2.0 Culture_National Culture and Organizations.pptx

1. MAN 3227: Managing International HRM
Policy and Processes
AGMM. Nusaike
MSc, BSc.IM, PGDipM, ACPM
Manager - Technology Transfer & TISC
South Eastern University of Sri Lanka
Higher National Diploma in Management
Hardy Advanced Technological Institute
2.0 Culture: National Culture and Organization

2. Topics Covered
2.1 Introduction: Culture and institutions
2.2 Institutional approaches to comparative HRM
2.3 Comparative capitalisms
2.4 Business systems theory
2.5 Regulationalism
2.6 What do these theories mean for human resource management?
2.7 The USA and the rest of the world
2.8 Conclusion
2

3. Learning Outcomes
At this end of this session, you will:
• Understand the cultural and institutional bases for differences between countries in
the way they manage their HRM.
• Appreciate the arguments concerning convergence and divergence.
• Be able to identify some key areas of similarity and difference in HRM practice
between countries.
3

4. 2.1 Culture and Instituions
• HRM is understood and carried out in different ways in different countries.
• Reject the notion that some countries are more backward than others and have yet
to adopt 'best practice'.
• Differences exist because people are trying to do different things to achieve different
objectives in different circumstances.
4

5. Culture and HRM
• Culture can have an effect on the objectives and practices of HRM.
• There are numerous definitions of culture.
• Deep-seated values that people hold will have a significant impact on the way people
are managed within organizations.
5

6. Culture and Institutions
• The reasons for different HRM policies and practices may lie in either cultural
differences between societies or in institutional differences between them.
• Explore the relationship between cultures and institutions before going into more
detail on the institutional differences between countries and groups of countries.
6

7. Popular Definitions
• Hall (1977) - a sum of a people's learned behaviour, patterns, and attitudes.
• Hofstede (1993) - the collective programming of the mind that differentiates
members of one social group from another.
• Trompenaars (1993) - a shared system of meanings, the way a societal group tends
to solve the problems related to relationships with others, time and the environment.
7

8. Cross Cultural Studies
• Most cross-cultural studies suffer from a failure to demonstrate a causal link between
cultural dimensions of a nation and its specific behaviors and actions.
• Other factors, such as institutional effects, need to be considered as well.
• Not all actions can be explained by cultural motives.
8

9. Institutional Factors
• Cullen et al (2004) found that seemingly exclusive cultural factors positively relate to
institutional factors.
• Achievement, individualism, and universalism positively relate to four institutional
factors: economy, welfare socialism, family strength, and the level of education.
• Institutional effects need to be considered when explaining differences in behaviors
across nations.
9

10. Employee Preferences
• Chiang (2005) found that employee preference for individual/group rewards was in
part caused by a perceived link between performance and rewards.
• National culture of the respondents is not the only factor affecting employee
preferences.
• Other factors, such as institutional practices and external environment, need to be
considered as well.
10

11. Institutional Environment
• The institutional environment also includes the societal structures of a country.
• It includes systems of politics, law, education, labor markets, class structures, and
social relationships.
• These structures shape the business systems within each country and directly affect
how businesses manage their people.
11

12. Meyer and Rowan's Definition
• Meyer and Rowan (1977) define institutionalization as the means by which social
processes, obligations, or actualities come to take on a rule-like status in social
thought and action.
• Institutionalization has a significant impact on how businesses operate and manage
their people within a particular environment.
12

13. The Impact of Culture in Institutions
• Some aspects of cultural environment beyond control. Efforts to affect culture, e.g.,
anti-corruption policies, consultative programs, hiring practices
• Deliberate recruitment of employees who do not represent the culture. Induction and
training programs, corporate culture change programs, and monitoring and appraisal
programs to modify cultural beliefs
• Size of the country and its population, infrastructure, wealth, education system, role
of government, and labor market beyond control
• Adapting to legal system, kind of politics and political leanings of the government
• Specific issues in HRM, e.g., employment laws, trade unions, government-provided
childcare, training, and employment support. Impact on foreign MNCs
13

14. Impact of Institutions and Culture on Multinational
Enterprises
• Institutions and culture can impact multinational enterprises in different ways
• Institutions have a heavy impact while culture may be less impactful and more
manageable
• Some aspects of culture can be managed by multinational enterprises
• Recruitment, training, and corporate culture change programs can be used to modify
employees' national cultural beliefs
14

15. Direct and Indirect Impact of Institutions
• Institutions have a direct impact on multinational enterprises
• Employment legislation, trade unions, and government-provided programs can vary
significantly between countries
• Cultural influence may be weak or channeled through institutions in these cases
• In areas where institutional impacts are largely absent, cultural influence may play a
bigger role
• Examples could include performance appraisal or other HRM practices not directly
impacted by institutions.
15

16. 2.2 Institutional Approaches to Comparative HRM
• The nature of institutional theory needs to be understood
• Institutional differences are very obvious and visible in comparative HRM
• Institutional differences explain most of the variation in HRM
• Same approach to recruitment may not be cost-effective in different countries
• MNCs pay different rates in different countries
• Consulting with a unionised workforce is different than consulting in a country where
trade unions are illegal
• Non-discrimination policies look different in different countries
16

17. Examples of National Differences in HRM
• Gender equality looks different in the USA, EU, and Saudi Arabia
• Non-discrimination policies look different in Malaysia and the Netherlands
• MNCs do not pay the same rates in Samoa and Canada
• Consulting with a unionised workforce is different in fully unionised countries
compared to countries where trade unions are illegal
17

18. Institutional Theory
• Organisations operate within a specific environment largely determined by history.
• Effective management requires recognition of local circumstances and sustaining
legitimacy with key stakeholders.
• Institutional theory, drawn from socio-economics, informs this approach.
• Developed in opposition to the rational hierarchical view in modern economics.
• Sees organisations as embedded in the society they operate in, providing both
supportive complementarities and constraints on behaviour.
• Three main schools of thought: comparative capitalisms literature, business systems
theory, and regulationist thinking.
18

19. HRM and Institutional Theory
• Institutional impacts explain most of the variation in HRM practices across countries.
• Organisations need to manage in ways that recognise local circumstances and
create legitimacy with key stakeholders.
• Transfer of HRM practices across borders is challenging due to institutional
differences.
• Chapters 16 and 17 will explore globalising HRM within this framework.
19

20. Forms of Society and Institutions
• Institutional theories extend beyond HRM and encompass relationships between
organizations and within them.
• Researchers classify forms of society according to the relationships between
organizations and between organizations and the state.
• Within organizations, researchers classify forms of society according to relationships
between owners, managers, employees, and other workers.
20

21. Common Paradigms
• According to institutional theory, each society has a common paradigm about
appropriate or effective ways to do things.
• Despite room for variation, most organizations within a society operate in similar
ways due to various pressures.
• Organizations that deviate from societal norms face unique pressures not
experienced by those who conform.
• Firms operating in the same environment tend to adopt similar HRM practices
referred to as 'isomorphism.'
21

22. Common Paradigms
• HRM adheres more closely to local practices than other management functions.
• Local practices are often mandated by regulation and shaped by strong conventions.
• Six key HRM practices most closely resemble local practices: time off, benefits,
gender composition, training, executive bonus, and participation.
• Practices are likely to conform to local competitors where well-defined local norms
for HRM practices exist and affect affiliate organization employees.
22

23. Reflective Activity
Think of three or four other HRM practices. In what order would they fit onto this list, in
terms of their likely alignment with local practices?
23

24. Rational Hierarchical Theorists and Freedom
• Rational hierarchical theorists believe that profit-seeking individuals should be as
free as possible to pursue their objectives.
• Trade unions are seen as a restriction on their effectiveness.
• North believed in the minimum of regulation and interference, while recognizing the
relationship between the organization and its context.
24

25. Neo-Liberalism and Flat World Theories
• Rational hierarchical theories resonate with neo-liberalism in politics and 'flat world'
theories.
• Flat world theories argue that technology is causing the world to become more
similar, leading to convergence in management practices globally.
• Friedman (2007) and Kidger (1991) have discussed these theories.
25

26. Legal Systems and Rights
• La Porta et al (1998) argued that common law legal systems privilege owner rights,
whereas civil law systems provide rights to a wider group.
• Other suggestions for variations in legal systems include political systems (Pagano
and Volpin 2005) and political ideology (Roe 2003).
• All these views assume that rights are a zero-sum game, where stronger owner
rights mean weaker rights for others (Djankov et al 2003).
26

27. Mutual Co-Operation
• The notion that mutual co-operation would be beneficial to all is not acknowledged in
these theories.
• When tested against HRM practice, political theories explain almost nothing and
legal theories only explain a little (Goergen et al 2009a, 2009b; Wood et al 2009).
27

28. 2.3 Comparative Capitalism
• Institutions are not created in isolation
• They evolve with history and practice
• In this presentation, we will explore the different forms of capitalism and the
institutions that shape them
28

29. The Evolution of Capitalism
• The fall of the Berlin Wall and market reforms in China led to a focus on the different
forms that capitalism takes
• Why did more regulated economies in continental western Europe and Japan
outperform archetypal capitalist economies such as Britain and the USA through
much of the 1980s?
• Why did the latter outperform the former in the 1990s and early 2000s?
• The Nordic countries have even better performance, but it has been largely ignored
29

30. Anglo-Saxon Capitalism
• Michel Albert distinguished an 'Anglo-Saxon' capitalism from a continental, West
European type of capitalism
• The former is a 'shareholder economy' where private enterprise maximizes short-
term profits for investors
• The USA and the UK are examples of this type of capitalism
30

31. Rhineland Capitalism
• The continental, West European type of capitalism is the 'Rhineland' model
• It is a regulated market economy with a comprehensive system of social security
• Government, employers' organizations, and labor unions consult each other about
economic goals to achieve harmony of interests
• It is a 'stakeholder economy' where competition and confrontation are avoided
• The state acts as a referee, guarantor, employer, and owner
31

32. Approaches in Capitalism
• The comparative capitalisms literature followed the analysis that societies are
interdependent webs of relationships (Dore 2000; Hall and Soskice 2001; Haneke et
al 2007; Jackson and Deeg 2008; Lincoln and Kalleberg 1990; Thelen 2014).
• The literature drew a distinction between two types of capitalism: Anglo-Saxon,
liberal market economies (LMEs) and collaborative market economies (CMEs) of
continental north-western Europe and Japan.
• Both systems are self-reinforcing and can be successful in terms of organizational
and societal performance.
32

33. Differences Between LMEs and CMEs
• LMEs: shareholders are more powerful, external labor markets predominate,
individuals have fewer rights at work, education/training/welfare relies on private
sector, and employment legislation puts few constraints on the employment contract.
• CMEs: stakeholders share power, internal labor markets are preferred, the state
supports education/training and provides welfare provisions, and employment
legislation determines important elements of the employment contract.
33

34. Criticisms of Comparative Capitalisms Literature
• Criticisms include assuming all complementarities are positive, ignoring differences
within nation-states, and not being able to explain change.
• The dichotomous approach has been critiqued as too simplistic, with mixed market
economies found in France and southern Europe proposed as a third set.
• Despite criticism, the dichotomy can provide a theoretical basis for comparison and
has found differences in financial participation, working time flexibility, corporate
social responsibility policies, and the link between HRM and firm performance.
34

35. Examples of Distinct Practices in LMEs and CMEs
• Financial participation: LMEs have less financial participation than CMEs (Croucher
et al 2010; Le et al 2013; Poutsma et al 2013).
• Working time flexibility: LMEs have more flexible working time arrangements than
CMEs (Richbell et al 2011).
• Corporate social responsibility policies: CMEs have stronger corporate social
responsibility policies than LMEs (Goergen et al 2012).
• Link between HRM and firm performance: the link is stronger in CMEs than in LMEs
(Goergen et al 2012).
35

36. 2.4 Business Systems Approach
• Business systems literature attempts to overcome limitations of varieties of
capitalism theories
• Rooted in embeddedness of organizations within network of complementary
relationships
• Constantly under pressure from firms innovating and experimenting to gain
competitive advantage
36

37. Central Features of Business Systems Theory
• Relationships within organization are central feature, alongside links between
organizations
• Link to HRM is even clearer
• Whitley (1999) defines links in terms of degree of employer-employee
interdependence and degree of delegation to employees
• Delegation includes collective bargaining, works councils, consultation, team
working, suggestion schemes, and quality circles
• Brewster et al (2008) found strong relationship between variations in delegation and
interdependence and country context
37

38. Archetypical Business Systems
• Whitley (1999) identified six archetypical business systems
• Wood and Frynas (2006) identify a seventh archetype: segmented business system
found in tropical Africa
• Amable (2003) identifies five systems: Anglo-Saxon Market (LME) model,
continental European (CME) model, Asian capitalism, social democratic (Nordic)
economies, and Mediterranean model
38

39. Reflective Activity
Why might it be that some HRM practices are best explained by the varieties of
capitalism categories, some by the wider comparative capitalisms literature and some
exhibit country differences but do not fit into these categories?
39

40. Answer…
1. Varieties of capitalism categories are based on fundamental differences in the economic systems of different
countries. These categories are useful in explaining HRM practices that are strongly influenced by the underlying
economic system, such as the role of unions and collective bargaining in shaping employee relations.
2. The comparative capitalisms literature takes a broader view of the institutional and cultural factors that shape
economic systems. This literature is useful in explaining HRM practices that are influenced by a range of factors,
such as the role of the state, the structure of the education system, and the cultural values of the society.
3. There may be country-specific factors that influence HRM practices but do not fit neatly into existing categories.
For example, in some countries, the role of family networks and nepotism may be more important than formal
HRM practices in shaping recruitment and promotion decisions.
4. Finally, it is important to recognize that HRM practices are complex and multifaceted, and may be influenced by a
range of factors at different levels of analysis (individual, organizational, national). As such, no single theoretical
framework is likely to provide a complete explanation for all HRM practices in all contexts.
40

41. 2.5 Regulationalism
• Regulation theory offers a different perspective on national differences
• Key idea: national regulation provides sets of rules that control the innovation and
experimentation of firms
• Social processes through which institutions develop these regulations are a central
concern
• Change is endemic, every situation is open to dynamic forces that may lead to
change
41

42. Levels of Regulation and Thinking
• Regulations may be found at every level: supra-national, national, regional, sectoral,
etc.
• EU rules, United Nations goals, and national regulations are examples
• Regulationist thinking tends to be in the critical tradition
• Argues that the elitist short-termism of the shareholder model is dysfunctional for
society as a whole
• Regulation to control owner power and to develop work and employment relations
that entrench worker rights and promote dignity will also lead to economic success
and long-term growth
42

43. Global Financial Crisis
• The global financial crisis of 2008 challenged the LME-style shareholder value
orientated model
• Excessive concentration on short-term shareholder value led to uncontrollable
speculation and a lack of attention to developing sustainable methods of wealth
creation
• Many of the export-reliant CME economies coped better with the economic stresses
and came through the crisis in better shape.
43

44. Institutional Theory Applied to Non-WEIRD Countries
• Institutional theory is gradually changing, and researchers have applied it to non-
WEIRD countries.
• Institutional theory has been applied to the European ex-communist countries,
including Russia as Kremlin Capitalism and Serbia as "wild capitalism."
• Institutional theory has also been applied to Latin American or "hierarchic market
economies."
• Indian capitalism remains unclassified, and it is unclear where the
capitalist/communist states of China and Vietnam fit in.
44

45. Development and Gaps in Institutional Theory
• The field of institutional theory is developing, but significant gaps remain in this
literature.
• Researchers are exploring the applicability of institutional theory to non-WEIRD
countries.
• However, the classification of some countries, such as India, China, and Vietnam,
remains unclear.
• Significant gaps remain in the literature of institutional theory.
45

46. Organizational Decision Making and Institutional
Theory
• Organizational structures are not determined by an organization's work activities and
competition demands.
• Institutional theory explains that organizational structures arise as a reflection of
rules that become rationalized in the search for legitimacy and recognition.
• From the perspective of institutional theory, organizational decision-making is not an
outcome just of strategic choice.
• External institutional agencies can create a drive for similarity in unrelated forms,
called "isomorphic processes," within any particular organizational field.
46

47. Isomorphic Pulls
• Three types of isomorphic pulls:
• Coercive pulls: pressures of external institutions such as the state, legal
environment, cultural expectations of societies.
• Mimetic pulls: where organisations model themselves on other organisations in their
'field' as a standard response to uncertainty.
• Normative pulls: result from the professionalisation of functions and individuals, such
as through educational institutions or through practice dissemination by professional
networks.
47

48. Examples of Isomorphic Pulls in Organizations.
• Institutional isomorphism: This occurs when organizations conform to the expectations of their institutional
environment, such as industry standards or professional norms. For instance, accounting firms may adopt similar
auditing practices or quality control measures to comply with the standards set by the regulatory bodies.
• Mimetic isomorphism: This occurs when organizations imitate the practices of successful firms in the same
industry or market. For instance, a startup company may adopt the management practices of a successful
competitor, hoping to replicate their success.
• Coercive isomorphism: This occurs when organizations conform to the demands of powerful external entities
such as governments or industry regulators. For instance, companies may adopt environmentally friendly
practices to comply with government regulations or avoid negative publicity.
• Cultural isomorphism: This occurs when organizations adopt similar values, beliefs, and norms as their peers or
industry. For instance, technology companies may emphasize innovation and risk-taking in their corporate
culture, influenced by the cultural norms of the tech industry.
48

49. Role of Agencies within an Organisation
• The environment 'enters' the organisation through processes of imposition,
acquisition, and authorisation.
• Internal agents within an organisation exert a series of 'pulls':
• Inducement of organisational structure
• Incorporation of salient aspects of differentiation
• Bypassing of formal structure with shared values
• Imprinting of institutionalised patterns
• Examples of the role of agencies within an organisation: Human resources (HR)
agency, Marketing agency, Operations agency, Finance agency, IT agency.
49

50. Variations in Institutional Theories
• Institutional theories have examined sectoral or occupational variations and
variations between states and have developed a number of different forms.
• Despite the many faces of institutionalism, its central tenets remain consistent.
50

51. 2.6 Role of Theories in HRM
• Link between institutional theories and HRM
• Unlikely that HRM practices will work the same way in all contexts
• Need to be conscious of and adapt to local requirements
51

52. Institutional Theories and HRM
• Institutional theories imply that HRM practices vary across contexts
• Practices that are standard in some countries may be unusual or even unlawful in
others
• Imposing such practices may be dysfunctional for international organizations
52

53. Cultural Theories and HRM
• Cultural theories also highlight the need to be conscious of and adapt to local
requirements
• Steer us towards specific aspects of what needs to be managed
53

54. Effect of MNCs on Local Economies
• MNCs behave differently in HRM from local companies, but not so differently
• Host countries influence and constrain business strategies and managerial practices
of subsidiaries
• Further exploration of this issue in Chapter 13 (IHRM theory)
54

55. 2.7 USA and Rest of the World
• Core assumption of North American HRM: considerable organizational
independence and autonomy
• Examples of assumptions: freedom to operate contingent pay policies, minimal
influence from trade unions, sole responsibility for training and development
• Reasonable for companies in the USA given weak trade union movement and low
levels of state subsidy and control
• Fits with neo-liberal notion of minimal state interference and individual rights
55

56. Viable Assumptions Elsewhere in the World
• Question: how viable are North American HRM assumptions elsewhere in the world?
• North American HRM assumptions untypical of the world as a whole (Trompenaars
1993)
• Examples of differences in the European context
• Importance of understanding and adapting to HRM differences globally
• However, this assumption is not applicable in all parts of the world, as it depends on
various factors such as the strength of the trade union movement and the level of
state support and control. Therefore, it is important to understand how and why
things are done differently elsewhere in the world.
56

57. Reflective Activity
ls the way organisations have to go through the processes of recruiting, inducting,
developing, paying and working with staff so similar in every country that general points
about how human resources are managed (or perhaps should be managed) are valid?
Or, is it the case that things are done so differently in different countries that we have to
be very aware of the location in which human resources are being managed before we
can understand them?
Or, can we combine these two accounts and, if so, how?
57

58. 2.8 Chapter Summary
• Any analysis of HRM needs to be clear about its level of analysis.
• There will be some aspects of HRM which may be applicable in any country and any circumstances: every organisation in
every country has to conduct basic HRM practices such as recruitment, payment, etc.
• There will also be many aspects of HRM which cannot be understood at that level and which must be explored at different
levels: workplace, sector, national or regional. A focus on any one of these areas will, like focusing a camera, clarify some
areas but blur others. It does not make either true or false - they are merely different perspectives.
• The national level of analysis is particularly informative, and it is often given less priority than it should be. We provide
evidence on these issues in the following chapters.
• At the national level, as we show in Chapter 3, HRM can be very different. This is because of cultural and institutional
differences between countries.
• This means that universal 'best practice' approaches to HRM, often originating in the USA (or for multinational organisations
at headquarters), should always be considered critically - are they appropriate for other environments?
• There are signs of these national differences reducing, but the best evidence we have says that they remain critical. Whilst
globalisation seems to be creating some common trends in HRM it is not reducing the difference between countries in the
way HRM is managed and conducted. 58

59. Home Take Assignment
1. Argue for or against the statement that we are seeing an increasing convergence of
HRM practices within Europe/across the world.
2. In the light of the arguments produced in this chapter, how do you assess the notion
of 'best practice' in HRM?
3. What is the role of individual national governments in HRM policies? What arguments
would you offer for the views that the role of the state is increasing/ decreasing?
59

60. Further Reading…
BREWSTER, C. and MAYRHOFER, W. (2011) A handbook of comparative HRM.
Edward Elgar, Cheltenham. This book explores these issues in depth, looking at
concepts, specific comparative aspects of HRM policies and practices, and the different
ways that HRM is conceived of and carried out in the different regions of the world.
The CIA world factbook (www.cia.gov/library/publications/the-world-factbook/
fields/2015.html) is an excellent source of information about countries and their
institutions.
60

61. Thank you for joining me today, and remember:
Always believe in yourself and never stop learning!
61