Convergence Divergence and Institutional Influence in International HRM

Convergence, Divergence and Institutional Influence in International HRM Michael Morley Professor of Management University of Limerick 1

Outline of Presentation • A (Short) Personal Perspective on The • • • 2 Financial Crisis Theoretical and Empirical Challenges in International HRM Different Lenses in Retrospect: The Meaning of International, Comparative and Cross Cultural HRM Globalisation, Convergence & Divergence

The Financial Crisis Well we are definitely in a recession…. but what kind of one is debatable… • V"-shaped • "U"-shaped • W"-shaped 3 • "L"-shaped

A Slightly More Technical Explanation of my Last Point 4

Theoretical and Empirical Challenges In International HRM Develop a more in-depth understanding of IHRM and associated activities as a result of increasing globalisation Adopt an appropriate paradigm with which to understand IHRM because of conceptual confusion of what is the scope of its subject matter 5 Look again at the value, or otherwise, which might be gained from time spent dedicated to delimiting the field Reflect on the criticisms levelled at IHRM, namely that it is a self-referential concept devoid of any disciplinary basis

Theoretical and Empirical Challenges in International HRM 6 – How can we eschew paradigmatic and methodological ethnocentrism characterising our IHRM research endeavour ? – How can we develop the quality of our research effort to improve IHRM problem-methodological fit? – How can we rise to the challenge of multi-level analysis? The cumulative impact of this renewed research effort should be that those stakeholders who might be served by our research endeavours would regard our effort as legitimate and relevant to their concerns

Different Lenses in Retrospect: International HRM dedicated to charting the anatomy of HRM in the MNC and unearthing the HRM strategies, systems and practices pursued in the context of internationalisation (Scullion, 1995; Taylor et al, 1996; Harzing, 1999; Schuler et al, 2002; Dowling & Welch, 2004; Scullion & Collings, 2006; Morley et al, 2006; Schuler & Tarique, 2007) Development Trajectory of IHRM variously concerned with: • Early Preponderance of Expatriate and Assignment Cycle Research • Concern with the Dominant Coalition as the Human Capital Base • Headquarter-Subsidiary Relations and the Diffusion Agenda • Developing a Globalised HR Architecture 7 Micro Macro Strategic

Different Lenses in Retrospect: Comparative HRM dedicated to exploring the landscape, contours and national patterns of HRM as a result of distinctive developmental trajectories (Budhwar, 2004; Brewster et al, 2004; Morley et al, 2007) Development Trajectory of Comparative HRM: • Mirrored earlier comparative trajectory in Industrial Relations systems research • Focus on National systems elements as basis for legitimate comparison of economically dominant territories in early investigations • Dominance of Institutional provision as wellspring for organisational level HR practice in increasing variety of contexts and emergence of Ethno-Theory • Platform for the exposition of the convergence thesis 8 Increasing Geographic Heterogeneity Ethno-Theory of Management

Different Lenses in Retrospect: Cross Cultural HRM, attributing particular analytical significance to national culture, is dedicated to explicating tenets of national culture as the dominant paradigm for conditioning what is acceptable organisational practice, often in comparative tradition (Laurent, 1986; Aycan, 2003; Tayeb, 2000; Sorge, 2004) The Development Trajectory of Cross Cultural HRM: • Focused on the significant explanatory power of societal Culture • Hofstede based analyses springing from the “Cultural Programming of the Mind” distinguishing one group of people from another • Managerial work values and the consequences for style 9 Dimensionalisation Replication

Three Things That The Different Lenses Demonstrate 1. Determining the anatomy and impact of HRM is an 2. 3. 10 uncertain line of enquiry in organisation science Doing it in an international context and maintaining accuracy in empirical generalisation is complex social science activity So why do we try? We try because “relevant insights into organization processes and systems in a global era will come from studying it in an international, comparative and/or cross-cultural context”

Convergence, Divergence and Institutional Influence in International HRM • If the popular press is to be believed we live in a • • 11 globalised world, in which tastes, behavioural patterns, cultural values and governance systems are becoming similar. Often substituted as “Americanisation” This is occurring for reasons such as: – Industrialisation and FDI, trade barrier diminution, globalised media, information and capital flows.

Convergence, Divergence and Institutional Influence in International HRM • Convergence debate is a key feature of much social science theorising…. Weber’s Bureaucracy, Kerr’s Logic of Industrialisation Thesis. • Institutional and Cultural Theorists doubt the concept, drawing attention to: – manifest varieties of capitalism – the role of the nation state – the differing developmental trajectory of societal institutions • Within the HRM context, while several debates assume a convergent, one best way solution, human resources, more than any other factor of production, are prone to local variation and embeddedness. • Hard and Soft Factors at play 12 – The Enduring Nature of National Culture, Societal Values, Local Traditions – Labour Market Regimes, Legal Regulation

Convergence, Divergence and Institutional Influence in International HRM • The argument has been applied particularly in the area of business and management, with differences being identified in: – management philosophies (Redding, 1990) and priorities (Hofstede, Van Deusen, Mueller, & Charles, 2002); – national innovation (Nelson, 1993); – and industrial relations (Frege & Kelly, 2003) – or human resource management (Brewster, Mayrhofer, & Morley, 2004). • Although several core human resource management (HRM) debates, such as HRM and organizational performance, assume a convergent, one-best-way solution human resources, more than any other production factor, are difficult to standardize and it has been argued that HRM is the aspect of management most likely to reflect local circumstances (Rosenzweig & Nohria, 1994). 13

Convergence, Divergence and Institutional Influence in International HRM • Different theoretical lines of enquiry arrive at discrepant conclusions about the emergence of similar forms of organising – Institutionalism – National Business Systems Theory – Scandinavian Institutionalism 14

Convergence, Divergence and Institutional Influence in International HRM • Many studies rely on an implicit understanding of convergence – Some claim convergence from a single point in time analysis – Some point to similar trends as evidence of convergence • We distinguish: 15 – Final Convergence where the variable develops over time in a way that eventually leads to a common end point – Directional Convergence where the development tendency of the variable points in the same direction in each country only, regardless of the initial starting point

Convergence, Divergence and Institutional Influence in International HRM • No Evidence of Final Convergence in HR Practice or • • 16 Configuration, testimony to the enduring effects of national institutional contexts in Europe Two HR practice variables – Employee Rewards and Employee Communications- show directional convergence with increasing values Likewise two Configuration variables – Strategic Potential of HR and Assignment of HR Responsibilities - show directional convergence with increasing values

Convergence, Divergence and Institutional Influence in International HRM • Empirically, draw attention to the effects of embeddedness • • • 17 of institutional contexts and the interplay between supranational drivers and institutionalisation Conceptually, attention drawn to a revised understanding of the notion of convergence which proves empirically useful Methodologically, attention drawn to the importance of multi-point-in-time and multi-country data for the analysis of convergence, despite the potential for underlying problems Practically, acting as a counterbalance against the widespread change and innovation frenzy prevalent in consulting and some applied academic literature

International Employment Relations/HRM and Multinational Companies Dr Patrick Gunnigle Professor of Business Studies University of Limerick Recent working papers available at http: //ssrn. com/author=348145 18

THE BIG PICTURE: WHY EXAMINE MNCs? Key role as channels for the spread of HR/ER policies & practices 1. Influence: increasing impact of MNCs 2. Incentive: firms compete on the basis of ‘advantages’ deriving from national business systems 3. Capacity: increased ability to transfer 19

MNCs Matter Huge Economic (& Political) influence ü 82, 000 MNCs with 810, 000 subsidiaries ü 76 of the top 150 economic entities are MNCs ü 77 million employees üExports by foreign affiliates account for 1/3 of total world exports of goods & services 20

…. Particularly in Ireland Ø‘Industrialisation by Invitation’ ØKey role in economic growth (esp. US FDI) Ø 2006: stock of American FDI of € 52. 5 bn - more than BRIC combined (€ 46. 5 bn) ØRecent years shift to services (esp. financial services) ØOutward FDI growth (exceeds inflows) ØChallenges…. . & GFC……. 21

GFC & FDI • Impact particularly severe in Ireland • Though many changes already afoot • Accelerated by GFC • Not all negative…. recession can be a good time to grow • Economic recession + high unemployment = a buoyant labour market/lower labour costs • Job Churn 22

GFC and MNCs • In 2008 Global FDI inflows 14% from historic high • Slide accelerated in 2009…. slow recovery 2010. . speed up in 2011. • implications = profits, divestments, layoffs & forced restructuring • has altered FDI landscape: developed countries worst hit, greater FDI growth in developing & transition economies • Divestment greater than FDI inflows in many countries • Rate of internationalisation of largest MNCs slowed markedly in 2008 while profits fell by 27% 23

Implications for HR/ER • Focus on re-structuring & cost reduction • Closures, redundancies, outsourcing, cuts in pay & conditions & related initiatives (see table) • HR function responsible for managing redundancy/lay-off process (selection, legal compliance, ethical aspects? ) ISSUES for HR/ER: - Macro: prospect for social partnership / national accords? - Micro: Strategic influence of HR or ? - turnover less R&S, talent management, etc. - T&D but not everywhere? - Changed work/IR climate…. . workforce malleability? - Implications for trade unions + or - ? - Efficacy of certain HR techniques? 24

Table 1 HRM in Recession – examples of current practice in Ireland • Many introducing initiatives e. g. short-time working, pay freezes, career breaks, redundancies (e. g. Intel, Microsoft, Abbott). • Some pay freezes or “inability to pay” under current national agreement (e. g. Irish Aviation Authority, Roadstone), but others give increases (e. g. Apple, Pepsi, Pfizer). • Increased no. of redundancies (up 30% in 2008) but lower settlements (more workers receiving minimum). Company examples: Independent News & Media: package of wage cuts & new working time arrangements. Unilaterally introduced by management, unions opposed. Aer Lingus: ‘Leave and return’ plan: 850 employees take lump sum severance before returning on reduced pay & conditions; lower entry pay rates, voluntary redundancies and changes in working conditions. Union led, but worse to come… AXA: new remuneration process, changes to performance mgt. system, new profit share criteria and voluntary redundancies. Agreed with unions Element Six: short-term working with voluntary redundancies – agreed with unions. Compulsory redundancies suggested on lower terms – unions opposed. 25

Concession bargaining (CB) • cost pressures TUs/Employee choice of CB. . on increase (EIRO) • Sign of weakness or value of social dialogue? examples: TNT: Trade unions in Dutch subsidiary agree wage cuts of 15% in exchange for no job loss for 3 years. Alternative was possible loss of 11, 000 jobs by management. Sony: Workers & management in Barcelona plant agree wage freeze and increased working time of 40 hours per year in exchange for commitment to keep plant open until 2010. Daimler: Recent agreement between works council & management aims to cut costs at German operations in exchange for job guarantees (delayed pay increase) • But not always successful……Continental & Siemens in Germany • Key issue = will CB have long term benefit? • To work to employee advantage concessions need to be temporary & related to specific preconditions 26

Methodology in International HRM Research: Experience from two large scale projects Patrick Gunnigle &Michael Morley University of Limerick 27

INTREPID: Parallel national surveys & common objectives Ø MNCs employment practices in organisational context Ø Canada, Ireland, Spain, UK Ø further surveys: Argentina, Denmark/Norway, Mexico (in the field); Belgium, Australia, Singapore (proposed) Ø national operations as the unit of analysis Ø respondent: senior HR executive in the national operation Ø structured questionnaire instrument 28

Focus of Study Four areas of employment practice: – – pay & performance management training, development, & org. learning employee involvement and communication employee collective representation and consultation; & Three distinct staff groupings 29 – managers – the ‘largest occupational group’ (LOG) – the ‘key group’ i. e. a group that the MNC defines as key to competitive advantage [excluding managers]

Why survey MNCs? · Previous research unrepresentative - ‘large and famous’ - Incomplete or inaccurate listings - Exclusion of home-owned MNCs Definition of an MNC - Foreign-owned: 500+ w/w and at least 100 in Ireland - Irish: 500+ employees w/w and at least 100 outside Ireland · Catches hitherto excluded categories · Indigenous MNCs 30 · Non-aided MNCs (esp in retail & hospitality)

Population & Survey Outcomes 31 CANADA IRELAND SPAIN UK Population 1398 517 1083 1729 Outcome N = 208 RR = 14. 9% N = 260 RR = 50. 3% N = 327 RR =30. 2% N = 302 RR = 17. 5%

The Cranet Project • A Research network, established in 1989, dedicated to analysing developments in the area of HRM in public and private organisations with more than 200 employees in a national, cross-national and quasilongitudinal way. 32

The Cranet Project • The two most important objectives of this internationally, • • comparative survey were, at the outset: to research whether a pattern of 'Europeanisation', i. e. convergence to a common pattern could be found over time; and to identify whether changes in personnel policies towards a more strategic approach ('strategic HRM') have occurred. • More broadly, the underlying objective was to extend the range of internationally comparable evidence about particular policies and practices that have been seen as relevant to the concept of HRM. 33

The Architecture Of The Cranet Project Two decades of research exploring variations in HRM in terms of where it operates, who its agents are and what contemporary activities are engaged in. • Now 50 countries (24 in Europe) • Academic partner in each one • In many instances there is a strong link with the local Professional HR Association • Data interpreted through a science-practice lens 34

The Architecture Of The Cranet Project • At the heart of the network is the Cranet survey. The survey • 35 asks detailed questions on the human resource function, in particular how this function is embedded in the organisation, how people are sourced, how employees are evaluated, trained, and compensated, and how the system of industrial relations is structured. The core questions of this questionnaire are identical for each country in the sense that, taking a committee designed questionnaire as a starting point, through the translationretranslation technique, it is ensured that one gets as much comparability of the questions as is possible in a cross-national and cross-cultural context.

The Architecture Of The Cranet Project The survey: – Repeating approximately every 3 years; – Thousands of responses each round; – Questionnaire to senior HR; – Factual, rather than perceptual items; – Representative of National Economic Structure 36

Core Domain Areas of the Inquiry • Strong emphasis on the basic architecture of HRM (Configurational, Policy and Practice Elements) – Structure, scale and scope of the HR Function – Staffing Practices – Employee Development – Compensation and Benefits – Employee Relations and Communication 37

Contributions of the CRANET Evidence • Potential charting of the international patterns of HRM (The Anatomy of the Field) which we can adjudge to be more or less Contextual or Universal – Human resource management is not a universal concept, but rather remains a socially constructed, institutionally derived phenomenon with manifest differences in the way it is conceptualised and conducted. 38

Contributions of the CRANET Evidence • Giving expression to within Country, local variation in HR practices and priorities – Indigenous versus multinational influences and their consequences – Host country effects are increasingly being overridden by the country of origin effects in regard to HRM practice in the MNCs – Previous evidence that MNCs have acted as an important vehicle for innovation in HRM or disruption of the Employment Relations System • • 39 Examples might include Role of the HR function and HR techniques such as performance related pay and performance Changing nature of collectivism

Contributions of the CRANET Evidence • Potential for exploring the HR/IR Nexus more fully – HR and IR likened to the proverbial ships passing in the night: aware of each others existence, but avoid each other and chart different courses – different forms of voice (trade unions, works councils, consultative committees in different contexts – This complexity cannot simply be willed out of existence 40

Contributions of the CRANET Evidence • Providing evidence on the big trends CRANET Data, over time, point to increases in: • – strategic potential of HR department; • – assignment of HRM to line; • – HR professionalisation; • – employee resourcing; • – individualisation of employee relations; • – increased information to employees; • – flexible working practices; • – contingent compensation systems. CRANET Data show fewer trends in the areas of: • – staff ratio; • – employee development 41

Source Material 42

SUMMARY • Charting the anatomy of HRM and its evolutionary tendencies • • 43 which are transitionary rather than transformational Juxtaposes traditions and transitions within and between nation states Provides a corpus of evidence for examining continuity and change Provides benchmarks for comparing Europe with developments elsewhere in the world. Bridges the academic/practice divide because of support for the project