Chapter 2 REVIEW OF RELATED LITERATURE
In the last decade, the HR function has increasingly become a target of criticism. The criticism is that the HR function is too bureaucratic, controlling, too operationally focused, reactive and powerless. Brief and Weiss (2002) says that HR indeed has not kept up with developments elsewhere in organizations. They say that HR professionals have become numb by the monopoly position they long enjoyed. The role of HR can become a very important one, that of a strategic business partner responsible for the return on investment in personnel and organization. To a lesser extent than before, human resource (HR) plays a purely operational, administrative and service delivery role. Administration and execution remain important but a considerable part of these activities will be automated or outsourced to external suppliers. HR then becomes more a distributor than a producer of services. Another part of the HR activities will disappear through new technology applications. HR-information systems for example, take over routine tasks by automating the processing transactions and administration. Further, personnel itself will more and more be able to retrieve information from and change information in databases.
Human Resources (HR) are an exciting function, which offers many opportunities for individuals to contribute to the business. At all levels of the company, HR professionals support leaders and leadership teams in the creation of business strategies and in ensuring the resources are ready and available to deliver those strategies.
Nevertheless, human resources (HR) seems to be losing ground in a majority of organizations (Saint-Onge, 2001). In most cases, human resources appear to be playing a secondary role at a time when this function should be more in demand and more valued. The HR function continues to be criticized for not moving with the times. The forces of the market have radically altered the ‘employment contract’, yet the people management practices do not seem to have followed suit. In the face of all this, the human resources function is often perceived as slow to adapt to the new realities of the market place. The traditional structures of HR inherited from the industrial era are not appropriate for the business challenges companies currently face. In this context, HR must evolve to successfully take on a key role in formulating and implementing the organization’s strategy for generating capability.
Organizational Culture
Any organization, may it be profit oriented or not-for-profit, the most vital asset is its personnel. And for these organizations to maximize their assets, they should manage the employees’ working condition with intelligence and efficiency (Ulrich, 1998). They must be allowed to be involved in making work-related decisions to further enhance the organizational structure (Delaney & Huselid, 1996).
Furthermore, the structure of tasks among the employees strengthens the organizational performance (Wilson, 1989). It is therefore necessary to understand the employees for the organization to be effective (Schneider, 1983). The development, building, motivation, enhancement and enrichment of the employees of any organization largely depend on the leadership, mandate and vision of the organization (Rainey & Steinbauer, 1999).
In the case of an international organization, it is very challenging to run its day-to-day operations in a smooth fashion. There is a whole area of human resource management that the organization has to consider especially when it consists of different nationalities. People make or break the organization. Therefore, it is important for any organization to be proactive with regard to their employees’ needs and requirements.
According to Barbeschi (2002), the process of making an organization is simultaneously the growth and maintenance of relationships among individuals who are working towards a common goal and the actual accomplishment of tasks, individually and collectively. In any organization, there exist two dimensions (Barbeschi, 2002). The technical dimension includes elements that are generally visible but hard to decipher like the control systems (recruitment mechanisms, administrative rules and procedures, etc.), structures (departments and divisions and physical facilities), and techniques and procedures (performance, working methods).
The cultural/political dimension is more intangible and strategic in nature. This dimension explains the assumption about the essence of the Secretariat’s culture. It includes rituals and myths, symbols and games. Due to the common behavior, an internal integration within the organization is developed. In a sense, all cultural learning reflects the original values of individuals and their sense of what ought to be as distinct from what is. According to McEwan (2001), culture is inseparable form the nation of human society which makes defining it a complicated task. As a result, there are many definitions for culture. Czinkota et al (Cited in McEwan, 2001) define culture as “an integrated system of learned behavior patterns, characteristic of the members of any given society”. In addition Hofstede (1991) identifies culture as “collective programming of the mind”.
Culture is an important factor in understanding organization, because for any organization to operate effectively it must for some extent have a general set of believes and assumptions. Because understanding the term of the culture metaphor helps organizations to be aware of how employees are thinking about the organization phenomena, and to recognize how different attitudes, value and beliefs affect the workplace. Understanding and assessing the national culture and organization’s culture can mean the difference between success and failure in today’s fast changing organizational environment. Cultural assessment can provide measurable data about the real organizational values and norms that can be used to get management’s attention. Though, it can be said that the basic assumption, values and norms drive practices and behaviors. Hence when a culture is created it becomes a driving force for the shape and scope of the organization.
Researcher Hofstede (1980) has developed the framework for national culture. While the respective merits and drawback of different framework are widely discussed, the Hofstede basic module of culture can be seen as a helpful framework to illustrate the major issues that need to be considered in change process.
Culture environment is one of the important principles that influence the organization. Hostfede (1991) identifies that there are four dimensions that differentiate cultures at a national level (power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance), which help to understand that people arrive to organizations with their own national culture.
Therefore, it is only necessary to understand the relation between organization itself and its culture. For that reason Hall (1976) identifies two classifications of culture that have an impact on business activity, the “High Context Culture” and the “low context culture”. The high context culture have a very high prevailing homogenous view on nationality, religious values and beliefs (Hall, 1976). Such culture can be found in Japan and Arab countries; the context of communication is more valued such as body language and gestures. However in the low context culture, communication context is more of formal written records, such culture can be found in the UK and USA.
Many studies about international organizations have been undertaken. However, a brief review of the literature about the sociology of international organizations indicates that these studies which have been conducted mostly by former employees of such organizations and were largely undertaken by white males who have tended to belittle the role of staff members from developing countries.
These authors have suggested that employees of international secretariats, hailing from developing counties are responsible for incompetence and inefficiency in these organizations as they are employed due to the principle of equitable geographical distribution and not because of their competence, qualifications and experience.
Organization Behavior
According to Brief and Weiss (2002), organizational behavior is an area of inquiry concerned with both sorts of influence: work organizations on people and people on work organizations. The organizations in which people work affect their thoughts, feelings, and actions in the workplace and away from it (Brief & Weiss, 2002). Likewise, people’s thoughts, feelings, and actions affect the organizations in which they work.
The central problems in organizational behavior are influenced by changes in organizations themselves (Goodman & Whetten 1997). Although researchers have reported the durability of such traditional categories as work motivation and performance, absenteeism and turnover, climate and culture, and groups and leadership, other recent commentaries report more substantial shifts. The time frame used to review a body of research is probably the greatest determinant of whether we observe change or stability. For example, Kunda’s (1992) investigation of trends in managerial thought ranged from the 1870s to the present and reported alternating cycles of rational and normative thinking among managers and scholars predicated on the degree of expansion or contraction in the economy of the time. From their starting point in the 1950s, Goodman & Whetten (1997) noted an adaptive quality in the field’s work that shifts attention toward particular applied problems firms face within a given decade.
Diversity and cross-culture HRM
Diversity training remains the primary method used to facilitate behavior change (Combs, 2002). However, existing diversity training is perceived to have failed, calling for a new diversity leadership focus to improve diversity performance.
Research suggests that situations reflecting serious overt and subtle discrimination continue to exist in the work environment. Grossman (2000) suggests that in spite of organizational efforts to manage diversity very little has changed in the experiences of culture, ethnicity, race, and gender groups.
Organizational leadership has opted, most frequently, to use diversity training to bring about a positive diversity climate. Diversity training infuses the organization with information and seeks to change the behaviors of employees related to diversity. In many cases the perception is that diversity training has not met expectations as a mechanism for alleviating the work environment of discrimination and prejudice (Caudron, 1999). As a change strategy, diversity training has been labeled ineffective (Flynn, 1998; McKee & Schor, 1999) Many suggest that such training does very little to promote a positive diversity climate. And, at best, diversity training programs, as currently constructed, result in only short-term suspension of discriminatory behaviors and often create more trouble than they resolve (Hemphill & Haines, 1997).
In the 15 years since the publication of Workforce 2000 (Johnston & Packer, 1987), diversity has emerged as an increasingly important issue in management circles. Diversity, workforce diversity, and managing diversity are now frequently used terms in and about business, and managers have been presented with a plethora of materials in the popular press on how to handle a diverse work force (Ferris, Frink, & Galang, 1994). The persistent messages about the need to address the phenomenon of a changing workforce and consumer base have motivated managers and organizations either to create internal diversity training programs or to hire consultants to sensitize employees to differences in race, gender, culture, religion, age, sexual orientation and abilities (Harter and Kirby, 2003). While 75 percent of Fortune 500 companies have already instituted diversity-training programs, at least another eight percent are in the planning stage, and small companies are also beginning to plan diversity programs.
Prior to the emergence of this notion of diversity management in the 1990s, issues of workforce composition were usually addressed through one of two approaches: affirmative action or valuing differences (Thomas, 1994). While affirmative action refers to requirements, often legally mandated, to change organizational demographics and remedy past situations where minorities and women were passed over for jobs and promotions, the approach of “valuing differences” is intended to be ethically and morally driven and encourages organizational members to appreciate differences. But as Wheeler (1995) notes regarding these approaches, “one of the primary problems was that they were not clearly connected to business objectives” (p. 9).
A primary business objective is being profitable, and managers must explain and justify business performance and decisions in light of this objective (Toulmin, Rieke, & Janik, 1984). Subsequently, a movement has emerged to make a business case for addressing the increasing diversity of both the workforce and the consumer base, and this approach is reflected in the popular literature surrounding diversity initiatives. Carnevale and Stone (1994), proponents for addressing diversity based on a business rationale, begin their article by saying, “Welcoming diversity is directly connected to the bottom line” (p. 24). As further evidence of such an orientation, a report entitled “The ‘bottom line’ organization benefits of diversity training: What’s in it for us?”), outlines the importance of managing diversity for profitability (Wheeler, 1995).
The views on effective management of diversity in general, and cultural diversity in particular, are scattered and it is hard to find a common line of agreement among the earlier writers. In one stream, there are writers arguing that a culturally mixed work force holds a potential competitive advantage for organizations (Cox and Blake, 1991; Mandrell and Kohler-Gray, 1990). In another stream are the writers who stress that similarity helps to develop cohesion which, in turn, is related to the success of a group. There are some other authors whose position lies in the middle of these streams (Adler, 1991).
International HRM
As an increasing number of organizations seek to operate in foreign markets, it is vital that management practitioners develop a better understanding of, and sensitivity to, the impact of different national settings on the management task. In the field of cross-cultural management/organization, scholars have sought to assist practitioners in achieving this by conducting research that has generally been guided by two key questions: (1) what is general and universal in the management of organizations; and (2) what is peculiar or specific to one nation or culture?
To date, there have been a series of review articles of the cross-cultural management/organization literature that have given a detailed picture of the nature of the research undertaken to answer these two questions. In addressing these issues, researchers have described the conceptual, theoretical, and methodological problems encountered and the solutions proposed. However, no equivalent review exists of the literature concerning comparative and international HRM.
Rapid changes in forces affecting the global workforce, differences between countries related to labor-management relations, and increases in the incidence of multinational corporate (MNC) activity have resulted in significant attention to international human resources management (Overman, 1994). Not only are labor relations affected by domestic change, but also the impact of global production has added another complex dimension for those firms choosing to compete internationally. Innovative global competitors, such as BSN Group, have developed approaches for effective labor-management relations at the international level. However, even innovators continue to have concerns over loss of managerial flexibility and authority (Campbell, 1989).
International labor relations is concerned with all aspects of the employment relationship in a global context (Poole, 1986). In every industrialized nation there are three labor relations “actors” with varying levels of common interests: employers and managers; workers and their unions; and the government (Dunlop, 1958). Recently, international joint ventures have begun to replace the wholly owned subsidiary as the most widespread form of U.S. multinational investment (Shenkar & Zeira, 1987). These joint ventures demand heightened attention to labor relations since the constituent owners of the joint venture may have significantly different prior experiences with labor relations in their home countries. The relative lack of familiarity of MNC managers with local industrial and political conditions have oftentimes needlessly worsened conflicts that a local firm could have resolved because of its familiarity with the host country and its labor sector (Prahalad & Doz, 1987).
Since labor relations vary greatly from country to country, MNC managers find the human resource approach, or strategy, used in one country to be ineffective or of limited value in another country (Prahalad & Doz, 1987; Bean, 1987). However, labor relations are important because they directly determine labor costs, productivity, and ultimately, profits. If labor and management do not have good relations, the cost of doing business will be higher than otherwise (Hodgetts & Luthans, 1997). Therefore, given the rapidly changing global marketplace and the differences between the expectations of organized labor and management of MNCs, the management of international labor relations will be a major challenge facing MNC managers in the 21st century (Williams, 1994).
The extent to which the practices and processes of human resource management (HRM) can be transferred from one country to another has been the subject of considerable debate. This question is of special interest to multinational corporations (MNCs) when they seek to establish HRM processes spanning different cultures and countries (Adler, 1991; Schuler et al., 1993). It is a question that has also aroused considerable interest among those researching HRM practices at MNC subsidiaries (e.g., Beechler and Yang, 1994; Hannon et al., 1995; Rosenzweig and Nohria, 1994).
Furthermore, There is an increasing demand for extensive, reliable, and informative research into comparative and international HRM and this has made business organizations and government research funding bodies more willing to fund research in the area. Moreover, both state bodies and business organizations have become more amenable to comparative/international HRM researchers, perceiving that there are now considerable benefits to granting them greater levels of access and cooperation than they might hitherto have deemed acceptable.
At a deeper level, an increasing awareness of the importance of HRM in the international business arena has seen a growth in two distinct strands of literature. First, there is a growing body of work that seeks to determine practical implications for managers. This type of work focuses on functional activities where they relate to the management of employees in multinational organizations (Bae et al., 1998; Brewster, 1993; Gertsen, 1990; Harish et al., 1998; Martin and Beaumont, 1998; Tung, 1990; Tung and Miller, 1990). It is of considerable value because it continues to push the boundaries of our knowledge and understanding of comparative and international HRM forward in a meaningful, though technocratic, sense.
Second, there has also been growing recognition that, although a focus on HRM-specific activities in multinational firms is of considerable importance, this does little to extend the conceptual/theoretical boundaries of HRM (Ferner, 1994; Kochan et al., 1992). Consequently, a whole series of studies have sought to provide new models, theories, and alternative understandings of, for example, the linkages between business strategy and comparative/international HRM (Festing, 1997; Kamoche, 1996; 1997; Kobrin, 1992; Millman et al., 1991; Schuler et al., 1993; Taylor et al., 1996), problems of control and autonomy in the management decision-making process that underlies international HRM (Edwards et al., 1993), comparative HRM research (Boxall, 1995; Chiu and Bu, 1990; Harzing and van Ruysseveldt, 1995; Teagarden et al., 1995), and the role of ethnographic, case study material in researching international HRM (Ferner, 1997).
Altogether, to suggest that research in comparative and international HRM has failed to progress and adds little to our understanding of this key facet of management is to deny the recent growth of research activity in the field and the significant advances in knowledge made by the resulting literature. Indeed, and as Scullion (1995, p. 377) noted, “it can be argued that considerable progress has been made, given the relatively recent emergence of the discipline.” Accordingly, we would contend that the “marginal” tag is no longer tenable. As the articles in this issue indicate, research in this area has become a legitimate and valuable field of inquiry.
Considering the above features of an international organization, it is important to have an effective people management within the organization. However, it is important first to consider the culture of an organization.
Leadership
Leadership is a key issue in the development of groups, organizations and nations. The study of leadership plays a crucial role in the behavioral and management sciences. It is generally accepted that good leadership is essential to the functioning of an organization. It may be useful to think of the leadership process as the interaction between the situation, the leader, and the followers. Leadership is a behavior so it is defined as a function of the leader’s personality (Ratzburg, 2001).
If the leader’s skills, and motivations to fulfill certain felt needs, are combined with his or her personality, then these factors contribute to leader behavior. Theoretical work on leadership was developed throughout the century, starting with `trait theory’, through to theories which focus on the way leaders use and exploit power, theories which explore behavioral approaches, others which look at contingencies, and finally those which consider situational aspects.
Leaders in a culturally diverse organization must not be biased towards a particular culture. It is important that the leader avoids racism and other acts that offend his/her employees. Further, a leader in this kind of environment must be sensitive to the needs unique to a specific employee.
Motivation and Empowerment
In managing people in a culturally diverse organization, as in any organization, the manager must first satisfy the needs of the employees. Motivational theories dealing with the needs of employees fall under the general rubric of Content Theories of Motivation (Ratzburg, 2001). Content theories state that employees’ behaviors are a function of the workers’ abilities to satisfy their felt needs at the workplace. A basic assumption of all need theories is that, when need deficiencies exist, individuals are motivated into action in order to satisfy them. The best known of the Content Theories of Motivation is Maslow’s Hierarchy of Needs. This is based on the assumption that people are motivated by physiological, safety, social, ego and esteem, and self-actualization needs. These needs are ranked, according to the order in which they influence human behavior, in hierarchical fashion.
Empowerment is a technique for improving employee satisfaction, which is being undertaken by many organizations. It involves responsibility and authority for decisions affecting the workplace, downward through the organization. In an international organization, employees need to be equally empowered. This empowerment results to an increased competence, self-esteem and self-respect, which are very important to one’s well being. Moreover, creating an environment in the workplace that results in employees feeling better about themselves when they are in it results in love of their work. A work environment that constantly raises an employee’s self-esteem, above that she/he experiences anywhere else in their life, will be where she/he most desires to spend their time and yields very high employee satisfaction with their job and costs next to nothing. People do more of what they enjoy and less of what they don’t enjoy. The results also show that people who enjoy working are more productive. Creating such a work environment is the responsibility of all corporate or organizational leadership. There are no schools that teach how to create such an environment and very, very few training programs that result in the behaviors necessary to do so. While a very small number of managers of people have found and refined the skills that produce such a high satisfaction environment, these are skills that anyone can learn and master through conscientious and consistent practice.
Empowerment refers to the process of gaining influence over events and outcomes of importance to an individual or group (Fawcett et al. 1994). This definition recognizes the primary purpose for adopting this construct: enhancing people’s control over their lives (Rappaport, 1981). It recognizes that empowerment endeavors should consider those domains important to a particular individual or group and facilitate a process that eventually leads to realized control and influence in those domains (Rapapaport, 1981). Some organizations ignored the person-environment interaction and the critical role that both individuals and contextual characteristics play in the empowerment process, which result in risking the implementation of ill-fated empowerment initiatives.
When assessing the interaction between culture and empowerment, it seems useful to identify and understand those subcultures that might engender a work environment more or less empowering than the larger organizational system (Wilkins & Dyer, 1988). By seeking these diverse subcultures, we can potentially elicit the unanticipated opportunities for empowerment present within a potentially disempowering, larger organizational context.
Aside from motivating and empowering their employees, managers should enable them to develop their self-management capabilities. Developmental feedback seeking is the extent to which one seeks feedback on performance and development needs. Individuals need to understand themselves, their strengths and weaknesses, developmental needs, and performance in their current environment.
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