Managing Human Resources in Europe

A Thematic Approach

Henrik Holt Larsen, Wolfgang Mayrhofer

• Publisher: Routledge
• Year: 2006
• eBook ISBN: 9781134267156
• Topic: Business
• Subtopic: Business General
• Index: Business

This informative text provides an analysis of the ten most important themes in European HRM. It takes a thematic yet critical approach and includes three distinct country examples in each chapter, paying special attention to dilemmas, controversies, paradoxes and problems in the field. The major themes covered here are the role of the institutional context, the importance of various organizational forms for HRM, the roles and contributions of HRM within the organization and the impact of societal macro-trends on HRM.

Written and edited by leading European authorities, this text is essential reading for all those studying or working in HRM in Europe, and allows an exciting synthesis of theory and practice, illustrated with living case studies.

European HRM: a distinct field of research and practice

1

WOLFGANG MAYRHOFER AND HENRIK HOLT LARSEN

Setting the scene – HRM as an emerging concept

Why a book on European human resource management (HRM)? The justification is at least twofold. First, the concept of HRM has played a key role in management research and practice during the last decades. It is reflecting an increasing dependency by the organization on competent and committed employees. Second, the very large differences between the European countries in terms of size, geography, history, institutional structure and labour market characteristics makes Europe an interesting arena for studying HRM, and the European research in this field certainly reflects this diverse picture. On the other hand, despite the considerable differences in HRM context and practice between individual countries, there are also some generic European features – and (in certain areas) an increasing convergence – in European HRM practice. In addition, a broad-based debate about European HRM has developed in theory as well as in practice.

The individual chapters of this book analyze such specific features of European HRM. Before we go into these, however, we will discuss briefly core elements of the two underlying concepts, i.e. HRM and Europe.

HRM as a concept emerged in the USA during the early 1980s. Two now famous textbooks formulating specific frameworks (Beer et al. 1985; Fombrun et al. 1984) indicated a shift away from personnel management. Although these frameworks varied, both argued that HRM differed from personnel management in a number of significant ways. Most prominently, HRM involved more integration of personnel policies across functions and with the corporate strategy, gave a greater role to line managers, had a clear focus on the link between HRM and organizational performance, proposed a shift from collective to individual relationships and indicated a reorientation away from a primarily humanistic to a more organizationally oriented value system.

Roots for the development of HRM can be traced back at least to the early twentieth century (Gooderham et al. 2004). One root is Scientific Management and its emphasis on carefully selected, rewarded and managed individuals as a major resource in the process of production. A second root is the Human Relations movement focusing on the importance of social relationships in the workplace for individual well being and, implicitly at least, good performance. A third historical root is the emerging awareness of the importance of occupational psychology and health in the early twentieth century. Evidence of working conditions which could be damaging to the health of the employee created an understanding of the necessity of improving working conditions and minimizing health hazards on the job. Parts of occupational psychology and social work/welfare are linked to these issues. Finally, in the 1970s, the human capital pointed out, among others, that human labour is an asset rather than a cost and of crucial importance for organizational productivity.

The emergence of the concept of HRM created a partly heated discussion about the specifics of this concept and its relationship to personnel management (see, e.g. Armstrong 2000; Legge 2005; Süß 2004). This very intense debate over the content and consequences of HRM – sometimes even questioning the very justification of talking about a ‘new concept’ (i.e. HRM) in the first place – has been a significant feature of European HRM in Europe. At a fairly general level, however, there seems to be a fair degree of consensus about five major characteristics of the HRM concept.

First, HRM emphasizes the necessity of integrating HR activities across a variety of functions and with the organizational strategic orientation (Boxall & Purcell 2003; Greer 2001; Lengnick-Hall & Lengnick-Hall 1988). Arguably, this is maybe the core characteristic of HRM. The mutual relationship between business strategy and HRM and the beneficial aspects of integration have been increasingly acknowledged (see, e.g. Schuler & Jackson 2000). There is some evidence, however, that currently we see a ‘two camp landscape’ in HRM. In one group of organizations, HRM clearly is an integral part of the strategic processes, playing a role already in the early stages of the process and being a valued player. In a second group, HRM has an important role, but is clearly subordinate. It plays a role in strategic processes only at a later stage and has to realise what has been decided earlier on.

Second, line managers play a crucial role in the concept of HRM. Their importance has to be seen in light of the developments at the organizational level. Through a number of developments such as new organizational forms (Whittington et al. 1999), the delayering of organizations (Morden 1997) leading to less middle-managers or the increasing cost pressures especially for so called non-productive units, the size of HR departments relative to the number of employees has been reduced over the past decade (Mayrhofer et al. 2004). Thus, organizations are moving away from large, centralized (staff) units and assign more responsibility and resources to ‘local’ or ‘front line’ managers. In turn, this has a direct effect on the HR department: it has to think about new ways of supplying the necessary services, performing its functions and equipping line managers with the necessary skills and competencies to handle the new HR tasks that they are confronted with. At the same time, the role of HR departments partly changes. While they still, at least to some extent, provide technical expertise, their role as co-ordinating unit acting as a catalyst for HR efforts becomes more important. Line managers and human capacity outside the organization play a crucial role for fulfilling HR tasks.

Third, the link between HRM and organizational performance is heavily emphasized. There is a broad and sometimes passionate discussion about the performance effects of HRM activities. Basically, three different approaches exist concerning the effects of HR on organizational performance (Delery & Doty 1996). The universalistic or ‘best practice’ approach assumes that specific HR practices have a universal, additive and positive influence on organizational performance (e.g. Becker & Gerhart 1996). The contingency approach emphasizes the role of contingency factors when linking HR practices and organizational performance. Special attention is paid to organizational strategy. Likewise, the importance of factors outside of the HR area is highlighted (e.g. Gooderham et al. 1999). The configurational approach has a more HR internal view. It focuses on the importance of a pattern of mutually compatible HR practices for organizational performance (for an example, see Ichniowski et al. 1997). A steadily increasing number of studies exist that analyze various aspects of the link between HRM and organizational performance at the conceptual and empirical level (see, e.g. Bowen & Ostroff 2004; Gelade & Ivery 2003; Wright et al. 2003; Fey & Bjorkman 2001; Huselid et al. 1997; Youndt et al. 1996; Delaney & Huselid 1996). Despite different conceptual and methodological approaches, a common tendency emerges. At least under specific conditions and in certain combinations, HRM has a positive impact on firm performance, even though the size of the effects are often comparatively small.

Fourth, in the relationship between the individual and the organization, there is less emphasis on collective forms of interaction and representation. Individual negotiations of work contracts or the decay of collective forms of representation such as trade unions or works councils are examples here.

Fifth, HRM also indicates a value laden focus shift: from the idea of balancing individual and organizational interests to a clear priority for improving organizational performance, regarding individual interests not as a value in itself but a restriction which has to be met when pursuing organizational goals. The focus shift turns the attention to the impact of HRM on organizational strategy, its customers or shareholders. Critics, especially from a European background, point towards a narrowness of perspective and the ignorance of other potential focuses, stakeholders and outcomes of HRM (see, e.g. Guest 1990; Legge 2005).

Universality questioned – the European focus

The current concept of HRM is the dominating paradigm in theory and practice. It has substituted personnel management and is discussed not only in the US, but worldwide. In this respect, Europe is no exception.

In other ways, Europe provides an arguably unique mixture of unifying and dividing elements. Heterogeneity and centrifugal forces do not come as a surprise when looking at a continent with an area of 9,839 million square kilometres (the US: roughly the same area, i.e. 9,809 million square kilometres), roughly 800 million inhabitants (the US: less than half, approximately 295 million), 45 nation states and more than 70 languages. History, culture and the economic and institutional situation contribute to a picture of diversity, too.

Historically, a long and often belligerent relationship between European countries led to a tradition of tension and rivalry. This does include large European states like the UK, France, Spain, Germany or Italy as well as tensions and war-like conflicts between smaller states or ethnic groups. Current examples for the latter include the struggle of the Hungarian minorities in Slovakia and Romania or, much more visible and forceful, the conflicts in Northern Ireland, Bosnia or the Basque country and the fierce ideological competition between Eastern and Western European countries with a very different political and economic background from 1945 until the fall of the iron curtain in 1990.

Culturally, major studies grouping countries according to basic cultural dimensions find great differences within Europe (see, e.g. Hofstede 1980; Trompenaars 1994). Findings indicate that regardless of inevitable differences even between closely related countries such as, e.g. Germany and Austria; cultural clusters, e.g. a Nordic, an Anglo-Saxon, a Romanic and a Germanic cluster with deep rooted cultural differences at the level of values/norms and basic assumptions can be identified.

Economically, large differences at the country and individual level exist. On the one hand, one can find countries with a comparatively high Gross Domestic Product (GDP) like Germany (2,712.3 billion dollars), the UK (1,402.6) or Italy (1,240.6). They stand in sharp contrast to countries comparable in terms of size with only a fraction of these values, such as Turkey (215.1) or Poland (179.9), not to mention smaller countries like the Slovak Republic with 26.2 billion dollars (Source: OECD main economic indicators, Feb. 2004; all figures for 2003). Looking at the individual level and per capita income, the situation is similar. Luxembourg, Norway, Switzerland, Denmark, Iceland, Austria, Ireland and the Netherlands have a purchasing power parity ranging from 27,470 (the Netherlands) to 51,060 (Luxembourg) international dollars (roughly speaking, the international dollar is a hypothetical currency unit reflecting the worth of local currency unit. It is calculated by using purchasing power parities and allows the comparison between countries and over time). Only the US (rank 3) and Canada (rank 9) join them in the top ten countries in the world. On the other hand, European countries like Albania (4,040), the Ukraine (4,650), Romania (6,290) and also countries now entering the European Union like Latvia (8,940) or Poland (10,130) are much further down this list (Source: World Development Indicators Database, World Bank, July 2003).

Institutionally, great heterogeneity exists. For example, European countries have a great variety of differences in labour related regulations and institutions. One can mention here the issues of labour law, especially in the area of protection of employees, the degree of regulation of the world of work or type of industrial relations and the role of trade unions and employers’ associations. For example, the UK's weak employment protection laws tend to create more of a ‘hire and fire’-like working environment than in most European countries (Morton & Siebert 2001).

The European Union has partly changed this picture. It created a more unified context for organizations to operate in (Brewster 1994a; Brewster 1994b). Nevertheless, national institutions and individual countries still play an important role. One might argue that in the area of management practices we see a European hybrid model emerging. It is based on the assumption that there are forces from the market, technology and institutional context that promote convergent developments. At the same time, the cultural and institutional context at the national level promotes a more differentiated European picture in the area of management practices. Findings for convergent as well as divergent tendencies of management practices in Europe might be interpreted as two sides of the same coin: management practices in Europe simultaneously become more alike in certain areas and stay or become different in other areas (Mayrhofer et al. 2002).

Given these European specifics and disregarding other important influencing factors in this respect, most notably the differences in scientific and epistemological traditions, it is little wonder that a more contextual paradigm has played a major role in discussing HRM in Europe. The universalistic paradigm is essentially linked to a nomothetic social science approach. It uses evidence to test generalizations of an abstract and law-like character. Much of the HRM discussion coined by the US debate implicitly or explicitly follows this epistemological and theoretical path. By contrast, the contextual paradigm focuses on understanding the differences between and within HRM in various contexts and determining factors of these differences. In addition, the often implicit assumption in much universalistic HRM research – the organizations’ objectives and their strategies are ‘good’ either for the organization or for society – is not necessarily shared. Therefore, the importance of factors such as culture, ownership structures, management decision processes, labour markets, the role of the state and trade union organization play an important role.

Linked to these considerations, the notion of ‘European HRM’ was developed, arguably as a reaction to the hegemony of US conceptions of HRM (see, e.g. Brewster 1994; Sparrow & Hiltrop 1994; Brewster et al. 2000). The specifics of this concept of European HRM do not touch the core tasks and basic function of HRM. Of course, supplying organizations with the right number of people with the right qualifications at a specified time and location is still a key characteristic of HRM. However, there are arguments about how this can and should be done and what ‘right’ means in this context. Specifically, in the discussion about European HRM some of the basic assumptions behind the US ver...

Table of contents

• Cover Page
• Half Title page
• Series Page
• Title Page
• Copyright Page
• Contents
• List of illustrations
• List of Contributors
• Foreword
• Preface
• 1 European HRM: a distinct field of research and practice
• Looking outside: The institutional context
• Looking inside: Embeddedness in the organization
• Looking at oneself: the roles and contribution of HRM
• Looking beyond: societal and economic macro-trends
• Conclusion
• Index