European HRM

University Degree Business and Administrative studies

European HRM

MCS-M-165

Management in International Firm

Student Name: Siyuan Li

Student ID: 2800712

Unit Coordinator: Colin Knapp

Assignment Question:

To what extent are European (EU) countries beginning to coalesce towards a common ‘European HRM’ culture? Or are the very different cultures of Europe proving resistance to pressures to change

Content

Introduction……………………………………………….. 4

Organizational Culture …………………………………… 5

European HRM culture…………………………………… 6

Theories behind convergence………………………………6

European Public Sector Integration………………………7

European Union Public Management Strategy…………...7

Further Evidence of convergence………………………….8

Implications to poor cultural Integration………………….9

HRM Cultural Policies……………………………………..10

Conclusion…………………………………………………..11

Bibliography……………………………………………….13

Introduction

There has been considerable debate amongst many scholars whether HRM systems and practices within nations are converging (Sotirakou and Zeppou, 2005). Forces that are driving globalisation, such as the liberalisation of international trade, the international market of production, research and marketing by major MNCs, as well as the emergence of major economic regions like the European Union, have given the opportunity to recruit overseas human capital in order to seek competitive advantage (Myloni et al, 2004). This view is supported by Sotirakou and Zeppou (2005) where they contend that due to such factors as market liberalization, ever changing information technology, globalisation and the recent emergence of knowledge societies have manufactured a turbulent and complex working environment for government agencies and organisations. There are an increasing number of organizations that are adopting a common European HRM culture due to such factors as cross-border-alliances and mergers (Brewster et al, 2005). In order to determine whether or not there is an effort to coalesce a common HRM culture, it is first necessary to gain a greater understanding of HRM culture, the EU and also any various perspectives on the matter. Harris (2004) believes that with the development of the European Union, there is an increasing demand for the ‘fusing together’ of diverse peoples and their national cultures. Also it is paramount that examples are shown where a common HRM culture has been achieved and the problems that can arise.

Organizational Culture

Bruce et al define organizational culture as the ‘personality of a firm’, they see it as a trait or characteristic that makes the organization ‘unique’ from the perspective of people within and outside the organisation. Koch (1996) sees cultural background as an organisation’s basic assumptions, values and ways of thinking. Various definitions of culture have been offered, however, the common contention is the belief and presence of shared values, beliefs, assumptions, and patterns of behavior (Schein 1992). What is evident in the Organisational Culture is the personification of the organisation where companies collectively share the characteristics and traits of their employees.

Adler (1997) argues that in there are five main components when managing human capital across various cultures and organisations. Often, he states, a balance is created by using all these options when the appropriate business situation calls for it:

Cultural dominance. This is where the Organisation with the greater power exerts certain traits on beliefs upon the smaller organisation:
Cultural accommodation. This strategy is the opposite of cultural dominance, here senior management accommodate the host company. For instance an expatriate employee may learn the native language of the organisation.
Cultural compromise. Cultural compromise is a combination of cultural dominance and cultural accommodation, usually there is some give and take, however, Alder notes that it is usually the smaller organisation that is more accommodation.
Cultural avoidance. As the term suggests, companies operate as if no conflict of cultures exists. This is particularly prevalent in Asian countries and where the unresolved issue is less important than the final outcome of the situation.
Cultural synergy. Cultural synergy promotes a ‘transcultural business environment’ and provides for new solutions where is acknowledges and respects all cultures. An example of this, would be negotiations being carried out in English between a Spanish and Italian company, if the Spanish company insisted on Spanish it would be cultural dominance, if they insisted on Italian it would be cultural accommodation and interpreters were used it would be cultural compromise. Adler (1997) notes that English is emerging as the principal language of communication among members which is important with the main topic been discussed.

Myloni et al (2003) argue that many Countries within the EU are different from each other and that their distinctive cultural differences are mirrored in labour legislation and other institutional factors such as labour market trends, trade-union influence, recruitment and selection, compensation and benefits, public opinion and stakeholder’s interests and views.

European HRM culture

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European HRM culture

According to Koch (1996) the European legal and police cultures are not homogeneous and maybe it is not even a good idea to try to homogenize them. He believes that discrepancies arise due to cultural diversity in different nations. Subsequently he sees that the solution lies in an effective ‘intercultural’ human resource management strategy. In Europe, the alignment of national public administration policies and practices to EU directions is regarded as a key factor in the process of integration. This is evident within European Public administration, the administration convergence is placing more pressure and demands in Human Resource managers in every European state (Sotirakou and Zeppou, 2005). The convergence of HRM within union states provides a unified policy, however, this strategy allows for differences at the national or organisational level, due to cultural factors. Consequently, the European convergence of HRM culture may be considered as an outcome of a complex interaction of many of members’ legislation, economies and varying market forces

Theories behind convergence

Mayrhofer & Brewster (2004) believe that there is evidence of a common convergence within Europe, the first major factor or reason is a market-driven ideology, this is based on the assumption that the many regions even outside Europe tend to follow or mirror the most powerful market in the world being the US. Companies thrive to follow on how Market leaders manage their organisations, including Human Resource Management. Furthermore they offer a second theory behind convergence; they see the ‘institutional power’ as an important factor behind European convergence. Reasoning for this is down to employment practice & procedure, which leads to a specific, there is the consensus though that the divergence thesis often utilises a cultural argument or perspective (Mayrhofer & Brewster, 2004). They also offer an alternative of a divergence where due to cultural differences; the management of organisations and particularly human resource will remain, fundamentally different from country to country within the EU. Due to national differences in ownership, structures, and apart from EU law all have a significant effect on the impact and the practice of employing organisations.

European Public Sector Integration

The questions posed in where European countries are beginning to coalesce towards a common ‘European HRM culture’ are evident within the European Public Sectors. With the introduction of the Euro which brought about the momentary integration, EU countries have promoted administrative convergence particularly with in public organizations (Sotirakou and Zeppou, 2005). In 2000, European countries came together to discuss and formulate specific public sector management policies, which must be followed by every member state (Sotirakou and Zeppou, 2005). This is seen as been instrumental in the process of EU integration in an effort to align all policies and practices for EU countries (Brewster and Harris, 1999).

Furthermore, The European Council of Lisbon for instance has formulated a specific public sector policy, which promotes public sector integration and modernization for all EU countries as a key factor in economic growth and ‘social development (). This view and perspective is shared by Mayrhofer & Brewster (2004), they contend that it is quiet clear that Europe needs a more ‘nuanced of convergence’ in HRM policies and practices.

European Union Public Mangement Strategy

According to Sotirakou and Zeppou (2005) the European Union public management strategy should promote the following HRM culture and practices

Simplify processes and procedures
Empower employees
Develop a leadership style which creates clarity and unity of purpose
Create a culture of trust, openness, transparency
Non-discrimination
A culture of constant evaluation
Learning and innovation. Evidence of Convergence

Brewster (1995) suggested that the empirical data on national cultural differences is limited and that it was difficult to draw correlations between countries. This was reflected in legislation that was drafted by different countries, which inherited different cultures.

Further Evidence of convergence

Nikandrou et al (2005) devised a study with the aim of examining whether there was a change towards a similar HRM within Europe, secondly the approach to identify any variations or a trend from a countries specific HRM culture to the periphery or ‘common’ HRM culture and lastly to identify of there were any ‘contextual changes’ that have taken place since the 1990’s.

It is of the view that many organisations in Europe are not autonomous whereby they are constricted at national level through cultural differences and conversely legal and institutional limitations. This is segmented by the nature of employee contracts and state owned companies (Mayrhofer & Brewster, 2004). Similarly the set out to establish whether there was a ‘European’ version of HRM by identifying different Human Resource management techniques and also see if there were any indications of a HRM convergence.

Within Europe, there are naturally enough, a number of Clusters i.e. Great Britain and Ireland, Eastern Europe, Scandinavia, Central Europe and Eastern Europe. For instance Gooderham et al (1999) contrast ‘Anglos-Saxon’ or UK and Ireland with ‘free market’ capitalism with varieties where there is greater state involvement and intervention. Due et al (1991: 90) draws comparisons in state involvement in industrial relations, it is noted that the UK, Ireland and Scandinavian countries have limited state involvement in contrast to Roman-Germanic countries such as France, Spain, Germany, Italy, Belgium, Greece and the Netherlands, in which the state has a centralised role and functions as an actor in industrial relations

Mayrhofer & Brewster (2004) have found that when focusing on HRM practices and culture in specific European Countries that it is very clear that there are significant differences between European Countries, which would in fact dismiss the essay question posed in this essay. They found several ‘core functional’ areas of Human Resource where there were differentiations:

Representation at director or the highest level for the human resource function or department
Internal Labour Markets where there were demands for scare skill requirements
The proportion of workforce that were on part-time contracts which in itself reflected different labour markets
Budgets as a proportion of salaries that were provided for training and development

Nikandrou et al (2005) contend that training is vital and one of the most important issues with Human Resource, they found that it was an area where there was little differentiation and there was no considerable differences. In 1995 there was empirical date to suggest that two major ‘clusters’ within Europe where different on the policy on internal training, however, in 1999 there is evidence of convergence. With regard to recruitment more Organisations in North-West Europe looked to recruit HR Managers from outside the organisation, however, in 1999 there is evidence that most countries look to external labour markets.

Among the HR aspects considered in the present study, Eastern Germany showed more evidence of convergence with the north-western cluster with regard to more formalization of HR policies and strategies (five out of five indices closed the gap between 1995 and 1999), and in evaluation and analysis (all of the four indices used showed a change towards the north-western cluster). Also, Eastern Germany showed a convergence on external orientation in labor market (three out of the six indices closed the gap).

With regard to other aspects of HR in Eastern Germany like employees involvement in HR, employment flexibility, position of HRM in organization, external orientation in training, seven indices showed change toward the north-western cluster. Overall of, all the HR aspects explored in the present study, West Germany seems to have remained stable – between 1995 and 1999 – in centralization of HR policies and in emphasis on training; in all other aspects of HR that this study considered, Eastern Germany to a more or less degree, showed changes towards the north-western cluster.

Implications to poor cultural Integration

CIPD (2008) argue that millions of pounds are lost as a result of poor cultural integration; there is evidence to suggest that some companies, which are involved in mergers and acquisitions, are losing millions of pounds as a result of cultural integration issues. In a report by Mercer it was found that of the European firms, 43 per cent suggested losses of up to €5 million.

Takei and Ito (2007) believe that many foreign managers find it difficult in motivating and encouraging employees towards company objectives and common goals in foreign operations where organizations have ‘higher level of cultural diversity’

Davidson and Cooper (1993) argue that throughout Europe, female workers have been frustratingly slow to advance into more senior positions in spite of implementation of EU labour legislation including European Union’s social protocol, to enforce issues in relation to equal opportunity including equal pay and sex discrimination.

HRM Cultural Policies

From the Mercer report (CIPD 2008), it was found that organisations that had invested in ‘structured cultural integration processes and programmes from as early stage were finding more positive contributions. She is of the belief that Organisations are starting to turn this trend by implementing processes, tools and capabilities aimed at reducing the liabilities and gaining advantage of the opportunities presented by organisation culture before, during and after a deal has been completed by all of the parties involved within the process (CIPD, 2008).

In spite of the collaboration of an EU labour legislative framework, efforts to harmonise the European Culture is still difficult due to institutional restraints. This is due to such varying differences and factors such as role and influence of trade unions, works councils, the level of safety and health regulations or the amount of regulation of the labour markets are just a few prominent examples of these institutional differences (Mayrhofer & Brewster, 2004).

Conclusion

The question posed was to determine whether or not there was a European HRM culture converging or perhaps the opposite. There has been a lot of debate on the matter in which various reasons have been given, the most prevalent being globalisation and possible the recent phenomenon of knowledge societies.

In order to grasp the concept of Organisational Culture, it is important to understand the different approaches. As mentioned by Adler (1997), there are five different approaches that can be used with the most effective been Cultural synergy which promotes a ‘transcultural business environment’. Furthermore there are various theories in to why a HRM convergence is needed. Mayrhofer & Brewster (2004) believe that there is evidence of a common convergence within mainly due to such factors as US as world marker leaders and ‘institutional power’

Brewster (1995) suggested that the empirical data on national cultural differences is limited and that it was difficult to draw correlations between countries. The first cultural convergence was that of the monetary form in the Euro. The public sector is one of the first signs of convergence, In 2000 European countries came together to discuss and formulate specific public sector management policies (Sotirakou and Zeppou, 2005), this is seen as been instrumental in the process of EU integration in an effort to align all policies and practices for EU countries (Brewster and Harris, 1999).

Further evidence is where research was carried out by Nikandrou et al (2005) who found some more specific correlations that would indicate a convergence of a HRM culture, they found evidence in 1999 that policies on training was converging. In 1999 there was evidence to suggest that most Organisations are now looking to recruit externally for HR mangers. With regard to recruitment more Organisations in North-West Europe looked to recruit HR Managers from outside the organisation, however, in 1999 there is evidence that most countries look to external labour markets.

There are for various reasons limitations to a complete convergence of a HRM culture within Europe mainly through cultural differences and conversely legal and institutional limitations. Mayrhofer & Brewster (2004) have dismissed the ideology of a common or a converging European HRM culture, they see that there are significant differences within European Countries, which. Of the major differences the found representation at the highest level for the human resource function within organisations, Internal Labour Markets were treated differently and labour markets were different particularly those on fixed term and part time contracts.

Cultural integration is paramount regardless if a common culture cannot be ratified, CIPD (2008) have found that millions of pounds are lost as a result of poor cultural integration and conversely it was found from a Mercer report (CIPD 2008) that it was found that organisations that had invested in ‘structured cultural integration processes and programmes from as early stage were finding more positive contributions. To conclude it is evident that there will never be a HRM cultural HRM culture due to distinctive cultural differences that many countries possess, however, it is important to try and align a common policy in order to remain competitive and to avoid costs.

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