TRANSFER OF HRM PRACTICES AROUND THE WORLD1 Chris Brewster Paper for the conference: Human resource Management

across Countries: the cultural dimension Athens University of Economics and Business October 17, 2002 Outline The meaning and importance of HRM HRM in an international context Convergence and divergence Integration and differentiation What is transferred; what is not Conclusions Abstract This paper briefly examines the notion of HRM and its different meanings and emphasises its importance. It argues that increasing internationalisation raises two key, linked, issues for HR specialists. On the first of these, the question of how different HRM is in different countries, both similarities and differences are found and the differences are significant. On the second issue, the question of how organisations that operate internationally can afford to manage HRM the same way in different countries by transferring successful HRM practices from one to another, the paper finds that there are arguments, and evidence, on both sides. What organisations attempt to transfer, and how they do it, are crucial.

This paper draws substantially on Human Resource Management: a universal concept? by Wolfgang Mayrhofer, Michael Morley and Chris Brewster in Mayrhofer, Morley and Brewster (eds) 2003 Human Resource Management in Europe Butterworth-Heineman, London (forthcoming); and Brewster, C., (2002) "HRM Practices in Multinational Enterprises", in Gannon, M.J. and Newman, K., Handbook of Cross-Cultural Management, Blackwell

The meaning and importance of HRM How are, and how should, people be managed? This is one of the most fundamental questions to be posed within the field of business management. After all, effective employee management is a major, if not the major, determinant of organisational success. The people doing the work are the major operating cost for nearly all organisations. And, on the other side of the equation, people are increasingly the key source of competitive advantage or effective operation. The questions about how people are managed, therefore, are the substance of "human resource management" (HRM) and key to organisational success.

HRM in an international context Management theorists have long argued that if one could develop management systems that could be proved to be effective, these could be implemented universally. In other words there is a belief that there is "a right way" of managing people that can be implemented by management consultants throughout the world. It has been pointed out elsewhere that the development of theories of HRM in the US tended to rely on the examples of a small number of large private sector firms; was based on a culturally typical US independent, individualistic, "frontiersman" mentality; suffered from a poorly thought out approach to rigorous theory; failed to link theory to general practice (or vice versa); and relied heavily for prescription on selected aspects of what was thought to be Japanese practice (Guest 1990; Poole 1990; Pieper 1990; Bournois 1991; Beaumont 1991; Brewster 1995; Legge 1995). Because of the hegemony of the USA in management thinking, their visions of HRM have tended to be the touchstone for HRM in other countries. However, the US theories, with their implications of virtually autonomous organisations, sit uncomfortably with the European reality. And this raises the question: Is the American vision of HRM a universal one, that will apply anywhere in the world, or is it a US-bounded one? For many years, institutional theory has directed the attention of students of organisational behaviour to the influences of social processes, beyond the organisations boundaries. Summarising the institutional perspective, Hoffman (1999, 351) states that A firms action is seen not as a choice among an unlimited array of possibilities determined by purely internal arrangements, but rather as a choice among a narrowly defined set of legitimate options. Obtaining legitimacy is not simply a matter of obeying extant legislation, it also involves abiding by the unwritten, tacit codes peculiar to the firms setting. Thus firms are located in settings not only of legislation but also of culture and social norms to which they have to react. In short, culture provides meaning and purpose, rules (including legislation), and norms (ethical standards). Each nation or region constitutes a unique or idiosyncratic institutional setting that skews firm behaviour in particular ways. From an institutional perspective, given that HRM is a product of the North American

institutional setting, whether it is readily transferable to the European setting remains a conceptual and empirical challenge.

Convergence and divergence The position is summed up by Clark and Mallory (1996: 11) as follows: American notions of HRM[since they are culturally bounded] may have little, or limited, relevance to nations which do not possess identical or similar cultures And there are clear differences: in Europe HRM is less dependent, companies have less autonomy and freedom of action, trade unionism is more important, the social partners have more influence, legal regulations are more important, and there is a stronger tradition of employee involvement It is also true that whilst there are differences between the way HRM is conceptualised and practiced in the USA and Europe (Pieper, 1990; Brewster & Bournois, 1991; Brewster & Hegewisch, 1994; Hegewisch and Brewster, 1993), there are also substantial regional differences within Europe authors (Filella, 1991; Brewster and Larsen, 1992, 2000; Clark and Mallory, 1996), and substantial differences between countries even within the same region (Brewster, Mayrhofer and Morley 2000; Brunstein 19XX ; ; Bures & Vloeberghs, 2000; Cazal and Peretti, 1992; Clark and Pugh, 1999 Fenton-OCreevy, 2001). Sparrow and Hiltrop (1994) note the role of four dimensions (cultural factors, institutional factors, differences in business structure and system, and factors related to the roles and competences of HRM professionals), further divided into 23 factors, resulting in distinctive national patterns of European HRM. But having established that there are differences another key question arises: are these differences increasing or decreasing? Is it perhaps the case that as world becomes more global HRM becomes more similar? Or might different regions even be becoming more distinct? Convergence versus Divergence the Main Arguments

More precisely, given that policies of market deregulation and state decontrol are spreading from the US to Europe, are European firms are moving towards a North American HRM approach to managing their personnel? Or is it the case that, owing to the ongoing economic and political integration of European Union countries, a convergence towards a distinctly European practice is underway? There is, of course, a third possibility: that European firms are so locked into their respective idiosyncratic national institutional settings that no common model is likely to emerge for the foreseeable future. We briefly explore the convergence and divergence arguments. As part of this examination we consider two distinct versions of the convergence thesis, the free market US model and the institutional European model. Although these two theses of convergence are very different from one another there is one underlying similarity. They all view firms' latitude in regard to selecting and developing personnel management strategies as being shaped, governed and given impetus by a mix of factors which may be broadly defined as either technological, economic or institutional. The convergence versus divergence debate has been an ongoing strand of the literature on management in general for decades and this has more recently been reflected in HRM theorising. Proposition 1: The Market Forces or US Convergence Model In brief, the convergence thesis argues that differences in management systems have arisen as a result of the geographical isolation of businesses. The consequent development of differing beliefs and value orientations of national cultures are being superseded by the logic of technology and markets which requires the adoption of specific and, therefore, universally applicable management techniques (Kidger, 1991). Kerr, Dunlop, Harbison & Myers (1960) believed that not only was the convergence of systems of industrial relations inevitable, but that the convergence would be toward US practices. They argued that management systems represented attempts to manage technology as efficiently as possible. As the United States of America was the technological leader, it followed that US management practices represented current best-practice, which other nations would eventually seek to emulate as they sought to

adopt US technology. Thus "patterns in other countries were viewed as derivative of, or deviations from, the US model" (Locke, Kochan & Piore, 1995: xvi). Characteristic of these various convergence perspectives is their functionalist mode of thought. The practice of management is explained exclusively by reference to its contribution to technological and economic efficiency. Thus it is a dependent variable that evolves in response to technological and economic change, rather than with reference to the socio-political context, so that "much of what happens to management and labor is the same regardless of auspices" (Kerr, 1983). More recently, the convergence thesis has received support from transaction cost economics which also contends that at any one point of time there exists a best solution to organising labour (Williamson, 1975, 1985). "Most transaction cost theorists argue that there is one best organisational form for firms that have similar or identical transaction costs" (Hollingsworth & Boyer, 1997:34). Likewise, parts of the industrial organisation literature argue that firms tend to seek out and adopt the best solutions to organising labour within their product markets, long term survival being dependent on their being able to implement them (Chandler, 1962, 1977; Chandler & Daems, 1980). Thus there is a tendency for firms to converge towards similar structures of organisation. Arguably, there is greater coherence in the US than elsewhere about what constitutes good HRM: a coalescing of views around the concept of high performance work systems. These have been characterised by the US Department of Labor (1993) as having certain clear characteristics: careful and extensive systems for recruitment, selection and training; formal systems for sharing information with the individuals who work in the organisation; clear job design; local level participation procedures; monitoring of attitudes; performance appraisals; properly functioning grievance procedures; and

promotion and compensation schemes that provide for the recognition and financial rewarding of high performing members of the workforce.

It would appear that, whilst there have been many other attempts to develop such lists (see eg Storey 1992a; 1995), and they all differ to some extent, few US experts in HRM would find very much to argue with in this list. Researchers and practitioners in other countries, however, find such a list contrary to experience and even to what they would conceive of as good practice. Thus, they might argue for sharing information with representative bodies such as trade unions or works councils, for flexible work boundaries, for group reward systems, etc. And they might argue that attitude monitoring, appraisal systems etc are culturally inappropriate. Many US multinationals and others, however, take the view that the US list contains necessarily superior practices. The US is the worlds most successful economy and therefore its organisational practices should be followed by every organisation that wishes to be as successful. Competitive market forces will ensure that those organisations that do not follow this model will lose out to those who do. The model assumes that anything (laws, trade unions) which restricts management is bad and must be opposed. For example Friedman, Hatch & Walker (1998:25) of Arthur Andersen state: Managers must be free to manage. Our experience all over the world shows that the systems used for developing human capital can make a critical difference in the survival of and success of companies. Technology and markets are changing so fast that companies need to be in a state of change and readiness, and they need the freedom and flexibility to change in every area from recruitment to compliance. They must invest in their human capital but the nature of their investment must be driven by market and company strategy, not government policy. (or presumably the views of their employees or the trade unions). Proposition 2: The Institutional or European Convergence Model

Whereas the market forces model regards developments in the US as a precursor of universal developments, it has been contended that within Europe there are powerful non-market, institutional, factors of precisely the kind that the American commentators warn us against. Not only do these make the central features of US HRM inappropriate to European organisations, they are arguably generating a specifically European model of convergence in HRM (Brewster, 1995a). Let us briefly recap the nature of these factors. In Europe organisations are constrained at a national level, by culture and legislation and at the organisational level by trade union involvement and consultative arrangements. Beyond this, the countries of the European area have agreed to accept common standards and legislation in significant areas of social conduct, including those of employment: for the countries in the European Union this legislation overrides national legislation. The legislative restrictions on employment contracts in European countries are much more extensive than are similar legal requirements in the USA. It is clear that, in general, European countries are more heavily unionised than the United States, and indeed most other countries. Trade union membership and influence varies considerably by country, of course, but is always significant. Indeed in many European countries the law requires union recognition for collective bargaining. In most European countries many of the union functions in such areas as pay bargaining, for example, are exercised at industrial or national level, - outside the direct involvement of managers within individual organisations - as well as at establishment level. Thus in Europe, unlike in the US, firms are likely to deal with well-founded trade union structures. It is worth noting that studies of HRM in the US have tended to take place in the nonunion sector (Beaumont 1991). In fact a constant assumption in research programmes in the US has been the link between HRM practices and non-unionism (see, e.g. Kochan et al 1984; Kochan et al 1986). "In the US a number of.... academics have argued that HRM [the concept and the practice] is anti-union and anti-collective bargaining" (Beaumont 1991a, p.300).

We have also indicated that state involvement in HRM in Europe is not restricted to the legislative role. Compared to the USA the state in Europe has a higher involvement in underlying social security provision. Equally it has a more directly interventionist role in the economy, provides far more personnel and industrial relations services and is a more substantial employer in its own right by virtue of a more extensive government-owned sector. Finally, we would also point to developments at the level of the European Union or the European Economic Area which impact upon all organisations in Europe. In a historically unique experiment, European Union countries have agreed to subordinate national legislative decision-making to European level legislation. These developments have indirect effects upon the way people are managed and direct effects through the EU's adoption of a distinct social sphere of activity. In particular it would appear that the European Community Social Charter and its associated Social Action Programme is having an increasing legislative influence on HRM. Given these circumstances, it is unsurprising that there have been calls for specifically European approaches (Thurley and Wirdenius 1991; Brewster and Bournois 1991). Proposition 3: Divergence in Europe Opposed to this institutionalist thesis of convergence in European HRM are a number of approaches which emphasise the existence of broad, relatively inert, distinctions between the various national contexts of personnel management within Europe which make convergence to a European model of HRM problematic. Attempts have also been made to identify country groupings within Europe. Due, Madsen & Jensen (1991) distinguish between, on the one hand, countries such as the UK Ireland and the Nordic countries in which the state has a limited role in industrial relations. On the other hand there are the Roman-Germanic countries, such as France, Spain, Germany, Italy, Belgium, Greece and the Netherlands in which the state functions as an actor with a central role in industrial relations. A particular feature of Roman-Germanic countries is their "comprehensive labour market legislation governing various areas, such as length of the working day (and) rest periods" (Due,

Madsen & Jensen, 1991:90). In other words, unlike either the Anglo-Irish or the Nordic systems, the latitude for firm-level decision making in Roman-Germanic countries in regard to employment issues is relatively low. Hollingsworth & Boyer (1997) focus on a different dimension, that of the presence or absence of communitarian infrastructures that manifest themselves in the form of strong social bonds, trust, reciprocity and co-operation among economic actors and which they regard as being "essential for successful flexible systems of production" (1997:27). They distinguish between social contexts characterised by self-interest and those in which "obligation and compliance with social rules are the guiding principles shaping human actions" (Hollingsworth & Boyer, 1997:8).2 It is their contention that because of the pervasive market mentality that limits trust and co-operation between workers and managers within firms, as well as between firms and their suppliers, the UK (and likewise the USA) does not have the social environment necessary for a successful flexible social system of production. In contrast, German and Scandinavian firms are embedded in an environment in which the market mentality is less pronounced with trusting relationships and communitarian obligations more prevalent thereby making flexible production systems a viable alternative. Finally, Hollingworth & Boyer distinguish France as an environment that, while not having a market mentality, is nevertheless deficient in communitarian infrastructures. Instead, the public authorities play a dirigeste role in the economy, enabling France to partially mimic flexible systems of production. "But for flexible forms of production to become widespread, firms must be embedded in a social environment very different from that which exists in most of France" (Hollingsworth & Boyer, 1997:27). That is an environment in which employer-employee conflict is endemic and there is an absence of "a spirit of generous co-operation" (Maurice, Sellier & Silvestre, 1986:86). Other authors have found different groupings. Filella (1991), looking at the early data used in this book in relation to pay systems, identified a Latin model. Brewster and Larsen (1992), using the same data, found a Latin, a Central European and a Nordic model or, later, a Northern European model (Brewster and Larsen 2000). See also Maurice, Sellier & Sivestre (1986) and their analysis of work systems in France and Germany.
2

Perhaps there are no absolute answers here: each country is full of differences in the way that different organisations conduct HRM; each country has a different conception of HRM; each geographical grouping can be distinguished from its neighbours; and Europe can be shown to be unlike the USA. The fact of dis-similarity leaves open the question, though, of convergence or divergence. Of course, the convergers" recognise that in practice there are many variations in management approaches around the world. However, they argue that, in the long term, any variations in the adoption of management systems at the firm level are ascribable to the industrial sector in which the firm is located, its strategy, its available resources and its degree of exposure to international competition. Moreover, they claim, these factors are of diminishing salience. Indeed, once they have been taken account of, a clear trend toward the adoption of common management systems should be apparent. Proponents of the divergence thesis argue, in direct contrast, that personnel management systems, far from being economically or technologically derived, epitomise national institutional contexts which do not respond readily to the imperatives of technology or the market. According to this institutionalist perspective, organisational choice is limited by institutional pressures, including the state, regulatory structures, interest groups, public opinion and norms (Di Maggio & Powell, 1983; Meyer & Rowan, 1983; Oliver, 1991). Moreover, many of these pressures are so accepted, so taken-for-granted "as to be invisible to the actors they influence" (Oliver, 1991:148). One observable effect of differing institutional contexts is that "the same equipment is frequently operated quite differently in the same sectors in different countries, even when firms are competing in the same market" (Hollingsworth & Boyer, 1997:20). As a consequence, Kerr (1983:28), in a retrospective analysis of his work with Dunlop, Harbison & Myers, concedes that that they had been wrong to suggest that industrialism would "overwhelmingly impose its own cultural patterns on pre-existing cultures. Kerr now argues that industrialism does conquer and it does impose, but less rapidly and less totally than we implied."

Divergence theorists, however, refuse to subscribe even to this thesis of partial and delayed convergence. They argue, on the contrary, that national, and in some cases regional, institutional contexts are slow to change, partly because they derive from deep seated beliefs and value systems and partly because major re-distributions of power are involved. More importantly, they argue that change is path dependent. In other words, even when change does occur this can only be understood in relation to the specific social context in which it occurs (Maurice, Sellier & Sivestre, 1986; Poole, 1986). Performance criteria or goals are thus, at any point in time, socially rather than economically or technologically selected so that they first and foremost reflect idiosyncratic principles of local rationality. Convergence of management systems can therefore only take place if supranational institutions are able to superimpose their influence across national contexts. Increasingly, it is being argued that that is what is taking place in the case of the European Union (Brewster, 1994). That is, there is an argument for an institutionally driven convergence of HRM practices taking place within Europe. In summary, and in broad terms, therefore, we may observe that in addition to the divergence thesis there are two distinct versions of the convergence thesis. On the one hand there is the traditional version of the convergence thesis that contends that convergence of HRM practices is driven by market and technological forces making changes in the USA a harbinger of trends elsewhere. On the other hand there is a newer, institutional, version that argues that institutionally driven convergence is taking place within the context of the EU. There is an ongoing debate between these two viewpoints (Brewster 1999). We now examine these two models in more detail, prior to presenting the divergence thesis applied specifically to the European context.

Integration and differentiation This paper follows authorities such as Schuler et al (1993); Punnett and Ricks (1992); Ghoshal (1987); and Galbraith (1987) in focusing on the tension between differentiation and integration, sometimes referred to as the 'global vs local' dilemma as a defining characteristic of the international perspective on HRM. This understanding may need to be developed beyond this somewhat simplistic dichotomy (see below), but it encapsulates a number of key questions for all organizations operating internationally: What freedom does an international organization have in regard to imposing its own approaches to HRM on its operations throughout the world? How can an international organization aware of the need to be sympathetic to local cultures still ensure that it gains optimum value from its internationalism? What is the relationship between the strength of organizational culture and national cultures? This section explores the somewhat simplistic nature of the dichotomy between differentiation and integration, explores the antecedents of decisions which tend to one or other end of the spectrum and then applies the concept to IHRM. Current approaches to IHRM may tend towards different ends of the differentiation/ integration spectrum but few commentators, and even fewer practitioners, would argue that the issue is anything other than central to IHRM. Easy answers do not exist: the consultants advice to "think global and act local" is a meaningless mantra when it is applied to practice. The issue still has to be teased out both theoretically and empirically. In all cases, sensitivity to which aspects of business practices in any particular country are emic (i.e. culture-specific aspects of concepts or behaviour) and etic (i.e. culture common aspects) is regarded as essential to a strategic choice of HR levers. The question of the balance of emphasis between the national cultures and the organizational culture remains. Of course, presenting this choice as a dichotomy, whilst of analytical value, may not capture all the possibilities. Many international organizations are now divisionalized,

with each division operating as a business unit and quite possibly following different strategies from those followed by other divisions within the same organization. Writers such as Hedlund 1986, Bennis 1992, Ghoshal and Bartlett 1990, and Lorange and Roos 1992 have highlighted the growth of complex dependency networks, federalization, global strategic alliances and loose coupled linkages, all of which confirm the variety of possibilities. The dichotomy between integration and differentiation may therefore be too simplistic. Organizations may need to operate simultaneously at both ends of the spectrum. Evans and colleagues have termed this phenomenon duality. The notion of "dualities" has been argued as being at the core of complex organizations, particularly applied to building an international competence (Evans and Doz 1992; Evans and Genadry 1999). Elsewhere these dualities have been termed dilemmas (Hampden-Turner 1990) or dialectics (Mitroff and Linstone 1993). Evans and his colleagues argue that HRM is a critically important tool for building dualistic properties into the firm. In terms of HRM, the key mechanism through which this can happen is layering, which involves building new capabilities and qualities into the organizations culture while reinforcing its past cultural strengths. An additional perspective would address the issues of building on the local cultures whilst generating and exploiting the economies of scale and compound learning that can arise from international integration. Organizations that are deeply layered often operate more informally than can be seen from an examination of rules, hierarchies or management processes. Layering often occurs through the long-term development of key managers and professionals who are recruited for careers rather than short term jobs and therefore the HRM functions of recruitment and selection, development, retention and reward management are vital regulators of this process. Furthermore, however complex a view of the differentiation/integration dichotomy is taken, the debate is not necessarily resolved for any organization on a consistent basis. There may well be differences between functions with, for example, R & D being centralized or carried out in an International division whilst selling is localized (Forsgren and Pahlberg 1992). Several researchers (Rosenzweig and Nohria 1994; Kobayashi 1982; De Maggio and Powell 1983) argue that although this tension between the pressures for internal consistency and local isomorphism affects all the

organization's functions, it is in HRM that there will be the greatest tendency to adhere closely to local practices. These are more than academic concerns. For the organization, the many factors which influence the choice of 'global vs local' HR practices and policies means that there are a myriad ways in which dysfunctional or ineffective decisions can be taken; and perhaps a recognition that, in this immensely complex area, there may be no "right solutions". Rather, the organization may find an ongoing need to pay careful attention to organizational policies, and to be prepared continually to review them. Thus, following Porter (1986), we would expect sectoral differences. There will, for example, be variation between the operations of a private employment agencies tightly connected with local markets even when they are part of a global chain, and the internationally operating pharmaceutical industry. We would expect differences between the way retail banking and merchant banking operate in terms of their affinity to local practice. Where proximity to the market is a critical factor, there will be a pressure towards local autonomy (Dunning 1993). A related issue concerns the nature of the industry, with greater local isomorphism in a multi-domestic industry as opposed to a global industry (Porter 1986; Prahalad and Doz 1987; Bartlet and Ghoshal 1989). A second factor in determining the extent of internal consistency or local isomorphism is the strength of the flow of resources such as capital, information and people between the parent and the affiliate. Conglomerates, where the different businesses are in effect unconnected, are unlikely to have common management systems (Marginson et al 1993). By contrast, where there are continual and critical transfers between headquarters and the subsidiaries or, in cross-border manufacturing, between the subsidiaries, then the need to maintain consistency becomes dominant. A third factor concerns the degree to which an affiliate is embedded in the local environment. This refers to its method of founding and its age, as well as its size, its dependence on local inputs and the degree of influence exerted on it from local institutions. Many organizations have operations that have been long established in a foreign country, are tied in to local networks of suppliers and outlets and are linked

with local government. Locals there are often surprised to discover that they are not locally owned. It is unsurprising that in such circumstances, internationalisation by acquisition often involves the acquiring company being limited in the degree to which it can impose common systems (Edwards et al 1993; Newman and Nollen 1998). Integration of HRM on greenfield sites of international organizations tends to be greater (Brooke and Remmers 1970; Hamill 1983; Bartlett and Ghoshal 1989). Other factors, help to determine the extent of differentiation, including the parent organizations orientation to control (Dunning 1993). Different organizations prefer different degrees of central control. There is also a country of origin factor in play here: some countries have a preference for uncertainty avoidance which is reflected in the organizations based in and originating from those countries (Hofstede 1984). For example, Japanese companies and US companies are more likely than others to have close control from headquarters over their foreign operations (Bomers and Peterson 1977; Hamill 1983). A linked factor relates to the differences between home and host country. These differences may be either institutional or cultural. The power of local educational, financial, legal, labour market and political systems remains extensive, so that policies which ignore these issues would be futile (Whitley 1992). Thus, certain kinds of operation may well be substantially influenced by local legislation or other local regulations (Rozenzweig and Nohria 1994). The stronger the institutional framework, the less options the global company may have to impose their own approaches (Milkman 1992; Gooderham et al 1999). These approaches may also be shaped by strong local conventions, or by local cultures. Where these are clear and unequivocal, then the room for manoeuvre of the MNE is obviously restricted. The fact that the anti-union US company Toys-R-Us was forced to recognise trade unions before it could open in Sweden is a good example. Where the local cultures are less clear, more tolerant, or simply unfocused, then the MNE has more scope to import practices if it so wishes. A further factor relates to the characteristics of the parent, including such elements as the home country culture and the degree of cultural distance from the local culture. Arguably, a high degree of distance between cultures might lead to more attempts to

impose internal consistency as headquarters feels less comfortable with the possibilities of unknown approaches. Evans and Lorange (1989) argue that in geocentric or global companies corporate culture is especially important. The social control mechanisms provided by corporate culture attempt to override, or to compensate for, the peculiarities of national culture. In this sense, the corporate culture is the glue that holds the organization together. Many of the processes which contribute to the development of this global corporate culture are HRM processes: corporate wide training programmes, international transfer of employees, networking through both formal and informal meetings etc (Evans et al 1989; Edstrom and Galbraith 1977). Doz and Prahalad (1986) argued that what they call "subtle management processes" can assist in the maintenance of internal consistency: internal communication, corporate trouble shooting, corporate jamborees, and opportunities for global networking, have the effect of encouraging a global orientation. Others, however, are more cautious. Laurent (1986), viewed the ability of even a strong corporate culture to overcome national cultures as "illusionary". His research among respondents from different European countries in one company found that the national cultures remained powerful. Within the organization there are subcultures and countercultures, there is abuse of rhetoric, and in the international organization, the power of the national cultures of the host territories. There will often be significant tensions where the corporate culture and the national cultures meet.

What is transferred; what is not So what, in practice, is being learned, and transferred from one state to another within Europe? The presentation will provide evidence of developments in HRM policies and practices across Europe, whether they are moving together, and how organizations are dealing with these issues.

Conclusions The point has already been made that different management functions may have different degrees of differentiation within one MNE, with HRM generally being one of the most differentiated. Furthermore, within HRM some practices (pay, conditions, holidays, retirement arrangements, participation and consultation) will be more constrained, and issues such as management development, less constrained. Rosenzweig and Nohria (1994) see the order in which six key practices will most closely resemble local practices as: (1) Time Off; (2) Benefits, (3) Gender Composition, (4) Training, (5) Executive Bonus and (6) Participation. Many international organizations struggle with the issue of which elements of their human resource policies and practices can be centralized and which decentralized. This is linked to the ongoing debate in the literature about the extent to which MNEs bring new HRM practices into a country, in comparison to the extent to which they adapt their own practices to those of the local environment. Arguably, ethnocentric organizations are more likely to be HRM innovators in the foreign locations (Marginson et al 1993) while polycentric organisations are more likely to adapt to the local environment (Evans and Lorange 1989; Marginson 1994). In practice, of course, there is always an interplay between the two and both factors apply to some degree; the question is one of degree. There is now considerable evidence that in HRM, MNEs will bring in new practices but are in general likely to conform to national practice (see, eg: De Maggio and Powell 1983; Maurice, Sellier & Silvestre, 1986; Due, Madsen & Jensen, 1991; Rosenzweig and Nohria 1994; Hollingsworth & Boyer, 1997; Cleveland et al 1999;.Brewster, Morley and Mayrhofer 2000). In this context, a key question underlying human resource practices in multinational enterprises is identifying what should be decided for the organization as a whole and what should be decided locally. At the extremes the arguments are clear: pay levels for locally recruited and employed staff are determined locally; management development systems for those selected as future organizational leaders should be world-wide.

Relevant pay rates within the local community will be unknown to specialists at the headquarters of the organization. They can only make such decisions by drawing on and then second-guessing the local specialists a dysfunctional waste of resources. Paying people the same salaries wherever they work makes little sense in a world where living standards vary considerably between countries, though international intergovernmental organizations such as the United Nations are close to that position. Other MNEs may have levels of pay which vary considerably, but nonetheless develop world-wide policies, for example that the top quartile always include a performance related salary element, etc). On the other hand, the organization needs to retain the right to promote and encourage its best and brightest, beyond the local unit if necessary, wherever they are found. An organizational objective, common to many MNEs, of drawing on the very best talent available irrespective of country of origin, requires that the management development systems have some cross-border coherence. Identifying the best people in each country will be of maximum benefit if there is some way of comparing these individuals across countries. Here, too, reality is not as simple as this statement implies. For example, one very successful international bank, Citicorp, has a uniform system throughout the world. This company argues that this facilitates identification of the best wherever they are in the world: and its results would seem to suggest that they are good at it. Another, equally successful international bank, and a direct competitor, Hong Kong and Shanghai Banking Corporation, has different systems in different regions and countries, and compares leading individuals after they have been identified by these different systems. This company argues that the different cultural environments in which it operates mean that imposing a world-wide system would mean missing people who may not be brought forward by a uniform, and therefore probably culturally biased, system. And this company too has good people coming through at the senior levels. Between these extremes there is much uncertainty and significant problems arise. A few examples will suffice to highlight the problems. Should there be a local performance assessment system, so that performance can be related to the local pay scales and take account of local cultures; or should the performance assessment system be international, so that it can identify likely future leaders wherever they are

found in the organization?

And, should the organization communicate with its

employees individually or through trade union or representative structures? Taking performance appraisal first, we have enough knowledge of the effects of culture to know that there is no easy answer to this question. The US-style performance appraisal process assumes that employees will work jointly with their boss to set targets, to assess their own performance, to comment on the extent to which their boss has helped them with achieving their targets or made things more difficult for them. It also assumes that they will do much of this through a face-to-face interview. It is not likely that such performance appraisal systems will operate in the same way in many Eastern societies, where open responses to seniors are discouraged, where challenging the boss's expectations of what is possible would be seen as insubordination, where admitting faults amounts to a loss of face and where, for example, the idea of criticizing the boss's work in front of that boss would be seen as some sort of organizational suicide. The organization will seek to ensure the objectives which appraisal are seen as meeting: encouraging improved performance, assessing career options and identifying training needs. But how to do this? The more the organization attempts to enforce a world-wide system, the more likely it is that managers will bend the system to their local requirements. Often this will involve exaggerated or incomplete reports or even reporting back on interviews that never in fact took place. Hence, what appears to be exactly comparable data may be very misleading. The more the organization is responsive to these cultural issues the less likely it is to have information which it can use to assess people across national boundaries. The question of communication channels is complicated by national institutions. In Europe, for example, employers are required to recognize trade unions for collective bargaining in different circumstances in different countries: when certain thresholds (usually the existence of one or a certain number of union members among employees) are reached; when employees request it; or, exceptionally, when unions win ballots. In many European countries employers are required to establish and pay for employee representation committees which may have extensive powers, including, for example, the right to review appointments or to be consulted prior to major

investment decisions. Of course, national laws and institutions are a reflection of and a support to national cultural values. MNEs, therefore, have a series of decisions to make. Will they deal with the trade unions? Will they refuse to? Will they check the legislation carefully and do the minimum necessary to comply with the legislation? Or will they embrace the law and the purposes behind it on the grounds that such behaviour will show them as a good citizen and that other MNEs in that country have been successful whilst adopting the local employment systems in full? Or will they allow individual countries (and, by extension, individual country management teams) to make their own decisions? What, in short, is to be the balance between the central organizational control and local country autonomy? The dualities identified by Evans and Doz (1992) and Evans and Genadry (1999) are a reflection of the complications involved in managing HRM generally and the extra level of complexity added by internationalism. The key paradox noted in this chapter, between the need for the organization to have HRM policies responsive to local national cultural demands and simultaneously to have the benefits of internationalization and economies of scale through leveraging organization-wide knowledge transfer, is a classic example of this complexity. There are unlikely to be exact or final answers to the questions raised by IHRM. However, the resolution of the paradox may lie in the learning process. The knowledge transfer perspective is useful in highlighting the fact that an advantage enjoyed by MNEs is their ability to learn from the range of ways of handling human resources available from the different cultures in which they operate. There are few organizations that would claim they have resolved the problems of ensuring that the messages concerning HRM have been comprehensively transferred from headquarters to the subsidiary countries, and even fewer that would claim that the two-way learning process is effective. In sum, there is much to be done before we can ensure that the dual requirements of differentiation and integration are well understood and can be managed effectively in international human resource management, so that knowledge transfer can be leveraged effectively.

***********************************************************
Table 2 provides one indication of the role of the state in the Rhineland model. Whereas public spending as a percentage of GDP in the EU averages at nearly 50%, it is only 32% in the USA. Table 2. Public spending as a percentage of nominal GDP (1997) Country Percentage of GDP _______________________________________ Sweden 62 Finland 54 France 54 Italy 51 Netherlands 49 EU total 48 Germany 48 Spain 42 UK 40 US 32 ______________________________________ Source: OECD Economic Outlook, 1998.

Table 3. Union Density and Coverage. 1994 Union Density Rate 1994 Bargaining Coverage _________________________________________________________ Austria 43 98 Belgium 53 90 Denmark 76 90 Finland 81 95 Germany 30 92 Italy 39 82 Netherlands 26 81 Portugal 32 50 Spain 22 66 Sweden 91 93 UK 36 47 US 16 18 ___________________________________________________________ Source: OECD 1995.

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