Management culture on HRM practices

Management culture on HRM practices Introduction This research paper identifies the influence of management culture on HRM practices and ultimately on the organization. Globalization is a process which facilitates the integration of societies and cultural values by means of communication and trade across nations which are primarily aided by strategic use of information systems. However, there are several issues of concern which an organization should consider before establishing their HRM practices. Issues pertaining cross-national transfer of HRM practices, individualism at work, individual and organizational transformation, more influence of economic success, differences in leadership practices, emphasis to spirituality, dehumanization, greater role of the state, difference in consultation and ownership are some of the key concerns that emerge in organization processes due to the cultural difference in management practice. Both western and non-western management culture has its own benefits and shortcomings. This research paper performs critical analysis of both western and non-western management culture by analyzing the relevant literature of human resource management in line with the management culture which is discussed in the next section. The discussion is built around difference in management styles of countries like Sweden, Japan, United Kingdom and India. In last section, based on the analysis of western and non-western management style, conclusions and recommendations are drawn. Hypothesis View Armstrong (2009) defines human resource management as set of policies which are designed to improve the organizational integration, employee commitment, flexibility and quality of work. Human Resource Management acts as an intermediate between the organization and the employees. The practice of human resource management involves supervision of the people (how they are employed and managed) in the organization. A well-designed structure of human resource management within an organization should result in no Trade Unions. Human resource management is a vital segment of any organization. It plays an important role in defining and designing the elements of organization culture. Organization culture is known as set of shared values and beliefs specified by the organization taking into account various agreeable and disagreeable conducts. Jackson (2002) supports a cross-cultural approach within an organization in order to give emphasis to management of segregation across cultures and to deal with the apprehension of difference in people management styles. Strategic human resource management also helps the organization to gain a sustainable competitive advantage over its competitors composed of high-quality people. The roles and objectives of human resource management depend upon the volume of the organization. Torrington et al. (2005) explained that as the size of the organization increases, the scope of employing people to specialize in particular areas of human resource management also increases. Figure 1.1 demonstrates various roles and objectives of human resource management. Change-management Objectives Performance Objectives Administrative Objectives Staffing Objectives Human Resource Management Human resource generalists Line Managers Consultants and advisers Human resource specialists Subcontractors Figure 1.1: HRM roles and objectives [Torrington et al. (2005)] Keating et al. (2004) identifies comparative human resource management (CHRM) research which improves the adequacy of human resource management practice and provides global point of view. CHRM research includes a comparative study of human resource management which results in variation due to the difference in culture and institutional environments. This research also supports cultural relativity between HRM concepts, theories and models. The word Integrative imply the propensity to collate diverse rudiments into one single function. Liu (2004) suggests that an organization can make use of integrative human resource management (IHRM) research model in order to allow all their subsidiaries to establish same human resource management practices. This method is more expensive due to integration between the parent company and all their subsidiaries through inter-transfer of their HRM practices. A critical challenge facing IHRM is fast and growing globalizing world. Figure 1.2 shows some of the key characteristics of Comparative and Integrative human resource management. Comparative HRM Integrative HRM Comparative HRM compares HRM practices at organizational level as well as national level Integrative HRM approach compares HRM practices at organizational level A study of Comparative HRM helps in identifying different patterns of HRM practices at organizational level as well as national level Two main objectives of Integrative HRM are: Standardization International learning A study of Comparative HRM helps in identifying different reasons for the variations in HRM practices investigated at organizational level as well as national level Integrative HRM approach describes same HRM practices for both parent company as well as its subsidiaries Comparative HRM describes two major categories for the reasons of variation: Cultural Issues Institutional Issues Major challenges of Integrative HRM are: Globalizing world Robust transfer mechanisms Difference in cultural values Comparative HRM does not use theoretical framework Integrative HRM involves centralization of work and improves monitoring Figure 1.2: Comparative HRM and Integrative HRM Comparative HRM and Integrative HRM approach are used by the organization in order to measure the impact of their existing HRM practices. Furthermore, CHRM provides a global perspective and IHRM facilitate centralization of work within organization. The organization implies Comparative Human Resource Management (CHRM) and Integrative Human Resource Management (IHRM) in order to investigate the areas of improvement. In the next part of this section, we shall discuss how CHRM and IHRM are related to the practice of personnel management and work group management. HRM versus Personnel Management Personnel Management is typically related to the practices and guidelines associated with management of employees working in an organization. As discussed earlier (in section 1 overview), HRM also defines the practices related to the supervision of the employees in an organization. So, what is the difference between Personnel Management and HRM? Bratton et al. (2007) describes the evolution of personnel management and some of the key differences between Personnel Management and HRM. In England (1970), when a new legislation was approved, promoting the equality in employment, there was an unexpected increase in the functions and status of personnel manager. A study conducted by Donovan Commission states that since 1914 there has been a constant growth of personnel managers with most of them found to be men. One of the key functions of personnel manager was to deal with Trade Unions. Second World War increased the demand of personnel managers and in 1989, the personnel specialists/managers rose to 35,548. The following figure (Figure 1.3) describes the difference between Personnel Management and HRM. Personnel Management Human Resource Management (HRM) Personnel Management is a subset of Human Resource Management Human Resource Management is integrated with strategic plan of an organization Personnel Management provide more significance to Legally Constructed Exchange Human Resource Management provide more significance to Psychological Contract Personnel Management deals with the activities related to the supervision of an employee like recruitment, training, counseling etc Major objectives of Human Resource Management: Encourage learning at workplace High employee commitment Improve performance of the organization Personnel Management facilitates Work Group management and improves the management process HRM focus more on an individual aspect and marginalize the collective measure of the aspects between an individual and management Figure 1.3: Difference between Personnel Management and HRM [Bratton et al. (2007)] However, as the main purpose of Personnel Management and Human Resource Management is to improve the relationship between the employer and employees, the term Personnel Management and HRM can be used interchangeably. Personnel management deals with functions like counseling for employees, security of personal information and proper job description. Personnel management also gets effected by the impact of cultural differences. Both comparative and integrative human resource management provides a framework which defines the guideline for the practices of personnel management. However, due to the swift growth of business across nations, personnel management practices should also be revised constantly. Work Group management can also be defined as a subset of Human Resource Management which consists of a group that manages the working practices followed by an organization. Work Group management confronts a crucial challenge due to the increase in diversity of culture and beliefs. CHRM and IHRM provide an analysis of the cultural difference which can be useful in design of work group management. Many believe that the concern raised by diversity is simply ignored while establishing HRM policies and practices in an organization. This might result in greater conflicts and low performance. Considering the perception of organization culture, western management culture has always been referred to the things that are not regarded as religious, spiritual and sacred. The universalistic approach makes western management culture give more emphasis to dehumanizing treatment of individuals and neglect the importance of incorporating cross-cultural and shared value perspective within the organization. Individuals are often referred as resources of the organization, which helps the organization to fulfill their requirement in the process of achieving business targets. On the other hand, non-western management culture involves a big fraction of human characteristics at work. Non-western management culture also describes equal importance to spirituality and cultural differences between the employees of the organization. Theory Analysis As discussed in the previous section, Integrative HRM and Comparative HRM help the organization to build a strategic HRM which in turn allows the organization to design competitive strategies in relation to their HRM policies and practices. However, as business is growing more and more in a borderless world, the organization has to deal with two important challenges: Maintain correlation between their national units which operates in respective national cultures. Employees of the organization have difference in cultural value. There are two ways of taking the discussion forward, one is at macro level (among different national culture) and second is at micro level (people possess different cultural value). Boone et al. (1997) identified that integration opportunity and constraining diversity were two main issues faced by the managers in Europe. In 1991, various multinational companies which were operating in Europe were in tight spot of making a strategic decision whether to adopt the European style of management or to continue with their own style of management satisfying all the norms of local-national culture. This involved an investigation from legal, social, economic and political point of view. According to Jackson (2002), there are four dimensions to represent the value systems of any national culture. Power Distance Uncertainty Avoidance Individualism Masculinity An organization can take up either integrative approach or differentiation approach for their HRM practices. For example, an operational unit of an organization decides to adapt the HRM practices which are followed by the host country. This results in differentiation of HRM practices between the parent company and its subsidiary. What happens when the companys growth is coupled with both the parent company and other operational units? Now, let us try to answer the above asked question by considering the management culture followed in different parts of the world. Swedish Management Culture Western management culture is generally referred to Western Machine Model as business organizations give more emphasis to economic success and often focus more on task completion and outputs rather than creativity, emotions and spirituality. Leaders create a vision whereas managers develop plans based on Leaders vision, the employees/workers concentrate on its implementation. In most of the western countries, robust HRM structure provides broad range of incentives based on the factors like opportunities, participation and working conditions. Jackson (2002) states that, when the act of co-determination at work was passed in 1976, the managers and union representatives were assigned equal right to information and managers were instructed to consult the unions before making any major management decision. Since the end of 1980s, distinctions between blue-collar and white-collar workers were supported by associate agreements which diminished the effect of trade unions at the workplace. Co nstant growth in service industries also resulted in weak trade union representation. In 1994, Sweden joined European Union. Swedes tend to focus more on social democracy and equality. They are impassively practical and bias towards rational reasons which define their sensible approach towards life. Jackson (2002) identified three main factors of Swedish Cultural value: Love of nature Individualism through self-development Equality As per Jackson (2002), Swedish management culture is considered to be ambiguous by the foreign managers. Informal relationships with subsidiary, avoiding conflict, low in power distance, high in individualism, low in uncertainty avoidance, unclear objectives are some of the key traits of Swedish organizations. The factor of equality can be understood by the fact that 75% of the women constitute the workforce. In order to explain this in more detail, Jackson (2002) took an example of IKEA: Furniture Distribution Industry. Since its beginning, IKEA faced a massive challenge of maintaining its Swedishness along with the strategic decision of adapting local-national culture in which they are operating. IKEA has been a global player from past 25 year which includes some of their biggest market in United States of America, France and Germany. Just like Swedish culture, IKEAs management style is also informal denying the actuality of employee as replaceable and interchangeable component. Common practice of sharing knowledge and skills were seen among managers towards their subordinates. Discussion and explanation were prime sources used in order to spread their organizational culture rather than formal training programs. Human resource management has also followed the same Swedish approach. Recruitments were made on the basis of good interpersonal skills and high potential whereas less emphasis is given to formal qualifications. Shortly, IKEA started having trouble with their subsidiaries in countries like Germany, France and USA. Issues pertaining managers authority, informality, job description, assessing risks, indecisiveness, lack of formal rules were some of the key concern for IKEA. IKEA also lost some of their key American managers in the same process. In order to overcome the above mentioned inadequacy, Jackson (2002) proposed a multicultural model. This model suggests that people having different cultural values should work together. Cultural differences and business ethics should not affect each other when communicating across nations. Boone et al. (1997) describes three types of diversity (refer figure 1.4) from the managerial perspective. Types of diversity Examples Diversity in negotiated environment Tax rules Subsidization practices Financial reporting requirements Quality and product standards Administrative diversity Internal accounting rules Information systems Manufacturing systems Inherited diversity Customer preferences Employee characteristics Business systems Figure 1.4: Three types of diversity [Boone et al. (1997)] Japanese versus UK/European Business Model Unlike western management culture, Japanese management style stress more on getting in groups to provide a solution of the problem. Motivation plays a very important role in determining the performance of any organization. However, Japanese organizations stay short on the motivational factor yet report very high productivity. Azhashemi et al. (1999) describes, that in recent years, more importance has been given to efficient frameworks in order to improve the quality of the management practice. Japanese management style introduced Total Integrated Management (TIM) framework to enable the organization to interrelate each of their facets. As multiple factors are joining hands with management quality, it becomes difficult for an organization to focus on each of these factors and enhance their quality of management practice. The following figure illustrates six critical factors defined in Total Integrated Framework (TIM) which are essential for the success of an effective organization. Business Structure Management Resources Management Design Corporate Culture Management Performance Management Cycle Figure 1.5: Critical Factors of Total Integrated Management (TIM) Framework [Azhashemi et al. (1999)] Total Integrated Management (TIM) framework helps the organization to identify the missing loop in their management practice by defining how the management cycle affects four factors of the organization (Business Structure, Management Resources, Management Design and Corporate Culture) which in turn reflects the performance of the management practices. Azhashemi et al. (1999) also describes that the quality of management cycle is directly proportional to the remaining five factors. If the management cycle shows high quality level, the six factors produce an excellent loop that enables the organization to be proactive and implement them. As discussed earlier, Japanese organizations show low job satisfaction. Career or Job satisfaction can be considered as a division of motivation. Jackson (2002) identified that motivational factors include both individual attributes and cultural values. The following figure describes the cultural differences among East Asian and Western cultures which constitutes the motivational factors. East Asian Western Equity Wealth Group Individual Saving Consumption Extended Family Relations Nuclear and mobile family Highly disciplined/motivated workforce Decline in work ethic and hierarchy Protocol, rank and status Informality and personal competence Avoid conflict Conflict to be managed Figure 1.6: Motivational Factors [Jackson (2002)] The core objective of spirituality is non-economic, yet critical for an individual. Spirituality consists of two main elements which are vision and inspiration. This refers to a framework in which more focus is offered to the individual eliminating the possibility of marginalization of human being. However, the perception of Japanese organization about their employees differs from that of western organization which consider employee as Intellectual Capital. Jackson (2002) defined seven spiritual values which are identified in the Japanese culture. National service through industry Fairness Harmony and cooperation Struggle for betterment Courtesy and humility Adjustment and assimilation Gratitude Jackson (2002) classifies British management culture as low measure of power distance, high on individualism, high on masculinity and very low measure of uncertainty avoidance. British organizations are not total learning organizations. However, British management culture is built around the concept of action learning. The second generation of Learning Organizations can be described as Knowledge Management a transition from British Management Style to Japanese Management Style. Jackson (2002) also suggested following methodology for management learning. Azhashemi et al. (1999) illustrates that UK/European business model framework helps the organization to increase management standards and performance. The basis of this framework is Total Quality Management (TQM) which mainly concentrates on customer satisfaction. This business model consists of nine elements (refer figure 1.7) which enables the organization to assess their business results. These nine elements are further divided into two major categories: Enablers and Results. Enablers consist of elements which convert input into output whereas Results allows the organization to measure their level of output. UK/European business model used a method of self-assessment in order to link and improve each facet of an organization. Azhashemi et al. (1999) suggested some of the key benefits of the self-assessment method. An objective assessment against credible and proven criteria. An assessment based on evidence. An opportunity to focus improvement where it is most needed. An opportunity to promote sharing of good, effective approaches within the organization. An opportunity to learn. The analysis of Total Integrated Management (TIM) of Japanese management style and UK/European business model indicates that the two frameworks concentrate mainly on the concepts of Total Quality Management (TQM). Policy and strategy are the two main elements of Total Integrated Management (TIM) framework which displays the belief of Japanese management style that these policies and strategies can affect both business and management factors. On the other hand, UK/European business model enables the organization to achieve high standards. Indian Management Culture Indian management style is based on its diversity with many religions, customs and ethics. Many believe that the managerial behaviour in India is influenced by values and beliefs an individual possess. Some also believe that people work in an organization only to nuture their supervisors. Spirituality plays an important role in Indian management style. Employees often feel difficult to choose between culture of the organization where they work and their own spiritual beliefs. Due to this, it is very often that people resign their job and start their own business which allows them to live based on their own spiritual values. Kumar et al. (2005) describes that the managers in Indian organizations often display emotionality in decision making. The individualism and collectivism goes hand-in-hand in Indian management style. Individualism defines more importance to an individual goal whereas collectivism refers to high importance to objectives of a group. It is often seen that spirituality acts as an vital function of the management style in which influence of the culture is more dominant. Pawar (2009) defined a relationship between individual spirituality, workplace spirituality and work attitudes. Individual spirituality injects into the workplace spirituality which in turn affects the motivation and involvement of an individual towards business ethics. Pawar (2009) explained this in figure 1.8. Individual Spirituality Workplace Spirituality Meaning in work Community at work Positive organizational purpose Positive Work Attitudes Job satisfaction Job involvement Organizational commitment Figure 1.8: Effect of Individual Spirituality and Workplace Spirituality on Work Attitudes [Pawar (2009)] However, Indian Management Style has been stirring towards Western management styles. During this process, difference in business practices and cultural values are some of the key challenges which are faced by Indian management style. Kumar et al. (2005) considered an example to explain this in detail, a subsidairy of South Korean firm in India. The study states that their employee receive targets which they should achieve on regular basis. Employees are also expected to raise their performance constantly. This shows that there is a shift from people-centric culture of Indian management style towards work-centric approach of western management style. Clark et al. (2000) defined the emphasis of HRM in seven European countries. In the last part of this section, we discuss advantages and disadvantages of the application of Comparative/Integrative human relations, Business Ethics and Spiritual/Cultural values to HRM practice. Figure 1.10 describes the advantages and disadvantages of the applications of Comparative and Integrative Human Relations to HRM practice. Advantages Disadvantages Provides an overview of cultural differences at both organizational level and national level Both Comparative HRM and Integrative HRM approach only provide a theoretical framework and does not provide a solution-based framework Provides a measure of diversity level at both organizational level as well as national level Major challenges towards implementation are: Globalizing world Robust transfer mechanism More influence of personal values Provides cultural relativity between HRM model, theories and practices Both Comparative HRM and Integrative HRM approach are too expensive to implement Provides global perspective and aid centralization of work Existing dependence of HRM practices on the laws and regulations governed at national level Provides the list of shortcomings in term of cultural issues and institutional issues Marginalize the collective measure of various other aspects between an employee and the organization Helps the organization in standardization and international learning Cultural and Institutional issues occur during communication across nations Figure 1.10: Advantages and Disadvantages of CHRM/IHRM on HRM Practices Figure 1.11 describes the advantages and disadvantages of the applications of Business Ethics and Spiritual/Cultural values to HRM practice. Advantages Disadvantages Improves the involvement and contribution of an employee at the organization Individual spirituality affects the workplace spirituality Helps the organization to improve productivity in line with high job satisfaction Difficult to manage the diversity in cultural values across organization Facilitate the improvement of Personnel Management practices Difference in business ethics and personal ethics results in greater conflicts in work group design Provides cultural relativity between HRM practices and aid international culture HRM practices need constant modification on regular basis Figure 1.11: Advantages and Disadvantages of Business Ethics Spiritual/Cultural values on HRM Practices Summary According to Stashevsky et al. (2006), leadership styles in which leaders possess intellectual stimulation, individualized consideration and inspirational motivation to be provided to the followers is known as Transformational Leadership. The term Leadership has always been coupled with strategic human resource management (SHRM). Leadership is one of the key managerial traits used in order to understand SHRM. For the organization to adopt resource-based strategic human resource management, one of the vital constraints required is competencies related to leadership. Generally, in an organizational context, the definition of managerial leadership reflects a process in which an individual exhibits influence upon others. However, there is a difference between a leader and a manager. Bratton et al. (2007) also defined that the reflection of the fact leaders create a vision whereas managers develop plans explains the difference. The study reveals that the leadership style followed in western culture is more influenced by repressive nature of the components which constitutes leadership. On the other hand, non-western culture follows the authority displayed by the autocratic nature of leadership components. Many workers/employees in non-western management style are seen to accept incorrect orders as 1) they are not willing to challenge their supervisors and 2) to show respect to their superiors. HRM practices in an organization confront many challenges due to the influence of spirituality and difference in cultural values. There are advantages and disadvantages in integrating spiritual/cultural values to HRM practices. Comparative HRM and Integrative HRM provides a measure of HRM practices at both organizational and national level. Difference in personal values affects the work group design in an organization. Personnel management which facilitates work group management helps the organization to minimize the effect of personal values by means of taking into account the security of personal information, counselling and specification on job. The following are the key issues faced by work group management due to the difference in personal values in a group. Greater conflicts Poor performance Low job satisfaction Traditional practice of HRM or personnel management concentrates mainly on an individual and offers marginalization of various other aspects between an individual and the organization. Due to globalization, it is not feesible to negate the fact that business is growing in borderless world and differences in cultural values are bound to occur. There are concerns if the organization concentrates on spiritual/cultural values more than business ethics, there are issues if the organization cancel out the actuality of cultural and institutional differences. Universal HRM is the key to success. Universal HRM refer to the process of defining high-level HRM models, theories and practices at both organizational level and national level in order to provide the organization with highly motivated workforce and greater productivity. Irrespective of cultural, institutional and various diversities, Universal HRM allows the organization to achieve their business goals more efficiently. After learning and analyzing the HRM practices followed in both western and non-western management style, Universal HRM is considered to be the Best-Practic