable to MNCs, who have to contend with business environments, employees, and customers spread across different countries, but also with local organisations who are also becoming, or have to become more globalised in their approach. This does not necessarily mean expanding outside ones shores. It is also in the way one perceives the world and the globalisation of markets, people, and companies, or rather the global mindset (Dekker et al., 2005). Apart from this global mindset, there are other factors such as size, age and ownership type of the organisation; use of technology; government policies; as well as the wider national and institutional culture that

effect this search for balance (Budhwar and Khatri, 2001:2). Therefore, given the extensive amount of variables which influence HRM/D and the resulting policies and practices which have to be congruent with both the social and organisational context in order to be effective, is it safe to say that it is not possible for HR to have one best way of HRM/D? Moreover, if HRM/D is becoming more of a competitive advantage due to globalisation, does it make sense for organisations to follow one best way of managing and developing HR? We will now try to answer both of these questions better vis-a-vis the convergence and divergence debate, and how countries and cultures are dealing with HRM/D policies and practices.

Convergence and Divergence Undoubtedly globalisation has fueled what has been known as the convergence and divergence debate within the HRM/D literature field. McGaughey and De Cieri (cited in Khilji, 2002:3) define the convergence view as becoming more similar, one where managers a round the world embrace attitudes and behaviours common to managers in other countries, despite cultural differences. Kerr at al. were among the first to argue that societies are beginning to converge given the industrialisation progress that was taking place (cited in Suda, 2007:2; CLMS, M3 U4:5). This view has been extended further given that Berger points at three routes that are potentially leading us to convergence: the success of market forces supported by reactive or passive governments; the diffusion of best practices and institutional forms; or one set of rules and institutions established through international negotiations or coercions (cited in Suda, 2007:2). It is probably not a question of one route over the other, however there are a number of driving forces which are pushing any one of these routes. Achieving competitive advantage through cost, quality and productivity; the development of similar ways of management and leadership; the emergence of transaction cost economics (Sparrow et al. cited in Brewster, 2004:13), technology, MNCs, international standards (Berger, Boyer, Lane cited in Suda, 2007); and the push towards shareholder-value and decentralization (Porter cited in Woywode, 2002:1) are all such forces present today. All these are, in some form or manner, effecting HRM/D policies and practices. On the other hand, the divergence view is defined as one where differences among societies result from their parochial sets of values and that individuals maintain diverse, culturally based values despite growing economic and social similarities between nations

(McGaughey and De Cieri cited in Khilji, 2002:3). This view is expanded further given that if change does occur, or certain concepts start becoming similar, they still need to be put in perspective or interpreted according to the specific local context (Hofstede, Trompenaars cited in CLMS, M3 U1:13). This is because organisations and employees are embedded within the local institutional, social, and cultural context (CLMS, M3 U3:32), thus they could act as potential stumbling blocks for achieving one best way of HRM/D. The institutional perspective supports this argument as it emphasises the effect that national factors such as the state, the legal, and financial systems have on economic activities, thus creating another strong element of distinctiveness (Suda, 2002:2). So the divergence perspective emphasis differences in societies due to diverse values, embeddedness of organisations and employees within local context, as well as the effect of national factors. However it is probably the cultural distinctiveness

argument that has been the most vociferous within the divergence view. We will now move on to discuss this argument in more detail.

When Suzuki described the implementation of Japanese management practices without the Japanese cultural background he encapsulated it as similar to The Samurai spirit with an abacus in place of a sword (cited in Gill and Wong , 1998:5). This statement emphasis the importance that culture has in the effectiveness of HRM/D and adds substance to the previous view that even when things may be getting similar, the local context is still needed for interpretation of such policies and practices. Culture is a fairly wide term, but defining it as being represented by the values, expectations, and behaviours that are learned and shared by a group of people, and transmitted from generation to generation (Erez and Earley cited in Gragan, 2001:5) encompasses pretty much of it. Therefore whilst certain elements of culture can be observable, others such as values and expectations are not and may be implicit. This is important to mention given that culture tends to manifest itself in each one of us through our ethnocentrism when using our culture as a standard in our thinking, evaluation, or judgment processes. However our ethnocentrism should not be taken as an absolute given we cannot discount the importance of personality in this process, although both can be interlinked to a certain extent given each one of us internalizes differently the meaning of our culture.

It is Hofstedes seminal research in the 1960s and 1970s which linked national cultures to the significant differences in work-related values, reflecting in the beliefs and practices of employees and managers in different parts of the world (CLMS, M3 U1:13). The importance of organisational culture was also brought to the forefront, shifting the emphasis from the individual to the group psychological state (CLMS, M3 U2:18), and how this serves to mobilize, allocate and leverage resources in achieving company goals through values, ritual, behaviours, management systems, decision criteria, and visionary planning (Barney, Lado, Merron, cited in Chan et al., 2004:2). Its influence extends to interpersonal relationships between employees and their response to incentives, how managers implement strategies, the way international negotiations are conducted, the importance of schedules and contracts (Gragan, 2001; Horwitz et al., 2002); as well as employee motivation (Money and Graham cited in Gragan, 2001). The discussion will now take a more practical view of globalisation and HRM/D, so as to understand what the situation is in relation to one best way of HRM/D.

HRM/D in Various Countries The argument that there is one best way of HRM/D can be attached directly to the universalism perspective that of having only a single management principle that should be applied to all situations. Universalistic cultures tend to see their way of doing business and managing people as the best way and thus should be adopted universally. The US has been cited on a number of occasions as an example (Vance and Paik, 2006:46). The emphasis within these cultures is particularly on short-term influences, shareholder value, individual achievement and selfactualization. Within the universalist perspective, various management theorists have developed principles that could be universally employed as single best practices for internal convergence (Pudelko, 2005), with particular references to MNCs seen as instigators of internal convergence through the dissemination of such best practices (Martin and Beaumont, 1998). Centralised reporting relationships, standardised assessments, development and compensation practices, creation of global policies and processes for data management, performance management, and education and development are all examples of such best practices being implemented (Rioux et al., 2000). However are these practices within HRM/D mostly still concepts and a one size fits all or are there distinctions and changes being made? The focus will now move on to examine if this is the case in several countries, with a particular focus on the EU.

The American HRM model, with its universalistic perspective, has been strongly influential within the HRM/D convergence field (Brewster, 2004:2), however it has encountered several stumbling blocks when implemented within the more collectivist and regulated European context (Ferner and Hyman, Guest, Brewster and Bournois, Brewster, Kirkbride, cited in Pudelko, 2005:3), as well as Japan (Kono and Clegg, Ballon, cited in Pudelko, 2005:3). In Japan, a dynastic approach is being taken towards policies and practices (Yan, 2003); whilst in China a strong element of coerciveness is still evident (Chan and Xiaoyang, 2003). However this is probably a stylized view of these two countries, given that recent studies show changes are taking place which are giving their HRM/D a more market-oriented approach (Zhu et al., 2008; Suda, 2007). On the other hand, the European Union (EU) with several different institutional contexts, languages, and cultures make the 27 countries that form part of it quite distinct, even though they share a common heritage, underlying values, as well as economic harmonisation. HRM is no exception (Brewster, 2004) with several studies having been undertaken which bring out a number of distinctions. Hofstedes influential study categorised countries according to four dimensions that characterized national societies (cited in Black, 2001). More recently, Ronen and Shenkars used cultural characteristics to categorize the various countries in Nordic, Germanic, Anglo, Latin European and Near Eastern clusters (cited in Brewster, 2004). Other studies clustered countries according to the importance of HRM, management development, pay determination, approaches to organisational performance, employee relations (Ignjatovic and Sveltic; Sparrow, Schuler and Jackson; Evans, Lank and Farquar; Filella; Stavrou and Brewster; Due, Madsen and Jensen, cited in Brewster, 2004); educational backgrounds and training of HR specialists (Sparrow and Hiltrop; Tyson and Wikander cited in Cabral-Cardoso, 2004).

From all these studies it is evident that considerable differences persist across EU countries, both in terms of HRM/D policies and practices, and even in the way they are conceptualized. However some aspects seem to be converging, not necessarily in the action but more in the form of a general trend. This is known as directional convergence where countries are merrily sharing the same trend, unlike full convergence where they are actually becoming the same. In areas such as strategic potential of the HR department, assignment of HRM to line management, HR professionalization, employee resourcing, individualisation of employee

relations, training and development, increased provision of information to employees, and contingent compensation systems, directional convergence is evident (Brewster, 2007). In terms of full convergence of HRM/D there is very little evidence to show (Brewster et al. cited in Brewster, 2004), thus the prospect of a European HRM model seems still far off (Cabral Cardosa, 2004). The view will now be constricted to MNCs which should provide an excellent example of how, or if, they are transferring their home -country policies and practices to their host-country subsidiaries. The home-country influence of MNCs is particularly present in HRM practices, organisational structure, strategy, and mode of control (Noorderhaven and Harzing, Harzing and Sorge, Ferner and Quintanilla cited in Geepert and Williams, 2006). They are in fact diffusing home-country practices to their subsidiaries (Yan, 2003), however its the host -country that influences how these practices are adapted locally (Geepert and Williams, 2006). Abo (1995) in his study of Japanese management concepts shows that when these were exported, they had to be locally adapted to become effective, resulting in a hybridization of both Japanese and local elements. The same was identified in German MNCs when transferring their indigenous model to UK and Spanish subsidiaries. Parts of it were localized within the more Anglo-Saxon framework (Dickmann, 2003). This is also the case with individual practic es. Woywodes (2002) study of Japanese-style workgroups within the French and German car manufacturing industry, identified strong elements of local adaptation due to factors such as the national educational system, industrial relations, organisations age and history, as well as management style. Thus it is the case that a strong element of localisation is being put in action when transferring HRM/D. Another effect of this HRM/D home-country influence that MNCs are diffusing is that of affecting the indigenous HRM/D practices of that particular country, such in the case of Asia (Rowley et al., 2004). Geary and Roche (2001) describe this as a spill-over effect, where in their study they found that local Irish companies were introducing new HR practices which were in line with those of MNCs. Myloni et al. (2002) take it a step further when they studied MNCs located in Greece. Whilst around 40% of their HRM practices were different to those used in Greek organisations, in practices such as performance pay and systematic training, Greek indigenous HRM was moving closer to that of MNCs. However it was only within the

professional firms that this trend was identified. The family run organisations were still found to be strongly embedded within the local culture. These studies show that whilst there are still a number of distinct policies and practices between local organisations and MNCs, certain practices are not. Thus is it the case that certain practices may be more culturally bound whilst other may not? This will be now discussed in the next section.

HRM/D Practices When Gill and Wong (1998) compared Japanese and Singaporean HR practices, they found a number of practices which could be potentially transferable whilst others, such as seniority systems, were not given such practices are viewed differently due to cultural differences that exist between the two countries. In the case of appraisal systems, these have proved to be difficult to transfer to China given they are seen as confrontational (McEvoy and Cascio cited in Khilji, 2002). In Egypt, most of HRM practices are consistent with the Arab socio-cultural context. However practices such as skill development and performance appraisals are not implying they may not be culturally bound (Leat and El-Kot, 2007). Other similarities in HRM/D practices were found between organisations in France and Korea (Morden cited in Floyd, 1999); Germany and Japan (Floyd, 1999); and UK and India (Budhwar and Khatri, 2001). Cases like these point to possible hybridisation systems. These stem from the crossvergence perspective which points at the creation of hybrid systems as a consequence of different cultural interactions (Jackson, 2002:15). Examples of these systems are found in Korea where the K-type management combines Korean with Japanese and American approaches (Chen cited in Jackson, 2002); in India where Western and Indian HRD are combined (Rao cited in Jackson, 2002); and in South Africa where the Ubuntu movement is integrating indigenous African approaches within their people management systems (Mbigi cited in Jackson, 2002). We will now move on to focus briefly on the recruitment practice given it is one which is of particular interest to us, as well as one which has been gaining importance lately due to the competitive advantage that hiring the right people brings.

The recruitment practice is one which has been taking on more of a strategic approach, both in the increased sophistication of the methods being used, as well as in the increasing integration with HRM/D objectives and concepts such as employee value propositions, employee

branding, and corporate social responsibility (Sparrow, 2007). It is a practice, which similar to other HR practices, imposes a potential global/local issue. Whilst on one hand HR has to replicate tools and techniques to source and hire employees in a consistent manner across the board, on the other hand it has to maintain an approach which is as locally responsive as possible (Wiechmann et al., 2003). Taking Japan as an example, recruitment practices are so strongly embedded within the social structure that MNCs have been unsuccessful to bring change (Robinson, 2003). In China, MNCs have been successful in bringing progressive and varied recruitment practices, unlike the local recruitment approach which is much more standardized (Shen and Edwards, 2004). Thus, there also seems to be an element of cultural embeddedness in the recruitment practice. Ma and Allen (2009) delved into this subject recently by exploring how cultural values influence the effectiveness of recruitment practices in different cultural contexts, resulting in a theoretical framework of recruitment. However it is still to be seen if this can be put into practice successfully.

When it comes to the selection criteria, the most important ones are practically similar in all countries the interview and the technical skills (Huo et al., 2002). However this could be changing given that a number of countries are putting more value on the individuals ability to integrate as well as fit with the organisations values, rather than on work experience (Munk cited in Glinow et al., 2002). Other selection criteria seem to be more culture-driven, as in the case of Anglo-Saxon and East Asian countries (Huo et al., 2002). Ryan et al. (2009) shifted the focus on the impact that perceptions of individuals with different cultural values have on selection tools. Most of these perceptions were very similar suggesting a strong element of convergence in this regard. Given our experience is directly related to the area of executive search consultancy, particularly investment banking equity derivative specialists, our recruitment processes run across various countries. However these are replicated irrespective of which nationality or cultural background investment bankers come from. This has to do with the similar organisational culture within the major investment banks across the globe. There is an element of implicitness within those that work in this area of business given they come from a relatively similar educational background, they know what is expected from them, they know how they function within an investment banking model, and also what they expect in return. We believe

that an important link can be made here to a number of studies of employees which have found to be culturally convergent irrespective of nationality (Child, Hoecklin, Trompenaars, cited in Woldu et al., 2006).

Concluding Remarks In the discussion put forward, it is clear that globalisation is undoubtedly having a profound impact on the world we know today. HR is changing alongside this transformation, given it stands in the middle of two constantly evolving elements the organisation and its employees. Organisations, now more than ever, cannot detach themselves from either the global or local context given they are practically intertwined. Their organisational objectives may be becoming similar, however the manner in which they internalize and move towards those objectives may not. This is being reflected in the different HRM/D policies and practices pursued. It has been argued that this is the case not only in countries which are seen as culturally different, but also in those which share common cultural traits. However, culture is having a stronger influence on HR practices rather than HR policies or strategies (Tayeb, 1998). Nevertheless, this cultural perspective on its own does not sustain the argument of why HRM/D is still different. The significance and influence that institutional factors have has been discussed, even in the case of countries which share common building blocks such as the EU. We thus concur with Verburg et al. (cited in Horwitz et al., 2002:9) that there is still no sustainability for universally applicable HRM practices. Globalisation is helping policies and strategies take a globalised form especially at a concept level, however an element of localisation would be needed when these are translated into practices. Tayeb (1995) encapsulates this in the what question in HRM might be universal, but the how question is culture-specific (cited in Aycan, 2005:3).

Globalisation is also bringing countries such as Eastern European and Asian ones closer. The pressure of changes, even from a political perspective, are helping in improving access to global products and services, as well as diffusing various ideologies. Whilst this does not denote homogenizing these countries, it may imply that certain social issues like work/life balance are being shared and acknowledged by a wider range of countries. HR is responding to these ever more common issues, and this is reflecting in a directional convergence at a concept and

approach level. At a practices level we see these issues as non-converging, that is not getting similar, rather than diverging, that is becoming dissimilar.

Furthermore, as has been argued in this paper, globalisation has enhanced the competitive advantage that HRM/D has increasingly become for organisations. This implies that it is not feasible for them to follow one best way of HRM/D given that to maintain this competitive advantage means being ahead, and this is difficult if it just means copying or following others.

The extensive literature and studies conducted over the years does not render the impact and effects of globalisation on countries, societies, people, and subsequently HR an easy subject. These are at times either too macro, too micro, or too generalist, with the risk of throwing everyone in the same basket. Within any country, even within the same industry, a diverse range of HRM models and practices in operation will keep existing. Even the same practice may have a different result, given both its implementation as well as its internalization can be different. Nevertheless, it is clear that a number of policies and practices are directionally converging, at least in their rationale. This directional convergence may continue increasing further in the future given it has to do, to a certain extent, with how society is homogenizing in certain social issues, ideas, and views.

The pressures of globalisation are also leading, as was discussed in this paper, to a number of commonalities between economies and societies. However each organisation still has its own set of variables which make it distinct, and HRM/D has to respond to that distinctiveness in order to be effective, thus it is very difficult that one best way will be able to respond to this.

In our first assignment the importance of workplace learning and line managers was discussed. In this case, we also believe that workplace learning plays a critical role in building global awareness in both managers and employees, not just by focusing on the tangible transfer of policies and practices but also by focusing on the intangible transfer of values and ideas. It will then be somewhat easier for everyone to be on a similar wavelength, subsequently enhancing the organisational culture, encouraging cultural convergence which will contribute to minimizing potential national culture differences. The investment banking field could be a case

in point. HR has to also be more effective in the development of HRM/D which embraces the global perspective as well as cross-cultural realities. It has to understand better what could be potentially globalised, and what would be more effective regionalised or localised. It is in this manner that HRM can be a champion rather than an obstacle to globalisation (Pucik , 1997). HR should focus less on pursuing best global practices, and more on understanding what is the best fit for the organisations strategy, adapted for institutional and cultural differences. That would then be their best way of managing and developing their own Human Resources.

Conclusion This paper has argued that the pressures of globalisation are not leading towards one best way of HRM/D. The distinctiveness of each organisation, given the embeddedness within the institutional, social, and cultural context, is still strong and evident across a number of studies discussed in this paper. This is reflected in differences in conceptualization and implementation of HRM/D policies and practices both within, as well as across various countries. Nevertheless, globalisation is homogenizing a number of issues via political, economical, and technological factors. This is being translated in directional convergence at a HR policy and strategy level. At a practices level, there is still no sustainability for universal applicability.

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