Is There One Right Way To Manage HR?

INTERVIEW/John Benson

A few kilometres from Chennai, in the heart of the automotive belt of Padi, you will find the local Tamil workforce comfortably using Japanese concepts like kaizen and kan-ban. In the North, in the middle of Haryana's cow-belt, the call centre industry is scrambling to retain its young workforce through aggressive American retention strategies.

Yet, as more and more Indian companies try to grapple with globalisation by importing management models, much in human resource management remains the same. In the family business, the baton still passes from father to son. Pay-for-performance might drive middle managers, but the foreman is still the chief guest at a factory worker's daughter's wedding.

This conflict between a unified international model for HRM versus the strong influence of indigenous forces is not unique to India alone "" it is an existential dilemma that faces all Asian economies as they struggle to find their place in a global economy. It is an antithesis that fascinates John Benson, associate professor and reader at the Department of Management, University of Melbourne, Australia.

A regular visiting professor at the London School of Economics and at the Institut d'Administration des Entreprises, Universite de Lyon III, France, in 1991, professor Benson was awarded a senior Japan Foundation Fellowship to examine the productivity of Japanese manufacturing enterprises. The opportunity allowed Benson to hone his major research interests "" Japanese management, the restructuring of Chinese industry, outsourcing and knowledge workers "" and allowed him to chronicle the curious dichotomies of human resource management in Asia.

In a recent paper "" "Convergence and divergence in Asian human resource management'' "" co-authored with Chris Rowley (City University Business School, London), Benson finds that as Asian companies seek to be internationally competitive, they scour for methods of flexibility and look upon human resources as a disposable resource. That initially points to "universalistic tendencies" which lead to a convergence of international HRM practices - but only at the enterprise level. On probing diverse economies in Asia deeper, Benson and Rowley find that underneath the patina of convergence there is deep divergence in HRM models followed in each country.

Tracking the extent of HRM change in medium to large manufacturing enterprises in four Asian economies - China, Japan, Thailand and Korea - showed Benson and Rowley how critical it was to not get blinded by the superficial convergence of HRM models and ignore the divergence. "Management of Western firms setting up operations in Asian countries must recognise the gap between policy and HRM practices. There is little to suggest in our research that policy will simply translate into operational practices."

In addition, national differences and culture are important constraints on the introduction of the parent company's HRM. Second, while the quality of human resources will be crucial to the success of overseas investments, a different management approach to such resources may need to be adopted. On this point the research demonstrated a definite lack of a strategic approach to HRM, and little reliance on line managers to play a key role in the management and development of employees.

Finally, the interaction between various business contexts and cultures means that in each country a 'unique' HRM approach will develop. While at the level of HRM practices this may represent a convergence towards a western HRM approach, it is clear that the differences will be important. Moreover, even the convergence is subject to variability as the meaning and operation of a particular practice varies substantially between countries.

Professor Benson has recently co-edited 'Globalization and Labour in the Asia Pacific' (Frank Cass, London, 2000). In a recent e-interview with Manjari Raman, he shares the global - and local - influences on the development of HRM models in Asia.

How do you define international human resource management (IHRM)? How is it distinct or different?

Human resource management is concerned with all aspects of recruiting, motivating and developing people in all sorts of organisations so as to achieve a competitive advantage. International HRM has often been defined as these issues applied to multinationals. This is too narrow and does not take into account a range of issues such as the question of convergence of HRM practices throughout the world, the role of culture and the effects of local institutions - education, government bureaucracies, banks, family values and religion.

What are the dangers of mixing the two up or of not paying attention to international HRM?

One of my case study companies in Shanghai is a state-owned enterprise (SOE), a domestic appliances manufacturer. Being a small SOE, it either has to make a profit or close down. It no longer receives any state subsidies. The director is entrepreneurial and has kept the company running under difficult circumstances.

A few years ago he decided the enterprise needed to diversify and came up with the idea of manufacturing plastic framed windows for high-rise buildings. Given the developments going on in Shanghai, the prospects looked good. He found a unused building and asked workers to provide the capital to start this new business. Seventeen workers invested in the company and took a 50 per cent share. The SOE held the remaining shares.

Twenty-five workers were transferred to the new business (including the 17 investors) with most working on the production line. The new company was extremely successful and after one year all the investors had recouped their initial investments. Business continued to grow well and the subsidiary became self-managed. But the 17 original investors decided that they were really owners and from what they had seen on television - mainly pirated US videos - of western companies, owners did not work on the production line.

These perceptions led them to grant themselves impressive titles and managerial roles and to increase staff at the shop floor level. Some of the 'owners' began to have long lunches, used taxis and granted themselves expense accounts. The treasurer also started to spend company funds on 'wine, women and song'. The wash up of all this was that the company became insolvent and was closed down.

All the 17 investors lost their investment and their jobs as did other workers in the company. The director of the SOE felt he had granted too much autonomy to the subsidiary and that they had not trained people in modern management practices.

What is the moral of this example?

The moral of this case study, I suppose, is that the 'owners' had converged their behaviour towards what they thought was typical Western management practice. The end result was a disaster with major consequences. Not enough care was taken to dispel myths about what Western management was, and prudential controls were non-existent.

Which factors are responsible for the convergence of HRM practices across the globe?

Some key factors are the idea of one best practice, that is, technical efficiency arguments, the impact of technology, the spread and influence of multinationals, globalisation and the economic imperatives.

Let's consider one of these factors: multinational corporations, who run their operations across the world through a "Blue Book" of rules. Was this one of the main spurs for the convergence of HR practices across countries?

This was often perceived to be the case but in reality it did not work this way.

In what way? After all, if a McDonalds' burger can be made to taste the same across the world, couldn't a multinational's offices be run the same way across global locations? What hinders the convergence?

The barriers to convergence include culture - however defined - past practices and the differences in institutions. The recognition that these factors determine how HRM can be conducted has led to variations in HRM policy in multinationals throughout the world. Companies like Ford and GM have different HRM policies depending upon the country the plant is located in.

Let's consider another factor: best practices. They have been responsible for convergence in HRM not just across countries but also across industries.

Yes, at least this was the intent. There are many who would argue that there are best practices that should be followed and that these practices can be transferred. Again the reality is quite different. I suppose the car industry is the most developed in terms of universal practices but this is not typical of most industries and sectors.

So what you are saying is that beneath this superficial layer of convergence there is actually a divergence in HRM across countries. Can you elaborate on its nature and causes?

There is no one best way of doing things. In a competitive marketplace, firms will always be looking for ways to gain a competitive advantage.

Nevertheless, the way they go about business will vary depending on a number of factors such as institutions, history, customs and practices, the nature of the labour force and so on. What we have also found is that where practices are converging they tend to be at the level of practice and not at the policy or architecture level.

The architecture level refers to the deep structures of an organisation. This means that in many cases change may well be superficial or short-lived. So beneath the surface we may have business as usual. It's not exactly divergence but there is certainly no convergence.

How many models of HRM do you see wielding a global influence?

There are a number of different business systems such as the so-called western model, the Japanese system, the Korean system and the approach of Chinese family businesses (CFB). For example, the CFB is the major form of business structure in a number of countries, including Hong Kong, Taiwan and Singapore.

What are the basic differences between models in the manner human resourses are managed?

The western model views labour as a cost to be minimised, the Japanese approach views labour as an investment while the Chinese family businesses view labour in terms of networks and relationships. The underpinnings of each system has led to vastly different HRM approaches.

Which factors are the strongest in fighting the international forces of convergence in people management?

Culture and institutions. These are very powerful and have developed over many hundreds of years. For example, the seniority pay is based on Confucianism where respect for those older is paramount.

A merit-based pay system, therefore, tends to be modified somewhat and really will only account for a small proportion of the total pay. In Korea, the large firms have introduced performance appraisals but there remains an understanding that people should not criticise 'the sincere efforts of others'.

Does that mean that any attempt at universalisation of HRM will always be undermined by national culture?

What we are saying is that a gap exists between the idealised universalistic model and the constraints imposed by culture. It may be that you have similar practices, but policy and architecture may be very different. So while McDonalds may have some similar products worldwide, they also produce products for domestic markets.

This extends to how you may train your staff and how you portray your organisation. In Australia, for example, multinationals have to recognise the different environments for determining wages and conditions of employment. An arbitral system still plays an important role in wage determination compared with individual or collective bargaining in the US.

What role does the shared mindset of the people of the organisation play in preventing the convergence of HRM?

Shared mindsets are the customs that hold an enterprise together. So if workers support a seniority pay system then it is quite difficult to change to a system based on merit. Many US firms, for example, have found it is difficult to introduce merit pay into their Japanese subsidiaries.

Could you explain the idealised model for HRM, on which you have based your comparative research in China, Thailand, Korea and Japan? What was the study trying to measure?

The idealised model is the Western model of HRM based on individualism, commitment and a unitary approach. We don't necessarily think this is the best model but we used it as a reference point to measure convergence. We were trying to see if there was convergence towards this approach. We measured three dimensions: beliefs and assumptions; strategic qualities and managerial roles; and key levers.

Under beliefs and assumptions we looked at two practices: impatience with rules, and values and missions. In strategic qualities and managerial roles we considered customer-orientation, importance of HRM in corporate plans, nurturing of managerial roles, and importance of line managers.

Finally, under key levers we tracked: freedom in personal selection, individual performance pay, harmonisation of work conditions, individual contracts, teamwork and continuous training. For all four countries - China, Thailand, Korea and Japan - we checked if these practices were present, not present, or present to some degree. We also tracked the degree of HRM change over the last 10 years for each country, each practice.

Why did you choose China, Thailand, Korea and Japan?

We chose these four countries as we had detailed material on them from the previous work we had undertaken. Other countries may have also been suitable but these four do represent countries at various stages of economic development. Different authors had contributed this material to a book. The time covered was the period leading up to 1998. We are now in the process of replicating that study to look at more recent changes.

What were the key findings upon comparing the four countries?

They are that the various countries are at various stages of convergence at the practice level but at the levels of policy/strategy and beliefs-architecture these countries have not converged with the Western model.

Could you provide specific examples from countries which support these findings?

The term key levers refers to practices and you can see some convergence. At the more fundamental levels of strategy and beliefs, there is far less convergence to the idealised Western model.

Impatience with rules, values and missions, etc, represents the idealised form of HRM, the Western form. So while, for example, China has introduced most of the key levers - freedom in personnel selection, individual performance pay, harmonisation of work conditions between white and blue collar workers, individual contracts, teamwork and continuous training - these were introduced as useful practices to improve productivity. The changes were not driven by values and mission statements. In other words reform was not driven through the entire system but only at the operational level.

What course should companies in an emerging economy set? Should they aim for convergence towards a global ideal of HRM or cling to their national individuality?

China is a good example of a country that has tried to adopt a Western model of HRM. In many ways this has resulted, as one commentator claimed, "in HRM with Chinese characteristics". To gain a competitive advantage countries should consider reform but also build on their strengths. This is why you will not see major transformational change in Japan over the next decade.

Post-liberalisation, India has seen the strong influence of American HR practices through MNCs who have set shop in India. At the same time, the Japanese TQM and TPM model have also left their thumbprint on many Indian companies. Is there a danger of being left with a mish-mash, or can such divergent influences be absorbed?

Yes, the danger is real. Most HRM and business systems rely upon an integrated approach with the various components of the system. When transferring practices to an alien environment it is always important to consider the supporting structures for any practice. For example the Japanese quality circle concept, where groups of workers meet after work to discuss ways to improve output, has failed in the West.

In Japan it works well because workers have job security - the so called lifetime employment system - so improved ways of doing things will not result in job losses, although transfers may take place.

Have you done any research on India? How is the Indian model evolving? Is different from the Western, Japanese or other Asian HRM models?

I have not done any research on India. It may well be another variant. Unfortunately I am not up-to-date with the literature on India but I do think that much thought needs to go into HRM and the need to build on strengths. Otherwise cultural and institutional factors could become major constraints on any attempt to change established practices.

Over time, do you see cultural issues dominating in such a way that each Asian country evolves its own unique HR model - perhaps, with underpinnings of global best practices?

I think you are right. This is what we are seeing now. Some practices are becoming more universal, albeit in various forms, but are often located within very different HR models. Just-in-time is one example, although this is limited to the auto industry. The most important thing to remember is that the idealised model of HRM is not one that I believe will be sustainable for a long period of time as the need for more skilled workers arises.

What is the internet's role in terms of convergence or divergence of HRM models?

This is a question I have not given much thought to. Perhaps I should. Clearly as information becomes more widespread and access to people, ideas and practices more easy, then over time perhaps this will become a new force for convergence.

ABOUT THE AUTHOR

Manjari Raman is a Boston-based writer on management. She can be contacted at manjariraman@yahoo.com

(This article appeared in the July 2002 issue of Indian Management magazine)