Convergence and Divergence of Human Resource Management Across Countries

Table of Contents

List of Figures

Index of Abbreviations

1 Introduction

2 The Concept of HRM

3 The Convergence - Divergence Debate
3.1 Convergence: Universalist Paradigm
3.2 Divergence: Contextual Paradigm
3.3 Empirical Conceptualization of HRM Convergence-Divergence
3.3.1 Type 1: Final Convergence
3.3.2 Type 2: Directional Convergence
3.3.3 Type 3: Stasis
3.3.4 Type 4: Divergence

4 Contextual Comparison between Europe and the USA
4.1 Less Focus on Individualism
4.2 The Role of State
4.3 The Role of Trade Unions and Consultation
4.4 The Role of Ownership Patterns

5 Anaylsis of HRM Convergence in Europe
5.1 HRM in Europe – One General Model vs. Distinctive National Models
5.2 Evidence of HRM Convergence in Europe
5.3 HRM Convergence-Divergence: A different perspective

6 Discussion

7 Conclusion & Recommendation

8 Bibliography

List of Figures

Figure 1: Final Convergence

Figure 2: Directional Convergence/Similarity

Figure 3: A dual-level framework of HRM

Index of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

The question of whether Human Resource Management practices in organizations are becoming more similar (i.e., convergence perspective) or more dissimilar (i.e., divergence perspective) over time and across countries is an important matter for both theory and practice (Brewster, 2004). Although this debate has been ongoing for decades, it still remains an unsolved issue open for discussion. Every organization has to recruit employees, deploy them, motivate them, pay them and eventually prepare them for their departure (Brewster, Sparrow, Vernon & Houldsworth 2011). There is little doubt that HRM practices are carried out differently in organizations around the world. Internationally operating companies face different cultures and also diverse institutional environments in comparison to their residence country. In order to be successful in effectively managing their Human Resources, companies need to be aware of those differences and further develop a sophisticated understanding about the deciding factors that lead to converging or diverging trends in HRM. In fact it is undeniable that outstanding HRM and leadership shape the most competent people and teams as a basis for optimal achievement of innovation, quality, speed and customer orientation in global competition (Scholz, 2008). According to Scholz, two of the most important success factors in conducting international business are the competence and motivation of employees. Consequently, HR activities become increasingly relevant for improving the organizations competitive position.

Although cultural and contextual settings vary across the world, there is of course one level at which HRM is clearly universal: all companies have to manage and hence to utilize Human Resources. A few questions might arise when exploring the convergence-divergence issue in HRM. How to define HRM and which particular HRM areas and practices should be analyzed for making hypotheses about the absence or presence of convergence? Which time horizon should one apply and how HRM convergence-divergence to be conceptualized? Can we find sufficient evidence for determining whether there are common trends of HRM becoming more similar or contrary more dissimilar over time and across nations? Are US derived HRM practices universally applicable to, for example, the European context? What are the specific HRM areas where researchers can identify developments towards convergence or divergence?

This bachelor thesis addresses the above mentioned questions in order to provide an overview about the most important issues in the convergence-divergence debate. The focus of this study is not to identify a winning side but instead to present some of the main concepts and best-available evidence for each perspective. This study aims at enhancing the readers understanding about relevant controversial subjects in the convergence-divergence discussion.

In Chapter 2, HRM as a concept is defined and the relevant approaches towards studying the subject are illustrated. Chapter 3, provides a brief overview of both theoretical viewpoints, convergence as well as divergence, and presents a typology for conceptualizing HRM convergence-divergence. Subsequent to this, in Chapter 4 a comparative analysis is conducted for the US and the European environment that outlines important contextual differences. With regard to the European context, Chapter 5 of this study examines whether a general model of HRM is applicable to the European situation or whether distinctive national models of HRM are prevalent in Europe. Furthermore, findings of selected empirical studies, which longitudinally analyzed HRM convergence in Europe, are presented. Additionally, a different perspective on analyzing convergence across countries is introduced, which connects converging and diverging developments with the underestimated role of economics. In Chapter 6, findings of the selected empirical studies are discussed and evaluated by pointing out some of their limitations. Finally in Chapter 7, some concluding remarks on the HRM C-D discussion are made and a dual-level framework is outlined for distinguishing the impact that country-level effects and firm-level effects have on HRM practice.

2 The Concept of HRM

In order to examine the question of whether HRM converges or diverges across countries, it is important to develop a sufficient understanding about the concept of HRM. Therefore, we have to take a closer look at the actual subject, the aims of HRM and the level at which it can be applied (Brewster, 2007a). With regard to exploring how different cultural and institutional contexts affect HRM practices in organizations, it is necessary to additionally consider which elements constitute HRM (Farndale, 2010). In general, traditional HRM is concerned with making decisions about recruitment and selection, training and development and performance management and reward (Wright & Dyer, 2000). Nevertheless, these basic components can be extended by various additional subjects, for example, involving flexible working, equal opportunities or employee participation (Brewster, 2007b). Since there is no broadly agreed consensus on a common definition or on specific characteristics of HRM, the subject matter is controversially discussed. Greater consistency regarding specific HR practices can probably be found in the USA, where the concept of “high performance work systems” is prevalent. HPWS is a set of certain HRM practices, as characterized by the US Department of Labor, aiming at improving organizational performance. According to Brewster (2007a), those practices can indicatively serve as a basis for determining “good” HRM. Nevertheless, a generalization of HPWS as being universally applicable to different national contexts around the world is not possible.

With regard to the focus of HRM, there is also a lot of controversy in the academic literature. Brewster (2007b) points out that for a majority of researchers in the USA the purpose of the study of HRM is about understanding how the management of human resources in organizations can be improved with the ultimate goal of enhancing organizational performance. Basing his argument on former research in that area, Brewster (2007b) argues that organizational performance shall be evaluated by its impact on the organization’s declared corporate strategy as well as on the individual customers and shareholders. In comparison to the US, management of Human Resources in Europe has consequences for a few more stakeholders Therefore European researchers tend to be more critically towards defining the focus of HRM (Brewster 2007a).

Furthermore, when analyzing HRM, scholars must be clear about the level of analysis. The level at which HRM can be applied is dependent upon the question being asked. While Europeans tend to assume that HRM can apply at various levels, most studies in the US concentrate on the organizational or in some cases on the sub-organizational level, for example, the business unit (Brewster, 2007a). A common pitfall of many researchers in the scientific literature is that they draw data from one level of HRM but conduct their analysis in a way as if the findings apply to all levels (Brewster, 2007b).

Moreover, there are different approaches towards researching in the field of HRM. Relevant for exploring the C-D debate is scientific literature from the areas of comparative HRM, international HRM and strategic HRM. Boxall (1995) made a clear distinction between comparative HRM and international HRM. According to Boxall, comparative HRM is about understanding and explaining to which extent HRM differs both within countries and across different regions in the world. In direct comparison, international HRM is concerned with the way that international organizations manage their employees across different national contexts (Sparrow, Brewster & Harris, 2004). Strategic HR is defined by Wright and McMahan as “the pattern of planned human resource deployments and activities intended to enable a firm to achieve its goals” (Wright & McMahan, 1992, p.298). It appears that the borderline between the above mentioned approaches is small. However, these three theoretical perspectives on HRM are essential for exploring the scientific articles in the HRM C-D discussion and understanding the intention of the respective authors with regard to their evaluation of empirical findings.

3 The Convergence - Divergence Debate

3.1 Convergence: Universalist Paradigm

Not only are there differences in HRM practices across countries but there are also different approaches towards conceptualizing the subject and towards the research methods through which the subject is explored (Sparrow et al. 2004). When exploring the existence of converging or diverging tendencies of HRM practices in organizations at the European or global level, researchers may take up on two approaches: the Universalist or the Contextual. Both viewpoints are paradigms. According to Kuhn (1970), the notion of paradigm relates to an accepted model or theory with the implication that other researchers might be using competing models or theories. The Universalist paradigm is basically a nomothetic social science approach concerned with formulating general or universal laws (Brewster, 1999). More concrete, the purpose of this paradigm lies in identifying “best practices” that are universally applicable to different scenarios and are improving the way human resources are managed in organizations with the ultimate goal of increasing organizational performance. Hence, the Universalist approach is connected with the Convergence thesis.

The Convergence thesis emphasizes different factors why HRM practices are becoming more alike globally. It is important to note that there is more than one version of the convergence concept. The Market-forces model states that variations in management systems, which arose from the geographical isolation of businesses and different value orientations of both national and corporate cultures, are being superseded by the logic of technology. This means that as a consequence of technology diffusion, organizations need to adopt the most efficient HRM practices in order to stay competitive (Kidger 1991; Gooderham & Brewster 2008). Consequently, competitive pressures cause a convergening development of HRM practices in organizations around the world.

Moreover, there is an institutional perspective on convergence. For example, in Europe differences in legal, trade union, and labor market conditions can potentially create dissimilarities in HRM. However, political constructs on the macro-level with similar legislation may also lead to a reduction in the differences between the ways HRM practices are carried out in different member states. Rather than global convergence, institutionalists see regional convergence. Thus in the European case, they consider the emergence of a common model of HRM (Brewster, 2006).

3.2 Divergence: Contextual Paradigm

In contrast to the Universalist paradigm, proponents of the Contextual paradigm focus on understanding “what is different between and within HRM in various contexts and what the antecedents of those differences are” (Brewster, 2006, p.71). For this reason, theorists working in this paradigm look at factors like labor markets, trade union organization and ownership structures of organizations for the sake of understanding what is contextually unique and why. Contrary to the Universalist paradigm, the “best practices” concept and the impact of HRM practices on organizational performance receive less attention in the Contextual paradigm. The scope of contextual studies goes far beyond the individual organization with the purpose of demonstrating the actual political and legal situation, in which companies are situated in reality. By putting a lot of emphasis on macro-level factors, the Contextual paradigm is linked to the Divergence thesis.

Scholars subsumed under the divergence school disagree with the view that irrespective of institutional or national context, universally applicable “best practices” can be identified in HRM. According to the divergence thesis, HRM practices of organizations in different countries are becoming more dissimilar over time. Hence, changes in the use of certain HRM practices are progressing in different directions. Divergence theorists emphasize the importance of diverse national cultures and institutional contexts and argue that each country will have its own unique approach to managing HR in organizations (Kaufman, 2016).

3.3 Empirical Conceptualization of HRM Convergence-Divergence

From an empirical point of view it is complex to conceptualize the notions of convergence or divergence (Mayrhofer, Muller-Camen, Ledolter, Strunk and Erten, 2004). Nevertheless, when conceptualizing converging or diverging developments, one can differentiate between four types related to the C-D discussion (Kaufmann, 2016):

3.3.1 Type 1: Final Convergence

Final convergence occurs when changes in the use of the analyzed HRM practices across different countries develop towards a common end point (Kaufmann, 2016). With reference to Figure 1, one can see that the examined countries are split up into samples of two. Irrespective of initial differences in the usage of the evaluated HRM practices, the development tendency in the pairwise compared countries progresses towards the same end point.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Final Convergence.

Source: Mayrhofer, Brewster, Morley & Ledolter 2011, p.52

3.3.2 Type 2: Directional Convergence

When comparing the developments between different countries, one can speak of directional convergence or directional similarity if changes in the use of the examined HRM practices develop in the same direction (see Figure 2). Each country might start with a different proportion of companies using certain HRM practices, and over time the difference in the usage of these particular practices might increase. Nevertheless, one speaks of directional convergence because a greater proportion of organizations are now using the respective HRM practices. Similarly the opposite might occur, with change in a negative direction (Mayrhofer et. al, 2011).

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Directional Convergence/Similarity.

Source: Mayrhofer, Brewster, Morley & Ledolter 2011, p.52

3.3.3 Type 3: Stasis

Another possible scenario would be that over time there is no change at all in the usage of the examined HRM practices across different countries. This development tendency is called stasis. Neither do HRM practices in various geographical contexts develop in a common direction or towards the same end point nor do they tend to move in complete opposite directions. The variables maintain their initial position over the analyzed time horizon (Kaufmann, 2016).

3.3.4 Type 4: Divergence

When the usage of comparable HRM practices in observed countries is developing in different directions over time, this trend relates to the concept of divergence. Although those HRM practices might reach a point in time where they share the same proportion of usage and thereby a state of final convergence, this does not mean that this trend will last. There can always be another phase of diverging developments after comparable variables across countries reach a common point of similarity (Kaufmann, 2016).

4 Contextual Comparison between Europe and the USA

While in the USA organizations might work with the same HR system in different states, in Europe it tends to be more complex because cultural and institutional differences between two countries can be extreme. Nevertheless, HRM in its modern conception is heavily influenced by the thinking in the USA, where the study of personnel management was originally developed and conceptualized (Brewster, 2004). The question of whether US derived HRM practices are universally applicable in different contexts around the world is important for both management theory and applied management practice (Brewster, 2004). For the sake of analyzing whether European HRM practices are converging towards US HRM practices over time, we have to take a closer look at the contextual setting in both continents.

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