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Future of European human resource management: A contingent approach
European Management journal Vol. 13, No. 4, pp. 434-442, 1995 Copyright 0 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0263-2373195 $9.50+0.00
Pergamon 0263-2373(95)00037-2
Future of EuropeanHuman
ResourceManagement: A ContingentApproach NICK FORSTER, Lecturer in Human Resource Management, Cardiff Business School; RICHARD WHIPP, Professor of Human Resource Management, Cardif Business School
The ability to cope with an increasingly open European Market, enhanced mobility between nation states and the threat of competition from the Far East will be highly prized organisational skills in the third millenium. Many commentators have argued that ‘Europeanisation’ (broadly defined) is an irreversible process and companies will have to cope proactively with this or perish. However, in this article we argue that many of these predictions are based on an uncritical acceptance of the ‘intemationalisation’ thesis, and on subjective assessments of possible future trends - rather than on sound empirical research within strong theoretical frameworks. Accordingly, this article takes a critical look at some widely-held assumptions about intemationalisation, Europeanisation and the (potential) development of European Human Resource Management (EHRM). It then goes on to suggest a framework of research which will be more able to capture future developments in EHRM and thereby facilitate more robust exchanges on strategic HRM with those companies operating in a European setting.
Introduction Over the last ten years, there has been an enormous growth in research on EHRM In spite of this, there is still considerable confusion about what EHRM actually is, how it is (re)forming and developing and what directions it might take in the future. Hence, this article has four objectives. First, to provide a short review of the literature covering the controversial subject of ‘internationalisation’ within a European context. Second, to provide a brief overview of our current understanding of developments in EHRM. Third, to identify gaps in our understanding of this dimension of international HRM; and fourth, to suggest a programme of research into EHRM based on a sound theoretical basis.
Globalisation and Internationalisation The late 1980s and early 1990s have seen an explosion of interest in international business. lntemationalisation has 434
stormed to the top of corporate agendas everywhere in the world. As they turn their attention to the international scene more and more companies are coming to realise that the international business environment of the 1990s and beyond is going to be fundamentally different from that of the past. (Barham and Devine, 1991: 1) As almost every factor of production - money, technology, factories and equipment - moves effortlessly across borders, the vey idea of a national economy is becoming meaningless, as are the notions of a national corporation, national capital, national products, and national technology. The same transformation is affecting every nation, some faster and more profoundly than others; witness Europe, hurtling towards economic union. (Reich, 1991: 8) In spite of the confident tone of these quotes, there are very mixed opinions about the extent to which organisations are becoming ‘internationalised’ at the present time, how this is to be measured and what factors might impede this apparently unstoppable process. In this context, there are perhaps five core questions which currently concern those who are interested in the field of international HRM. 1. 2.
3.
4. 5.
Are organisations becoming truly internationalised? If they are not, can we talk meaningfully of the emergence of international human resources management strategies? If we are moving towards true internationalisation how is this developing across different regions of the globe and at what pace? What is the impact of these developments on Europe? What are the implications of this for the study of human resource management in Europe?
Many authors (e.g. BIC, 1992) argue that internationalisationlglobalisation is both a clearly identifiable and irreversible process with growing numbers of companies intent on increasing their business presence in both continental European and World markets in the 1990s. For example, 62 per cent of a group of 171 British organisations surveyed in 1990, planned to expand their
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business interests into Europe (Wood and Peccei, 1990: 65). Short-term partnerships between multinational firms are also becoming increasingly common as are corporate 'buyouts' of potential competitors on foreign markets (Lei and Slocum, 1992). At the same time, international careers are becoming more common features of the working lives of professionals and managers all over the world. And, increasing numbers of graduates world-wide are now pursuing transnational career opportunities. All these authors argue that if companies pursue a strategy of transnationalisation they can achieve a number of strategic objectives simultaneously. They are able to: 1. 2.
3. 4.
5. 6. 7.
achieve economies of scale by spreading their main operating functions in a variety of localities; exploit cheap labour markets and by-pass what they regard as 'restrictive' trades unions or labour protection legislation (e.g. Japanese companies in the UK; French textile firms moving to Scotland; American clothing and shoe companies moving their manufacturing centres to the Far East and Mexico; BMW buying out Rover and so forth); exploit new foreign markets by having a handson presence in local regions; identify and utilise mutually beneficial strategic alliances with host companies more quickly and effectively; fully utilise the globalisation of computing and telecommunication systems; recruit and develop the very best staff from global labour markets; access financial investment from a variety of local financial sources.
These commentators recognise that there are many barriers to internationalisation but argue that this process, in Europe and further afield, is indeed proceeding apace, with more joint partnerships between organisations; the business expansion of many national companies into other regions; the growing mobility of professional/managerial employees; an increase in the numbers of graduates seeking employment outside their countries of origin and the development of identifiable international HRM strategies (Storey, 1992; BIC, 1992; Barham and Devine, 1991). In contrast, Hirst (1993) disagrees fundamentally with many of these assumptions. He argues that if a globalised economy exists it should have four basic features. First, it would be dominated by 'international world market processes' and domestic government economic policies would be subservient to these. Second, the world would be dominated by truly transnational corporations (TNCs), whose workforces would be recruited internationally and located wherever competitive advantage and market conditions dictate. And, unlike multinational corporations (MNCs), they would not have a principal national base. Third, a truly global economy would mean a severely weakened organised
labour movement. While the movement of capital would be global in nature, labour mobility would be localised. Fourth, economics and politics would 'pull apart'. By this Hirst means that there would be no dominant hegemonic state overseeing the world economic order. Hirst says that on these criteria, 'we are nowhere near a fully globalised economy, and are unlikely to get there'. How does he justify this? First, he cites the existence of local trading blocs like the EU and NAFTA as developments which will limit the globalisation of economic processes. These are big enough to allow the existence of localised commodity/product markets, labour markets, social provisioning and political control over such processes as labour law and industrial legislation. Second, he says that there is no such thing as a truly transnational company at the present time. All the major successful German, US, European and Japanese companies remain, in essence, MNCs. Third, the continuing upsurge of nationalist movements from the Baltic States, former Yugoslavia, the former Soviet Union and the Gulf are all powerful sociological processes which mitigate against the development of a truly internationalised economy with free trade, the free movement of goods, people and capital and an effective and influential internationalised Trades Union movement. Last,
Whilst the US can no longer provide the hegemonic stability it did in the Cold War, it remains the only power able to protect militarily the world open-trade system against ambitious, nationalistic regional powers. (Hirst, 1993) Hirst concludes by suggesting that while we do have a loosely structured internationalised economy there still are strong regional and localised economies. However, Hirst's contention that regionalised trading blocs will arrest the process of internationalisation is contested by Barham and Devine (1991: 2). They suggest that many companies will have actually to ensure against these recursive trends by actively developing trading links and job-creation activities outside these blocs (1991: 2). Even within these trading blocs many organisations are seeking to expand their operations outside their home nation-states (in the SEM for example). And, they cannot simply rely on recruiting local people to run these parts of the company because of the danger of the creation of localised 'fiefdoms' and restricted career opportunities for staff recruited locally. Barham and Devine cite a number of European company directors who argue that the only realistic way forward is to embrace the international route. Even those companies who choose to operate exclusively within a nation state will find that they are doing this in someone else's international market. BIC (1992), in a study of 25 companies from a number of countries, highlight clear changes in diversity management, recruitment and retention strategies, the development of new international management skills and the management of work/family conflicts in response to the challenges of internationalisation. Hu (1992: 55) also argues that there are no truly multinational companies currently in existence. There
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are national companies with international interests --
what he describes as 'bi-national enterprises'. This situation will continue as long as the nation state continues to be the main focus of people's sense of belonging and identity. In some markets, while the consumption of goods is indeed global, the production of these commodities is actually becoming more regionalised. An example of this is camera production -- most of the world's output is now based in the Far East (Kay, 1990: 2-4). And, even where production is localised (e.g. Coca-Cola) marketing and sales strategies are firmly based on a series of domestic markets. But, Reich (1991: 113; 138) regards this argument at fundamentally flawed. He describes numerous household name products which are 'produced' in home markets but with often over 50 per cent of the components which make them being imported from abroad. He rightly asks if any product, apart from food, can be described as purely mono-nafional in origin these days? One example he cites is an 'American' Pontiac car. The technical input and components which go to make the car and sell it, come from: Japan Germany, Taiwan, Singapore, Ireland, Barbados and Britain. In fact less than 40 per cent of the cost of the car is paid for in the US. Similarly patterns of share ownership and distribution are becoming increasingly fluid, opaque and internationalised. -
-
What is Actually Happening The idea that there is now one global, borderless, stateless world is clearly nonsense. There is no such thing as a truly global or truly European company at the present time. For example two of the largest MNCs, Pepsi-Cola and McDonalds, still have over half of their fixed assets in the US. Ford has 80 per cent. All MNCs still largely conform to their national cultures, the demands of their national governments and identify themselves as being 'British', 'American', 'French' or 'Japanese'. There are companies who operate in many areas of the globe, but none has relinquished its primarily national identity. However, it is quite clear that something called 'internationalisation' is continuing apace, with increasing numbers of companies going down the route of international trade some extensively, others with more regionalised operations, but this will be characterised by: -
1.
2. 3.
-
A centralisafion of economic power in regionalised trading blocs in North America, Europe and the Far East/Australia. Marked disparities between rich and poor regions of the globe. Growing disparities of income and access to work within nation states (cf Reich, 1991: 208-224; 252-253; 268-281).
It is against this background that researchers have been trying to make sense of the internationalisation debate and the implications of this for EHRM. In spite of the controversy over internationalisation, a number of 436
established research fields have continued their exploration of, inter alia, the evolution of international industries, the process of internafionalisation, the organisation of the international corporation, the trading and development of the 'European' or 'international' manager and the impact of international relocation on the professional and personal lives of employees. The work on international industries contains three divergent sub-sets with each employing very different disciplinary approaches. The first centres on the 'celebration' of the success of either international Japanese firms or, the experience of leading corporations in specific industries. In either case the emphasis is on perceived 'world class' performance and the standards of competition to be met by aspiring world players. There is a strong tradition in the US, going back to Abernathy's path-breaking work of the early 1980s of seeking to understand the way Japanese companies have understood, matched and then re-defined performance standards across industries world-wide. The second sub-set covers the work of industrial economists (mainly working in business schools). Here the examination of the operation of domestic industries has revealed the extent to which such arenas have become internationalised. In the UK cutlery or whitegoods industries, foreign competitors are highly active in domestic markets and the character of these fields is heavily international. The work of the economist Kay (1990) and others is relevant in that he raises fundamental questions about the boundaries and operation of industries and markets in Europe. He shows, for example, in a review of various industries how there may exist some European industries but relatively few European markets. The third sub-set is from a wholly different disciplinary tradition and is best described by the label, economic sociology. The central purpose of such scholars has been the institutional analysis of industries, in other words, to understand the role of social values and related practices in the evolution of sectors. This involves the study of not only labour markets or legal frameworks but also the operation of industry networks and the influence of recipe knowledge. Only recently has the attention of this school turned to international industries (Rasanen and Whipp, 1992). However, their intellectual depth and the emergence of European comparisons promises much (Whitley, 1992). The work on European regional industrial formations is a close cousin and especially relevant to any consideration of HRM activity. A wholly different literature concerns the problem of the internationalisation of firms. The majority of this work has been developed by Scandinavian academics, particularly at the Stockholm School of Economics, and concentrates on plotting the process of internationalisation (Johanson and Mattsson, 1988). In the past, the results have centred on Swedish organisations and their prodigious international expansion. More recently the subject has been rejuvenated in the light of both the Japanese success and the advent of the SEM.
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A related but apparently fast expanding field has grown up around the organisation of the international/national corporation. In the broadest sense this research seeks to understand the distinctive organisational capacities and internal processes fo such companies. The work of Doz is well regarded but has only touched on the character of HRM as a key constituent of these processes and tends to repeat many of the US nostrums on corporate HRM (Evans et al, 1989). International joint ventures and corporate alliances are reported to be the key means of meeting the demands of escalating R & D costs and meeting the competitive bases of international industries. In addition to this, there has been a steady growth in interest in the management of international career pathing, job mobility and relocation in the fields of developmental and occupational psychology and in management sciences. Researchers have looked at: how organisations can develop international managers (Tung, 1988; Barham and Devine, 1991; BIC, 1992); theoretical perspectives on the professional and personal outcomes of international job mobility (Forster 1993, 1992b; Blake et al, 1991); the adaptability of employees to new cultures and languages and the effect of training on adaptation (Brislin and Yoshida, 1994); the special problems faced by women expatriates and the impact of international relocation on dual-career couples (Forster, 1993); the problems faced by expatriates returning to their home countries (Forster, 1994) and important role which family dynamics can have on relocation outcomes (Munton and Forster, 1993: 113-137). In general, all of these researchers accept that internationalisation (broadly defined) is an identifiable and probably irreversible process despite the existence of strong regional and national forces which may slow this process down or, in some areas temporarily reverse the process (in Africa, the Middle East, South America and the old Eastern Bloc for example). This may even happen in Europe. A study by Forster (1992a) showed that many UK companies had adopted a 'wait and see' approach to the SEM or have cut back on their international expansion strategies in the current recession. But, this study also suggests that many of these companies see both the SEM and wider markets as environments in which they will have to become more involved in the long term. Other researchers have pointed to both marked regional and cultural variations within Europe which may impede internationalisation within Europe (Leeds et al, 1994) and to specific examples of transnational collaborations which required sensitive handling of cultural conflicts. For other authors the whole debate about whether a firm is truly a multinational enterprise (MNE) or not is relatively unproblematic. For example, Sundaram and Black (1992: 733) define an MNE as:
any enterprise that carries out transactions in or between two sovereign entities, operating under a system of decision making that permits influence over resources and capabilities, where
the transactions are subject to influence by factors exogenous to the home country environment of the enterprise. If we expect this broad definition, a way forward in this debate may be to stop trying to be prescriptive (or even self-serving) about these trends and recognise instead that there are a number of developments occurring simultaneously. In other words, let us simplify what it is we are trying to get to grips with here in a European context. This means that a number of different kinds of companies can occupy home, regional and international markets. These can include: purely home based companies; home based companies with limited regional operations; home based companies with extensive regional operations; home based companies with limited global operations; home based companies with extensive regional and global operations; transnational organisations with highly decentralised operations and, lastly, truly globalised corporations. Reich (1991: 110-118) suggests a helpful analogy to help us understand this. The influence of these companies and the range of their activities can be compared to 'webs' of influence of differing size and structure which are both interweaving with and being interwoven by other 'webs' of influence. Keeping tabs on the changing nature of these 'webs' is obviously an extremely difficult task for both academics and personnel practitioners. But, by simplifying what we are trying to look at should enable the task of conceptualising what HRM currently 'is' in these different types of European companies considerably easier. This, as Rasanen and Whipp (1992: 19) argue, means that we should look at each country/ sector from a variety of perspectives and employ different research strategies. This means that we can analyse EHRM by sector (or 'industry'), at different sized companies, at different levels as well as by region and by country. This makes considerable sense if we remember that the EC's programme for removing trade barriers is not essentially about creating a single market but is also promoting measures to create single industries which will often continue to operate from national markets (Kay, 1990: 8). The operations of some European companies will remain national or within a limited regional area but there is clear evidence that many have embraced and are now pursuing an international route. The success of companies in this arena will depend on a number of other factors which are outside their immediate control, including: the basic infrastructures within which they operate; the health of, and levels of investment in, national education systems, the availability of skilled labour, the numbers and quality of the graduate students they can employ and the economic and social policies which their governments pursue in the 21st century (Reich, 1991: 225-240; 254-258). The implications of all these developments for the development of European HRM strategies and the 'Euro-manager' remains relatively unexplored (Contractor and Lorange, 1989). The implications of this for the study of HRM in Europe are discussed below.
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Human Resource Management in Europe HRM in Europe is complex. There is no other region in the world where so many different histories, cultures and languages exist in such a relatively small space. Each European country has its own approach to the employment of people; its own laws, institutions, trades unions, education and training provisions, and managerial culture. In many European countries these approaches operate at a number of geographical levels. Overlapping this complicated picture there is now the unique supranational legislation of the European Community. (Brewster et al., 1992: 2) Before discussing what HRM in Europe is, there is a need to clarify our current understanding(s) of 'HRM'. It is an idea which has gained considerable currency in organisational studies over the last decade but it has come under growing criticism for being imprecise, prescriptive and, in essence, little more than old style 'personnel management' dressed up in new clothes. It may disguise, but has not done away with, traditional forms of industrial conflict, management control and exploitation. There is, however, general agreement that there are two basic types of HRM -- the 'hard' and 'soft' approaches. The hard approach emphasises the need to treat people like any other resource -- to be recruited and used as cheaply as possible. This approach, essentially, emphasises that HRM exists to serve strategic business needs. In contrast, the other approach emphasises that people are resources quite unlike any other, whose innovative qualities, motivation, skills and commitment can create real competitive advantage if they are nurtured, trained, utilised and rewarded effectively. Can we speak meaningfully of EHRM in either its 'soft' or 'hard' forms? The short answer to this question is a resounding 'No'. This is because there is a huge variety of perspectives and practices both within and among the nation states of Europe. Two editions of Employee Relations in 1992 (Volume 14: Nos 4 and 5), highlight the very different histories of and approaches to, HRM in a variety of countries in the EU. In a review of the Price Waterhouse/Cranfield Project on EHRM, Brewster and Bournois (1991: 10-11) also point to wide variations i n t h e ways that different European regions conceptualise and implement HRM strategies. These differences should not surprise us because they, 'can only be understood in the context of each national culture and its manifestations in history, law, institutions and trade union and employing structures'. There are marked variations in how managers view their roles in terms of developing dose or very distant relationships with colleagues and subordinates, how leadership and authority is perceived -- from highly autocratic to laissezfaire or democratic. There are also widespread differences in the influence'of HRM functions within organisations, patterns of ownership, recruitment practices, training and career development policies, the ways in which employees are rewarded and in terms of trade union recognition and influence (Brewster, 438
1994). And, of course, there are still many variations in the role which the State plays in regulating business practices and in enforcing employment laws. These and other differences are reflected in the many varieties of HRM currently practised in Europe. A further complicating factor is that there are identifiable differences in the way that HRM is both conceptualised and practised in Europe when compared to the US. So it is inappropriate to continue to think in American paradigmatic terms if we are trying to conceptualise what EHRM is. We need to develop a more distinctive Eurocentric conception. However, there are common issues in EHRM which all enterprises, public and private, will have to respond to effectively in the next decade. These include: the threat of compensation from North America and the Far East; the provisions of the Social Charter on employee rights; changing demographics (with a reduction in the numbers of elderly citizens to be supported; changes in the structure of 'the family'; the radical impact of new technologies; the paradox of high unemployment and skills shortages coexisting in the Community; the growth of women in fulltime career streams; the removal of barriers to employee mobility and relocation in the Community (e.g. The Directive on Mutual Recognition of Professional Qualifications and the Erasmus Programme); the need to recruit, train and retain increasing skilled workforces; the need to increase flexibility in workforces and, as discussed earlier a need to operate effectively in an increasingly internationalised global economy. These common challenges suggest that a recognisably 'European' HRM philosophy will develop over the next ten to twenty years (Brewster, 1994: 80-84). In order to respond to these challenges, Barham and Devine (1991) suggest that companies will have to implement a number of common HRM innovations. At the top of many corporate agendas will be the need to manage change effectively -- a combination of environmental assessment, leading change, linking strategic and operational change, utilising human resources effectively (both as assets and liabilities) and ensuring coherence (Pettigrew and Whipp, 1992: 228). Naturally, the success of any change programme which embraces internafionalisafion is dependent on a firm's employees. Companies will only be able to manage change effectively if they are able to link HRM to corporate strategy by first understanding the company's current stance on management development; knowing where it is and where it wants to get to; possess a European/worldwide audit of their management resources and create core cultural values of internationalism throughout their workforces. Second, they will have to develop a number of core skills which their managers will need to learn in order for their organisations to be successful in these new international environments (Barham and Divine, 1991: 21). Organisations will also have to consider the development of other skills such as leadership in an international context, networking skills, life-long learning abilities,
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highly-developed interpersonal competencies, cultural and linguistic adaptability and helping women to attain an equal role in international career opportunities. It is also very clear that more consideration will have to be given to the problems faced by women, dual-career couples and families in the management of international relocation and repatriation (Forster, 1992a). The urgent need to develop these skills is further reinforced by recent research which shows that many companies have experienced a shortage of international managers and over 70 per cent believe that they will experience shortages in the future (Scullion, 1994: 203).1 Some companies believe that one of the best ways forward is to develop 'Euro-Managers' -- individuals who can transcend national boundaries and develop the transnational firm 'organically'. To develop these they will need to: recruit, train and retain the right people; have stable succession planning systems in place to ensure the availability of sufficiently qualified people at the appropriate times; ensure that managerial/technical excellence is widespread throughout the company; develop learning packages to help employees cope positively and effectively with international assignments; establish HRM as a core component of general organisational strategy; develop a corporate culture which emphasises a total commitment to innovation, quality, customer service and an ability to adapt positively to change in an international arena. Some European companies are now experimenting with different types of human resource activities as a means of developing these sources of international competitive advantage (including, among others, Fiat, MercedesBenz, Unilever, ICI, IBM, Ciba-Geigy and BP). In terms of the development of the international manager, these companies' strategies indicate that they are actually developing different kinds staff who can operate in a variety of bi- or multinational environments. These can include: the purely home based manager; the multicultural team member who works on a series of international projects; the internationally mobile manager who makes frequent international job moves; the traditional expatriate who carries the home country's culture with him/her on relatively lengthy postings and the transnational manager who is a truly global citizen, linguistically and culturally (Storey, 1992: 3-4). This approach reminds us of Reich's 'web' analogy. We would argue that we should be less concerned about trying to identify what EHRM 'is' but instead focus on changing HRM practices in a variety of enterprises. In other words, we should be adapting a contingent approach to the study of the future of HRM in Europe by looking at what companies are actually doing at the present time in an uncertain and turbulent environment.
Future Research Areas In order to understand how EHRM strategies might be developing and how HR managers can cope effectively with these changes, we need to answer the following kinds of questions:
What does, or rather do, HRM strategies in firms committed to an international route look like? Are there similar patterns of development across regions and industrial sectors? Do these EHRM strategies differ from imported American models of HRM? How do these strategies differ from companies with purely national operations? How can HRM help a company develop as an international firm? Is international job mobility an effective way of developing 'Euro-managers'? Do these strategies work for companies? What problems arise? How are these policies translated into recruitment, training, staff development, reward systems, and mobility and relocation policies? One approach is to adopt a contingency model and look at HRM developments in small, medium, national and European-wide companies and also examine cultural, sectoral and regional differences. We need to know if 'good practice' in the development of international HRM strategies transcends national, regional and cultural differences. We need to know how these organisations learn to develop new effective HRM strategies. Do they get this information from other companies? From academics? From consultants? In order to answer such a list of questions, future research will have to be framed carefully to reflect the range of contingent features discussed above. Broadly speaking this includes the diversity of development in the core characteristics of the international firm, the persistent variety of national business systems, and the specific requirements of different types of firm. Each of these three areas produces key research issues. The research on the international corporation and global competition, as we have argued in this paper, has produced a rich vein of results. Yet, as the attention devoted to the character of the international firm has increased, no corresponding growth in research has occurred which locates the HRM function at the heart of such corporate evolution. Such relative neglect runs the risk of missing a key opportunity. The conflicting strategic demands on the international firm are extreme. As the previous sections indicate, the need is for such firms to be, simultaneously, nationally responsive to national differences in consumer preferences and able to mount a high level of integration in order to achieve economies of scale. Research is required which explores the role of EHRM within these multi-dimensional patterns. Specifically, there is a need to investigate the contribution of the HRM function to this framework of distributed resources and assets, specialised operations and high level of interdependence. Key questions include: how does HRM help achieve flexible specialisation on a transnational basis?; in what ways do HRM managers enable the international firm to pursue innovation in a variety of market contexts?; if the transnational firm aspires to be an integrated network which links facilities, assets and practices, what are the implications for HRM professionals? Overall
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lateral conceptions of management, as opposed to fixed hierarchies are already confronting conventional orientations to managing people; doing so within an international firm suggests an additional set of problems. The second key area of investigation is equally demanding. Clearly the attention given to the rise of global markets and forms of competition has been considerable in recent years, as the previous pages confirm. However, while this global system has led to the 'denationalisation' of major firms and an increasing standardisation of managerial practices, one should not reach a premature conclusion that convergence has occurred. The precise form of international corporate activity exhibits considerable variation according to sector and internationalisation route. Indeed, some writers argue that the influence of national forms of economic organisation and their related institutions has a critical bearing on the way international firms seek to resolve some of conundrums mentioned earlier in this section. We agree with Whitley (1994) that, in particular, pan-European systems of economic co-ordination do not follow directly from the Single European Market. Rather, they should be seen 'as contingent phenomena arising from the interaction between national and regional forms of economic organisation and their institutional contexts' (Whitley, 1994: 102). More precisely, the need is to examine how international operations of firms in Europe relate to the relative strength of national institutions. In particular, the HRM function is a prime candidate for uncovering the impact of dominant, national configurations of politics, finance, labour and culture. HRM managers are in large part responsible for framing the response to such forces. The third area which is ripe for research relates to a set of immediate practical issues which underline the contingent nature of internationalisation. The list is at once formidable and in many ways surprising in the light of the dominant characteristics of the 'globalisation' literature. A strong example is the realisation that many domestic markets are essentially international. The question for HRM managers therefore, is how can they help in the translation of domestic competitive strengths to international market settings. Another example is the way, even in the new transnationals, the majority of employees are unlikely to be internationally mobile and local conditions of employment will continue to be the norm for some time. The research method employed to answer such questions has to be framed accordingly. If contingent relationships are to be examined and, to an extent, counter-intuitive assertions tested, then a combined approach is required. The need is even greater when one considers the lack of an established literature which might provide a secure framework. We suggest the departure point should be the comparative-intensive study of the HRM function in a small number of organisations with extensive European operations. The aim would be to explore in detail the pattern of inter440
nationalisation and the way such organisations resolve, in practice, the conundrums of the transnational firm. The first phase would also allow scrutiny of the contingent character of the relations between national institutions and the internationalisation process. It would also be the most appropriate means of assessing how some of the practical problems of HRM in the European firm are resolved at the operational level. The second phase of the research would build on the results of the first by moving from the particular to the general. The pattern of contingent relations found in intensively researched leading examples would then be the basis for survey instruments. The surveys would test such patterns across industrial, financial and service sectors. Above all, the intention of such a two step project would be to move beyond the single case studies and largely descriptive empirical studies which have dominated the literature on Europeanisation to-date.
Conclusion It is clear that there is still considerable disagreement over what internationalisation really signifies, within either a global or European context. The literature on EHRM, while voluminous, is fragmented, often descriptive and lacks any clear theoretical framework. Further complications arise because of the different intellectual foci of authors from different fields and disciplines. The variety of research methodologies employed by these researchers also causes significant problems of comparability. Most studies of how EHRM might develop in the future are descriptive and prescriptive. They often suggest that there is, essentially, a 'one best approach' to the development of either European or global HRM strategies. It is more than probable that the management of change of this magnitude, the development of EHRM strategies and Euro-managers will be much more complex than many of these authors appear to imply. We hope that we have identified some clear paths through this maze by clarifying what we mean by internationalisation, by providing an overview of our current understanding of EHRM, identifying gaps in our current body of knowledge and suggesting some clear directions for future research in this burgeoning field. Such an understanding will dearly be of benefit to both academic researchers and practitioners in organisations who will have to cope with the development of European HR strategies in the near future.
Note 1
This message was reinforced at a Conference on International Recruitment at the London Business School (January 10-11, 1994), sponsored by the international graduate recruitment firm EMDS. They reported a 'severe shortage' of graduates with suitable international credentials (i.e. languages or experience of working or studying in other countries).
Bibliography Business International Corporation (BIC) (1992), Managing
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People in Today's Global Economy, New York: Business International Corporation. Barham, K. and Devine, M. (1991), The Questfor the International Manager: A Survey of Global Human Resource Strategies. The Economist Intelligence Unit: Special Report No. 2098, London: Ashridge. Black, J., Mendenhall, M. and Oddou (1991), Towards a Comprehensive Model of International Adaptation: An Integration of Multiple Theoretical Perspectives, Academy of Management Review, 16(2): 291-318. Brewster, C. (1994), Developing a 'European' Model of Human Resource Management, International Journal of Human Resource Management, 4(4), 765-85. Brewster, C. and Bournois, F. (1991), Human Resource Management: A European Perspective, PersonnelReview, 20(6), 4-40. Brewster, C., Hegewisch, A. and Holden, L. (1992), The European Human Resource Management Guide, London: Harcourt Brace Jovanovich. Brislin, R. and Yoshida, T. (eds) (1994), Improving Intercultural Interactions: Modules for Cross-Cultural Training Programmes. London: Sage Publications. Contractor, F. and Lorange, P. (eds) (1989), CooperativeStrategies in International Business, Lexington: Heath. Evans, P., Doz, Y. and Laurent, A. (eds) (1989), Human Resource Management in International Firms, Basingstoke: Macmillan. Forster, N. (1992a) International Managers and Mobile Families: The Professional and Personal Dynamics of Transnational Career Pathing and Job Mobility in the 1990s, InternationalJournalof Human ResourceManagement, December, 3(3), 605-623. Forster, N. (1992b), The Challenges of 1993: The Response of British Companies to the Advent of the Single European Market, European Access, December, 6, 15-17. Forster, N. (1993), International Job Mobility and Relocation in the 1990s, The European Work and Organisational Psychologist, 2(3), 191-192. Forster, N. (1994), The Forgotten Employees? The Experience of Expatriates Returning to the UK, InternationalJournal of Human Resource Management, 5(4), 405-427. Guest, D. (1989), Personnel Management and Human Resource Management -- Can You Tell the Difference?, Personnel Management, January, 48-51. Hirst, P. (1993), Globalisation is Fashionable But is it a Myth?, The Guardian, March 23, 18. Johanson, J. and Mattsson, L.-G. (1988), Internationalization
in Industrial Systems -- A Network Approach. In Hood, N. and Vahlne, J.-E. (eds), Strategiesin GlobalCompetition, New York: Croom Helm. Kay, J. (1990), Identifying the Strategic Market, Business Strategy Review, Spring. Leeds, C., Kirkbride, P. and Durcan, J. (1994), The Cultural Context of Europe: A Tentative Mapping. In Kirkbride, P. (ed.), Human Resource Management in Europe: Perspectives for the 1990s, London: Routledge. Lei, D. and Slocum, J. (1992), Global Strategy, Competence Building and Strategic Alliances, California Management Review, 35(1), 81-97. Munton, A.G. and Forster, N. (1993), JobRelocation: Managing People on the Move. London: Wiley & Son. Pettigrew, A. and Whipp, R. (1992), Managing Change and Corporate Performance. In Cool, K., Neven, D. and Walter, I. (eds), European Industrial Restructuring in the 1990s, London: Macmillan. Rasanen, K. and Whipp, R. (1992), National Business Recipes. In Whitely, R. EuropeanBusiness Systems, London: Sage. Reich, R. (1991), The Workof Nations: PreparingOurselvesfor 21st Century Capitalism, London: Simon & Schuster. Scullion, H. (1994), Creating International Managers: Recruitment and Development Issues. In Kirkbride, P. (ed.), Human Resource Management in Europe: Perspectives for the 1990s, London: Routledge. Storey, J. (1992), Making European Managers: an Overview, Human Resource Management Journal, 3(1), 1-11. Sundaram, A. and Black, J. (1992), The Environment and Internal Organization of Multinational Enterprises, The Academy of Management Review, 17(4), 729-758. Tung, R. (1988), The New Expatriates: ManagingHuman Resources Abroad. Cambridge, Mass.: Ballinger. Whitley, R. (1992), European Business Systems: Firmsand Markets in their National Contexts, London: Sage. Whitley, R. (1994), The Internationalization of Firms and Markets: its Significance and Institutional Structuring, Organization, 1(1), 101-124. Wood, S. and Peccei, R. (1990), Preparing for 1992: Business versus Strategic Human Resource Management, Human Resources Management Journal, 1(1), 63-89.
Note The authors would welcome comments from both academics and practitioners working in the field, with a view to possible research collaborations in the future.
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442
NICK FORSTER, Cardiff Business School, University of Wales, Cardiff, Colum Drive, Cardiff CF1 3EU
RICHARD WHIPP, Cardiff Business School, University of Wales, Cardiff, Colum Drive, Cardiff CF1 3EU
Dr Nick Forster is Lecturer in Organisational Behaviour and Human Resource Management at the Cardiff Business School. He is the author of numerous articles on employee career development and job mobility and is co-author (with Tony Munton) of Job Relocation: Managing People on the Move. His current research interests include: the management of change, international job relocation, the development of international managers and human resource management in European countries.
Professor Richard Whipp is Professor of Human Resource Management and Deputy Director of Cardiff Business School. He has taught and researched at the Aston Management Centre, Warwick Business School, and held visiting appointments at the University of Uppsala, Sweden and the London Sshool of Economics. He has published widely on the subjects of innovation, the management of strategic change and competition, and the institutional analysis of sectors. His books include: Innovation in the Auto Industry (1986), Patterns of Labour: Work in Social and Historical Perspective (1990), Managing Change for Competitive Success (1991), and Competition and Chaos (1996).
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Future of EuropeanHuman
ResourceManagement: A ContingentApproach NICK FORSTER, Lecturer in Human Resource Management, Cardiff Business School; RICHARD WHIPP, Professor of Human Resource Management, Cardif Business School
The ability to cope with an increasingly open European Market, enhanced mobility between nation states and the threat of competition from the Far East will be highly prized organisational skills in the third millenium. Many commentators have argued that ‘Europeanisation’ (broadly defined) is an irreversible process and companies will have to cope proactively with this or perish. However, in this article we argue that many of these predictions are based on an uncritical acceptance of the ‘intemationalisation’ thesis, and on subjective assessments of possible future trends - rather than on sound empirical research within strong theoretical frameworks. Accordingly, this article takes a critical look at some widely-held assumptions about intemationalisation, Europeanisation and the (potential) development of European Human Resource Management (EHRM). It then goes on to suggest a framework of research which will be more able to capture future developments in EHRM and thereby facilitate more robust exchanges on strategic HRM with those companies operating in a European setting.
Introduction Over the last ten years, there has been an enormous growth in research on EHRM In spite of this, there is still considerable confusion about what EHRM actually is, how it is (re)forming and developing and what directions it might take in the future. Hence, this article has four objectives. First, to provide a short review of the literature covering the controversial subject of ‘internationalisation’ within a European context. Second, to provide a brief overview of our current understanding of developments in EHRM. Third, to identify gaps in our understanding of this dimension of international HRM; and fourth, to suggest a programme of research into EHRM based on a sound theoretical basis.
Globalisation and Internationalisation The late 1980s and early 1990s have seen an explosion of interest in international business. lntemationalisation has 434
stormed to the top of corporate agendas everywhere in the world. As they turn their attention to the international scene more and more companies are coming to realise that the international business environment of the 1990s and beyond is going to be fundamentally different from that of the past. (Barham and Devine, 1991: 1) As almost every factor of production - money, technology, factories and equipment - moves effortlessly across borders, the vey idea of a national economy is becoming meaningless, as are the notions of a national corporation, national capital, national products, and national technology. The same transformation is affecting every nation, some faster and more profoundly than others; witness Europe, hurtling towards economic union. (Reich, 1991: 8) In spite of the confident tone of these quotes, there are very mixed opinions about the extent to which organisations are becoming ‘internationalised’ at the present time, how this is to be measured and what factors might impede this apparently unstoppable process. In this context, there are perhaps five core questions which currently concern those who are interested in the field of international HRM. 1. 2.
3.
4. 5.
Are organisations becoming truly internationalised? If they are not, can we talk meaningfully of the emergence of international human resources management strategies? If we are moving towards true internationalisation how is this developing across different regions of the globe and at what pace? What is the impact of these developments on Europe? What are the implications of this for the study of human resource management in Europe?
Many authors (e.g. BIC, 1992) argue that internationalisationlglobalisation is both a clearly identifiable and irreversible process with growing numbers of companies intent on increasing their business presence in both continental European and World markets in the 1990s. For example, 62 per cent of a group of 171 British organisations surveyed in 1990, planned to expand their
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business interests into Europe (Wood and Peccei, 1990: 65). Short-term partnerships between multinational firms are also becoming increasingly common as are corporate 'buyouts' of potential competitors on foreign markets (Lei and Slocum, 1992). At the same time, international careers are becoming more common features of the working lives of professionals and managers all over the world. And, increasing numbers of graduates world-wide are now pursuing transnational career opportunities. All these authors argue that if companies pursue a strategy of transnationalisation they can achieve a number of strategic objectives simultaneously. They are able to: 1. 2.
3. 4.
5. 6. 7.
achieve economies of scale by spreading their main operating functions in a variety of localities; exploit cheap labour markets and by-pass what they regard as 'restrictive' trades unions or labour protection legislation (e.g. Japanese companies in the UK; French textile firms moving to Scotland; American clothing and shoe companies moving their manufacturing centres to the Far East and Mexico; BMW buying out Rover and so forth); exploit new foreign markets by having a handson presence in local regions; identify and utilise mutually beneficial strategic alliances with host companies more quickly and effectively; fully utilise the globalisation of computing and telecommunication systems; recruit and develop the very best staff from global labour markets; access financial investment from a variety of local financial sources.
These commentators recognise that there are many barriers to internationalisation but argue that this process, in Europe and further afield, is indeed proceeding apace, with more joint partnerships between organisations; the business expansion of many national companies into other regions; the growing mobility of professional/managerial employees; an increase in the numbers of graduates seeking employment outside their countries of origin and the development of identifiable international HRM strategies (Storey, 1992; BIC, 1992; Barham and Devine, 1991). In contrast, Hirst (1993) disagrees fundamentally with many of these assumptions. He argues that if a globalised economy exists it should have four basic features. First, it would be dominated by 'international world market processes' and domestic government economic policies would be subservient to these. Second, the world would be dominated by truly transnational corporations (TNCs), whose workforces would be recruited internationally and located wherever competitive advantage and market conditions dictate. And, unlike multinational corporations (MNCs), they would not have a principal national base. Third, a truly global economy would mean a severely weakened organised
labour movement. While the movement of capital would be global in nature, labour mobility would be localised. Fourth, economics and politics would 'pull apart'. By this Hirst means that there would be no dominant hegemonic state overseeing the world economic order. Hirst says that on these criteria, 'we are nowhere near a fully globalised economy, and are unlikely to get there'. How does he justify this? First, he cites the existence of local trading blocs like the EU and NAFTA as developments which will limit the globalisation of economic processes. These are big enough to allow the existence of localised commodity/product markets, labour markets, social provisioning and political control over such processes as labour law and industrial legislation. Second, he says that there is no such thing as a truly transnational company at the present time. All the major successful German, US, European and Japanese companies remain, in essence, MNCs. Third, the continuing upsurge of nationalist movements from the Baltic States, former Yugoslavia, the former Soviet Union and the Gulf are all powerful sociological processes which mitigate against the development of a truly internationalised economy with free trade, the free movement of goods, people and capital and an effective and influential internationalised Trades Union movement. Last,
Whilst the US can no longer provide the hegemonic stability it did in the Cold War, it remains the only power able to protect militarily the world open-trade system against ambitious, nationalistic regional powers. (Hirst, 1993) Hirst concludes by suggesting that while we do have a loosely structured internationalised economy there still are strong regional and localised economies. However, Hirst's contention that regionalised trading blocs will arrest the process of internationalisation is contested by Barham and Devine (1991: 2). They suggest that many companies will have actually to ensure against these recursive trends by actively developing trading links and job-creation activities outside these blocs (1991: 2). Even within these trading blocs many organisations are seeking to expand their operations outside their home nation-states (in the SEM for example). And, they cannot simply rely on recruiting local people to run these parts of the company because of the danger of the creation of localised 'fiefdoms' and restricted career opportunities for staff recruited locally. Barham and Devine cite a number of European company directors who argue that the only realistic way forward is to embrace the international route. Even those companies who choose to operate exclusively within a nation state will find that they are doing this in someone else's international market. BIC (1992), in a study of 25 companies from a number of countries, highlight clear changes in diversity management, recruitment and retention strategies, the development of new international management skills and the management of work/family conflicts in response to the challenges of internationalisation. Hu (1992: 55) also argues that there are no truly multinational companies currently in existence. There
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are national companies with international interests --
what he describes as 'bi-national enterprises'. This situation will continue as long as the nation state continues to be the main focus of people's sense of belonging and identity. In some markets, while the consumption of goods is indeed global, the production of these commodities is actually becoming more regionalised. An example of this is camera production -- most of the world's output is now based in the Far East (Kay, 1990: 2-4). And, even where production is localised (e.g. Coca-Cola) marketing and sales strategies are firmly based on a series of domestic markets. But, Reich (1991: 113; 138) regards this argument at fundamentally flawed. He describes numerous household name products which are 'produced' in home markets but with often over 50 per cent of the components which make them being imported from abroad. He rightly asks if any product, apart from food, can be described as purely mono-nafional in origin these days? One example he cites is an 'American' Pontiac car. The technical input and components which go to make the car and sell it, come from: Japan Germany, Taiwan, Singapore, Ireland, Barbados and Britain. In fact less than 40 per cent of the cost of the car is paid for in the US. Similarly patterns of share ownership and distribution are becoming increasingly fluid, opaque and internationalised. -
-
What is Actually Happening The idea that there is now one global, borderless, stateless world is clearly nonsense. There is no such thing as a truly global or truly European company at the present time. For example two of the largest MNCs, Pepsi-Cola and McDonalds, still have over half of their fixed assets in the US. Ford has 80 per cent. All MNCs still largely conform to their national cultures, the demands of their national governments and identify themselves as being 'British', 'American', 'French' or 'Japanese'. There are companies who operate in many areas of the globe, but none has relinquished its primarily national identity. However, it is quite clear that something called 'internationalisation' is continuing apace, with increasing numbers of companies going down the route of international trade some extensively, others with more regionalised operations, but this will be characterised by: -
1.
2. 3.
-
A centralisafion of economic power in regionalised trading blocs in North America, Europe and the Far East/Australia. Marked disparities between rich and poor regions of the globe. Growing disparities of income and access to work within nation states (cf Reich, 1991: 208-224; 252-253; 268-281).
It is against this background that researchers have been trying to make sense of the internationalisation debate and the implications of this for EHRM. In spite of the controversy over internationalisation, a number of 436
established research fields have continued their exploration of, inter alia, the evolution of international industries, the process of internafionalisation, the organisation of the international corporation, the trading and development of the 'European' or 'international' manager and the impact of international relocation on the professional and personal lives of employees. The work on international industries contains three divergent sub-sets with each employing very different disciplinary approaches. The first centres on the 'celebration' of the success of either international Japanese firms or, the experience of leading corporations in specific industries. In either case the emphasis is on perceived 'world class' performance and the standards of competition to be met by aspiring world players. There is a strong tradition in the US, going back to Abernathy's path-breaking work of the early 1980s of seeking to understand the way Japanese companies have understood, matched and then re-defined performance standards across industries world-wide. The second sub-set covers the work of industrial economists (mainly working in business schools). Here the examination of the operation of domestic industries has revealed the extent to which such arenas have become internationalised. In the UK cutlery or whitegoods industries, foreign competitors are highly active in domestic markets and the character of these fields is heavily international. The work of the economist Kay (1990) and others is relevant in that he raises fundamental questions about the boundaries and operation of industries and markets in Europe. He shows, for example, in a review of various industries how there may exist some European industries but relatively few European markets. The third sub-set is from a wholly different disciplinary tradition and is best described by the label, economic sociology. The central purpose of such scholars has been the institutional analysis of industries, in other words, to understand the role of social values and related practices in the evolution of sectors. This involves the study of not only labour markets or legal frameworks but also the operation of industry networks and the influence of recipe knowledge. Only recently has the attention of this school turned to international industries (Rasanen and Whipp, 1992). However, their intellectual depth and the emergence of European comparisons promises much (Whitley, 1992). The work on European regional industrial formations is a close cousin and especially relevant to any consideration of HRM activity. A wholly different literature concerns the problem of the internationalisation of firms. The majority of this work has been developed by Scandinavian academics, particularly at the Stockholm School of Economics, and concentrates on plotting the process of internationalisation (Johanson and Mattsson, 1988). In the past, the results have centred on Swedish organisations and their prodigious international expansion. More recently the subject has been rejuvenated in the light of both the Japanese success and the advent of the SEM.
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A related but apparently fast expanding field has grown up around the organisation of the international/national corporation. In the broadest sense this research seeks to understand the distinctive organisational capacities and internal processes fo such companies. The work of Doz is well regarded but has only touched on the character of HRM as a key constituent of these processes and tends to repeat many of the US nostrums on corporate HRM (Evans et al, 1989). International joint ventures and corporate alliances are reported to be the key means of meeting the demands of escalating R & D costs and meeting the competitive bases of international industries. In addition to this, there has been a steady growth in interest in the management of international career pathing, job mobility and relocation in the fields of developmental and occupational psychology and in management sciences. Researchers have looked at: how organisations can develop international managers (Tung, 1988; Barham and Devine, 1991; BIC, 1992); theoretical perspectives on the professional and personal outcomes of international job mobility (Forster 1993, 1992b; Blake et al, 1991); the adaptability of employees to new cultures and languages and the effect of training on adaptation (Brislin and Yoshida, 1994); the special problems faced by women expatriates and the impact of international relocation on dual-career couples (Forster, 1993); the problems faced by expatriates returning to their home countries (Forster, 1994) and important role which family dynamics can have on relocation outcomes (Munton and Forster, 1993: 113-137). In general, all of these researchers accept that internationalisation (broadly defined) is an identifiable and probably irreversible process despite the existence of strong regional and national forces which may slow this process down or, in some areas temporarily reverse the process (in Africa, the Middle East, South America and the old Eastern Bloc for example). This may even happen in Europe. A study by Forster (1992a) showed that many UK companies had adopted a 'wait and see' approach to the SEM or have cut back on their international expansion strategies in the current recession. But, this study also suggests that many of these companies see both the SEM and wider markets as environments in which they will have to become more involved in the long term. Other researchers have pointed to both marked regional and cultural variations within Europe which may impede internationalisation within Europe (Leeds et al, 1994) and to specific examples of transnational collaborations which required sensitive handling of cultural conflicts. For other authors the whole debate about whether a firm is truly a multinational enterprise (MNE) or not is relatively unproblematic. For example, Sundaram and Black (1992: 733) define an MNE as:
any enterprise that carries out transactions in or between two sovereign entities, operating under a system of decision making that permits influence over resources and capabilities, where
the transactions are subject to influence by factors exogenous to the home country environment of the enterprise. If we expect this broad definition, a way forward in this debate may be to stop trying to be prescriptive (or even self-serving) about these trends and recognise instead that there are a number of developments occurring simultaneously. In other words, let us simplify what it is we are trying to get to grips with here in a European context. This means that a number of different kinds of companies can occupy home, regional and international markets. These can include: purely home based companies; home based companies with limited regional operations; home based companies with extensive regional operations; home based companies with limited global operations; home based companies with extensive regional and global operations; transnational organisations with highly decentralised operations and, lastly, truly globalised corporations. Reich (1991: 110-118) suggests a helpful analogy to help us understand this. The influence of these companies and the range of their activities can be compared to 'webs' of influence of differing size and structure which are both interweaving with and being interwoven by other 'webs' of influence. Keeping tabs on the changing nature of these 'webs' is obviously an extremely difficult task for both academics and personnel practitioners. But, by simplifying what we are trying to look at should enable the task of conceptualising what HRM currently 'is' in these different types of European companies considerably easier. This, as Rasanen and Whipp (1992: 19) argue, means that we should look at each country/ sector from a variety of perspectives and employ different research strategies. This means that we can analyse EHRM by sector (or 'industry'), at different sized companies, at different levels as well as by region and by country. This makes considerable sense if we remember that the EC's programme for removing trade barriers is not essentially about creating a single market but is also promoting measures to create single industries which will often continue to operate from national markets (Kay, 1990: 8). The operations of some European companies will remain national or within a limited regional area but there is clear evidence that many have embraced and are now pursuing an international route. The success of companies in this arena will depend on a number of other factors which are outside their immediate control, including: the basic infrastructures within which they operate; the health of, and levels of investment in, national education systems, the availability of skilled labour, the numbers and quality of the graduate students they can employ and the economic and social policies which their governments pursue in the 21st century (Reich, 1991: 225-240; 254-258). The implications of all these developments for the development of European HRM strategies and the 'Euro-manager' remains relatively unexplored (Contractor and Lorange, 1989). The implications of this for the study of HRM in Europe are discussed below.
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Human Resource Management in Europe HRM in Europe is complex. There is no other region in the world where so many different histories, cultures and languages exist in such a relatively small space. Each European country has its own approach to the employment of people; its own laws, institutions, trades unions, education and training provisions, and managerial culture. In many European countries these approaches operate at a number of geographical levels. Overlapping this complicated picture there is now the unique supranational legislation of the European Community. (Brewster et al., 1992: 2) Before discussing what HRM in Europe is, there is a need to clarify our current understanding(s) of 'HRM'. It is an idea which has gained considerable currency in organisational studies over the last decade but it has come under growing criticism for being imprecise, prescriptive and, in essence, little more than old style 'personnel management' dressed up in new clothes. It may disguise, but has not done away with, traditional forms of industrial conflict, management control and exploitation. There is, however, general agreement that there are two basic types of HRM -- the 'hard' and 'soft' approaches. The hard approach emphasises the need to treat people like any other resource -- to be recruited and used as cheaply as possible. This approach, essentially, emphasises that HRM exists to serve strategic business needs. In contrast, the other approach emphasises that people are resources quite unlike any other, whose innovative qualities, motivation, skills and commitment can create real competitive advantage if they are nurtured, trained, utilised and rewarded effectively. Can we speak meaningfully of EHRM in either its 'soft' or 'hard' forms? The short answer to this question is a resounding 'No'. This is because there is a huge variety of perspectives and practices both within and among the nation states of Europe. Two editions of Employee Relations in 1992 (Volume 14: Nos 4 and 5), highlight the very different histories of and approaches to, HRM in a variety of countries in the EU. In a review of the Price Waterhouse/Cranfield Project on EHRM, Brewster and Bournois (1991: 10-11) also point to wide variations i n t h e ways that different European regions conceptualise and implement HRM strategies. These differences should not surprise us because they, 'can only be understood in the context of each national culture and its manifestations in history, law, institutions and trade union and employing structures'. There are marked variations in how managers view their roles in terms of developing dose or very distant relationships with colleagues and subordinates, how leadership and authority is perceived -- from highly autocratic to laissezfaire or democratic. There are also widespread differences in the influence'of HRM functions within organisations, patterns of ownership, recruitment practices, training and career development policies, the ways in which employees are rewarded and in terms of trade union recognition and influence (Brewster, 438
1994). And, of course, there are still many variations in the role which the State plays in regulating business practices and in enforcing employment laws. These and other differences are reflected in the many varieties of HRM currently practised in Europe. A further complicating factor is that there are identifiable differences in the way that HRM is both conceptualised and practised in Europe when compared to the US. So it is inappropriate to continue to think in American paradigmatic terms if we are trying to conceptualise what EHRM is. We need to develop a more distinctive Eurocentric conception. However, there are common issues in EHRM which all enterprises, public and private, will have to respond to effectively in the next decade. These include: the threat of compensation from North America and the Far East; the provisions of the Social Charter on employee rights; changing demographics (with a reduction in the numbers of elderly citizens to be supported; changes in the structure of 'the family'; the radical impact of new technologies; the paradox of high unemployment and skills shortages coexisting in the Community; the growth of women in fulltime career streams; the removal of barriers to employee mobility and relocation in the Community (e.g. The Directive on Mutual Recognition of Professional Qualifications and the Erasmus Programme); the need to recruit, train and retain increasing skilled workforces; the need to increase flexibility in workforces and, as discussed earlier a need to operate effectively in an increasingly internationalised global economy. These common challenges suggest that a recognisably 'European' HRM philosophy will develop over the next ten to twenty years (Brewster, 1994: 80-84). In order to respond to these challenges, Barham and Devine (1991) suggest that companies will have to implement a number of common HRM innovations. At the top of many corporate agendas will be the need to manage change effectively -- a combination of environmental assessment, leading change, linking strategic and operational change, utilising human resources effectively (both as assets and liabilities) and ensuring coherence (Pettigrew and Whipp, 1992: 228). Naturally, the success of any change programme which embraces internafionalisafion is dependent on a firm's employees. Companies will only be able to manage change effectively if they are able to link HRM to corporate strategy by first understanding the company's current stance on management development; knowing where it is and where it wants to get to; possess a European/worldwide audit of their management resources and create core cultural values of internationalism throughout their workforces. Second, they will have to develop a number of core skills which their managers will need to learn in order for their organisations to be successful in these new international environments (Barham and Divine, 1991: 21). Organisations will also have to consider the development of other skills such as leadership in an international context, networking skills, life-long learning abilities,
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highly-developed interpersonal competencies, cultural and linguistic adaptability and helping women to attain an equal role in international career opportunities. It is also very clear that more consideration will have to be given to the problems faced by women, dual-career couples and families in the management of international relocation and repatriation (Forster, 1992a). The urgent need to develop these skills is further reinforced by recent research which shows that many companies have experienced a shortage of international managers and over 70 per cent believe that they will experience shortages in the future (Scullion, 1994: 203).1 Some companies believe that one of the best ways forward is to develop 'Euro-Managers' -- individuals who can transcend national boundaries and develop the transnational firm 'organically'. To develop these they will need to: recruit, train and retain the right people; have stable succession planning systems in place to ensure the availability of sufficiently qualified people at the appropriate times; ensure that managerial/technical excellence is widespread throughout the company; develop learning packages to help employees cope positively and effectively with international assignments; establish HRM as a core component of general organisational strategy; develop a corporate culture which emphasises a total commitment to innovation, quality, customer service and an ability to adapt positively to change in an international arena. Some European companies are now experimenting with different types of human resource activities as a means of developing these sources of international competitive advantage (including, among others, Fiat, MercedesBenz, Unilever, ICI, IBM, Ciba-Geigy and BP). In terms of the development of the international manager, these companies' strategies indicate that they are actually developing different kinds staff who can operate in a variety of bi- or multinational environments. These can include: the purely home based manager; the multicultural team member who works on a series of international projects; the internationally mobile manager who makes frequent international job moves; the traditional expatriate who carries the home country's culture with him/her on relatively lengthy postings and the transnational manager who is a truly global citizen, linguistically and culturally (Storey, 1992: 3-4). This approach reminds us of Reich's 'web' analogy. We would argue that we should be less concerned about trying to identify what EHRM 'is' but instead focus on changing HRM practices in a variety of enterprises. In other words, we should be adapting a contingent approach to the study of the future of HRM in Europe by looking at what companies are actually doing at the present time in an uncertain and turbulent environment.
Future Research Areas In order to understand how EHRM strategies might be developing and how HR managers can cope effectively with these changes, we need to answer the following kinds of questions:
What does, or rather do, HRM strategies in firms committed to an international route look like? Are there similar patterns of development across regions and industrial sectors? Do these EHRM strategies differ from imported American models of HRM? How do these strategies differ from companies with purely national operations? How can HRM help a company develop as an international firm? Is international job mobility an effective way of developing 'Euro-managers'? Do these strategies work for companies? What problems arise? How are these policies translated into recruitment, training, staff development, reward systems, and mobility and relocation policies? One approach is to adopt a contingency model and look at HRM developments in small, medium, national and European-wide companies and also examine cultural, sectoral and regional differences. We need to know if 'good practice' in the development of international HRM strategies transcends national, regional and cultural differences. We need to know how these organisations learn to develop new effective HRM strategies. Do they get this information from other companies? From academics? From consultants? In order to answer such a list of questions, future research will have to be framed carefully to reflect the range of contingent features discussed above. Broadly speaking this includes the diversity of development in the core characteristics of the international firm, the persistent variety of national business systems, and the specific requirements of different types of firm. Each of these three areas produces key research issues. The research on the international corporation and global competition, as we have argued in this paper, has produced a rich vein of results. Yet, as the attention devoted to the character of the international firm has increased, no corresponding growth in research has occurred which locates the HRM function at the heart of such corporate evolution. Such relative neglect runs the risk of missing a key opportunity. The conflicting strategic demands on the international firm are extreme. As the previous sections indicate, the need is for such firms to be, simultaneously, nationally responsive to national differences in consumer preferences and able to mount a high level of integration in order to achieve economies of scale. Research is required which explores the role of EHRM within these multi-dimensional patterns. Specifically, there is a need to investigate the contribution of the HRM function to this framework of distributed resources and assets, specialised operations and high level of interdependence. Key questions include: how does HRM help achieve flexible specialisation on a transnational basis?; in what ways do HRM managers enable the international firm to pursue innovation in a variety of market contexts?; if the transnational firm aspires to be an integrated network which links facilities, assets and practices, what are the implications for HRM professionals? Overall
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lateral conceptions of management, as opposed to fixed hierarchies are already confronting conventional orientations to managing people; doing so within an international firm suggests an additional set of problems. The second key area of investigation is equally demanding. Clearly the attention given to the rise of global markets and forms of competition has been considerable in recent years, as the previous pages confirm. However, while this global system has led to the 'denationalisation' of major firms and an increasing standardisation of managerial practices, one should not reach a premature conclusion that convergence has occurred. The precise form of international corporate activity exhibits considerable variation according to sector and internationalisation route. Indeed, some writers argue that the influence of national forms of economic organisation and their related institutions has a critical bearing on the way international firms seek to resolve some of conundrums mentioned earlier in this section. We agree with Whitley (1994) that, in particular, pan-European systems of economic co-ordination do not follow directly from the Single European Market. Rather, they should be seen 'as contingent phenomena arising from the interaction between national and regional forms of economic organisation and their institutional contexts' (Whitley, 1994: 102). More precisely, the need is to examine how international operations of firms in Europe relate to the relative strength of national institutions. In particular, the HRM function is a prime candidate for uncovering the impact of dominant, national configurations of politics, finance, labour and culture. HRM managers are in large part responsible for framing the response to such forces. The third area which is ripe for research relates to a set of immediate practical issues which underline the contingent nature of internationalisation. The list is at once formidable and in many ways surprising in the light of the dominant characteristics of the 'globalisation' literature. A strong example is the realisation that many domestic markets are essentially international. The question for HRM managers therefore, is how can they help in the translation of domestic competitive strengths to international market settings. Another example is the way, even in the new transnationals, the majority of employees are unlikely to be internationally mobile and local conditions of employment will continue to be the norm for some time. The research method employed to answer such questions has to be framed accordingly. If contingent relationships are to be examined and, to an extent, counter-intuitive assertions tested, then a combined approach is required. The need is even greater when one considers the lack of an established literature which might provide a secure framework. We suggest the departure point should be the comparative-intensive study of the HRM function in a small number of organisations with extensive European operations. The aim would be to explore in detail the pattern of inter440
nationalisation and the way such organisations resolve, in practice, the conundrums of the transnational firm. The first phase would also allow scrutiny of the contingent character of the relations between national institutions and the internationalisation process. It would also be the most appropriate means of assessing how some of the practical problems of HRM in the European firm are resolved at the operational level. The second phase of the research would build on the results of the first by moving from the particular to the general. The pattern of contingent relations found in intensively researched leading examples would then be the basis for survey instruments. The surveys would test such patterns across industrial, financial and service sectors. Above all, the intention of such a two step project would be to move beyond the single case studies and largely descriptive empirical studies which have dominated the literature on Europeanisation to-date.
Conclusion It is clear that there is still considerable disagreement over what internationalisation really signifies, within either a global or European context. The literature on EHRM, while voluminous, is fragmented, often descriptive and lacks any clear theoretical framework. Further complications arise because of the different intellectual foci of authors from different fields and disciplines. The variety of research methodologies employed by these researchers also causes significant problems of comparability. Most studies of how EHRM might develop in the future are descriptive and prescriptive. They often suggest that there is, essentially, a 'one best approach' to the development of either European or global HRM strategies. It is more than probable that the management of change of this magnitude, the development of EHRM strategies and Euro-managers will be much more complex than many of these authors appear to imply. We hope that we have identified some clear paths through this maze by clarifying what we mean by internationalisation, by providing an overview of our current understanding of EHRM, identifying gaps in our current body of knowledge and suggesting some clear directions for future research in this burgeoning field. Such an understanding will dearly be of benefit to both academic researchers and practitioners in organisations who will have to cope with the development of European HR strategies in the near future.
Note 1
This message was reinforced at a Conference on International Recruitment at the London Business School (January 10-11, 1994), sponsored by the international graduate recruitment firm EMDS. They reported a 'severe shortage' of graduates with suitable international credentials (i.e. languages or experience of working or studying in other countries).
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People in Today's Global Economy, New York: Business International Corporation. Barham, K. and Devine, M. (1991), The Questfor the International Manager: A Survey of Global Human Resource Strategies. The Economist Intelligence Unit: Special Report No. 2098, London: Ashridge. Black, J., Mendenhall, M. and Oddou (1991), Towards a Comprehensive Model of International Adaptation: An Integration of Multiple Theoretical Perspectives, Academy of Management Review, 16(2): 291-318. Brewster, C. (1994), Developing a 'European' Model of Human Resource Management, International Journal of Human Resource Management, 4(4), 765-85. Brewster, C. and Bournois, F. (1991), Human Resource Management: A European Perspective, PersonnelReview, 20(6), 4-40. Brewster, C., Hegewisch, A. and Holden, L. (1992), The European Human Resource Management Guide, London: Harcourt Brace Jovanovich. Brislin, R. and Yoshida, T. (eds) (1994), Improving Intercultural Interactions: Modules for Cross-Cultural Training Programmes. London: Sage Publications. Contractor, F. and Lorange, P. (eds) (1989), CooperativeStrategies in International Business, Lexington: Heath. Evans, P., Doz, Y. and Laurent, A. (eds) (1989), Human Resource Management in International Firms, Basingstoke: Macmillan. Forster, N. (1992a) International Managers and Mobile Families: The Professional and Personal Dynamics of Transnational Career Pathing and Job Mobility in the 1990s, InternationalJournalof Human ResourceManagement, December, 3(3), 605-623. Forster, N. (1992b), The Challenges of 1993: The Response of British Companies to the Advent of the Single European Market, European Access, December, 6, 15-17. Forster, N. (1993), International Job Mobility and Relocation in the 1990s, The European Work and Organisational Psychologist, 2(3), 191-192. Forster, N. (1994), The Forgotten Employees? The Experience of Expatriates Returning to the UK, InternationalJournal of Human Resource Management, 5(4), 405-427. Guest, D. (1989), Personnel Management and Human Resource Management -- Can You Tell the Difference?, Personnel Management, January, 48-51. Hirst, P. (1993), Globalisation is Fashionable But is it a Myth?, The Guardian, March 23, 18. Johanson, J. and Mattsson, L.-G. (1988), Internationalization
in Industrial Systems -- A Network Approach. In Hood, N. and Vahlne, J.-E. (eds), Strategiesin GlobalCompetition, New York: Croom Helm. Kay, J. (1990), Identifying the Strategic Market, Business Strategy Review, Spring. Leeds, C., Kirkbride, P. and Durcan, J. (1994), The Cultural Context of Europe: A Tentative Mapping. In Kirkbride, P. (ed.), Human Resource Management in Europe: Perspectives for the 1990s, London: Routledge. Lei, D. and Slocum, J. (1992), Global Strategy, Competence Building and Strategic Alliances, California Management Review, 35(1), 81-97. Munton, A.G. and Forster, N. (1993), JobRelocation: Managing People on the Move. London: Wiley & Son. Pettigrew, A. and Whipp, R. (1992), Managing Change and Corporate Performance. In Cool, K., Neven, D. and Walter, I. (eds), European Industrial Restructuring in the 1990s, London: Macmillan. Rasanen, K. and Whipp, R. (1992), National Business Recipes. In Whitely, R. EuropeanBusiness Systems, London: Sage. Reich, R. (1991), The Workof Nations: PreparingOurselvesfor 21st Century Capitalism, London: Simon & Schuster. Scullion, H. (1994), Creating International Managers: Recruitment and Development Issues. In Kirkbride, P. (ed.), Human Resource Management in Europe: Perspectives for the 1990s, London: Routledge. Storey, J. (1992), Making European Managers: an Overview, Human Resource Management Journal, 3(1), 1-11. Sundaram, A. and Black, J. (1992), The Environment and Internal Organization of Multinational Enterprises, The Academy of Management Review, 17(4), 729-758. Tung, R. (1988), The New Expatriates: ManagingHuman Resources Abroad. Cambridge, Mass.: Ballinger. Whitley, R. (1992), European Business Systems: Firmsand Markets in their National Contexts, London: Sage. Whitley, R. (1994), The Internationalization of Firms and Markets: its Significance and Institutional Structuring, Organization, 1(1), 101-124. Wood, S. and Peccei, R. (1990), Preparing for 1992: Business versus Strategic Human Resource Management, Human Resources Management Journal, 1(1), 63-89.
Note The authors would welcome comments from both academics and practitioners working in the field, with a view to possible research collaborations in the future.
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NICK FORSTER, Cardiff Business School, University of Wales, Cardiff, Colum Drive, Cardiff CF1 3EU
RICHARD WHIPP, Cardiff Business School, University of Wales, Cardiff, Colum Drive, Cardiff CF1 3EU
Dr Nick Forster is Lecturer in Organisational Behaviour and Human Resource Management at the Cardiff Business School. He is the author of numerous articles on employee career development and job mobility and is co-author (with Tony Munton) of Job Relocation: Managing People on the Move. His current research interests include: the management of change, international job relocation, the development of international managers and human resource management in European countries.
Professor Richard Whipp is Professor of Human Resource Management and Deputy Director of Cardiff Business School. He has taught and researched at the Aston Management Centre, Warwick Business School, and held visiting appointments at the University of Uppsala, Sweden and the London Sshool of Economics. He has published widely on the subjects of innovation, the management of strategic change and competition, and the institutional analysis of sectors. His books include: Innovation in the Auto Industry (1986), Patterns of Labour: Work in Social and Historical Perspective (1990), Managing Change for Competitive Success (1991), and Competition and Chaos (1996).
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