Strategic Human Resource Management in Europe: Strategic Human Resource Management in Europe Catherine Voynnet Fourboul


Introduction & objectives: Introduction & objectives to understand what means International Human Resource Management, the specificity of Europe to introduce progressively the managerial context (FDI, transnational, integration, organisation structure, HQ orientation) of Industrial Relations


Contents: Contents IHRM definition FDI & Transnationalisation European specificity (structure, corporate governance, HQs orientation) European Human Resource Management


IHRM definition: IHRM definition


International Human Resource Management: International Human Resource Management Definition


Towards a definition of International Human Resource Management: Towards a definition of International Human Resource Management


Fields and types of Comparative Management Research: Fields and types of Comparative Management Research Enterprise-Specific Location-Specific International-Environment Related Enterprises / local, institutional, cultural environment Enterprises / local, institutional, cultural environment / international environment Enterprises / international environment Local / international environment Source: Redding S. G. (1994), Comparative Management Theory: Jungle, Zoo or Fossil Bed ?, Organization studies, vol. 15, n° 3.


3 paradigms of Management: 3 paradigms of Management


FDI & Transnationalisation: FDI & Transnationalisation


Global interdependenceFOMBRUN WALLY, globalizing management, 1992: Global interdependence FOMBRUN WALLY, globalizing management, 1992 Communication Travel Trade Capital Flows Direct Investment North America Europe Asia Pacific Capital Flight Widening Gap Net World Order Capitalist Ascendency Spread of English Cultural Homogeneization Technological change Financial integration Regional communities Third world periphery Shifting political axes Western hegemony INFRASTRUCTURE SOCIOSTRUCTURE SUPERSTRUCTURE


Some of the world’s top MNCs: Some of the world’s top MNCs Source : World investment report, 1996, United Nations Conference on Trade and Development


The environment of MNCs: The environment of MNCs


Transnational Integration : definition: Transnational Integration : definition Increasing integration result in increased intrafirm exchanges of : people technology raw materials components finish goods


Types of international strategies Source : Michael E. Porter, Competition in Global Industries, Harvard Business School Press, BOSTON , 1986: Types of international strategies Source : Michael E. Porter, Competition in Global Industries, Harvard Business School Press, BOSTON , 1986


Slide15: Transnational Integration : definition not only Cross border coordination rationalization standardization of product centralization of technological development vertical or horizontal integration of manufacturing dependence of subsidiaries on the MNC system


Transnational Integration : definition: Transnational Integration : definition Increasing integration result in increased intrafirm exchanges of : people technology raw materials components finish goods


Transnational Integration : definition: Transnational Integration : definition Internationalization and integration are different Transnational integration entails exploiting assets internationally through internalization within the firm, through administrative hierarchies rather than external markets


Degree of transnational integration: Degree of transnational integration Flows of : parts, components and finished goods funds, skills and other scarce resources intelligence, ideas and knowledge people across borders


Degree of transnational integration: Degree of transnational integration Operationalisation of a concept assumption : the greater the degree of intrafirm trade, the greater the degree of integration intrafirm flows of products correlate with flows of resources and information International sales = parent exports + sales of overseas subsidiaries


Degree of transnational integration: Degree of transnational integration Index of integration = affil to affil + affil to par + par to affil affil sales + par exports


HRM context: HRM context


Slide22: Source: Brewster C. (1995), Towards a “European” Model of Human Resource Management, Journal of International Business Studies, vol. 26, n° 1.


Country’s factor: Country’s factor National cultures impact


Types of research in International Management: Types of research in International Management Adapted from Adler N. J (1984), Understanding the way of understanding, in Farmer R. N. [ed.], Advances in International Comparative Management, pp. 34-35.


Different socialization emphases to Power Distance: Different socialization emphases to Power Distance


Different socialization emphases to collectivism and individualism: Different socialization emphases to collectivism and individualism


Different socialization emphases to feminity and masculinity: Different socialization emphases to feminity and masculinity


Culture specifications: Culture specifications


Hofstede ’s dimensions of national culture: Hofstede ’s dimensions of national culture Adapted from Hofstede G. (1993), Culture Constraints in Management Theories, Academy of Management Executive, vol. 7, n° 1.


Implications of British and French management cultures: Implications of British and French management cultures Source: Naulleau G., Criccom J. H. (1993), A comparison of French and British Management Cultures, Management Education and Development, vol. 24, pp. 14-25


Trompenaars’ cultural dimensions: Trompenaars’ cultural dimensions Source: Beardwell I., Holden L. (1997), Human Resource Management: A contemporary perspective, Pitman, pp. 695


HR practices in MNCsSusan Schneider, 1986, HRM: HR practices in MNCs Susan Schneider, 1986, HRM HR policies developed at HQ reflect the national culture of the MNC A menu of HR practices : planning & staffing, appraisal & compensation, selection & socialisation


Planning & staffing: Planning & staffing Career management systems represent formal LT HR planning (inappropriate in Islamic countries vs determinant in Europe France: computerized system: engineering approach In US, concrete results = criteria for selection & promotion  UK France (school & family background) In Japan job descriptions are vague & flexible to fit uncertainty to strengthen the bond Individu/Cie  US F specified : more job mobility between organizations F values maths & science diplomas  US UK , HR generalists Europeans more internationaly oriented than US


Appraisal and compensation: Appraisal and compensation In Japanese firms: concern for integrity, morality, loyalty MBO: appraisal and compensation systems are linked US practice easily transferred in D (decentralisation, less emphasis on hierarchy and formalization) but in France considered as an exercise of arbitrary power In one Danish subsidiary, a proposal for incentives for sales people was turned down  egalitarian spirit D (1 Mercedes not enough: need for a chauffeur = status concern) ; S (monetary reward less motivating than vacation village): quality of life Pension expected 40% of salary in Southern Europe  85% in Nordic countries


Selection & socialization: Selection & socialization IBM avoid power accumulation of managers by moving them every 2 years (I’ve Been Moved)  Italian: more political than instrumental oriented Boot camp tactics of IBM to create professional armies of corporate soldiers  not well accepted in Europe Artifacts of corporate culture (US) seen in Europe as an intrusion into the private realm of the individual US: Formal, impersonal control  Europe informal, personal control


Corporate culture: Corporate culture


Corporate Culture: Corporate Culture “A pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.” E H. Schein [1986]


Corporate Culture: Corporate Culture Integrative and unifying character Common code of information transmission Increase convergence, co-ordination Organisational and local national culture both influence the communication system of the company.


Identification with the worldwide Organization: Identification with the worldwide Organization The subtlety and complexity of a flexible multidimensional decision-making process appears difficult to achieve solely through formal organizational change. Influence through the informal structure Management of expatriates develop linkages throughout the MNC


European specificity: European specificity Structure, Corporate governance, HQs orientation


Factors of integration of European H.R.M.: Factors of integration of European H.R.M. Common strategic pressures Foreign Direct Investment Emergence of transnational organizations Restructuring into larger units A highly regulated labor environment Strong identity of managers (cadres) Cultural diversity (organ.&national level)


Implication for Human Resource Management : Implication for Human Resource Management Flat, flexible Europe-wide org. Structure Structures more customer-focused More strategic policy-making role for the HRM function Greater sensitivity to national cultural differences Emergence of Euro-Managers


Organizational structure: Organizational structure


Continuum of Two Basic Types of Control: Continuum of Two Basic Types of Control


Seven structural Dimensions: Seven structural Dimensions Formulation Specialization Standardization Hierarchy of authority Complexity Centralization Professionalism


Metaphors and images: Metaphors and images Machines Organisms Brains Cultures Political systems Psychic prisons Flux and transformation Instruments of domination Morgan G., 1986, Images of Organization


The bases for grouping people in the structure: The bases for grouping people in the structure Employee roles Communication and coordination nodes and patterns of interactions Time spans of discretion and levels of individual capability


Employee roles (Mintzberg): Employee roles (Mintzberg) Operating core strategic apex Middle line Technostructure Support Staff Ideology


Aims of Organization Design: Aims of Organization Design Shape the Org. Establish a mechanism of governance Shape the way people think and behave Create an org. Identity Provide the most appropriate combination of competencies Ensure efficient communication, coordination


Scope of organizational design: Scope of organizational design Establishing the processes by which responsibility is allocated Definition of roles Creation of control systems Identification of accountabilities Delegation of decision making authority Source Galbraith 1977


Forces for coordination & departmentalization: Forces for coordination & departmentalization Departmentalization forces Coordination forces Matrix departmentalization Place or product departmentalization Equilibrium Functional departmentalization


Functional structure: Functional structure


Product or divisional structure: Product or divisional structure


Matrix structure: Matrix structure


Case study: context: Case study: context A MNC in the chemical sector, 70 000 employees. 5 divisions. The aim: organizing one division, the European fibre polymer division Products : nylon, polyester, thread, stockings, carpet Every corporations are autonomous CH: 2500, F:3500, D:2500, I:1200 (1 Managing director + 1 HRD/ country) There is 1 Managing Director at the EU level but no troops.


Case study: plan & question: Case study: plan & question Report: Cost, no communication and no mobility among nationals HRD. HRD don’t know each other. Executives: 10 % of employees, no mobility. Aim: to Europeanize the structure, to increase the intra sector mobility from 5 to 50 movements, to create a HR organization Questions: How would you organize the European department with 4 executives? Imagine the possible scenarios and the advantages and drawbacks for each scenario. What action do you take? What are the limits?


Functional Structure: Functional Structure Product / divisional Structure


Craft Scenario: homogeneity of career path: Craft Scenario: homogeneity of career path HRM functions Scenario :


Human resources themes Scenario : Human resources themes Scenario Countries scenario


Age scenario : Age scenario Layer scenario


Strategic analysis framework: Strategic analysis framework


Strategic analysis: local MD: Strategic analysis: local MD


Strategic analysis: corporate managing director: Strategic analysis: corporate managing director


Strategic analysis: HRD: Strategic analysis: HRD


Implementation : Implementation Political blocks (Managing Directors of national countries fear to lost power nominate ex-nationals HRD at the European level Influence for a country /structure failure


National differences in organization structure: National differences in organization structure UK Production workers Maintenance workers Technical staff Supervisory staff Clerical administrative Management Staff 37% Works 63%


National differences in organization structure: National differences in organization structure France Production workers Maintenance workers Technical staff Supervisory staff Clerical administrative Management Staff 41.6% Works 58.4%


National differences in organization structure: National differences in organization structure Germany Production workers Maintenance workers Technical staff Supervisory staff Clerical administrative Management Staff 28.2% Works 71.8%


Culture and structure: Culture and structure


Corporate governance: Corporate governance


Corporate governance: Corporate governance How a MNC organization structures the 2 main bodies of corporate governance? Proportion of insiders and outsiders on boards unitary and dual board structure


Governance system: Governance system German and French companies  a two- or a unitary system of administration, British companies  the unitary system. dual-system both a supervisory and a management board with overlap in membership, supervisory board exert control over the management board In the unitary system executive and non-executive directors sit together on one board.


Critics of the 2 tier structure : Critics of the 2 tier structure


The case of Germany : The case of Germany In Germany: size dependence unitary  (< 500 employees) small CIE (GmbH) dual  larger companies (AG or Aktiengesellschaft) single-tier board: company managers + directors elected by shareholders. two-tier system: supervisory board (Aufsichtsrat) shareholders and employee representatives. Bankers mainly on the supervisory boards. The composition of the supervisory board tends to be a mirror of the company's business relationships. other industrialists (customers or suppliers) The management board (Vorstand) consists solely of 3-15 top managers.


The German system of management: institutions: The German system of management: institutions is a collegiate system where members bear collective responsibility for the company no managing director, only a chairman who is considered primus inter pares. The supervisory board the legally designated organ of control over the management board extensive formal powers appoints and dismisses top managers, determines their remuneration and supervises their activity. advises on general company policy and can specify which kind of management decisions require its prior consent.


The German system of management: stakeholders: The German system of management: stakeholders German banks (long-term perspective): do not press business enterprises for short-term returns on invested capital.  British and French banks and individual shareholders (ST) The supervisory board: from control  to administration close community of interest between members of the two boards Bank representatives are valued they provide a broader sectoral or even macro-economic perspective, offer an unrivalled consultancy service, can mobilize capital and have good government contacts. Industrialists, in turn, serve on banks' supervisory boards. The supervisory board may wrest control from top management and actively participate in, or dominate, key decision-making Top management is on five-year contracts which have to be renewed by the board  potential power. Few cases (Thyssen Krupp and AEG) where the bank representatives removed the chairman of the management board because his performance was considered unsatisfactory.


The German system of management in small Cies: The German system of management in small Cies Geschäftsführung usually consists of three to four people the Geschäftsführer, being the owner or chairman, the technical director, the commercial director. (sales and marketing or administration) they manage collectively But the technical director is invariably more powerful than the commercial director, highlighting the central importance of production in the German enterprise


Britain: Britain no clear division of power at the top of the enterprise hierarchy. The board of directors: both executive and non-executive directors supreme decision-making body, but has more a counselling role: A top management meeting in Britain, in contrast with Germany, is a board meeting Non-executive directors may be: representatives of share-owners non-stakeholders who are present to provide expertise. There are no employee representatives on the board. Some of the directors are full-time employees of the company and form its top management. According to Horovitz (ibid.), a majority of board members ( 69 per cent in his sample) are insiders. ln a high proportion of large British companies the managing director is at the same time the chairman of the board. The actual exercise of strategic control varies from company to company. It can lie either entirely with top maÎ1age- ment, with the board merely acting in a councelling capacity and rubber- stamping their decisions (this is relatively rare), or the board can be, to varying degrees, actively involved in strategic policy making. According to the data collected by the IDE Research Group (Wilpert and Rayley, 1983: 45, Table 4.2), the board is considered more influential in relation to top management than is the case in German companies. Although there is no collegiate management in British companies and the chief executive or managing director has ultimate responsibility for the conduct of company affairs, delegation of responsibility to other mana- gers is extensive. The chief executive is elected and can be dismissed by the board. Financial organizations, particu.larly pension funds, have in recent  


Britain: Britain a majority of board members ( 70 per cent) are insiders. The managing director is often at the same time the chairman of the board. The actual exercise of strategic control varies from company to company. The board acts as counsellor or can be actively involved in strategic policy making. the board is considered more influential in relation to top management than is the case in German companies. Although there is no collegiate management in British companies and the chief executive or managing director has ultimate responsibility for the conduct of company affairs, delegation of responsibility to other managers is extensive. The chief executive is elected and can be dismissed by the board.


HQs attitude towards subsidiaries: HQs attitude towards subsidiaries Perlmutter


HQs orientation: HQs orientation


HQs orientation: HQs orientation


SOURCES OF MANAGERS : SOURCES OF MANAGERS Home-Country Nationals (or parent-) country nationals are the citizens of the country in which the headquarter of the multinational company is based Host-Country Nationals Citizens of the country that is hosting a foreign subsidiary are the host-country nationals. TCN: Third-Country Nationals = a French executive working in a German subsidiary of an American multinational company


Home-Country Nationals as Managers : Home-Country Nationals as Managers Historically, key positions with home-country nationals. reasons: unavailability of host-country nationals having the required technical expertise or managerial talent the desire to provide the company's more promising managers with international experience the need for coordination and control; foreign image in the host country; advantageous during the start-up phase desire to ensure that the foreign subsidiary complies with overall company objectives and policies


Host-Country Nationals as Managers: Host-Country Nationals as Managers in middle- and lower-level management positions in developing countries. because of local law. But, scarcity of managers with the necessary qualifications for top jobs. For example, Brazil requires that two-thirds of the employees in a Brazilian subsidiary be Brazilian nationals, and there are pressures on multinationals to staff upper management positions in Brazilian subsidiaries with Brazilian nationals.


Host-Country Nationals as Managers: Host-Country Nationals as Managers Assignment of domestic North American employees on a short-term transfer or loan basis. reasons for hiring host-country nationals : close to the local culture and language, lower costs as compared to HCN, improved public relations that resulted from such a practice. more effective in dealing with local employees and clients, greater continuity of management because they tend to stay longer in their positions than managers from other countries. avoidance of low morale if they don’t move into upper management positions.


Third-Country Nationals as Managers : Third-Country Nationals as Managers greater technical expertise only from advanced countries. a top management position at the subsidiary is usually envisioned as the ultimate goal in her or his career development. Advantage: salary and benefit requirements less than those of home-country nationals. a French citizen could adapt fairly readily to working in the Ivory Coast. Drawbacks: animosities of a national character between neighboring countries-for example, India and Pakistan, Greece and Turkey.


What Are the Trends in International Staffing? : What Are the Trends in International Staffing? predictable stages of internationalization American managers often in charge of subsidiaries – MNC with a strategy of spreading a limited product line around the globe. from maturation to a strategy of multinational product standardization. The firms pulled together the once relatively independent subsidiaries under the umbrella of a regional headquarters office. U.S. managers: head the regional divisions as products and policies standardized supranationally, host-country managers again replaced home-country managers as the senior staff of local subsidiaries in U.S. firms. Some even filled top managerial posts at regional division headquarters. Some host-country managers were also used to manage subsidiaries in third countries.


Euro managers: Euro managers Euro managers are able to think European "glocalized" in their attitudes and behavior understand local nuances in tastes and preferences manage people of a different cultural heritage and nationality in a flexible way bring a diverse team together learn at least one foreign language


Euro managers and firms: Euro managers and firms increasing need for managers who can work effectively in several countries and cultures. especially true in Europe, where unification in 1992 is forcing many companies to focus several aspects of their businesses from a pan-European perspective. Firms are facing difficulties finding Euromanagers for their European operations. how global companies like ICI, Colgate-Palmolive, Unilever, 3M, and HoneyweIl are facing and handling the difficulties of hiring and keeping such managers .


IBM: IBM Europe: an integrated market Divergent languages and a growing skills shortage pose a particular problem for the computer industry. the Greeks will still use a different alphabet, the Germans will still require a double "s," and the French will still employ accents over their vowels. The problem does not end after designing separate keyboards continentwide networks to consider, automatic translation programs to write, and manuals, help screens, operating system software. IBM formed a Management Academy in West Berlin


Reasons to select the recruitSegalla M. Sauquet A., Turati A., symbolic vs Functional Recruitment, EMJ 2001: Reasons to select the recruit Segalla M. Sauquet A., Turati A., symbolic vs Functional Recruitment, EMJ 2001


Symbolic recruitment: Symbolic recruitment The recruit = corporate advertising - foreign faces means the company is international. Important in Europe where the establishment of the European Market contributes to the rapid expansion of companies across borders pressure of providing culturally sensitive services to foreign clients. French people may find attractive to move from a local bank to an international bank. (200000 French currently live in the UK)


Symbolic recruitment: Symbolic recruitment the Italian and French managers rely more often on symbolic rationale than their English, German and Spanish counterparts Perhaps the French and Italian respondents believe that recruiting foreigners sends strong signals to their clients and to their own subordinate managers


The heterarchical MNC: The heterarchical MNC


The heterarchical MNCHedlund G.,the hypermodern MNC- A Heterarchy?, H.R.M., spring 1986 : The heterarchical MNC Hedlund G.,the hypermodern MNC- A Heterarchy?, H.R.M., spring 1986 Near from the geocentric model but different in strategy : not only exploiting competitive advantages derived from a home country seeking advantages originating in the global spread of the firm different in structure : it defines structural properties then looks for strategic options


Heterarchy: Heterarchy Many centers : polyarchy subsidiary managers play a strategic role not only for their own but for the MNC as a whole different kinds of centers R&D, product division, marketing, purchases ; not one overriding dimension superordinate to the rest but coordination


Heterarchy: Heterarchy Favorite structure : matrix but with negotiation and different reporting integration is achieved through normative control (cultural control) information about the whole is contained in each part every member will be aware of all aspects of the firm’s operations


Heterarchy: Heterarchy Metaphor : the brain & the body strategy makers : the brain implementers : the body separation between thinking and acting coalitions with other companies


Human Resource Management in Heterarchy: Human Resource Management in Heterarchy Movement between centers more common at the core : people with a long experience communication network not easy to imitate hologram quality : many employee share the same info (replace each other) the core : memory & communication satellites : new ideas


Human Resource Management in Heterarchy: Human Resource Management in Heterarchy High rotation of personnel, travel and postings capacity for strategic thinking and action : open communication of strategies, effective control reward and punishment performance of the entire firm, shareholding


Personality in Heterarchy: Personality in Heterarchy Searching and combining elements in new ways communicating ideas, turning them into action several languages, knowledge of several cultures honesty and personal integrity willingness to take risk and to experiment


European Human Resource Management: European Human Resource Management


Comparing European and US HRM: Comparing European and US HRM


European specificity: European specificity More restricted employer autonomy Market processes Emphasis on the group Emphasis on workers Emphasis on managers Emphasis on the individual Role of 'social partners' Government intervention


Reinterpretation of management agendas at the local levelBrewster, Hegewisch Lockhart - 1991: Reinterpretation of management agendas at the local level Brewster, Hegewisch Lockhart - 1991 Identical questions about specific HRM tools are interpreted within the national cultural and legal context. i.e. Flexible working in Britain and Germany is linked to demographic change (reintegrate women into the labour market) In France , seen as a response to general changes in lifestyle Health and safety Seen in Britain as a narrow manufacturing-related issue Seen in Sweeden with reference to the working environment (at the forefront of the personnel management)


Historical role of HRM professionals: Historical role of HRM professionals Varies considerably across European countries Italy, Holland: financial background  cost control ans labour savings Germany: legal background  focus on interpreting rules and regulations


Career paths vary widely: Career paths vary widely HRM specialists rarely reach the highest positions except in Scandinavia) Greatest level of HRM experience (>5years: D, Ir, F, NL, UK) Coming from non-personnel functions: Dk,Ir  decentralisation Coming from other organizations: (most countries)


The German personnel function: The German personnel function more reactive, legalistic, concerned with training less autonomous than many other European HRM functions. not involved in pay negotiations but in the implementation and execution of pay policies. The co-determination system create a climate of restraint, shared responsibility, and higher levels of trust More activities are encoded by legislation such as rights and duties of trades unions, annual wages contracts, system of labour courts,Works Council structures


Role of HRM function: Role of HRM function most European organizations with more than 200 employees determine HRM policies centrally, but share responsibility for most issues between the HRM function and the line. In Holland and Belgium high specialized (difficulty to meet the needs of line managers) UK Denmark more decentralized In France  an advisory role in Spain, Italy  low integration of HRM activities into line management.


Strategic role measures of the HRM functionBrewster 1993: Strategic role measures of the HRM function Brewster 1993 An organizational structure which provides for the head of the HRM function to be present at the key policy-making forum Perceived involvement in developing corporate strategy The existence of a written personnel HRM strategy


HR representation on the board and involvement in corporate strategy 1993 Brewster: HR representation on the board and involvement in corporate strategy 1993 Brewster


Integration and devolvement: Integration and devolvement Degree of integration of HRM into business strategy Degree of devolvement: the degree to which HRM practive involves and gives responsibility to line managers rather than personnel specialits


The integration devolvement matrix Brewster Larsen 1993: The integration devolvement matrix Brewster Larsen 1993 Devolvement Integration - - + + Guarded strategists Pivotal The wild west Mechanics Norway France Spain Sweden Switzerland UK Italy Germany Netherlands Denmark


Contextual determinants of European HRM: Contextual determinants of European HRM


Contextual determinants of European HRMWhitley 1992: Contextual determinants of European HRM Whitley 1992