Human Resource Management of Multinational Organisations … · 2011-06-28 · Human Resource Management of Multinational Organisations Operating in Europe - Finding the Proper Balance

Human Resource Management of Multinational Organisations Operating in Europe -Finding the Proper Balance Between Standardisation and Differentiation of Human

Resource Policies and Practices

D I S S E R T A T I O N der Universität St. Gallen,

Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG)

zur Erlangung der Würde einer Doktorin der Wirtschaftswissenschaften

vorgelegt von

Sabine Nitsche

aus

Deutschland

Genehmigt auf Antrag der Herren

Prof. Dr. Martin Hilb

und

Prof. Dr. Chris Brewster

Dissertation Nr. 2840

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Die Universität St. Gallen, Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG), gestattet hiermit die Drucklegung der vorliegenden Disseration, ohne damit zu den darin ausgesprochenen Anschauungen Stellung zu nehmen. St. Gallen, den 26. Juni 2003

Der Rektor:

Prof. Dr. Peter Gomez

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Contents

Chapter I: Introduction...................................................................... 1

1 Research Question..................................................................................................................................2 1.1 Practical Background to the Research Question .................................................................................2

1.1.1 Employment Legislation: Trend towards Harmonisation .........................................................3 1.1.2 The European Union and the Single European Market: Forces in the Business Environment .4 1.1.3 Human Resource Management at National Level: Continent of Diversity ...............................6 1.1.4 Implications for Multinational Organisations ...........................................................................8

1.2 Theoretical Background to the Research Question .............................................................................9 1.2.1 Human Resource Management in Europe.................................................................................9 1.2.2 The Universalist versus the Contextual Paradigm...................................................................12

2 Research Objective ..............................................................................................................................18

3 Research Approach..............................................................................................................................18 3.1 Scientific Approach...........................................................................................................................19 3.2 Research Process...............................................................................................................................21 3.3 Definitions.........................................................................................................................................22 3.4 Structure of the Thesis ......................................................................................................................25

Chapter II: Theoretical Framework................................................. 27

1 International vs. National HRM .........................................................................................................27

2 System-theoretical Perspective on Multinational Organisations .....................................................29 2.1 External Context of a Multinational Organisation ............................................................................30 2.2 Internal Context of a Multinational Organisation .............................................................................35

3 First Component of the Theoretical Framework: Internal and External Contexts .......................40

4 Second Component of the Theoretical Framework: HR Strategy for Internationalisation ..........41

5 Third Component of the Theoretical Framework: HR-Subfunctions.............................................48 5.1 Recruitment and Selection ................................................................................................................49

5.1.1 General Steps within International Recruitment and Selection...............................................49 5.1.2 Alternative Pools of Applicants ..............................................................................................51

5.2 Training and Development................................................................................................................59 5.3 Compensation and Benefits...............................................................................................................66

6 Conclusions ...........................................................................................................................................73

Chapter III: Empirical Analysis ....................................................... 78

1 Introduction..........................................................................................................................................78 1.1 The Necessity for a New Approach ..................................................................................................78 1.2 Building on the Theoretical Findings................................................................................................80 1.3 Choice of Methodology.....................................................................................................................81

2 Quantitative Empirical Analysis: The Cranet-E Survey ..................................................................85 2.1 Introduction.......................................................................................................................................85 2.2 Research Sample ...............................................................................................................................87

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2.2.1 Selection of the Research Sample ...........................................................................................87 2.2.2 Description of the Research Sample .......................................................................................88

2.3 Analytical Framework for the Quantitative Analysis........................................................................91 2.3.1 Definition of Organisational Types and Concepts of Standardisation ....................................91 2.3.2 Statistical Procedures ..............................................................................................................96

2.4 General Results .................................................................................................................................97 2.4.1 Chi-Square Tests “Country Differences (All Types of Organisation)”...................................97 2.4.2 Chi-Square Tests “Organisational Type Differences (All Countries)” ...................................97 2.4.3 Joint Interpretation of “Country Differences” and “Type Differences” ..................................98 2.4.4 Chi-Square Tests: Country Differences per Organisational Type ...........................................99

2.5 HR-Specific Results ........................................................................................................................105 2.5.1 Strategy and Policy ...............................................................................................................105 2.5.2 HR Practices..........................................................................................................................110

2.6 Summary of Quantitative Analysis .................................................................................................119

3 Qualitative Empirical Analysis - Case Study Interviews................................................................123 3.1 Introduction.....................................................................................................................................123

3.1.1 Interview Guideline...............................................................................................................124 3.1.2 Research Sample ...................................................................................................................124

3.2 Methodology: Case Study Interviews .............................................................................................125 3.3 Results.............................................................................................................................................127

3.3.1 Structure of the Human Resource Management Functions in Europe ..................................127 3.3.2 Relationship between Central and Local Human Resource Functions..................................130 3.3.3 Human Resource Strategy.....................................................................................................130 3.3.4 Degree of Standardisation of HRM Strategy, Policies and Practices ....................................131 3.3.5 Degree of Standardisation at Various Staff Levels ...............................................................133 3.3.6 Degree of Standardisation according to Stages of Internationalisation.................................134 3.3.7 Reasons for Standardisation of HRM Policies and Practices ................................................135 3.3.8 Obstacles to Standardisation and Problems faced at National Level ....................................136 3.3.9 Standardisation of Human Resource Management Practices ................................................137 3.3.10 Influencing Factors in Europe and Main Problems ...............................................................141 3.3.11 Recommendations by Practitioners .......................................................................................142

3. 4 Summary of Qualitative Analysis ..............................................................................................142

4 Overall Summary of the Empirical Analysis ...................................................................................144 4.1 Continent of Diversity and the Desire to Standardise .....................................................................144 4.2 Can We Reconcile the Findings? ....................................................................................................146 4.3 Implementation of HR ....................................................................................................................147 4.4 What Drives Standardisation...........................................................................................................147 4.5 Outlook and Implications for Future Empirical Work ....................................................................148

Chapter IV: Implications for the Implementation of HRM in Europe........................................................................................................ 151

1 Introduction........................................................................................................................................151

2 Definition of the Change Process ......................................................................................................153

3 Identification of Organisational Goals and Values .........................................................................155

4 Analysis of the Organisational Environment: External and Internal Contexts ...........................156 4.1 Analysis of the External Environment of Multinational Organisations ..........................................157 4.2 Analysis of the Internal Environment of Multinational Organisations ...........................................159

5 Determination of the Best Practices and the Degree of Standardisation ......................................161

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6 Implementation and Evaluation Procedure.....................................................................................162

7 Summary.............................................................................................................................................165

Chapter V: Conclusions................................................................ 166

1 Introduction........................................................................................................................................166

2 The Issue of Standardisation.............................................................................................................166 2.1 External Environment .....................................................................................................................168 2.2 Internal Context...............................................................................................................................169 2.3 Stage of Internationalisation ...........................................................................................................171 2.4 Staff Groups Affected .....................................................................................................................174 2.5 Level of HR (Strategy, Policy and Practice) ...................................................................................174 2.6 Subfunctions of HR (R&S, T&D and C&B)...................................................................................174 2.7 Organisational Factors (Size, Regional Coverage). ........................................................................175

3 Strategy ...............................................................................................................................................175

4 HR Subfunctions ................................................................................................................................176 4.1 Recruitment and Selection ..............................................................................................................176 4.2 Training and Development..............................................................................................................177 4.3 Compensation and Benefits.............................................................................................................178

5 Implications for Future Research.....................................................................................................178

6 Outlook................................................................................................................................................180

Appendices.................................................................................... 182

Appendix I: Questionnaire ..........................................................................................................................182

Appendix II: Division of Sample into National and Multinational Organisations.................................207

Appendix III: List of Variables...................................................................................................................209

Appendix IV: Results from the Chi-Square Tests.....................................................................................214

Appendix V: HR Experts and Interview Partners ....................................................................................231

Appendix VI: Interview Guideline ............................................................................................................233

Literature........................................................................................ 237

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Figures Figure I.1: Structure of Chapter I...................................................................................................... 2 Figure I.2: Models of HRM................................................................................................................ 7 Figure I.3: Scientific Approach: Basic Science vs. Applied Social Science .................................... 20 Figure I.4: Research Process........................................................................................................... 22 Figure II.1: External Environmental Factors .................................................................................. 30 Figure II.2: External Environments: Headquarter and Subsidiaries .............................................. 33 Figure II.3: Internal Environmental Factors................................................................................... 35 Figure II.4: Internal Contexts of Headquarter and Subsidiaries..................................................... 38 Figure II.5: First Component of the Theoretical Framework: Internat. Working Environment ..... 40 Figure II.6: Internationalisation Strategies ..................................................................................... 44 Figure II.7: Strategy Mix ................................................................................................................. 46 Figure II.8: Second Component of the Theoretical Framework: Internationalisation Strategy...... 47 Figure II.9: International Recruitment and Selection Activities...................................................... 51 Figure II.10: Advantages and Disadvantages of Recruitment Activities by Target Group ............. 56 Figure II.11: Competencies ............................................................................................................. 61 Figure II.12: Lead in Developing Training Concepts...................................................................... 64 Figure II.13: Advantages and Disadvantages of Compensation and Benefits Systems ................... 69 Figure II.14: Third Component of the Theoretical Framework: Integrated HR-Subfunctions ....... 72 Figure III.1: Research Methodology................................................................................................ 82 Figure III.2: Relevant Situations for Different Research Strategies................................................ 83 Figure III.3: Main Research Question and Perspectives................................................................. 85 Figure III.4: Description of the Research Sample ........................................................................... 88 Figure III.5: Country of Corporate Headquarters........................................................................... 89 Figure III.6: Sector .......................................................................................................................... 90 Figure III.7: European Standardisation .......................................................................................... 93 Figure III.8: Multinational Standardisation .................................................................................... 93 Figure III.9: Headquarters Standardisation.................................................................................... 94 Figure III.10: No Standardisation ................................................................................................... 94 Figure III.11: Mosaic: Four Type of Chi-Square Tests ................................................................... 96 Figure III.12: Combined Results of the Tests by Country and Organisation .................................. 98 Figure III.13: Results and Interpretation....................................................................................... 100 Figure III.14: Research Sample by Sector and Country of Origin ................................................ 125 Figure III.15: Steps of the Qualitative Analysis............................................................................. 127 Figure III.16: Business Lines......................................................................................................... 128 Figure III.17: European Human Resource Department ................................................................ 128 Figure III.18: Country/Region Line............................................................................................... 129 Figure III.19: Structure of the European Human Resource Management Function ..................... 129 Figure III.20: Degree of Standardisation According to Strategy, Policies and Practices ............ 132 Figure III.21: Degree of Standardisation According to Staff Levels ............................................. 133 Figure III.22: Degree of Standardisation According to Stage of Internationalisation.................. 135 Figure III.23: Degree of Standardisation According to HR-Subfunctions .................................... 137 Figure IV.1: Management Process for Implementation................................................................. 153 Figure IV.2: Fields of Investigation and Sources of Strategic Information................................... 157 Figure IV.3: Expected Degree of Standardisation......................................................................... 162 Figure V.1: Stages of Internationalisation..................................................................................... 173

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Chapter I: Introduction Empirical research on European Human Resource Management (EHRM) has shown that policies and practices vary considerably across nations in Europe. These variations confront the Human Resource (HR) managers of multinational organisations with a number of difficult, but also very interesting, questions. How relevant are these variations for multinational organisations? Do these variations reflect differences in the external context of firms in different nations and, if so, is the observed HRM response simply an expression of optimal adap-tation to these circumstances? Does the type of organisation matter? Are the needs and requirements of subsidiaries of multinationals different from the headquarters of national organisations? What are the implications of the ongo-ing trend towards European integration? Existing theoretical and empirical research offers some help in answering these questions. Large data sets have been evaluated in order to find out which poli-cies and practices vary. Proposals have been made, as to how to approach the difficulties of international HRM. This study intends to broaden and deepen these efforts. We want to broaden the findings by exploring the HRM approaches adopted by multinational organisa-tions in Europe. By distinguishing these from national organisations and by separating headquarters and subsidiaries of multinationals, we are able to gener-ate a number of new results that confirm the “continent of diversity” finding but also provide a subtler picture of the efforts of multinational organisations to im-plement best practices across their subsidiaries. We want to deepen the existing research by focusing on one particular issue, the degree of standardisation. We look at the “desire” to standardise among HR di-rectors, we analyse the existing degree of standardisation, explore the factors that influence the degree of standardisation, look at the evolution of standardisa-tion during the phases of internationalisation, and draw some normative conclu-sions that are relevant for the task of determining an optimal degree of stan-dardisation for their HRM policies and practices. Indeed, our analysis leads us to formulate the concept of “flexible standardisa-tion”, an approach that is designed to avoid some of the pitfalls of European Human Resource Management (EHRM) that our, and previous, research re-vealed. However, given the novelty of the research questions we address, the normative conclusion follows from, but is not at the heart of, this study. The purpose is to explore the actions taken by European multinational organisations in order to meet the challenge of a continent of diversity and to study the implications for

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future empirical and theoretical research that can be drawn from the results of the research. This chapter explains the practical and theoretical background of the research question (Section 1). On the basis of the identified importance of the topic and the research deficits, the main research objective (Section 2) as well as the re-search approach (Section 3) are derived. Figure I.1 illustrates the structure of this chapter.

Figure I.1: Structure of Chapter I

1 Research Question

In the following, the practical, as well as the theoretical, background to the re-search question are outlined. This puts our research question into the context of current HRM practice and ongoing research in the field.

1.1 Practical Background to the Research Question

Research in the field of European Human Resource Management has come to the conclusion that the concept of HRM, which originated in the United States of America, cannot be transferred to Europe without taking into account the dif-ferent cultural and legal environments in Europe. It is obvious that research should focus on HRM in Europe rather than on the findings of America’s HRM. The European context was given particular emphasis in the EHRM debate and several factors were identified that are of particular importance to HRM in

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Europe. In addition to the changes in the European employment legislation by the European Union (EU) and the impact of the development of the Single European Market (SEM), multinational organisations operating in Europe are confronted with various HRM systems at national level. In general, the situation that multinational companies face in Europe can broadly be described by the following three categories: A) The ongoing trend towards greater harmonisation of employment legis-

lation in the EU member states directly affects companies in Europe, e.g. via implementation of the Directives of the Social Chapter into national legislation.

B) The formations of the European Union and the Single European

Market itself have a number of indirect effects on business in Europe due to changes in the economic and social environments.

C) Despite the ongoing trend toward harmonisation, Europe can still be de-

scribed as a continent of diversity. Multinational organisations are con-fronted with different nations, cultures and laws. Human Resource Man-agement seems to be strongly determined by the national, legal, and insti-tutional framework in every single country.

The following is a more detailed discussion of each of the factors.

1.1.1 Employment Legislation: Trend towards Harmonisation The European economy is strongly influenced by the European Union, which consists of 15 member states1 with an overall population of more than 372 mil-lion citizens and a labour force of over 146 million people. Together with its three partners2 of the European Economic Area (EEA) the EU is the largest eco-nomic unit in the world. Since its foundation by the Treaty of Rome in 1957, the European Union and its predecessor, the European Economic Community, have followed the goal of greater economic, political and social integration and harmonisation among its member states. Employment and social affairs have always been a concern of the EU with the task to “...promote a high level of employment and social pro-tection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States”. 3

1 As of 2002 the member states consist of Austria, Belgium, Denmark, Finland, France, Germany, Greece,

Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom. 2 The partners are Iceland, Liechtenstein and Norway. The EU member states agreed on 1 January 1994 on

the creation of a single market in the EU with countries of the European Free Trade Association. Switzer-land voted not to participate in the European Economic Area in a referendum on December 1992.

3 Treaty of Rome, 1957, Opening Article.

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The Social Chapter promotes “improved working conditions and an improved standard of living for workers, so as to make possible their harmonisation”4 and calls for “closer co-operation in the social field”.5 By its various directives,6 which have to be implemented into their national legislation by all 18 Member States of the EEA, the EU intends to establish common basic employment prac-tices across Europe. The goal is to enhance the best possible use of human re-sources and, hence, to improve the economic competitiveness of the EEA. The various EU directives of the Social Chapter have a direct impact on specific ar-eas of Human Resource policy like parental leave, part-time work as well as the information and consultation of employees.7 Overall, the harmonisation of EU-employment legislation has two implications. On the one hand, it provides the opportunity for more standardisation, as the dif-ferences in national legislations are being reduced. On the other hand, the stan-dards picked by the European Union’s legislative bodies may not be the pre-ferred type of European-wide procedures, as these are not always in line with the interests of the HR leadership of the organisation. Whether this is liked or not, the harmonisation of employment legislation and the various directives of the Social Chapter contribute to a convergence of HRM in Europe. In order to comply with the law, companies in Europe have to keep abreast of developments in the European employment legislation and have to make sure that their policies and practices are in line with existing laws.8 They have to find the best option for their organisation in order to act according to the law and to suit the interests of their company.

1.1.2 The European Union and the Single European Market: Forces in the Busi-ness Environment With the creation of the Single European Market and its free movement of goods, labour, services and capital between the Member States, competition be-tween the Member States has increased significantly. Pinder emphasises that “companies will have to become much more aware of the speed and scope of the process of legislative and cultural change, and (that) there will be major im-

4 Social Chapter of the EEC Treaty: Article 117. 5 Social Chapter of the EEC Treaty: Article 118. 6 For an overview of the various EU Directives see European Industrial Relations Review (1999). 7 Multinational companies and employers’ representatives do not always support the changes in European

employment legislation and the trend toward standardisation. For example, the EU Directive on European Works Council (EWC) was strongly criticised. The EWC, under the terms of the Directive, was regarded as inflexible and incompatible with the structure of some organisations and it was feared that it would provide a basis for European-level collective bargaining. Instead organisations preferred a more national-oriented or individualistic style of their information and consultation procedures and found the terms of the directive as counter-cultural for their organisation.

8 See IPD Executive Brief (1996).

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pacts on employment practices arising from the Single Market Programme”.9 As an effect of the EU and the SEM, the number of mergers and acquisitions in Europe has more than tripled10 since the 1980s and changes in the economic and social environment are also affecting European organisations and their man-agement of human resources. Several factors in the European business environ-ment are analysed in the literature11 and general ways are outlined as to how European organisations might respond to these changes: • Increased competition and expansion across Europe may lead to the im-

plementation of new organisational structures and change management pro-grammes. Companies are forced by strong international competition to re-duce their costs, to improve their labour supply and to constantly develop their human resources.12 The role of training attracts particular interest as in-ternational competition increases and human resources are seen as a major asset. Language skills, social awareness, adaptability to other cultures and the management of multi-national teams become important topics.

• The significant number of take-overs and mergers and acquisitions force

some organisations to adapt to different national and organisational cultures. The opportunities for companies to increase their activities across Europe can only be optimally used if the required human resources are, both in quantita-tive and qualitative terms, available. The need for specially trained and se-lected “Euro-Managers” increases.13

• Changes in the labour market, like the free movement of labour and the

abolition of work permits for employees from the EEA, lead to European-wide resourcing and training activities. More knowledge about the various labour markets in other countries as well as about their recruitment and selec-tion policies might be required. Furthermore, changing qualifications like language skills and international experience become important.14

• Due to increased mobility of employees across Europe, in particular at man-

agement level, compensation and benefits packages are compared at Euro-pean rather than at national level. Furthermore, differences in pay and social benefits among the various member states as well as the increased demand for equal treatment of employees make it necessary to redesign common compensation and benefits procedures.15 Although companies might stan-dardise their remuneration packages across Europe, differences at the na-

9 Pinder (1990). 10 Directorate-General for Employment, Industrial Relations and Social Affairs (1990). 11 A good overview of the different environmental forces, which affect HRM in Europe, is provided in

Sparrow/Hiltrop (1994). 12 Hiltrop (1993). 13 Marr (1991). 14 IPD: Europe Personnel and Development (1998). 15 Wagner (1991).

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tional level, like cost of living, taxes, and state pension, remain and hence have to be taken into consideration.

European companies face various strategic pressures in the business environ-ment of ongoing change. According to Sparrow and Hiltrop, they have to re-spond to “a collection of strategic pressures (such as globalisation, rationalisa-tion, business integration and social and demographic problems) that will re-shape and possibly supersede national differences in HRM as organisations im-plement new policies and practices. (...) These pressures for change will not only shape the context for European HRM, but will increasingly determine its content.”16

1.1.3 Human Resource Management at National Level: Continent of Diversity

In addition to the mentioned factors and forces of change in HRM in Europe, multinational organisations are also confronted with various national HR sys-tems. If we compare Europe with the United States of America, it can be de-scribed as a multi-national conglomerate17of different nations, cultures, and laws, rather than as a single nation. Every European country has its own histori-cal and legal heritage. This is also reflected in different traditions of industrial relations and personnel management.18 The Cranet-E project,19 which is the largest pan-European study in the field of EHRM, found that HRM in Europe is very complex, whereby the single countries exercise a variety of different na-tional HRM practices.20 The results of the project provide an overview of the spectrum of different HRM approaches in Europe and show that HRM varies significantly across countries. No single European HRM approach could be identified. In almost all countries HRM seems to be strongly determined by the national legal or institutional framework. According to the degree of integration of HRM into business strategy and the degree of devolvement to line manage-ment, the HRM practices of European countries can be categorised into four positions (see Figure I.2).21

16 Sparrow/Hiltrop (1994, p. 137). 17 Krulis-Randa (1989, p. 134). 18 See Bamber/Lansbury (1987). 19 The Cranet-E project is a network of HRM experts from leading business schools or university depart-

ments in more than 20 European countries and co-ordinated by the Centre for European Human Resource Management at the Cranfield School of Management. The research team collects comparable data on HRM within various European countries on an ongoing basis.

20 Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster (1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al. (1997); Brewster et al. (2000a).

21 This table combines two tables from Brewster/Larsen (1993), p. 132 and p. 140. It has been up-dated since we have conducted our research, showing some slightly different categorisation of the countries based on the results from the latest Cranet-E-Survey (Hilb 2002, p.5).

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Figure I.2: HRM Models Source 22 These results do not mean “...that all organisations in every country fit the “typical” model. Indeed, there will probably be a range of all kinds of organisa-tions in each country. Nevertheless, the country tendencies are clear”:23 • The professional mechanic position is characterised by operative personnel

administration in “traditional” personnel departments: low integration and low devolvement (Germany, UK and Italy).

• The guarded strategist position follows strategic personnel management

concepts in “traditional” personnel departments: high integration but low de-volvement (France, Spain and Norway).

• The wild-west position can be described as personnel work, which is mainly

done decentrally by line management, but without strategic orientation: low integration and high devolvement (Denmark and The Netherlands).

• Finally, the pivotal position represents strategic oriented personnel functions

with line management responsibility: high integration and high devolvement (Switzerland and Sweden).

Overall, the Cranet-E research findings and other research conducted in the field of EHRM provide a comprehensive overview of HRM policies and practices in

22 Brewster/Larsen (1993, p. 132). 23 Brewster/Larsen (1993, p. 142).

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European countries. However, in the presence of the multitude of European-wide operating organisations, as well as the ongoing trend towards European in-tegration and internationalisation, the question of “what HRM policies and prac-tices in every single country look like” is not the only relevant issue. It appears equally important to analyse what the HRM concepts of those multinational or-ganisations look like that are operating on a European-wide scale and hence are confronted with both an ongoing trend toward harmonisation on the one side and different national personnel practices in Europe24 on the other. It is this is-sue that we will focus on in this dissertation.

1.1.4 Implications for Multinational Organisations The development of European Human Resource departments in multinational organisations has increased over the past four to five years. Recruitment adverts searching for European HR managers with European-wide experience and par-ticular knowledge in at least two different European countries are more and more common.25 It seems that widely recognised national HR policies and prac-tices no longer fit the demands of European multinationals, and HR strategies and techniques are reassessed in the light of the European environment. Hiltrop discovered that “although experience has shown that managerial understanding of and responsiveness to these issues generally is low, research shows that a number of European companies are addressing these challenges and are taking actions that will dramatically change their approach to managing people.”26 In this context Krulis-Randa states that “...it is essential for companies to generate strategic HRM approaches rather than to persist with professional PM if they are to survive and prosper in the emerging European environment...”27 Strategically minded HR specialists have to react to these changes in their com-pany’s business environment and have to anticipate future demands. In order to respond effectively they have to develop and co-ordinate policies and practices that are flexible and adaptable to the demands of the different European coun-tries. In order to find the right balance alongside the needs of the organisation, a European-wide HRM approach is required, which takes the spectrum of differ-ent factors into consideration. But how do these policies and practices look like, which should fit across vari-ous cultures and national systems? No definite agenda exists for HR managers on how they should respond to these new challenges.28

24 Europe is not restricted to only the countries of the European Union. The emphasis in this project is on

West-European countries, which include Switzerland and other non EU member states. Note that the ori-gin or headoffice of the multinational companies analysed need not to be in Europe. However, in EHRM EU-policy clearly plays an important role in the non-member states as well.

25 See e.g. People Management Magazine: Appointments. 26 Hiltrop (1993). 27 Krulis-Randa (1989, p. 138). 28 Pinder (1990).

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Hence, from a practical point of view, there is a clear need for a holistic frame-work and advice for HRM professionals regarding the development, implemen-tation and management of HRM in Europe, in order to find the proper balance between standardisation and differentiation of their HR policies and practices.

1.2 Theoretical Background to the Research Question The discussion on HRM over the last two decades shows a clear shift away from traditional Personnel Management to strategic-oriented Human Resource Man-agement.29 There is an increasing interest for HRM at top management level30 and HRM is valued as an important part of the organisation’s corporate and business strategy.31 As the role of the HR function transformed from a support function to an in-creasingly strategic function for the organisation, its particular importance for the internationalisation of the organisation was more and more emphasised.32 Today, an effective management of human resources is seen as a competitive advantage for multinational organisations.33 Both, theory and practice of HRM at an international level can no longer be de-scribed as being in its infancy-stage of development,34 and interest from re-searchers and practitioners is increasing.35 This is true for (strategic) human re-source management in general,36 and human resource management from an in-ternational or European perspective in particular.37 In the following we provide a brief summary of the developments of human resource management in Europe.

1.2.1 Human Resource Management in Europe

29 Teagarden/Glinow, v. (1997); Analoui (2002a&b); Karami (2002); Storey (2001a); Purcell (2001); Tyson

(2002). 30 Sparrow/Hiltrop (1994). 31 Schuler/Rogovsky (1998); Watson (1986); Hendry/Pettigrew (1986); Buttler (1988); Purcell (1989); Box-

all/Dowling (1990). 32 Teagarden / Glinow, v. (1997). 33 Porter (1980 & 1987); Mabey et al. (1998); Miller (1989); Ferner/Quintanilla (1998); Huang (1998); Beer

et al. (1985); Birkinshaw/Marnison (1998); Hendry/Pettigrew (1990). 34 In his article, Laurent (1986) describes HR as being in its infancy-stage of development. We believe that

this description no longer describes the current status quo, as research in this field has developed signifi-cantly over the last decade.

35 Scullion (2001); Black et al. (1999); Dowling et al. (1999). 36 e.g. Storey (1995 & 2001); Sisson/Storey (2000); Purcell (2001); Tyson (2002); Analoui (1999 & 2002). 37 e.g. DeCieri/Dowling (1999); Dowling et al. (1999); Black et al. (1999); Brewster (2001); Scullion

(2001); Jackson (2002), Joynt/Morton (2000), Albrecht (2001); Mayrhofer et al. (2000); Kamoche (2001); Brewster/Harris (1999); Kumar/Wagner (1998); Duane (2001); Brewster et al (2000a). See also Clark et al’s review (1999) on the increasing number of publications within the field of HRM.

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Historically, the concept of HRM found its entry into the theoretical debate in Europe via the UK. Several authors have significantly contributed to the discus-sion of HRM.38 The questions arose of how consistent the American model of HRM is with British “Industrial Relations” and what advantages could arise from HRM compared to traditional PM. Within the European theoretical debate it was emphasised more and more that research should concentrate on a Euro-pean model of human resources rather than to try and fit the American approach to the European environment.39 It was argued “we are in culturally different contexts” and “rather than copy solutions, which result from other cultural tradi-tions, we should consider the state of mind that presided in the search for re-sponses adapted to the culture.”40 Therefore, the European environment of dif-ferent national industrial relations and personnel management systems was given particular consideration. The following aspects of European concepts were identified within the literature as being distinct from American concepts of HRM: 41 1. More restricted employer autonomy. 2. Less emphasis on the market processes. 3. Less emphasis on the individual, more emphasis on the group. 4. More emphasis on workers rather than managers. 5. Greater importance of “social partners” in employment relationships. 6. Higher level of governmental intervention in many areas of HRM. Taking the above-mentioned factors into consideration, it became more and more important to understand HRM from a European perspective, and research within EHRM increased significantly within the last decade. Various research projects covering HRM within Europe can broadly be summarised into the fol-lowing categories42: 1. Research within single European countries conducted by national re-

searchers in order to investigate various topics concerning HRM within their country.43

38 See Guest (1987 & 1994); Legge (1989); Hendry (1994); Purcell (1988); Storey (1995 & 2001a)); Tyson

(1987 & 2002); Torrington/Hall (1995); Purcell (1989 & 2001); Sisson/Storey (2000). 39 Cox/Cooper (1985); Thurley/Wirdenius (1991). 40 Albert (1989), cited after Brewster/Hegewisch (1994, p. 5). 41 Sparrow/Hiltrop (1994, p. 30); see also Brewster/Larsen (2000b). 42 This categorisation provides an overview of different research investigations within Europe, but should

not be exclusive. 43 For an overview of several national researchers by country, see Sparrow/Hiltrop (1994, p. 4).

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2. Research focusing on a single subfunction44 of Human Resource Man-

agement like competencies for a “Euro-Manager.”45 3. European-wide groups of researchers taking a polycentric approach,

whereby individual domestic studies are conducted in various countries. This approach is characterised as ascertaining and describing the “many ways”, rather than the “one way”.46 For example:

• Clark et al.47 examine whether there is a single shared concept of

HRM, which transcends national boundaries. The European-wide re-search team tried to answer the question of “what do people in differ-ent countries understand as HRM?”; or

• Kumar et al.48 investigate the practice and particularities of HRM in

several European countries.

• Brunstein et al.49 follow the goal of providing detailed “insider” de-scriptions of HRM within various European countries.

4. Research, which focuses on HRM approaches in Eastern Europe.50 5. Worldwide HRM research, which also covers European countries, such

as the survey by Towers Perrin51 or research by Duane52, who investi-gates four regions of the world (US, Western Europe, Eastern Europe, and the Middle East) in terms of their HR practices.

6. Research investigating European organisations abroad.53 7. An ongoing Pan-European research project, which compares various

concepts of HRM. Within the Cranet-E project, a theoretical model was developed, which analysed HRM polices and practices within the Euro-pean “external environment of national culture, power systems, legisla-tion, education (and) employee representation”.54

44 Newell/Tansley (2001); Leblanc (2001). 45 See Marr (1991). 46 Adler (1986, p. 41). 47 Clark et al. (1996). 48 Kumar/Wagner (1998); Urban (1998); Hollinshead/Weik (1998); Echenarria/ValNumez (1998);

Eckartstein, v./Müller (1998); Thom et al. (1998). 49 Brunstein et al. (1995). 50 Holtbrügge (1995); Adam (1987); Frank/Bennett (1991); Pieper (1990); Lang (1998). 51 Towers Perrin (1992). 52 Duane (2001). 53 Kidd et al. (2001); Festing (1996); Kumar et al. (2001); Worm et al. (2001), Charles-Pauven (2001). 54 Brewster/Hegewisch (1994, p. 7).

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In general, the various above-mentioned research approaches provide important information about HRM in Europe and come to wide ranging comparative re-sults.55 The research investigations reveal differences between various European countries with respect to their HR policies and practices, although distinct re-gions, showing similar cultural pattern56, management development techniques57 or HR policies and practices58, were analysed. This finding, of different HR policies and practices across various European countries on the one hand, and a trend towards standardisation at the institu-tional level on the other hand, leads us to the question of how HRM, from the perspective of multinational organisations operating across various European countries, looks like and should look like.59 Should multinational organisations adapt their HR policies and practices to the various national circumstances, or should they standardise them? Multinational organisations have to consider carefully whether the benefits of a homogenous company culture are greater than the costs of not adapting to environmental cir-cumstances. Within the literature, two main research paradigms are discussed, dealing with this question of standardisation versus differentiation: the universalist versus the contextual paradigm.

1.2.2 The Universalist versus the Contextual Paradigm

The universalist and the contextual paradigm not only represent different ways in which HRM is conducted, but also reflect different research traditions through which HRM is explored.60 The universalist research paradigm concentrates on the management of hu-man resources across various national borders, i.e. within an organisation. The idea of the universalist paradigm is that HR policies and practices can be trans-ferred from one country to the other, in the belief that what works in one coun-try can be applied to organisational units in other countries as well. The propo-nents believe that successful HR policies and practices are universally applica-

55 Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster

(1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al. (1997); Brewster et al. (2000a).

56 Hofstede (1988). 57 Evans et al. (1989). 58 Brewster/Larsen (2000a&b); Larsen/Brewster (2000); Brewster et al. (2000b). 59 Myloni (2002); Ferner (1997); Ferner/Quintanilla (1998). 60 Brewster (2001); Brewster (1999a&b); Brewster et al. (2000b); Weber et al. (2000); Schreyögg et al.

(1995); Mayrhofer et al. (2000); Holden (2001a); Brewster et al. (2001).

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ble. This “one-best-way-perspective” places little emphasis on the external con-text, but concentrates on specific organisational characteristics. Standardisation of HR policies and practices is regarded as a strategic advantage and an improvement in the organisation’s overall performance. Standardisation not only underpins the organisational culture, but also has synergetic effects for the multinational organisation. For example, - the costs for the development of certain recruitment or training pro-

grammes can be shared; and - Managers working across different nations can apply the same manage-

ment systems, which creates managerial homogeneity.61 Given the assumed positive effects of standardisation for the organisation, it is believed that multinational organisations favour standardisation62 and that this leads to a competitive advantage for multinational organisations relative to na-tional organisations.63 The contextual research paradigm compares the HR systems of one country with others, identifies similarities and differences between those countries (or regions) and investigates the antecedents for those differences. The proponents of the contextual paradigm doubt that certain HR policies and practices that work well in one particular environment, lead to the same success within other environments. They place particular emphasis on environmental factors impact-ing HR policies and practices within the various countries. Hence, researchers analyse the differences between the countries’ HR systems and try to understand what factors cause those differences. The universalist paradigm focuses on organisational factors, which are applica-ble across countries, while the divergence paradigm leads to the necessity of considering the organisation’s internal and external environment. Overall, the discussion of the universalist versus the contextual paradigm leads to the con-clusion that the former is more likely to call for a high degree of standardisation, while the latter is more likely to call for differentiation. Each research paradigm clearly has its advantages and disadvantages.64 A syn-thesis of the major ideas of the different paradigms is regarded as a useful way forward65 and Mayrhofer et al.66 argue “we can learn most by drawing on the best of both traditions.”

61 Celestino (1999). 62 Child (1981); Adler (1997); DeCieri (1996). 63 Sparrow/Hiltrop (1994). 64 Holden (2001). 65 Beardwell/Holden (2001). 66 Mayrhofer et al. (2000, p. 10).

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We can learn from the universalist paradigm that standardised HR policies and practices might be favoured by multinational organisations, due to various com-pany-specific reasons like company culture, synergies or cost-saving aspects and that they might be a competitive advantage for the organisation. From the contextual paradigm we learn that environmental factors play an im-portant role in the use of HR policies and practices. In the following, we will discuss in more details results from research investiga-tions that are particularly relevant for our research, because they focus on - multinational organisations in Europe, and - analyse the impact of country-specific factors, including home67- and

host-country-specific factors68, and/or - organisation-specific factors.69

All these aspects are important for the issue of standardisation, which is at the heart of our study. The following three studies are of particular relevance: The study by Gooderham, Nordhaug and Ringdal,70 Tregaskis’71 research, and the investigation by Weber, Kabst and Gramley.72 The research investigation by Gooderham, Nordhaug and Ringdal73 analyses whether, and to what degree, US subsidiaries in Europe adapt their HRM prac-tices to the varying national institutional contexts. Their findings indicate that US subsidiaries make use, on the one hand, of their home-country-specific HR policies and practices, while also adapting to the local conditions of the host-countries. Their approach is to compare practices of US subsidiaries with those of local firms in Ireland, the UK and two Nordic countries, Denmark and Norway. They define a set of calculative or central HRM practices, stemming predominantly from PM in the USA: performance measurement, non-recognition of labour un-ions, direct channels of communication. They use this set of HR practices or core features of American-style HR in order to prove their thesis that the strate-gic discretion available to the subsidiaries of US multinationals to implement

67 Myloni (2002); Mabey et al. (1998); Carell et al. (2000); Holden (2001). 68 Holden (2002); Schuler/Rogovsky (1998); Newman/Nollen (1996); Myloni (2002); Rosenzweig/Nohria

(1994); Carell et al. (2000). 69 Rosenzweig/Nohria (1994); Bae et al. (1998); Müller (1998); Ferner (1997); Myloni (2002). 70 Gooderham et al. (1998). 71 Tregaskis (2000). 72 Weber et al. (2000). 73 Gooderham et al. (1998).

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and apply US-style HRM in Europe, will largely be a function of the host coun-try’s specific institutional environment. In particular, they test two hypotheses: First, being a US subsidiary in the UK, Ireland or Denmark/Norway, as opposed to being a domestic firm in these coun-tries, has a positive effect on the use of calculative HRM practices. This shows that multinationals differ from national organisation – a finding that will be sup-ported by our research. Second, the use of calculative HRM practices by sub-sidiaries of US multinational companies is greater in the UK and Ireland than in Denmark/Norway. This is intended to prove that the “ethnocentric” approach finds its limit in the host country’s institutional environment. This result sug-gests that multinational organisations implement a standardised (“home coun-try”) approach, whenever possible. While it is an interesting hypothesis to investigate whether the institutional envi-ronment has an influence on the policies and practices adopted, we believe that this should be enriched by also asking the more subtle question whether there exist policies and practices where standardisation would be feasible but does not occur. A question not addressed in this research. However, their results clearly indicate the value of more detailed research into the policies and practices of multinational organisations in Europe.74 They find an interesting organisational effect: the size of the company, whether a subsidi-ary or a domestic firm, has a significant positive effect on the adoption of calcu-lative HRM practices. Furthermore, a corresponding effect is associated with being in the banking and finance industry, as contrasted with all the other in-cluded industries. Tregaskis75 assesses the impact of the home-country versus the host-country-specific context on the use of certain human resource development policies and practices in foreign multinational organisations in Europe. Tregaskis’ results re-veal that the impact of the host-country context is more important than the home-country context.

She tests the relative impact of the host-national context, and the national origin of the parent company in shaping the Human Resource Development (HRD) practices of foreign multinational organisation in Great Britain and compares European, US and Japanese multinationals. She tests the following hypothesis: There will be statistical differences in the HRD practices of MNOs based in Britain according to the national origin of their parent company (Japanese, US and European). Four sub-groups are built: The European group consists of French, German and British subsidiaries, based in Great Britain; Japanese sub-sidiaries in Britain; US subsidiaries in Britain and indigenous organisations con-sist of independent single or multiple site organisations, based in Great Britain.

74 Ferner (1997); Ferner/Quintanilla (1998). 75 Tregaskis (2000).

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Differences between the practices of the three types of MNOs (European, Japa-nese and US) are examined. In the second stage, it is assessed whether there are significant differences between the practices of MNO and British indigenous organisations. The three types of MNOs show significant differences in only 3 out of 50 vari-ables measured, which fails to support the argument put forward by the first hy-pothesis that the parent company’s national origin predicts MNO HRD practice. As 90% of the practices examined reveal no differences, this suggests either a similarity in MNO practices, reflecting the practices of successful companies or a strong similarity between MNO and host-country practices. This was the key question of the second test. Comparisons of MNOs and indigenous organisations reveal both differences and similarities. These results suggest that, in some areas of HRD, there is a commonality among MNOs, irrespective of national origin – what some may consider the element of multinational ‘best practice’. However, in other areas the similarity in MNO and indigenous practice suggests that the national context of operation is a key factor influencing organisational HRD approaches. These findings suggest that MNOs demonstrate a stronger element of strategic integration of HR and business issues than indigenous organisations. Tregasikis concludes that the findings provide mixed support for the second hypothesis, al-though, on the whole, there is greater similarity than difference between the MNEs. This means that in a few areas HRD practice is more likely to be a prod-uct of a common multinational approach, but in the majority of areas it is reflec-tive of the national conditions in which the company has to operate. Weber, Kabst and Gramley76 analyse the influence of country- versus organisa-tion-specific factors on the formulation of HR policies. They investigate whether company-specific factors lead to convergence, whereby country-specific factors lead to divergence in the formulation of HR policies and practices. Their results cannot provide a universal answer and each of the HR policies considered shows its own pattern of significant factors of influence. However, their results do show that the impact of organisation-specific factors is more dominant, par-ticularly for training and development and, to a lesser extent, for compensation and benefits. Recruitment and selection is influenced by both, company- and country-specific factors. The company-specific antecedents considered are the corporate strategy, the size and the sector of organisation. They find that corporate strategy has a positive influence on the existence of HR policies. Corporate strategy is the main explanatory factor for a policy for R&S, T&D and C&B. Company size is another independent variable, which exercises

76 Weber et al. (2000).

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a positive influence on all of the HR policies. Indeed, the results show that or-ganisation-specific factors exercise the dominant influence. All three studies provide valuable contributions that are relevant for this thesis. The study from Gooderham, Nordhaug and Ringdal demonstrates the home-country-specific effect. They and the research from Weber, Kabst and Gramley find that organisation-specific factors, like size, have a positive effect on the use of a certain HR policy or practice. Tregasikis finds that multinational organisa-tions show no significant differences from each other, leading to a multina-tional-organisation-specific effect. Furthermore, she finds both differences and similarities between multinational and national organisations, leading to the in-terpretation of both, a common multinational-organisation-specific factor, as well as a reflection of the national conditions. However, the research samples of all three studies include both, multinational organisations from abroad and local multinational organisations, without a dis-tinction of subsidiaries and headquarters. We believe that the results of these studies suggest that there is a benefit in dividing the group of multinational or-ganisations into subsidiaries and headquarters of multinational organisations, as the latter group also represents home-country-specific factors, while the former represents host–country-specific factors. Therefore, building on the above dis-cussed research results, our quantitative empirical investigation is designed as follows: - We investigate home-country-specific factors by building a sub-sample

containing only multinational organisations that have their headquarters outside the country of investigation.

- We analyse host-country-specific factors by building two sub-samples

containing, on the one hand, multinational organisations that have their headquarters within the country and, on the other hand, national organi-sations.

- This division is important for the third factor analysed within literature,

the organisation-specific factors. The division into three sub-samples: subsidiaries of multinational organisations (MSUB), headquarters of multinational organisations (MHQ) and national organisations (NAT) al-lows us to investigate the organisation, in particular multinational-organisation-specific factors.

Overall, this discussion shows that the analysis of the question of standardisa-tion versus differentiation requires a wide context of analysis.77 We examine this question from the perspective of a multinational organisation and want to find out to what extent they standardise their HR policies and practices across vari-

77 Scholz (1993); Myloni (2002); Kamoche (1996).

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ous European countries.78 In addition, we analyse how foreign subsidiaries of multinational organisations differ from domestic multinational organisations and from national companies in their use of specific HR policies and practices across various European countries. This comparison allows us to take the above-mentioned (home- and host-) country-specific, as well as organisation-specific factors, into consideration. The resulting research objective of this dissertation is described in the section below.

2 Research Objective Due to the identified importance of the topic, the need of agendas for HR man-agers and the analysed deficits in theory and research further investigations in the field of EHRM are relevant from a practical and from a theoretical point of view. The overall objective of this dissertation is to contribute to the understand-ing of EHRM from the perspective of multinational organisations within Europe. The analysis of the various HRM approaches adopted by multinational organisa-tions in Europe will provide answers to the following questions, which have, to our knowledge, not been thoroughly addressed by research to date:

• What does the HRM approach of multinational organisations across

various European countries look like? • To what extent do they standardise their HR policies and practices

across European countries, and why? While these questions characterise the main explorative interest of our work, we also intend to go further and ask the following question: • What normative conclusions can be drawn for HRM practice of multi-

national organisations that operate in Europe?

Answers to the above mentioned questions as well as further results from a de-tailed analysis of the HRM approaches adopted by multinational organisations within Europe enrich the current research with an important transnational per-spective.

3 Research Approach

The scientific approach adapted in our research is explained in Section 3.1, the research process in Section 3.2 and the structure of this dissertation in Section

78 Ferner (1997); Ferner/Quintanilla (1998).

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3.4. Section 3.3 covers the main definitions of key concepts used in this research investigation.

3.1 Scientific Approach The scientific approach of this dissertation is based on the understanding of business administration as an applied social science.79 The goal is to reach sci-ence-based knowledge, which will help people to act within practice. The task of the researcher is to provide information and guidance for practitioners in or-der to build a basis for them to develop their own action model. Therefore, spe-cific knowledge for the development of practical solutions is systemised and typical problems are analysed. Compared to basic science, applied social science has a different scientific and empirical approach to the generation of scientific questions, the argumentation of scientific statements and the application of scientific findings: The “generation” of scientific questions is characterised by actual problems within practice, where not enough knowledge exists in order to find a solution. While the typical research problem of basic science develops within the theo-retical context, the typical problem of applied social science develops within practice. Hence, the practical context is constitutive, which means that the ulti-mate goal of applied science is to provide practitioners with the opportunity to act on the basis of scientific knowledge. The “argumentation” of scientific statements is, compared to basic science, not the main research objective. The current reality forms the starting point for research in order to systemise existing experience and knowledge from practice as well as to analyse typical problems. The “application” of scientific findings is a main component within the re-search process and the scientific findings include solutions for practice. Figure I.3 contrasts the scientific approach of basic science with applied social science.

79 For more detailed information on the scientific approach see Ulrich (1984).

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Figure I.3: Scientific Approach: Basic Science vs. Applied Social Science Based on the theoretical foundation of system thinking,80 this dissertation re-gards an organisation as a complex and open social system that takes input from the environment. This input goes through various transformations within the or-ganisation and finally results as an output.81 As an open system there is a need for the organisation to maintain favourable input and output transactions with the environment in order to survive over time. Organisations as systems are composed of multiple independent elements, whereby changes within one part of the system will result in changes in other parts. Some congruence models take the view of organisations as open social sys-tems.82 In these frameworks the organisation is regarded as a conglomerate of systems being composed of tasks, formal and informal structures, individual and various subsystems. The basic hypothesis of these models is that organisations will be most effective when their major components are congruent with each other. The congruity concept highlights that the interaction among organisa-tional components is perhaps more critical than the characteristics of the com-ponents themselves. Furthermore, following a contingency approach,83 the solution found by one or-ganisation cannot be generalised and hence cannot be transferred one-to-one without adjustment to other organisations. They are only valid under specific

80 Bertalanffy (1951); Ulrich (1984); Ulrich et al. (1984); Probst/Siegwart (1985). 81 Katz/Kahn (1978); Ulrich/Krieg (1972); Ulrich (1984); Bleicher (1991); Staehle (1991); Hill, et al.

(1994). 82 Leavitt (1965); Lawrence/Lorsch (1969); Khandwalla (1973); Galbraith (1987). 83 Nadler (1987).

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circumstances and within a clearly defined context. Therefore, there is no one right way to manage HRM across Europe and the appropriate strategies, policies and practices vary from company to company and from environment to envi-ronment. Hence, no general conclusion can be drawn from the research. Follow-ing this perspective, the goal of this dissertation is to provide “situationally rela-tivised (…) statements.”84 The results provide companies with detailed informa-tion, which they can use to develop their own context-specific EHRM approach.

3.2 Research Process As a first step a theoretical framework was developed as a general basis for the empirical analysis of the research project. It covers strategic and operational as-pects of international human resource management under consideration of the various external and internal factors influencing multinational organisations within Europe. As a second step an empirical analysis of EHRM approaches adopted by multi-national organisations was conducted. In order to pursue the research and to seek answers to questions arising from both the problem’s practical and theo-retical background, an interview guideline was developed, which broadly cov-ered the following HRM functions: structure and strategy; recruitment and se-lection; training and development as well as compensation and benefits. Due to the lack of previous relevant research and because of the broad and complex na-ture of the research field, the methodological research approach is characterised by: a) Interviews with HRM experts in order to discuss the HRM situation in

European multinational organisations. These expert interviews are fol-lowed by a case study approach making use of the semi-structured inter-view guideline, in order to encourage interviewees to describe their cur-rent EHRM approaches.

b) A secondary analysis of the rich database collected by the Cranet-E re-

search team85 in order to gain new insights by posing new questions. The application of both qualitative and quantitative empirical research points to the analysis' empirical focus, which is largely of explorative character. It is hoped that learning about the EHRM approaches that have been used by ad-vanced multinational organisations and by the companies covered in the Cranet-E database enhances our knowledge about problems and solutions to the Euro-

84 Ulrich/Fluri (1995, p. 30); translated by the author. 85 I would like to thank the Cranet-E research teams for their permission to use their dataset for my research.

In particular, I thank the British, Danish, German and Swiss teams that provided me with their 1999/2000 country dataset for secondary analysis.

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pean dimension of HRM. Interpretations and theoretical assumptions are as-sessed and revised step-by-step.86 Finally, as a third step based on both the theoretical framework and the empiri-cal research finding, conclusions are drawn for both theory and practice. These should provide multinational organisations that are operating in Europe with guidance for designing their concept of HRM in Europe. Figure I.4 illustrates each step within the research process.

Figure I.4: Research Process

3.3 Definitions In this section we briefly review the use of, and define the three key terms for this research project: the general meaning of “Human Resource Management”, the particular meaning of “European Human Resource Management” and the term “multinational organisations”. After a long lasting debate about the meaning of Human Resource Management, it is today distinguished from traditional Personnel Management as taking a more holistic view of the organisation and as being more strategic in the way human resources are managed.87 Within literature, a number of distinctive features of strategic HRM are ana-lysed: 88

86 See Hilb (1985) and Keller, v.(1982). 87 Guest (1987 & 1994); Legge (1989); Hendry (1994); Purcell (1988); Storey (1995 & 2001a); Tyson

(1987 & 2002); Torrington/Hall (1995); Purcell (1989 & 2001); Sisson/Storey (2000). 88 As within the discussion of HRM and strategic HRM the terms became increasingly more synomymous

and hence should not be further differentiated here. See Mabey et al. (1998) and Karami (2002).

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• Strategic HR decisions are characterised by more uncertainty in the deci-

sion-making process since future changes within the environment of organi-sations are anticipated.89

• This leads to a more choice and flexibility of strategic HR decisions, chang-

ing the nature of HR activities to being more adjustable to change and less determined by rules.90

• The role of the HR department91 is emphasised and becomes more central,

particularly in the strategic decision making process of the organisation.92 Moreover, the concept of integration distinguishes strategic HRM from person-nel management. Integration has many facets: a) The integration of HR with corporate strategy and the strategic needs of the

business93, in order to reach the organisation’s goals and to achieve em-ployee satisfaction and development.94 This integration process is regarded as very complex.95

b) The organisational integration of the HR function with other organisational

functions of the company, as well as the involvement of line management and employees in HRM. The HR function becomes an integral part of the strategic planning process of the organisation.

c) The importance of integrating the various HR subfunctions, like recruitment

and selection, training and development, and compensation and benefits, with each other. 96

Overall, due to its strategic role, HRM is seen as source for a competitive advantage, allowing the organisation to act more effectively in an environment of ongoing change and being able to maximise the added value provided by its human resources.97 This is mainly due to the proactive role of HR, searching for the organisation’s particular way, due to individual and situational requirements.

89 Johnson (1987); Purcell/Ahlstrand (1994). 90 Analoui (1999 a&b). 91 Legge (1989); Tyson (1987); Storey (1992b); Purcell/Ahlstrand (1994). 92 Miller (1989); Analoui (1998). 93 Purcell (1989); Boxall/Dowling (1990); Purcell/Ahlstrand (1994); Watson (1986); Hendry/Pettigrew

(1986); Buttler (1988); Beer et al. (1994); Fombrun et al. (1984); Schreyögg (1987); Karami (2002); Wright et al. (1998); Mabey et al. (1998); Miller (1989); Schuler/Rogovsky (1998).

94 Pearce/Robinson (1997). 95 Hiley (2002). 96 Hilb (2002). 97 Mabey et al. (1984 & 1998); Beer et al. (1985); Hendry/Pettigrew (1990); Storey (2001a), Porter (1980 &

1987); Huang (1998); Miller (1989); Ferner/Quintanilla (1998).

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Within the context of our explorative research questions we certainly do not limit our interest to strategic HRM. We simply want to find out how multina-tional organisations manage their personnel, whatever their approach may be. However, in the context of our theoretical approach and our normative research question we clearly operate within the context of strategic HRM research.

After we have looked at the distinguished features of strategic Human Resource Management we now investigate what is meant when we speak about European Human Resource Management.98 As already outlined above (1.2.1) the theoretical debate on HRM in Europe dis-tinguishes itself from the American concept, due to distinct features identified within the European environment. Furthermore, several researchers investigate whether a distinct European HRM approach exists that differs from the ap-proach taken in other parts of the world, like the US, Japan, or the Pacific Rim region. Indeed, important differences in the way HRM is conducted in Europe, com-pared to other regions in the world, have been identified. However, this differ-ence of Europe compared to other economic areas does not necessarily imply that the several European countries show a consistent pattern of HR. Research-ers have identified variations across the European countries (1.2.1), although some distinct regional patterns within Europe were identified.99 Therefore, on the basis of the identified wide-ranging differences of HR policies and practices and the national institutional frameworks within Europe in general but also across the countries of the European Union, some authors regard it as impossi-ble and absurd to speak of a “European system or model” of HRM.100 The focus of our study is on the HRM approach of multinational organisations in Europe. Whilst we, therefore, see our work as a contribution to the literature on HRM and European HRM, we do not intend to generate particular insights on whether the term of European HRM is justified. This would require not only an analysis of the degree of diversity observed within Europe (which we do), but also an analysis of policies and practices prevailing in other regions. For in-stance, our work will not answer the question as to whether the differences within Europe may be greater than the differences across the Anglo-Saxon countries that span several continents. Finally, we want to clarify the term multinational organisation, which is often used in this study.

98 At this stage, we do not want to investigate the difference between national and international level HRM

(therefore, see our discusion in Part II). Here, we concentrate on the understanding of European HRM. 99 Brewster/Larsen (2000 a & b); Larsen/Brewster (2000); Brewter et al. (2000c). 100 Whitley (1992); Holden (2001).

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Several terms have been coined in order to describe organisations that operate in several countries: multinational, global, international or transnational organisa-tions.101 These various definitions intend to distinguish organisations by their organisational structure, their international business activities, or according to their stage of internationalisation.102 Some authors also show an ideal version, which organisations operating on an international scale should reach at the end of several sequential stages.103 While these normative implications attached to the various terms are interesting, they do not fit well into our explorative interest. We use the term “multinational organisation” since it is the most commonly-used term within literature and can be regarded more or less as a collective term for organisations operating across borders. We will use the term multinational organisation without any normative connotation.

The following section introduces the structure of this study.

3.4 Structure of the Thesis Chapter I covers the practical and theoretical background of the research prob-lem, the evolving research objective and the scientific approach taken in this dissertation. Chapter II analyses this dissertation’s theoretical background and develops a model of EHRM by drawing upon research results from various fields. The in-ternal and external environmental factors of the multinational organisation are examined. Internationalisation strategies are discussed, whereby the question of European-wide integration and co-ordination is given particular interest. The three main HR subfunctions: recruitment and selection, training and develop-ment as well as compensation and benefits are discussed from an international point of view. Finally, all three steps: external and internal environment, internationalisation strategy and HR subfunctions are combined within an overall theoretical framework for International/European HRM. Chapter III presents the empirical part of the research, the quantitative and qualitative analysis. The research methodology is discussed. The research find-ings are presented, by looking again at the external and internal environment, the internationalisation strategy and the three distinct HRM subfunctions: re-cruitment and selection, training and development, as well as compensation and benefits. Herein, the question of European-wide integration, i.e. how far multi-national organisations standardise their HR policies and practices, is given spe-

101 Bartell/Ghoshal (1989); Sherman et al (1996); Ivancevich (1998). 102 Adler/Ghadar (1992); Bartlett/Ghoshal (1991 & 1995); Kanoche (2001); Scullion/Starkey (2000); Scul-

lion (2001); Hilb (2000). 103 e.g. Adler/Ghardar (1992).

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cific attention. In this context, we investigate in detail whether HR policies and practices are influenced by either external (country-specific) or internal (organi-sation-specific) factors. Chapter IV evaluates both the theoretical results, as well as the empirical re-search findings, with a view to developing an overall guideline, which intends to support multinational organisations in their efforts to design their HRM in Europe. Chapter V concludes and summarises the implications of this research study for both theory and methodology. This chapter ends with a brief outlook.

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Chapter II: Theoretical Framework The purpose of this chapter is to develop a theoretical framework for interna-tional Human Resource Management in order to investigate HRM within the European context of HRM diversity. The following three levels of international HRM are discussed and combined in the theoretical framework: environmental level, strategic level and operational level.

• Environmental Level: In order to analyse the environmental level, interna-

tional HRM is compared to HRM at national level (Section 1). Then, the system-theoretical perspective is introduced and both the external and inter-nal environments are given particular attention (Section 2). Building on the results of the two sections, we derive the theoretical framework’s first com-ponent: the external and internal context of a multinational organisation (Section 3).

• Strategic Level: Based on the traditional, contingency theoretical interna-tionalisation strategies, Section 4 develops the theoretical framework’s sec-ond component: the HR strategy for internationalisation. The discussion of HR strategies focuses on the drivers of standardisation.

• Operational Level: Finally, in Section 5, the three main operational sub-functions of HRM: recruitment and selection, training and development as well as compensation and benefits are discussed from an international point of view. This is the third component of the theoretical framework.

The main ideas of the various steps undertaken are condensed in the theoretical framework. We use this framework in the empirical part of this study (Chapter III) as well as for the development of guidelines for practitioners (Chapter IV).

1 International vs. National HRM In this section we show that, compared to Human Resource Management at a national level, the complexity of HRM within multinational organisations is sig-nificantly higher.104 The confrontation with various environments and external settings, the different nationalities of and geographical distance between the workforce as well as the different local HR systems lead to a more complex sys-tem of Human Resources. The higher degree of complexity mainly arises due to “...national differences in the legislative systems, differences in the cultural con-text and in the stage of development of the economy of the countries.”105 Based

104 Acuff (1984); Dowling (1988); Morgan (1986); Marcharzina (1989 & 1992); Albach (1981); Torrington

(1994); Ivancevich (1998). 105 Albach (1981, p. 19); translated by the author.

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on work by several authors, Schulte106 summarises the following six categories of higher complexity of international HRM: • More HRM functions and activities: Due to the higher complexity of the

multinational organisation and its national and international subsidiaries, the amount of HR functions and activities increases. The HR department is con-fronted with additional tasks next to national HRM and has to deal with dif-ferent types of employees in the relevant countries.

• Broader perspective: Multinational organisations have to consider a wider

spectrum of factors in order to reach a solution. They are confronted with a variety of different groups of employees, especially across different cultures or economic systems.107 Therefore, for example, the complexity of treating groups of employees equally in terms of pay or personnel development across the various countries increases.

• Higher degree of involvement in the private sector of employees: Espe-

cially in the field of expatriation, a higher degree of involvement in the pri-vate sector of employees becomes necessary in order to reduce the additional burden of expatriates, e.g. to cope with different social security systems, re-location and housing problems.

• Change of importance of various HRM activities according to the ma-

turity of the foreign business: The focus of HR activities might change during the organisation’s internationalisation process. In this context Dowling108 identified that during the early stages of internationalisation, the selection of expatriates is given higher priority while in later stages person-nel development of third country employees plays a more dominant role.

• Higher risk and degree of insecurity: Organisations face higher risks in

the HRM decisions they have to take. For example, in case an employee terminates expatriation earlier than agreed, or an employee does not perform according to the company’s expectations within the host country, additional costs for the organisation as well as for the career of the employee might re-sult. Furthermore, costs of expatriation like higher salary, special develop-ment or relocation costs, are in general three times higher than for local em-ployees.

• Higher degree of external influences: Multinational organisations operat-

ing in various national contexts face more external influences on their man-agement of human resources, e.g. by the various national legal systems or the different economic developments of each country. Therefore, HR profes-

106 Schulte (1988, pp. 180 – 183). 107 See also Morgan (1986). 108 Dowling (1988).

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sionals need to invest a lot of time and energy in learning about local differ-ences.

Thus, international HRM is confronted with a variety of tasks beyond national HRM. For the purpose of our study it is helpful to consolidate the above list into two main aspects in which international HRM differs from national HRM:109 1) International HRM needs to cope with more heterogeneous external

(environmental) factors such as economic, cultural or legislative as-pects of the various host countries that lead to a higher degree of dissimi-larity, diversity and fragmentation.

2) It faces higher internal (organisational) complexity of the multinational

company and its international subsidiaries, requiring a higher degree of (international) co-ordination.

In order to understand the various internal and external factors of influence and their impact on the optimal degree of standardisation of HR policies and prac-tices for multinational organisations, a theoretical framework is needed. This framework must not neglect the environment’s variety but should make it its fo-cus. Thus, we suggest a holistic perspective on the situation of multinational or-ganisations. Therefore, in the following, the systemtheoretical perspective is in-troduced, building the basis for our model in order to think, analyse, develop and evaluate Human Resource Management within the European context.

2 System-theoretical Perspective on Multinational Organisations System-oriented management theories focus on the design and management of the whole system rather than on the individual employee or small groups.110 System-theoretical approaches emphasise the network character and the interre-lation between the individual parts of the systems as well as between the indi-vidual parts and the whole system.111 Furthermore, the various systemtheoretical approaches, which are either rooted within natural science,112 like biology, cy-bernetic or information technology, or within the context of social science,113 enable us to systematically analyse the external relationships of the organisation.

109 See Macharzina/Wolf (1998). 110 Next to the systemtheoretical perspective other theoretical models like the transaction-cost theory or con-

tingency-theoretical approaches are discussed in the literature (see Wolf (1994) or Festing (1996)) in or-der to understand HRM from an international point of view. However, especially due its focus on the or-ganisation as a whole system and its interaction with the organisational (internal and external) environ-ment, the systemtheoretical perspective is selected for the underlying study.

111 See Probst (1987). 112 Bertalanffy (1979); Emery / Trist (1965); Johnson et al. (1973); Ulrich (1970); Bleicher (1972). 113 Barnard (1970); Homans (1968); Parson (1960); Luhmann (1968 & 1984).

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Organisations, as open social systems, do not only react to environmental influ-ences, but also stand in a reciprocal relationship with their environment. This means that the environment an impact on the organisation, but also, due to its interactive relationship, the organisation has the possibility of actively shaping its environment. Social systems do not have clear borders. Hence, organisations have to draw their own limits by defining areas of activities. This allows an or-ganisation to distinguish itself from other organisations and makes it identifiable as a system in relation to its environment. In the following, the various external and internal contexts of influence are looked at and integrated in the general system-theoretical frame underlying this research investigation.

2.1 External Context of a Multinational Organisation Figure II.1 demonstrates the four main external environmental factors114 identi-fied in the literature.115

Figure II.1: External Environmental Factors International human resource management is influenced by various economic factors.116 The economic systems of host countries, their economic develop-ment, as well as related factors like the inflation rate or the labour market situa-

114 Next to these four selected external environmental factors, others were identified within the literature,

such as the ecological factor. However, as we believe that the above-selected four factors are particulary relevant for Europe and as they are the most commonly used within literature, we restrict our analysis to these four factors. This does not mean that further factors are always irrelevant. The concentration on the main factors is pursued in order to reduce complexity and, hence, to make the evaluation of the organisa-tion’s external environment manageable.

115 See Farmer/Richman (1970); Kammel/Teichelmann (1994); Steinmann/Schreyögg (1997); Dülfer (1991); Hilb (2002).

116 Garelli (1997).

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tion, are important for human resource management.117 For instance, they have an impact on the multinational organisation’s compensation and benefit systems due to different standards of living or tax systems. Furthermore, national labour markets118 influence the availability of specific qualifications or staff groups within the various countries. Technological factors entail the condition of production technologies as well as information and communication technologies.119 They are relevant for the deci-sions of specific production locations and they influence the cost structure of the organisation, their working productivity as well as the need for specific qualifi-cations, as they determine how people work and interact within the organisation. The impact of the political-legal environment on multinational organisations is due to different national employment laws and social legislation systems.120 The latter covers employee representation systems like works councils or employ-ment contracts, and employee protection such as maternity leave, pension schemes or tax systems. In addition to the national systems of each country, the EU social legislation system has an impact on multinationals. Key social and employment directives from the EU cover areas like equal treatment, employ-ment protection, employee relations as well as health and safety regulations. Changes within the legal environment are important to comply with, and they often change more frequently than other environmental factors. The socio-cultural environment of the organisation has an outstanding impor-tance within the strategic decision-making process. Several failures and mis-investments are due to a lack of consideration of this factor.121 This is mainly due to the hardly comprehensible and quantifiable character of the relevant as-pects of the socio-cultural environment, such that the impact of socio-cultural aspects is neglected. However, for the success of Human Resource Management within multinational organisations, the importance of considering socio-cultural aspects is mentioned frequently within literature.122 Socio-cultural aspects imply culture-related norms and values as well as social relationships and commitments.123 The former involves cultural building aspects like religion, ethical norms, ideological paradigms or general socialisation prin-ciples within single countries. They might influence the way in which employ-ees are motivated as well as the leadership style and resulting problems of com-pensation, personnel development and planning.124

117 Kammel/Teichelmann (1994); Cherrington (1983); Hentze (1989). 118 Kammel/Teichelmann (1994); Torrington/Hall (1987); Kienbaum (1989); Buttler/Bellman (1992). 119 Hilb (2002). 120 Gustaffson (1990); Pieper (1990). 121 Steinmann/Schreyögg (1997 p. 141). 122 Keller, v. (1989); Hossain/Davis (1989). 123 Hofstede (1988 & 1991); Schein (1985); Adler (1997); Trompenaars (1993); House (1998); Hilb (2000). 124 Scherm (1999).

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Social relationships are important for the international management of human resources, as in general one tries to fulfil expectations of the social environment. Thus, aspects like social classes, equal opportunities or trade unions are impor-tant within international working relationships. Various areas of international HRM, ranging from manpower planning to industrial relations, are affected.125 Sparrow and Hiltrop emphasise that environmental factors have a significant impact on multinational organisations. In order to survive and prosper in the in-ternational business environment, multinational organisations should anticipate and understand these influence factors. This would “...place them in a better po-sition to capitalise on opportunities and to minimise or avoid problems.”126 While these influencing factors are well established in the literature, we intend to emphasise that a multinational organisation faces different environments in the mother country and each host country (see Figure II.2).

125 Scherm (1999). 126 Sparrow/Hiltrop (1994, p. 92).

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Figure II.2: External Environments: Headquarters and Subsidiaries This change in perspective raises some interesting questions. How far should multinational organisations standardise their HR policies and practices, given that the local environments of subsidiaries differ? Which of the four aspects dis-cussed above are the most important impediments to standardisation in practice? In the empirical part, we will provide answers to these questions. Here we want to develop some conjectures. Multinational organisations intend to standardise their HRM policies and prac-tices across the various host countries as much as possible. Their intent might be to reduce costs, to increase the overall international corpo-rate identity and image of their organisation, to be more transparent across coun-tries or to be able to transfer employees from one country to another more eas-

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ily. Overall, a higher degree of economic advantages and synergies might be reached by implementing a standardised HRM approach across the organisa-tional sub-units. For example, some organisations implement global training programmes in order to save development costs, to reach overall quality stan-dards, to increase the comparability of qualifications and to enhance the mobil-ity of staff. Given this a priori interest in standardisation, we now investigate potential ob-stacles to standardisation that are due to the environmental factors presented above. We develop four conjectures. Technological factors have a minor impact on the standardisation decision in the context of European HRM. While technological factors may be of importance if subsidiaries of multina-tional organisations are based in less developed countries, they are of minor im-portance in the context of European HRM. For example, in all European coun-tries there is access to the necessary hardware for setting up efficient HRM software or install adequate communication technologies, such as e-mail or tele-conferencing. Moreover, the training and development needs of employees, which may depend on the technological standards within a country, are likely to be similar across Europe, as defined in this study. Both the political-legal as well as the economic factors are likely to become more homogenous across European countries in the future. As pinpointed in Chapter I, the EU legislative process is harmonising the legal environment in Europe. This is of crucial importance, since previous research has shown that current differences in national HRM systems in Europe are mainly due to differences in the national legal environments. Thus, national HRM systems are likely to change significantly in the future. This said, it is also important to consider that a number of differences are likely to prevail. Take for instance the recent Directive on European works councils. While it requires multinational firms to set up a European works council covering all countries in which an organisation has a significant presence, different national systems of employee representation continue to exist. Partly as a result of the harmonisation of the legal environments, but also due to increased economic integration and the resulting pressures on national govern-ments, the economic conditions in the EU Member States are becoming more equal. Despite this trend, some economic factors are likely to continue to play an important role in the future, as local conditions determine aspects like the supply of and demand for labour. Socio-cultural factors will remain of significant importance for European HRM.

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Culture is more difficult to change than law. As a result socio-cultural factors are likely to remain heterogeneous even if the political-legal environment is harmonised. As a result, multinational organisations might prefer (or are forced) to adapt as much as possible to the local circumstances of the host country. The organisations may prefer to be in line with the common practices and traditions, first, in order to reduce resistance against new and unknown practices among the workforce, and second, in order to be comparable to other national organisa-tions. Failing to adapt may make the recruitment (personnel marketing) of local employees more difficult or may have a negative impact on motivation. Note, however, that as a result of internal factors, like corporate culture, there may nevertheless be a net benefit of standardisation. We will take up this issue below when discussing the internal factors.

2.2 Internal Context of a Multinational Organisation The internal context covers the actors of the organisation as well as company-specific structures, cultures and employee-related issues, such as staff qualifica-tion or HR policies and practices.127 The following figure shows the main inter-nal factors mentioned in the literature.128

Figure II.3: Internal Environmental Factors The strategy of the organisation has an impact on the organisational structure, inter-organisational communication and co-operation, the integration of HR policies and practices, as well as the approach of the organisation towards inter-nationalisation. The structure of the multinational organisation and its various subsidiaries is an important internal factor to consider as it determines the way of processes and

127 See Footnote 115: External factors. 128 Freeman (1984); Rowe et al. (1989); Wagner (1998).

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procedures within the organisation and its various sub-units.129 The organisa-tional structure can be regarded as the result of a conscious, goal-oriented for-mation of rules for social co-operation.130 The analysis of the organisational structure allows the HR department to gain a broader understanding of the or-ganisational action, being determined by certain characteristics of the organisa-tional structure. According to the Aston concept131 the following six dimensions of the organisational structure can be identified:132 • Specialisation: Degree to which tasks are differentiated within the organisa-

tion, like the number of specialist positions that require specific job descrip-tions.

• Co-ordination: Degree to which shared positions are integrated, e.g. by

managers who are primarily in charge of co-ordinating employees in these positions.

• Configuration: Levels of hierarchies within the organisation and the num-

ber of employees reporting to one manager. • Standardisation: Degree to which tasks are reglemented by routine proce-

dures, e.g. the number of standardised and programmed procedures. • Formalisation: Degree to which organisational rules and regulations are de-

termined in writing. • Delegation: Degree to which decision-making takes place at lower staff lev-

els. The greater the differences are between the internal structures of the headquar-ters and the international subsidiaries, the more complex are the organisation’s internal procedures and the more complicated are the internal European-wide co-ordination and co-operation processes. Stakeholders133 are individuals or groups who have a legitimate interest in the organisation and can either influence the decision-making of the organisation or are affected by these decisions. The importance of the organisation’s stake-holders are discussed frequently within the literature134 and the various stake-holders of both the parent organisation and the subsidiaries are important to consider, as their goals and power within the organisation may differ and thus

129 See Bleicher (1990); Hilb (2000); Analoui (2002b); Ghoshal/Bartlett (1997) 130 See Staehle (1989). 131 For more details regarding the Aston concept see Hill et al. (1994); Kieser/Kubicek (1992); and

Kubicek/Welter (1985). 132 See Kubicek/Welter (1985). 133 For more information about the stakeholder approach see Freemann (1984) and Salaman (1992). 134 See Freeman (1984) and Rowe et al. (1989).

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lead to inner-organisational conflicts. The perspectives and goals of the owner, customer, the management team,135 and the employees of the multinational or-ganisation are to be considered. Particularly, the interests of both the managers and the various employees are important for multinational organisations, as con-flicts of interest might exist. While managers of the organisation mainly follow business and profit-oriented goals, the employees and their representatives are likely to be interested in social aspects.136 In addition, multinational organisations are confronted with the problem of con-flicts between a manager of the company’s headquarters and a manager within the various company’s international subsidiaries regarding different goals, lan-guage systems, cultural and social norms or specific qualifications.137 Therefore, next to the general question of international HRM, particular aspects like the sharing of competence, interaction and co-operation, are central areas for HR to solve. The organisational culture is an important internal factor of the multinational organisation.138 The main idea of a strong organisational culture is to build an organisation-wide system, containing a set of overall shared norms and values, which transcends national boundaries and systems. The culture gives the or-ganisation its identity and enhances its integration e.g. via socialisation of em-ployees into certain cultural procedures. Furthermore, the organisational culture has a strong impact on various areas of HRM and determines the leadership style of the organisation, the way in which employees are treated as well as working relationships. In addition, the organisational culture plays an important role for the organisation’s internationalisation strategy. Therefore, the more dif-ferent the various organisational sub-cultures are from each other, the more complex the organisational internal procedures and the more complicated the in-ternal European-wide co-ordination and co-operation processes are. Following the approach we have applied to the external context of a multina-tional organisation, we now focus on the differences in the internal contexts of the parent organisation and each subsidiary (see Figure II.4).

135 See Hilb (2002). 136 See Marr/Stitzel (1979). 137 Holtbrügge (1995). 138 See Hilb (2000); Schein (1989); Hall/Hall (2001); Wong-Rieger/Rieger (1989).

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Figure II.4: Internal Contexts of Headquarters and Subsidiaries It turns out that these differences lead to a number of special challenges for HRM of a multinational organisation in Europe. In the following, we discuss three aspects that seem particularly important. Headquarters and subsidiaries are likely to differ in terms of structure. There are several straightforward reasons why the structure of a subsidiary is likely to differ from the structure of its headquarters. First, in most cases sub-sidiaries are smaller than their headquarters. Since structure will follow size, at least to some degree, it is our conjecture that subsidiaries will tend to be charac-terised by a lower degree of formalisation, a flatter hierarchy, and less delega-tion and specialisation. The second reason, why the structure of subsidiaries is

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likely to differ, is that subsidiaries typically face different tasks. For instance, some functions, like marketing or research and development, may be pursued centrally at the organisation’s headquarters. Moreover, the local organisation’s structure is likely to be influenced by external environments, which differ across countries, as we have discussed in the previous section. These differences between headquarters and subsidiaries lead to particular chal-lenges for European HRM. For instance, employees of the headquarters, who are moved to a subsidiary, will face a different environment. While they may have acted as a specialist in a clearly defined role at the headquarters, a subsidi-ary may require more generalist skills and management capabilities. This re-quires specific training and development, a task for European HRM. By the same token, if an expatriate returns to the headquarters he may have to be rein-tegrated and an adequate position needs to be found. Nevertheless, the differences may also help HRM to develop employees. Sub-sidiaries provide the opportunity to test the employees’ skills and can be used as a pool for recruiting top management. Given that the performance of local em-ployees can be better monitored than the past performance of external appli-cants, such a pool can be of great value. The stakeholders and their incentives differ between headquarters and subsidi-aries. This is likely to cause tensions and conflicts of interest. The most obvious difference in the stakeholders is often a result of the hierarchy between headquarters and subsidiaries. While the former have to satisfy stock-holders, the latter have to report to the headquarters. Moreover, subsidiaries may compete among themselves – for resources or in the product market. As a result it is a particular requirement for HRM of the multinational organisa-tion to improve communication and co-operation. Conflicts of interest have to be solved by appropriate conflict management. This is an important task for European HRM. A strong corporate culture may ease or hinder the tasks of European HRM in a multinational organisation. The challenges that result from the different incentives of stakeholders are even more pronounced if there are differences in the organisational cultures of the subsidiaries and the headquarters. Such differences may result in misunderstandings that lead to or escalate conflicts. On the other hand, there are a number of arguments in favour of adapting the culture of a subsidiary to the external environment of that subsidiary. Recruiting and motivating employees with a different cultural background than the local (recruiting) organisation, is well known to be difficult in a number of contexts. However, a strong corporate culture may also be helpful for HRM as it provides a degree of common under-

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standing and may also be attractive for local applicants and employees who fa-vour the resulting atmosphere.

3 First Component of the Theoretical Framework: Internal and Ex-ternal Contexts On the basis of the categories discussed above for an international working en-vironment of a multinational organisation, Figure II.5 shows the four most im-portant sub-systems. This builds the first piece of the theoretical model, which is developed step-by-step within this chapter.

Figure II.5: First Component of the Theoretical Framework: Internat. Working Environ-ment This model contains the important sub-units of the external and internal contexts of the multinational organisation. Therefore it builds the main frame for the

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model underlying this study in order to analyse, implement, manage and evalu-ate human resource management within Europe. As a theoretical frame, it allows us to analyse a complex international human re-source management system with its interrelations to various (sub)systems139 and its main fields of European-wide integration and co-ordination. Organisations need to take this information into consideration, when they decide how far they will consider country-specific differences and how much autonomy they will give to national HR departments. After having identified the four main sub-systems of the international working environment, the following section looks at the main internationalisation strate-gies.

4 Second Component of the Theoretical Framework: HR Strategy for Internationalisation International Human Resource Management has an important but difficult role within the internationalisation process of an organisation. During this process companies are confronted with various external environments and need to co-ordinate their international sub-units. Organisations have to find the right bal-ance between standardisation and differentiation of their HR policies and prac-tices.140 The aim is to reach the maximum synergetic effect, on the one hand, and optimal differentiation in order to cope with the internal and external differ-ences on the other. Another area of importance is the management of co-ordination.141 One important question in this context is whether the main re-sponsibility of HR policies should be centralised at the company’s headquarters or decentralised to the subsidiaries. We follow the literature in using a situation-focused, contingency-theoretical perspective as a basis for identifying an optimal internationalisation strategy for multinational organisations. This perspective suggests that there is no one best way to manage all organisations. Organisations have to be analysed in relation to their specific context. The contingency-theoretical approach provides a framework for thinking, developing, implementing and managing an interna-tional HRM strategy, as a basis for international HRM policies and practices.

Based on the differentiation of Perlmutter,142 the following four HRM strategies towards internationalisation can be classified:143

139 See Conradi (1983); Drumm (1989), Berthel (1995). 140 Kamoche (1996). 141 Macharzina/Wolf (1998); Wolf (1994 & 1997); Morgan (1986); Welge (1980). 142 Perlmutter (1969) and Heenan/Perlmutter (1979); see also Hilb (1985); Hofstede (1988); and

Joggi/Rutishauser (1980).

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The ethnocentric strategic approach is based on a (universalistic) attitude. Therefore, values and strategies of the parent organisation are transferred to all subsidiaries. This point of view disregards national, as well as cultural, differ-ences of host countries and asks for a high degree of standardisation of person-nel policies in line with the practices of the parent organisation. The polycentric strategy on the other hand emphasises the country-cultural in-fluences and strengthens the independence of cultural-bound and national fac-tors. Therefore, every single subsidiary will be regarded as an autonomous, in-dependent sub-unit, with its locally, recruited employees and national practices. This cultural-bound point of view argues that the differences across countries are due to cultural diversity and differences in the national institutional frame-works. These differences are said to imply that practices are not transferable into other cultures or nations. This approach can also be described as multi-ethnocentric.144 The regiocentric strategy (in this case Eurocentric) assumes that with a view towards Europe, one overall regional approach should be implemented. This strategy also follows a more universalistic perspective, because Europe is re-garded as one single region145 where national and cultural differences are ig-nored. The geocentric strategy considers both the organisation-wide commonalties as well as the cultural and national differences in its strategic approach towards in-ternationalisation. Hereby, “world-wide normative personnel-political guide-lines and global standardised systems are developed, integrated, and evaluated under consideration of strategic regional conditions as well as operative national conditions.”146 This strategy emphasises the internationality of organisations and strengthens both cultural differences and commonalties. The first three strategies have a one-dimensional perspective, because they ei-ther over-emphasise or underestimate cultural differences or regional- and or-ganisational-specific commonalties. Only the geocentric strategy emphasises both and makes use of the advantages of multicultural HRM.

143 Next to the categorisation by Perlmutter, other authors also differentiate between three or four different

strategic position. As these categorisations are similar to the ones discussed above and as they do not bring additional information for the underlying research question, the “traditional” version of internation-alisation strategies from Perlmutter is used here.

144 Wunderer (1993). 145 This assumption is in contrast to the results obtained by Hofstede (1991). He came to the conclusion that

no separate continental cultures like Europe, Asia or America, exist. 146 Hilb (1995, p. 216); translated by the author.

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The approach of Perlmutter is only one of many approaches that consider the question of global integration and co-ordination.147 The majority of the alterna-tive approaches also take culture-specific and system-specific differences into account and postulate several sequential stages of international human resource management. These stages then typically lead to one favoured stage, which the multinational organisation should adopt – whether it is termed a geocentric, a global or a transnational position. The internationalisation strategies of Perlmutter have been criticised for a num-ber of reasons:148 - Given that the optimal strategies are usually formulated within the context of

HR, there is an issue as to whether it is possible to define internationalisation strategies independent of the organisation and business strategies.

- The concepts are sometimes criticised for not having spelled out the practi-

cal implications. Some critics question whether multinational organisations are able to put the strategies into practice149 and complain that the typologies fail to give accurate answers on what the HR polices and practices within the certain categories should be.

- Another criticism is that no differentiation, according to others factors than

the stage of internationalisation, is made. Important factors to consider are staff group or the dimension (strategy, policy, practice).150

- The Perlmutter categorisation is regarded as too simplistic in order to de-

scribe the complexity of the multinational organisations.151

We do not believe that these criticisms imply that we need to reject the ap-proaches and the terminologies adopted. Rather, we feel that the critique points to further extensions and more detailed work with regard to the inner context of the organisation and the specific policies and practices in question. In the fol-lowing we make use of Perlmutter’s terminology, as no other theories on inter-nationalisation strategies152 provide such a clear-cut typology153 of different in-

147 Scholz (1993); Kumar (1998); Milliman et al. (1991); Schuler et al. (1993); Dowling et al. (1994); Bart-

lett/Ghoshal (2000). 148 Rosenzweig/Nohria (1994); Tayeb (1998); Scholz (1993); Myloni (2002). 149 While the majority of authors do not provide further information how these strategic positions should be

reached in practice, Hilb developed a very complex model of “glocalpreneuring” for the transnational management of human resources (Hilb 2000). He describes in four main components: profile analysis, purpose creation, people management, and process evaluation various techniques as to how multinational organisations become glocalpreneurs. But as his concept is a very complex and detailed HR management model, whereby the internationalisation strategy is one important component, we will not go into further detail at this stage.

150 Wunderer (1993). 151 Myloni (2002). 152 For example see the discussion on the concept of fit in IHRM like Sorge (1991); Milliman et al. (1991);

Ivancevich (1998); Scholz (1987 & 1993).

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ternationalisation strategies, a categorisation, which is helpful for the purpose of our research investigation. The following table provides an overview of the four strategies in terms of their consideration of multicultural differences and commonalties.

Figure II.6: Internationalisation Strategies Source154 All four strategies lead to variations between the two alternatives, standardisa-tion and differentiation of HRM policies and practices. In essence, the ethnocen-tric strategy suggests complete standardisation, whereas the polycentric suggests complete differentiation. The regiocentric approach suggests both complete standardisation within the region and complete differentiation between the re-gions. Only the geocentric strategy calls for a mix of standardisation and differ-entiation. Moreover the strategies imply different structures for the HR department. For instance, in the context of European-wide co-ordination responsibility for HR decision-making and implementation can either be centralised, at the compa-nies headquarters, or decentralised, at the national level of the subsidiary.155 This requires that the adequate degree of the subsidiaries’ autonomy is deter-mined as well as the degree to which intervention, rules and regulations of the parent organisation are binding. The ethnocentric strategy implies a centralistic approach and the polycentric strategy a decentral. The regiocentric strategy sug-gests centralisation within the region but decentralised HR across regions. The geocentric strategy suggests a central HR department at the company’s head-quarters that co-ordinates and co-operates intensively with the local decentral-

153 Myloni 2002. 154 Hilb (1995, p. 213). 155 Brewster et al. (2001).

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ised HR units. The exchange between the headquarters and subsidiaries is in-tended to be two-way. In order to retain control with regard to Human Resource Management or to re-duce costs, or to create a common corporate identity and company culture, a multinational organisation might decide to leave the main responsibility for HRM decision-making as well as their development, implementation and man-agement, centrally, at their companies headquarters. However, decentralisation and differentiation of HRM policies and practices in-creases the autonomy of the various subsidiaries and helps integrating local HR expertise into the decision-making process. In the following, we derive some re-sults from the theoretical and empirical literature regarding the use and applica-tion of the different strategies. Firms often adopt an ethnocentric strategy during the first stage of internation-alisation. This does not seem to be an ideal approach. As research shows, organisations, particularly in their first stage of internation-alisation, neglect the importance of an international Human Resource Manage-ment strategy.156 They mainly adopt an ethnocentric strategy towards interna-tionalisation by simply transferring the local HR policies and practices of the parent organisation into the host countries. Problems resulting from such a stra-tegic position towards internationalisation, were reported frequently in the lit-erature.157 Therefore, it seems to be important that organisations, already in their early stages of internationalisation, consider their management of human re-sources as an important business tool and as a major component of competitive advantage.158 “Wrong” systems, already in practice, are difficult to change at a later stage due to resistance to change among the workforce, and an already “frozen” organisational culture is hard to “unfreeze” and modify.159 The degree of standardisation implied by an internationalisation strategy should depend on the staff group that is affected by the resulting HR policies and prac-tices. Wunderer160 suggests using a mix of the various internationalisation strategies in order to find the right balance between a unique management of the organisation and the situational adaptations to the national environments of the single coun-tries in which the organisation operates. Figure II.7 illustrates the strategy mix according to dimension and target group.161

156 Scherm (1999). 157 Tung (1982); Wirth (1992); Black et al. (1992); Bahai/Reisel (1993); Caliguiri (2000); Duane (2001). 158 Bennett et al. (1998); Mabey et al. (1984 & 1998); Beer et al. (1985); Hendry/Pettigrew (1990); Storey

(2001a), Porter (1980 & 1987); Huang (1998); Miller (1989); Ferner/Quintanilla (1998). 159 See Lewin (1963). 160 Wunderer (1993). 161 Figure II.7 combines the pyramide from Wunderer (1993, p.13) with a table from Hilb (1995, p. 217).

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Figure II.7: Strategy Mix According to Wunderer, the geocentric strategy should be applied at the norma-tive level. General company-specific regulations and rules, such as equal oppor-tunities, business ethics, full-employment policies or general rules for employee involvement should be reached with a geocentric strategy. Furthermore, policies and practices like career planning, compensation and benefits for senior man-agement staff, should be developed with respect of a geocentric perspective. The regiocentric strategy should cover the strategic dimension and be applied at the level of potential managers and future expatriates. The regiocentric approach seems to be appropriate for programmes or target groups such as graduate re-cruitment or the adaptation of leadership guidelines to specific regions like Europe or Africa. Finally, the polycentric approach should be applied at the operational dimension and for non-managerial staff. This involves the level of strategy implementation within the single countries and the management of local employees according to the national rules, regulations and habits. We make use of the idea that the degree of standardisation is likely to vary with regard to the staff group affected by the HR policy in question. Moreover, we follow the argument that the degree of standardisation is likely to depend on the dimension. However, rather than identifying the strategies with standardisation, we argue that a geocentric approach is compatible with different degrees of standardisation. In fact, if applied to different staff groups the geocentric strat-egy will indeed lead to different levels of standardisation. Moreover, based on the discussion above, we add a factor that is known to have an impact on stan-dardisation: the stage of internationalisation. Figure II.8 integrates the three factors, staff level, dimension, and stage of inter-nationalisation into the theoretical framework of the multinational external and

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internal influencing factors, demonstrating the relationship between the organ-isational strategy and the internal and external environmental factors of multina-tional operation.

Figure II.8: Second Component of the Theoretical Framework: Internationalisation Strat-egy After having looked at the main strategic questions, in a next step, the specific HR policies and practices of international management are important to con-sider. An integrated approach is envisaged, which aims to make the HR sub-functions consistent amongst each other and congruent with the context of the international organisation.

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5 Third Component of the Theoretical Framework: HR-Subfunctions The system-oriented consistency approaches regard HR practices not as single independent instruments, but as a part within the net of interrelations.162 In the following, the three main areas163 of HRM: recruitment and selection, training and development as well as compensation and benefits, are discussed in more detail, building on existing research on international HRM. We will follow common practice and analyse each of these areas separately. However, this should not induce us to neglect the need of an integrated HRM approach164, as the various HR subfunctions are related to each other. For example, in an integrated HR approach, training and development is co-ordinated with recruitment and selection. The required qualifications and com-petencies of new recruits can be identified within the training and development function, to name but one example of such interrelations. On the basis of these company-specific demands, the appropriate candidates are selected within the recruitment process. Although employees bring certain skills and qualifications when being re-cruited, they will typically have specific training and development needs, like a special induction into the actual position. In addition, next to technical or work-related knowledge, these are also factors relating to the culture of the company, like certain norms or values that are to be communicated. Here, the recruitment and selection function can provide input for the training and development func-tion. Similarly, the career planning and staff assessment functions of training and de-velopment are an important input for the planning of compensation and benefits. Where necessary, we will, in the following, point to these interrelationships. However, our focus will not be on them. Indeed, given the explorative nature of our research and the added complexity of co-ordinating HRM at an international level we will emphasise the international dimension and standardisation across countries in order to keep the analysis tractable.

162 Mintzberg, (1979); Staehle (1991); Probst/Siegwart (1985); Gomez/Probst (1985 & 1989). 163 Next to the three selected subfunctions of HRM, recruitment and selection, training and development, as

well as compensation and benefits, other subfunctions like employee relations or staff assessment exist (see Hilb (2002)). However, we focus on the three selected functions for three reasons: First, they repre-sent the functions typically discussed in the literature. Second, they cover a wide range of HR actitivies from the entrance of the employee into the organisation (recruitment and selection) via its growth and de-velopment (training and development) as well as techniques to keep and motivate the employee (compen-sation and benefits). Third, due to complexity issues within our research investigation we need to limit the number of subfunctions.

164 Hilb (2002).

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5.1 Recruitment and Selection 5.1.1 General Steps within International Recruitment and Selection

One of the main goals of the HR function is to make sure that Human Resources are sufficiently available, in both quantitative as well as qualitative terms. Thereby, vacancies can either be filled a) from the internal labour market;165 b) from the external labour market;166 or c) from both, the internal and external labour markets. In order to use the internal labour market of the organisation, the HR functions have to make sure to advertise and communicate vacant positions within the or-ganisation. This can either be done nationally or internationally, according to the recruitment strategy of the organisation. Internal recruitment (at national level) is always combined with internal transfer or promotion of existing staff. Therefore, within an integrated HRM the internal recruitment process is combined with other HR activities, including staff as-sessment, long-term career planning as well as the individual training and de-velopment of employees. The main advantages of internal recruitment are the low costs, as no expenses have to be made for advertisement, complex screening procedures as well as the time spent in order to introduce the new employee to the specific organisational contexts. The last point mainly implies the employees’ knowledge of the inter-nal structure of the organisation, the company’s culture and already existing working relationships. In addition, the overall risk of recruitment decreases, as the employees are already known within the company, and information on their past performance is often available via internal staff assessment procedures. Irrespective of whether organisations recruit their employees internally or exter-nally, it is important to identify the core competencies needed for the particular position available.167 Within the literature, general management skills are mainly divided into social competencies like creativity, communication, and leadership style as well as technical skills required in order to perform the position.168

165 This strategy has particular impact on related areas like staff assessment and development. 166 This strategy is difficult to implement in an organisation with a strong organisational hierachy, due to the

restriction of promotion of employees (motivational factor). Rather, this strategy is appropriate for com-panies with a flat organisational structure with equal staff teams, mainly composed of experts from differ-ent fields.

167 Leblanc (2001); Sparrow (2000). 168 Staehle (1989); Scherm (1999).

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These competencies may vary from company to company, from environment to environment and from employee level to employee level. Furthermore, the diffi-culty of measuring competencies should be taken into account. According to Heymann and Schuster169 the HR department can use the follow-ing techniques in order to identify and select international management staff, whereby they distinguish between internal and external organisational instru-ments. Internal instruments in order to identify and select international managers are: • Internal job market: The internal job market should be transparent across

the various international operations of the company. It provides the employ-ees with the possibility of being in charge of their own international career and hence to be able to use the international job-rotation system or to apply for permanent positions abroad.

• Management review: On the basis of regular management reviews, the

leadership potential can be analysed, based on their overall performance and potential, and hence, might be selected in an integrated IHRM approach for specific management-development programmes. Some organisations use specifically designed mobility-reviews.170

• International high-potential seminars: Specially designed assessment cen-

tres for managerial positions are an important source for international re-cruitment activities for the multinational organisation. They provide the op-portunity to assess the potential candidate according to specific job-related competencies. Furthermore, within an assessment centre, employees can be confronted with critical real-life situations that can be simulated.

External instruments, in order to select and recruit international staff, include the screening of application forms, one-to-one and panel interviews as well as as-sessment centres. Again, the international perspective should be reflected and national systems should be taken into account. Compared to recruitment at national level, international recruitment activities imply a wider range of tasks and hence, more potential problems171 like the dif-ficulty of comparing qualifications172 and experience of applicants arise.173 Therefore, multinational organisations increasingly use external recruitment

169 Heymann/Schuster (1998). 170 For example Henkel KgaA; see Heymann/Schuster (1998). 171 Fritsch (1990); Wiltz/Koppert (1990). 172 For the European Union it is intended to standardise “Diplomas” (“berufliche Befähigungsnachweise”), in

order to make qualifications more comparable. See Sellin (1991), according to Scherm (1999, p.156). 173 See Nelson (2001); Talbott (2001); Sparrow (2000); Heyman/Schuster (1998); Duane (2001); New-

ell/Tansley (2001); Scullion (2001).

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agencies, as these are more familiar with the various national systems and have knowledge of national labour markets. They often have more knowledge of dif-ferent employee demands, such as living standards or pay and benefits, as well as of different recruitment and selection procedures operated within the various countries. Furthermore, it is an advantage of some recruitment agencies that they also operate on an international scale. These firms are able to provide in-ternational HR expertise, which might be hard to gain for smaller multinational organisations or for an organisation within their early stages of internationalisa-tion. Therefore, the use of external advice becomes more and more common among multinational organisation.

5.1.2 Alternative Pools of Applicants The recruitment and selection process of multinational organisations operating in Europe is dominated by the question of whether the organisation should re-cruit local nationals for vacancies in subsidiaries or whether they should transfer employees from the headquarters to the individual countries.174 In addition, a European-wide employee recruitment and selection process, to date mainly adopted for graduate recruitment, is a third interesting alternative to consider. Figure II.9 shows the main three areas of European recruitment and selection ac-tivities.

Figure II.9: International Recruitment and Selection Activities In the following, the three types of procedures are discussed in more detail. A) Recruitment of Employees within each Host-Country In particular, the recruitment and selection of employees within each host coun-try requires knowledge of the various national systems. In this context multina-tional organisations are confronted with the question of European-wide inte-

174 Some authors also distinguish the possibility of recruiting third country nationals, but this is not consid-

ered here. For further information see Festing (1996) and Kumar et al. (1998).

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gration: Should the multinational organisation transfer its recruitment and se-lection policies and practices to the host countries or should they operate ac-cording to the national common practice? The answer to this strategic question might vary according to the respective staff group, the distance between the practices of the parent organisation and the subsidiaries, as well as other factors of the organisations internal and external context.175 One important advantage of recruiting employees in each host country is that local employees are familiar with the business practices and socio-economic, political and legal environment of their host country. Moreover, it is less costly than expatriation. If recruitment and selection occurs in the host country, this raises the question of European-wide co-ordination.176 Should the recruitment and selection process be developed, organised and managed from the company’s HQ, the national HR department, or the line management? Again, the answer to this strategic ques-tion is likely to vary according to the staff group or the stage of internationalisa-tion of the organisation. This means, if the multinational organisation has only minor operations within a specific host country, it is more likely that the man-agement of human resources is co-ordinated from the company’s headquarters. In case of extensive international operation in another country, the necessity to implement a national HR department increases. In this context, the multinational organisation should be aware of various expec-tations among potential candidates in different countries, which results from dif-ferent meanings of working177 such as status, job for life, or expected career prospects. Therefore, companies have to make sure not to encourage wrong ex-pectations, which lead to the demotivation or decommitment of employees. More generally, there may be difficulties in communication between local em-ployees and home office personnel. These problems are likely to be less pro-nounced for managerial positions, since applicants for these positions are likely to have a more international perspective. Clearly, the decision to fill positions by recruiting locally takes away the oppor-tunity for staff in other subsidiaries or the headquarters to gain international and/or cross-cultural experiences. In general, employees are often recruited within the host country: • for lower staff levels,

175 See the system-oriented frame with internal and external context of the multinational organisation in

Chapter II.2 & II.3 176 Please bear in mind that the same questions of European-wide integration and co-ordination arise for the

other HR subfunctions training and development, as well as compensation and benefits. But the aspects considered here should not be repeated within the discussion of each subfunction. Macharzina/Wolf (1998); Wolf (1994 & 1997); Morgan (1986); Welge (1980).

177 See the result from the “Meaning of Working Study” in Europe; Wilpert et al. (1990).

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• if country-specific knowledge or experience is required, or • in order to emphasis or develop a multinational culture of the organisation. The last argument becomes more important, especially within Europe, where national boundaries disappear and former barriers like language, work permits, varying levels of qualification become less significant. B) Expatriation The experience of expatriation is widely discussed within the International Hu-man Resource Management literature. Due to the fact that this research is mainly dominated by US American researchers, the focus lies on examples of US American organisations operating within less developed countries and using an expatriation system in order to manage their foreign operations. However, most of the problems analysed in this setting are different from the problems or-ganisations face in the European environment. Large differences between em-ployees’ education level and therefore particular skill shortage at management level are not experienced in Europe. Furthermore, the living conditions of expa-triates in the host country, as well as the differences in culture, are of minor concern in the European context, if compared to organisational relations with developing countries. In Europe, however, multinational organisations have to deal with the expatriation issue when employees are transferred from one Euro-pean country to another. In general, expatriation178 is mainly used • at senior management or management level, • within early stages of internationalisation,179 • in countries with a significantly lower skill level than that of the mother

country and for • highly trained and specialised workteams with particular expert knowledge.

178 Note that expatriation systems will vary depending on the internationalisation strategy of the organisation.

For example, organisations that follow a geocentric strategy will use a different approach than organisa-tions that follow an ethnocentric strategy.

179 In this case it has to be considered that organisations, which did not operate at an international level be-fore, might not have the appropriate skills internally available for business abroad. Therefore, this prob-lem might either be solved by intensive training within this field or by external recruitment of employees with international work experience (see Wilhelm (1989) and Fritsch (1990)).

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One important advantage of expatriation, which implies recruitment and selec-tion within the mother country, lies in the ease of administration, the knowledge of the local labour market as well as the application of common recruitment and selection procedures of the home country. Moreover, the use of expatriates often is a positive factor for the international working relationship between the HQ and the subsidiaries, as cultural habits, in terms of leadership and management style and decision-making, can be communicated to the various international subsidiaries.180 Disadvantages of the use of expatriates are widely discussed within literature.181 Here we focus on the most important issues. In contrast to the positive assess-ment of the impact of expatriation on communication between the headquarters and the subsidiaries pointed out above, the use of expatriates might also have a negative effect on the international working relationship as the subsidiaries might lose their autonomy and local employees may feel “invaded” by foreign policies and practices. Moreover, the concept of expatriation has its clear limits, as staff might resist long-term stays abroad, due to personal reasons like children, double career prospects or problems of reintegration. In addition, the high costs of expatria-tion, due to special compensation packages or training requirements, are re-ported frequently in the literature. 182 The problems of expatriation are likely to decrease within the European envi-ronment, as it becomes increasingly common among graduates, especially from European business schools, to live within various countries and to speak more than one foreign language. Therefore, it becomes more popular among multina-tional companies to recruit candidates directly from international-oriented busi-ness schools and the traditional concept of expatriation might lose its impor-tance over time. We address this issue in the next section.

180 See Kumar/Steinmann (1989). 181 Ivancevich (1998); Black et al. (1991); Roberts (1998). 182 Harvey/Wiese (2001); Foster (2000); Lineham (1999); Black et al. (1999); Scullion (1994); Caliguiri

(2000); Duane (2001); Hill (1997); Roberts (1998); Wirth (1992).

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C) European-Wide Recruitment The recruitment of graduates directly from universities (milk round) is becom-ing increasingly common in Europe. 183 One reason for this is that universities support it in order to make sure that their graduates find appropriate positions. For international organisations, the milk rounds of European business schools are of particular interest, because certain skills, including language, mobility, and international work experience, are provided by those candidates. Some or-ganisations already have a selection of “good” universities from which they re-cruit most of their employees. Focusing on a few universities leads to the advan-tage, that existing employees who are involved in the selection process (e.g. in the interview process or assessment centre) bring a better understanding of the qualifications gained by the applicant. Furthermore milk rounds have a cost-saving advantage, as interviews can be held at the university and are limited to only a few locations. The following table summarises the advantages and disadvantages of recruit-ment of employees within each host country, of expatriation and of graduates with European or international experience mentioned within literature. The table draws on previous surveys from Borg and Harzing.184 However, while the au-thors compare the advantages and disadvantages between the use of parent-country nationals vs. host-country nationals and third-country nationals, here the use of European-wide recruitment, such as graduates from European business schools, is given greater emphasis than the recruitment of third-country nation-als in general.

183 Bosler/Lescher (1992); Kolter (1991). 184 Borg/Harzing (1995, p. 186). See also Macharzina/Wolf (1998).

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Figure II.10: Advantages and Disadvantages of Recruitment Activities by Target Group

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Looking at the decision of the HR department as to which pool of potential ap-plicants to approach, our analysis of the pros and cons leads to a list of criteria that can be used for assessing the appropriateness of a procedure. The criteria are: • the quality of the pool of potential applicants, • the costs of the recruitment and selection process, • the required compensation and benefits in order to make recruitment suc-

cessful, • the applicant’s characteristics (in terms of culture, knowledge of organisa-

tional procedures etc.), • the likelihood of successful recruitment, • the potential for a high quality screening of the applicants. If we apply these criteria and make use of the list of pros and cons provided in Figure II.10, can we draw some more general normative conclusions for multi-national organisations? We attempt to make a first step in this direction with the following conjectures. At the beginning of an internationalisation process, the use of expatriates is par-ticularly attractive. Experience shows that local recruitment requires significant knowledge of local common practices. This knowledge needs to be built up over time. Even if this problem can be overcome by the use of local recruitment agencies, there are a number of factors that make the use of expatriates advantageous in this start-up phase. The possibility that expatriates can transfer the organisational procedures and cultural habits to the subsidiary seems particularly important at the infant stage of the subsidiary as the early policies and practices are likely to determine the future development through the persistence of culture and procedures. Moreover, in the early phase of internationalisation the need for communication between subsidiaries and the headquarters is likely to be more intense, as small subsidiaries rely more on the knowledge and services of the HQ. Again, this is a strength of the expatriation system. In Section 4 we argued that firms, at the beginning of an internationalisation strategy, should not adopt an ethnocentric approach. Indeed, the literature has reported a number of problems that result from this strategy. This suggests that expatriates face an even more difficult task than transferring the culture and procedures of the headquarters to the subsidiaries. At the same time they have to

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feed back the problems that the firm’s culture and procedures cause within the host country and work, together with the headquarters, on an improved corpo-rate culture and improved policies and practices that have a European fit. This is true for all employees, but in particular for the human resource managers them-selves. As the subsidiary matures, the disadvantages of the expatriation system become more important. If the subsidiary has a strict high-level staff expatriation sys-tem, local employees will be demotivated as their career perspectives are sig-nificantly hindered. Moreover, tensions may arise if an organisation of a signifi-cant size is perceived as ignoring the local habits and needs. In practice, another important problem appears if there is a mix of local employees and expatriates and (typically) the latter have a significantly higher income than the former. Does this imply that at a later stage firms should not use expatriates any more? The answer is no. In later stages of internationalisation, a mix of all sources for recruitment and selection seems best. The key advantage of a local staff is the fit with the subsidiary’s external envi-ronment. Expatriates, on the other hand, can continue to stimulate a lively ex-change of cultures and ideas across the organisation and confirm the corporate culture. Thus, from a geocentric perspective there are good arguments for both sources. Hence, if the costs of using both recruitment and selection procedures are not prohibitive, it seems advisable to use an open procedure. Then the obvi-ous criterion is to choose the best candidate for the job out of all pools. This is also motivating for local staff as it shows that there is a career opportunity if performance is good. Hence, there are good arguments for using expatriates and recruiting within the host country. “Milk rounds” are a good way of recruiting locally or internationally. Whenever external recruitment is chosen, milk rounds have a number of very at-tractive features. They can be concentrated on good universities, making re-cruitment cost effective. The screening of the applicants is eased, if the same universities are approached over time, which improves the assessment capabili-ties of the recruiting staff. In general, irrespective of the country from where the employee comes, in order to recruit the right candidate for an international operating organisation, certain steps within the recruitment and selection process have to be taken, as discussed above. The following part looks at various techniques for training and development at the international level.

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5.2 Training and Development

The goal of training and development is to guarantee a high degree of qualifica-tion among the workforce. This involves activities such as analysing the training needs of the company, providing or organising training courses, assessing staff and identifying their potential and career planning. Training and development at an international level needs to take the additional international demands of the organisation into consideration. In the literature, the following three areas of personnel training and development activities are distinguished according to the extent of the employee’s involvement in interna-tional operations: 185 a) The training and development of employees who work at national level,

but for an international operating organisation.

Compared to employees who work on a national scale only, the addi-tional qualifications employees need in the international working envi-ronment are specific work-related knowledge about the various countries where the organisation operates, their languages as well as information on country-specific practices.

The spectrum and the demand for the various training and development activities are related to the overall internationalisation strategy of the or-ganisation. Hereby, one has to consider that due to the international envi-ronment different standards for training and development might exist. This means that due to the heterogeneity of the working environment, and, hence, due to different education and qualification systems, different training and development practices might exist at the national level. These factors have to be taken into consideration within the analysis of the external and internal framework of all training and development ac-tivities for a multinational organisation.

b) Training and development of employees with minor international ex-

change, who are either sent for short assignments abroad or have close working relationship with colleagues in other countries and international work teams.

Due to the increased extent of their international contacts and the amount of time they spend in different countries, special international training and development activities may be envisaged for those employees. Fur-thermore, particular knowledge of co-operation within multinational teams or different leadership styles becomes a topic for those employees,

185 Scholz (1993).

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but complex cross-cultural training activities and particular preparation courses for international assignments might only be appropriate for the staff groups discussed in point c).

c) Training and development of graduates, potential managers, specialists

as well as expatriates for future international assignments.186

Next to the additional demand for training and development activities for local staff, particular training and development programmes for interna-tional managers, specialists and expatriates have to be dealt with. This area of training and development was given particular interest by re-searchers over the last decade187 and specific cross-cultural training ac-tivities will be discussed in more detail below.

In an international organisation, employees need to be able to work with colleagues or clients from different countries and cultures. Therefore, they need to be open to different cultural systems in order to build up a working environment that allows a high degree of cross-cultural co-operation and understanding. In addition, due to the increased complexity of working relationships, employees need to be more flexible. Moreover, it demands individual and organisational learning in order to adapt to changes in the external and internal organisation’s environment.188 Therefore, international personnel development activities have to envis-age wide-spanning international training and development activities in order to encourage information and innovation transfer between the vari-ous units of the organisation and to make sure that the right range of competencies is present among the international operating workforce (see Figure II.11).

186 Ivancevich (1998); Scullion (2001); McCune (2001); Francis (2001). 187 See Dowling/Schuler (1994), Wirth (1992). 188 Scullion (2001); Scullion/Starkey (2000).

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Figure II.11: Competencies Source189 The extent of training and development activities might vary according to the following points:190 • The degree of interaction with the foreign culture, • the time spent on the foreign assignment, • the divergence between the home and host culture and • the risk potential, which means the likelihood of the employee to culturally

misbehave and the costs of potential consequences. Furthermore, according to the internationalisation strategy of the organisation, the extent of training and development activities varies. This means, in case an organisation follows a more ethnocentric strategy, the core training and devel-opment activities focus on the preparation of expatriates for their mission, as well as their reintegration after their stay abroad.191 The whole process is devel-oped, implemented and managed from the company’s headquarters and the in-volvement of the local HR department is minor.

189 This table is based on a table by Huber/Lange (1998 p. 109); some competencies have been selected and

slightly modified by the author. 190 Tung (1981); Mendenhall et al. (1987). 191 Black et al. (1999); Scullion (1994); Kumar (1993); Marlias et al. (1995).

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A geocentric strategy demands the training and development of managers, spe-cialists and other employees from, and in, various countries.192 Organisations should consider that, due to cultural differences, training courses and develop-ment programmes, which might have been developed in one country, need to be adjusted to the specific needs of other countries. Certain aspects, like learning style, have to be taken into account. Therefore, it seems to be appropriate to in-volve local HR staff and employees in the development and evaluation of train-ing and development activities. Multinational organisations need to develop specific concepts in order to gain and select the country-specific information required. The development of a de-mand profile in combination with a complementary qualification profile leaves room for individual interpretation and consideration of the different countries education and qualification systems. However, a complete picture of the em-ployees’ training and development needs is hard to get. Thus, other techniques might be envisaged. For example, specially designed assessment centres are in-teresting alternatives or additional methods. In these assessment centres, the jury can be composed of employees from various international locations. Due to the problem of international comparability of specific skills and the training needs of employees, a common understanding of the organisational training and development activities has to be developed. Hence, multinational organisations have to work in close relationship with their business partners and managers in the various countries in order to communicate the overall goals and values of an international training and development system. In this context the personnel department should see its role as a consultant supporting the man-agement team locally. An international network of external consultants and local trainers can support the role of the HR department. The goal of cross-cultural training programmes is to provide the necessary qualifications and competencies needed, next to the technical know-how, in or-der to operate on an international basis and to work in international relationships with employees from other cultures.193 As several studies show, training programmes before foreign assignments lead to a better performance of the expatriates.194 Cross-cultural training will ini-tially concentrate on basic information that will enable the employee to learn within different cultures and to understand different systems and structures. The degree of information the employee gets depends on the extent of the foreign as-signment, as well as on the position the employee will hold abroad. At this stage, the employee gains knowledge of the country’s actual political situation

192 Monka (1992); Robinson/Riekhof (1992); Sulanke (1992). 193 “Cross-cultural training enables the individual to learn both content and skills that will facilitate effective

cross-cultural interaction by reducing misunderstandings and inappropriate behaviors,” Black/Mendenhall (1990); cited in Scherm (1999, p.120).

194 See Tung (1982 & 1998); Briggs/Harwood (1982); Vance (1992).

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as well as of its economic and social status quo. Next to important legal and so-cial facts he learns how to easily integrate into the foreign culture without any conflicts. According to Gudykunst and Hammer, four different categories of cross-cultural training can be distinguished:195 a) General Culture Training:

• Intercultural (verbal and non-verbal) communication or behaviour training (intercultural competence).

• Awareness of own culture in order to understand own cultural beliefs,

norms and values as a basis for understanding other cultural systems (empathy).

b) Specific Culture Training:

• Language and general information about the foreign country.

• Sensitivity training, field experience or specific culture-related case studies.

Cross-cultural training should prepare the employee for his foreign assignment in order to perform well. However, the international experience per se can be of value to the employee’s development. A foreign assignment can be an important step within the employee’s career. It mainly implies the possibility for a career move, to take on more responsibility or to get a leadership position. In addition to similar roles in the home country, the intercultural perspective provides the chance to gain intercultural compe-tence. Due to the high costs of expatriation and foreign assignments, a stay abroad has to be planned properly and the employee has to be sufficiently pre-pared. Not only the foreign assignment itself has to be organised but also the re-patriation. At the time of repatriation the right vacant position must be found and, ideally, this position should benefit from the experience gained in the for-eign assignment.196 Training and development at an international level deal with particular cross-cultural topics, in order to manage staff in various countries and to integrate employees from various nations into the international organisation. The main problems, which multinational organisations face derive from different national

195 Gudykunst/Hammer (1983). 196 Black et al. (1999); Scullion (1994); Gregersen (1992); Kumar (1993).

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systems and individual qualifications of each employee. It is therefore important for international training and development to ensure that all necessary informa-tion is available in order to assess the employee, to develop individual training and development criteria and to systematically analyse the success of training and development interventions. One purpose of this section is to derive some conjectures regarding the potential for standardising and centralising the training and development function. In the following, we focus on training and distinguish training by content. By way of summarising, we find: With the exception of vocational training, all training concepts can be devel-oped centrally with a high degree of standardisation. Figure II.12 provides an overview of what we believe are the most important training contents and the required involvement of either the headquarters or the subsidiary.

Figure II.12: Lead in Developing Training Concepts While cross-cultural training can potentially be developed decentrally, there are a number of arguments for keeping the lead at the headquarters. First, in the context of preparing expatriates, which is one important purpose of cross-cultural training, persons to be trained are likely to be based in the headquarters. Second, and related, cross-cultural training involves, by definition, the knowl-edge of both the local culture and the cultural background of the person that is to be trained. Thus, the subsidiary is not necessarily better placed to provide these services. This is even truer when persons of several cultural backgrounds are trained together. Third, often there are specialised agencies that provide a “one-stop-shopping” offer for cross-cultural training for many different combinations of cultures. Thus, the selection and monitoring of the agent that provides the service is easier if the services are sourced centrally. Finally, cross-cultural

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training can be combined with corporate culture training, which we now argue should be developed centrally. The argument for developing corporate culture training centrally is straightfor-ward. By definition, corporate culture intends to define the organisation’s com-mon cultural ground. Thus, for corporate culture to have a meaning there should be no differences in, say, induction programmes between the subsidiaries. Since the management and leadership style in an organisation is indeed one im-portant component of corporate culture the same argument applies for this cate-gory. A less critical role is seen for skills training. Often skill training programmes need to be adapted to local circumstances in order to provide adequate examples and use the right “language”. Since, within Europe, the cultural and educational differences between countries are not extreme and often well known to Euro-pean nationals, we see a large degree of flexibility for the development and monitoring of such training. Beside the option of central or local in-house de-velopment, there is the option of outsourcing this training either to local agen-cies or to international agencies at the headquarters. The latter has the advantage that standardised training is adapted to local needs while the content and quality of the local training are guaranteed to be on a similar level across countries. The only aspect of training that has to be developed with significant input from the subsidiary or under full control of the subsidiary is vocational training. Here national legislation, and national attitudes of employees play an important role so that standardisation does not seem feasible. There is, however, scope for a common element in vocational training that could be combined with the induc-tion and provided at one location jointly for the relevant employees in all sub-sidiaries. By “expert training” we mean training of certain techniques that are particular to the industry or the specific tasks of the employee. This training should be devel-oped or sourced by the organisational unit that has the best skills. There are no a priori arguments for allocating this task to the headquarters or a subsidiary. Standardisation of training and development is likely to be higher than stan-dardisation of recruitment and selection. The most obvious reason for this conjecture is based on the analysis presented above. While standardisation seems a feasible option for all training contents except vocational training, the analysis of recruitment and selection has shown a much more diverse picture. A further reason for this conjecture is that in host country recruitment, multina-tional firms have to compete with national firms. If national habits and standards

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are ignored, multinationals may miss a large segment of the market of potential employees. To name one example: if a multinational firm chooses as a standard policy to recruit employees via a recruitment agency, it may, in some countries, miss a large fraction of potential employees who only study adverts in local newspapers. Another important reason for conjecturing that the degree of standardisation is higher in training and development is that training and development is a more long-term process, which is, often, designed to unify the employees. Finally, most training and development efforts are targeted at the management staff level. As analysed in the section on recruitment and selection, the cultural differences among international management staff are likely to be less pro-nounced than for local employees. Next to the training and development of employees, it is important to reach a highly motivated workforce in order to get the highest return on the employees’ skills and performances. This can be achieved by a well-balanced compensation and benefits package. In an integrated approach of HRM, this is already impor-tant at the early stage of personnel marketing in order to attract good candidates for the vacant positions. Therefore, in the following section, various techniques of staff compensation at an international level are looked at.

5.3 Compensation and Benefits Organisations have an incentive to develop a good and fair197 staff compensation system. A high-value compensation and benefits package is required in order to recruit the best candidates. Compensation and benefits help in order to bind the employee to the organisation and to avoid absenteeism. Moreover, compensa-tion and benefits are an important motivational factor. Finally, positive rewards (salary increase, bonus), or the lack of it, can signal the assessment of the per-formance to the employee. At an international level, multinational organisations can use their compensation and benefits system to encourage or discourage international mobility of their staff. Compensation and benefits at an international level face the question of interna-tional comparability.198 Both level and structure of compensation and benefits of similar positions in different countries often vary significantly. Even if the level is the same, there may be differences in structure as the mix of fixed salary, variable salary and non-monetary benefits varies.

197 Staehle (1987); Steinmann/Schreyögg (1997). 198 Perkins/Hendry (2000); Duane (2001); Speer (1998).

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When determining the level and structure of compensation and benefits, multi-national organisations consider the following factors: • The national and international job-market, • employment law and social security system, as well as • fairness, which is determined by culture and common practices. In order to avoid dissatisfaction among the employees, the compensation and benefits system should be perceived as fair among the workforce. According to Hahn and Willers199 four components of fairness can be distinguished: • The employee, group or company performance. • Certain staff expectations, such as employees performing the same position

getting the same compensation. • Social factors, like age, family structure or time spent with the company. • Market rate and the compensation provided by competitors. It is obvious that these components are not reconciled easily and lead to a num-ber of trade-offs. We will address some trade-offs below. The design of the compensation and benefits system depends on the internation-alisation strategy of the organisation. Multinational organisations that follow an ethnocentric strategy try to transfer their compensation and benefits system as much as possible to other countries in order to reduce the administrative burden and to increase the comparability and simplicity. All expatriates are treated equally, irrespectively of the country where they are working. From a polycentric perspective, the country-specific different systems are the guiding factor. Then the overall comparability lags behind and the burden of administration increases. The disadvantages are reduced and the advantages are used by applying the geocentric strategy. Here, organisational-wide guidelines reduce the adminis-trative burden and increase the comparability of the systems without loosing sight of national differences. A well-developed international compensation sys-tem demonstrates the success of international HRM, as it reflects the considera-tion of external and cultural factors and the overall fit with organisational cir-cumstances.200

199 Hahn/Willers (1992). 200 Scherm (1999).

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For staff on international assignments, the following five compensation models are discussed within literature:201 • Home-country-based compensation: The employee receives the base sal-

ary he would receive in a comparable position in the parent organisation. In addition he might get an extra bonus to compensate for his foreign assign-ment and to outbalance additional costs and differences in the tax, pension and social security system. The goal of this compensation model is to be fair to all employees within the parent organisation, although big differences might be reached within the single host countries.

• Host-country-based compensation: The employee receives the basic salary

that is normally paid for his position in the host country. The main idea of this model is to treat the expatriate as a local employee, although a misbal-ance might result to his colleagues at the parent organisation. In general, this approach is mainly applied for longer stays abroad.

• Headquarters-related compensation: All expatriates in all host countries

receive the same salary, oriented at the compensation and benefits level of the companies’ headquarters. Hence an overall common compensation sys-tem is practised. It is mainly used in organisations where expatriates, coming from various countries, work together and where expatriates or groups of specialists are transferred from one country to another quite often.

• Market-related compensation: The compensation and benefits package is

in line with the market rate for a comparable position. The main goal is to keep the employee with the organisation, in particular in areas, which de-mand a specific skill level.

• Hybrid model: A mixture of the above-discussed concepts in order to find

the most appropriate compensation package. Hereby in general, the expatri-ates’ compensation and benefits package is related to the local market sys-tem. If this salary level is not appropriate e.g. in comparison to the local standards of the home country, extra benefits might be added.

The compensation and benefits system of a multinational organisation varies ac-cording to the stage of internationalisation. As internationalisation advances, the home country-based model loses significance. The majority of multinational or-ganisations relate their expatriate compensation to the basic salaries of the host countries and balance out the differences in order to avoid a lower income level than the expatriate had previously.202 Overall, international compensation and benefits systems show a higher degree of flexibility and more transparency

201 See Macharzina (1993); Speer (1993); Foster (2000). 202 See Speer (1993).

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among the employees. Figure II.13 illustrates the main advantages and disad-vantages of the above-discussed compensation models:

Figure II.13: Advantages and Disadvantages of Compensation and Benefits Systems Source203

203 Figure II.13 is due to Speer (1993).

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The problem of compensating expatriates can be made transparent by the fol-lowing thought experiment. For simplicity, consider a firm with two subsidiar-ies, each based in a different country, and one headquarters. Assume that local market rates for a certain position differ in each country and that firms cannot pay below that rate locally. A multinational organisation that wants to make use of expatriates faces an important constraint: pay-cuts are likely not to be ac-cepted by expatriates. On the other hand, firms aim to equalise local pay for the same position. This leads to the following conjecture. Each compensation and benefits system for expatriates faces a trade-off be-tween equality and cost saving. Given the scenario introduced above, there is a simple but expensive way to achieve the goal of equality. Let pay be uniform across all parts of the organisa-tion at the highest of the subsidiaries’ market rates. Of course, this approach is expensive as it involves paying local employees, at two of the three locations, more than required. An alternative approach is to compromise on the aim of equality and pay the expatriates the higher of the two pay-levels in question (source location and des-tination). This makes the system work but raises an issue of inequality. If the pay-level in the host country is lower than that of the source country, expatriates will receive a higher income for the same position as local employees. If the pay-level in the host country is higher than in the source country, there is no inequality issue, while the expatriate remains in the host country. However, the issue appears on reintegration. Firms can (and do) reduce the significance of the trade-off by either hiding in-equality or making pay cuts less transparent. Both ends can be achieved by providing extra non-monetary benefits, such as free accommodation, or temporary monetary compensations, like lump sum payments for, say, moving. This makes differences in the compensation schemes less transparent. At the same time there is no need for a cut in basic salary when the employee returns. More generally, the aim of hiding inequality can be achieved by keeping salary levels confidential. This may even be in the interest of those employees, who regard knowledge about their salary as a private matter, an attitude that is com-mon in some, but not all, European countries. Moreover, in some industries it may not be welcomed, making (potentially high) salaries of employees public. However, non-transparent compensation schemes suffer from some significant drawbacks. If compensation is not clearly linked to a position, employees do not get information about their relative treatment within the firm. This reduces the

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incentive to perform and may be perceived as unfair. The intransparency gives room for hidden patronage as pay decisions cannot be monitored. Moreover, if considered as strictly private, attractive compensation and benefits systems can-not be marketed as effectively as in a transparent system. Based on this discussion, it does not come as a surprise that firms often use a pay range for each position and most firms, even in an Anglo-Saxon environ-ment, avoid making pay levels fully transparent. In the context of expatriates the problem of comparability already solves the transparency issue to some extent. While in our simple scenario we have as-sumed that it is clear when an employee has to accept a pay cut, in practice this is not so. Effectively, an assessment of the “real” income of an expatriate is a difficult task as the nominal exchange rate is likely to be of limited relevance. A proper assessment requires an estimation of the local cost of living compared to the cost of living in the source country (or city). Moreover, the result depends on the savings-rate of the employee and the likely future place for spending those savings. Figure II.14 puts the three HR-subfunctions into the context of our theoretical framework. We expect that the degree of standardisation is likely to vary by subfunction. Thus, each subfunction should be evaluated separately.

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Figure II.14: Third Component of the Theoretical Framework: Integrated HR-Subfunctions Note that together with the first and the second component we have now identi-fied five drivers of standardisation: 1. the stage of internationalisation, 2. the staff groups affected, 3. the level or “dimension” of HR (strategy, policy, practice), 4. the HR-subfunctions (R&S, T&D, C&B), and 5. organisational factors (size, regional coverage). This categorisation will re-appear in the empirical analysis. In the interviews the importance of each of the standardisation drivers was highlighted.

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After having discussed the three main areas of HRM: recruitment and selection, training and development as well as compensation and benefits, the next section intends to integrate the main results into the theoretical framework of European HRM.

6 Conclusions The purpose of our study is to draw conclusions for theory and practice regard-ing HRM in Europe. Today, there exists a well-established body of literature that shows that HRM policies and practices in European countries differ signifi-cantly. From a system-theoretic perspective, this should not come as a surprise. We expect the choice of HR policies and practices to be determined, at least to some degree, by the external context of an organisation. However, this external context differs from country to country. As a result, we expect that management choices in each country differ too. The empirical research that follows will rep-licate this general finding. These differences in national HR policies and practices raise one important question, which is at the centre of this dissertation: How do multinational or-ganisations respond to this European environment of diversity? Multinationals have an incentive to standardise their HR policies and practices. Indeed, we have identified a number of reasons why multinational organisations are likely to standardise their HRM policies and practices across the various host countries: they may intend to reduce costs, strengthen the corporate iden-tity, increase transparency, improve the mobility of employees and so on. This incentive to standardise HRM policies and practices, combined with the findings of a continent of diversity, makes the explorative question that we ana-lyse in this dissertation a very interesting one. If not only national organisations, but also multinational organisations, choose different HR policies and practices in each country that they operate in, this suggests that the obstacles to standard-ise are perceived to be prohibitive. If, however, multinational organisations choose to standardise their HRM approach, we can conclude that the reason for diversity is mainly due to historical factors. Then, firms that have an incentive to change their approach can do so. The shift in our perspective from a simple country-comparative perspective to an analysis of the HRM approaches of multinational organisations naturally leads to another interesting question: If multinational organisations choose to standardise their approach, which one is best? Of course, given our system-theoretic view, we do not expect a simplistic an-swer to the questions raised. Rather, we expect that we will find some areas of

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HRM where standardisation is feasible and, as a result, has been pursued by multinational organisations. Others are likely to be more difficult to standardise and we expect that multinationals will follow the respective nationals in their approach. Indeed, one of the main aims of the quantitative empirical analysis that follows is to identify which HR policies and practices of multinational sub-sidiaries differ from those of national firms. There are further issues that follow from our approach. The HR department of a multinational organisation not only faces a different external environment in each country that the firm operates in, it also needs to take into account the dif-ferent organisational contexts of the headquarters compared to its subsidiary. Thus policies and practices in those parts of the organisation, that are located outside the headquarters’ location, may be determined, by the fact that they are subsidiaries and not by their or their mother firms location. Again, we will ad-dress this issue in the empirical approach. Internal and External Context On the environmental level we have distinguished the external and the internal context of a multinational organisation in Europe. Following the general ap-proach in the literature, we have identified four main factors that determine the external context of a multinational organisation: the economic, the socio-cultural, the political-legal and the technological environment. Clearly, the first interesting question that is raised by this distinction of external factors is the relative importance of each aspect of a European HRM approach chosen by multinational organisations. Here, we derived a number of conjec-tures. First, we believe that in the European context technological factors are likely to play a minor role compared to the remaining three external factors. Second, political-legal as well as the economic factors is likely to become more homogenous across European countries in the future. This will shift the balance even more in favour of standardisation within the European HRM approach of multinational organisations. This leaves the socio-cultural factors to play an im-portant role. Here, however, the motives for and obstacles to standardisation are subtler than in the other areas. Current employees may be difficult to motivate unless the compensation and benefit scheme as well as the training and devel-opment programmes are adapted to their expectations. On a similar footing, fu-ture employees may be difficult to recruit unless they find the culture they are used to. However, a policy of always adapting to the local culture has some important consequences for the internal structure of a multinational organisation. Here, our analysis of the internal context shows that a multinational organisation should not necessarily follow national socio-cultural differences. First, and most sim-ply, being different may be perceived as a strength. Moreover, there is a large

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body of literature that argues that corporate identity is an important motivating, or at least satisfying factor for employees. Certainly, a common, “corporate” culture eases communication within an organisation. Since an organisational culture of a multinational organisation cannot be the sum of local cultures, there is a necessary divergence from national approaches. Indeed, we conclude very cautiously that corporate culture may ease or hinder the task of European HRM. Finally, our analysis of the internal context of a multinational organisation in Europe has highlighted two further important aspects that we have to consider when pursuing the empirical analysis. First, headquarters and subsidiaries are likely to differ in terms of structure. This is a straightforward conjecture that builds on the presumption that the headquarters is likely to be larger than the subsidiary and has to deal with a greater variety of tasks. Second, the relation-ship between the headquarters and its subsidiaries is not necessarily without conflict. Subsidiaries have a different set of stakeholders than the headquarters. One of the two most important stakeholders in a subsidiary are the local em-ployees and the headquarters. In contrast, the latter will have to take into ac-count the needs of stockholders as well as the needs of the employees in all sub-sidiaries. Strategic Level The second level of analysis is the HRM strategy. Here we draw on the familiar distinction of ethnocentric, polycentric, regiocentric and geocentric strategies. Indeed, we find a straightforward link between the strategic focus and the ques-tion of standardisation. While an ethnocentric strategy implies maximum stan-dardisation, it does so with the “one best way” being determined by the habits and procedures of the headquarters. The polycentric, as the opposite extreme, leads to a complete adaptation to local practices and policies. The regiocentric approach, as a mixture of the two approaches, suggests standardisation within and differentiation among regions. This leaves the geocentric strategy, which puts much more emphasis on finding a more appropriate approach that develops HRM policies and practices by taking into account the local circumstances and the benefits to standardisation. Further theoretical work has made use of the typology of these four strategies. It has been shown that firms change their strategic approach depending on the stage of internationalisation. While starting off with an ethnocentric strategy, firms become more open toward different strategies in later stages of interna-tionalisation. From a more normative perspective it has been argued that the polycentric, the regiocentric and the geocentric approaches should be used, but for different pur-poses. We do not fully follow this methodological approach but take on board

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the idea that the degree of standardisation is likely to vary according to the staff level to which the HR policies and practices are applied. In the empirical part we investigate what strategies those multinational organisa-tions follow, which operate on a European-wide scale. Furthermore, it is ana-lysed how far multinational organisations standardise their HR policies and practices across the various European countries and how far they co-ordinate their HR policies centrally at the companies international or European HQ or decentrally within the single country of operation. HR Subfunctions Finally, we derived some conjectures for each HR subfunction. This leads to some normative conclusions regarding the policy choices of an HR department in a multinational organisation. These will supplement our empirical findings when developing a guideline for practice. A central question regarding the recruitment and selection policy of a multina-tional organisation is the extent to which expatriates should be used. Previous research has shown that firms tend often to use expatriates early in the process of internationalisation. In line with this empirical finding, we conclude in the theoretical analysis that at the beginning of internationalisation the use of expa-triates is particularly attractive. However, this does not imply that expatriates should not be used in later stages of the process, as well. Rather it seems that a mix of sources: expatriates, locally recruited employees and employees re-cruited on international milk rounds seems a good approach. In particular, the use of milk rounds has a number of attractive features for multinational organi-sations, like the ease of targeting high-potential future employees and improved possibilities for monitoring the quality of applicants. With regard to training and development, we derive two explicit conjectures re-garding the potential degree of standardisation. First, we argue that, with the ex-ception of vocational training, all other training concepts can or even should be developed centrally, with a high degree of standardisation. Second, we conclude that the degree of standardisation in training and development is likely to be higher than in the other HR subfunctions. This leads us to the last of the three subfunctions, compensation and benefits. Here, we conjecture that each compensation and benefits system for expatriates faces a trade-off between equality (e.g. of C&B for a position) and cost saving. The trade-off arises as, first, it is unlikely to get expatriates unless the candidates are not worse off compared to their current remuneration and, second, local pay levels will often differ depending on the country where the subsidiary is located. Indeed, we find that multinationals can pursue two strategies in order to over-

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come some of the difficulties raised by this trade-off, they can hide the inequali-ties or make pay cuts less transparent.

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Chapter III: Empirical Analysis

1 Introduction In this dissertation we intend to shed light on the achievements of, and potential obstacles to, a successful development and implementation of European HRM. We not only want to provide an overview of the existing EHRM strategies, poli-cies, and practices; we also intend to explore what drives HRM in Europe and what are important obstacles. While these are “big” questions, the analysis focuses on the HRM approaches of multinational organisations in Europe. Moreover, we will have a special interest in the degree of standardisation chosen by multinational organisations for their European HRM strategies, policies and practices. In this chapter, we present the results of the empirical analysis. We also intend to motivate and explain the methodological approach, which consists of two complementary studies, a quantitative analysis of the largest dataset that is available in the field of international HRM in Europe and a qualitative analysis, which is based on case study interviews with representatives of ten multina-tional organisations. The empirical analysis builds on the findings of the theoretical analysis. At the same time one purpose of the empirical analysis is to check and question the conjectures that have been developed in the theoretical analysis. The next section relates the empirical approach to previous empirical work in the field (Section 1.1). We then move on to clarify the link between the theoreti-cal analysis of the previous chapter and the empirical analysis presented here (Section 1.2). Finally, we motivate our methodological choice (Section 1.3).

1.1 The Necessity for a New Approach At the heart of many previous empirical analyses of European HRM was the question of whether policies and practices differ across countries in Europe (see Section 1.2.1).204 We intend to explore new aspects of this issue and focus on multinational organisations. We want to know whether multinational organisations standardise their HR policies and practices within their organisations. We are also interested in

204 Brewster/Hegewisch (1994); Brewster/Larsen (1993); Brewster/Larsen (2000a); Hegewisch/Brewster

(1993); Gunnigle et al. (1994); Brewster (1995a&b); Brewster (1996); Brewster (2001); Brewster et al. (1997); Brewster et al. (2000a).

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whether different multinationals adopt similar approaches. If there are differ-ences in the degree of standardisation between multinationals, we want to learn why we observe them. In order to see why this raises some new issues that have not been the focus of previous research, consider the following possible explanations for differentia-tion or standardisation: • Differences between multinational organisations’ HRM policies and prac-

tices may arise because of an ethnocentric approach of the headquarters. If headquarters impose their home country’s traditional HRM approach on their subsidiaries, we would expect that the subsidiaries of one multinational differ from those of another, if they have their headquarters in different countries that are known for variations in their HRM policies and practices. Thus, this kind of diversity would be perfectly in line with standardisation (and we will reserve the term “headquarters standardisation” for it).

Standard quantitative empirical evaluation techniques that have been applied in the past cannot pick up this kind of standardisation. By simply comparing HRM policies and practices between organisations in different countries, headquarters standardisation cannot be identified, since differences between HRM policies and practices between countries may be driven by differences of national organisations and/or differences between multinationals. Qualita-tive analyses can, of course, address this issue more directly.205 However, as we will discuss in more detail below, addressing the question with qualita-tive methodologies alone may make the empirical analysis vulnerable to a critique that stresses on the methodological limitations of the qualitative ap-proach.

• Differences between multinationals could also be due to a perfect adaptation

of local practices. This would underpin the finding of diversity by showing that, even within organisations, there is no European approach (i.e. there is “no standardisation”).

• If multinationals adopt similar approaches in the European member states,

we ask whether this reflects a specific multinational approach (we term this “multinational standardisation” or whether it simply reflects that, for this particular policy or practice, a common approach has been taken by all organisations in Europe “European standardisation”.

• Finally, it is clear from the theoretical analysis that organisational factors

may well influence the policies and practices that are adopted. Thus, we would like to be able to distinguish organisational types in order to identify

205 Festing (1996).

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differences between subsidiaries and headquarters of multinational organisa-tions and between these and national organisations.

In order to explore questions like these, we develop a special evaluation frame-work, which allows us to address these questions by using the most extensive data set on HRM in Europe, the Cranet-E survey. The quantitative analysis is complemented by qualitative analysis that is based on ten case studies of multinational organisations.

1.2 Building on the Theoretical Findings The empirical analysis builds on the theoretical findings of the previous chapter. We make use of our theoretical framework, which combines the three main components of international HRM identified in the literature: the international working environment of a multinational organisation, the internationalisation strategy and the three integrated HR subfunctions, recruitment and selection, training and development and compensation and benefits. Based on this framework we have, in the previous chapter, identified a number of factors that we expect will drive observed differences in the degree of stan-dardisation: 1. the stage of internationalisation,

2. the staff groups affected,

3. the level or “dimension” of HR (strategy, policy, practice),

4. the HR-subfunctions (R&S, T&D, C&B), and

5. organisational factors (size, regional coverage). This categorisation will re-appear in the empirical analysis. In particular in the interviews, the importance of each of the standardisation drivers was high-lighted. The common thread of these drivers is that all affect the relevant exter-nal or internal environment of the organisation. The chosen empirical methodology is designed to further explore the impor-tance of these factors. Moreover, the theoretical analysis yielded a number of conjectures and we will take these to the data and see what empirical support we can give. Whilst the focus of this chapter is on the positive analysis of European HRM, i.e. on finding out what multinational organisations do, the empirical analysis

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also serves two other purposes. First, in the interviews, we asked HR managers what they aim for when designing their HR policies and practices. Comparing the aims with our findings on the actual practices reveals the contrast between wishes and reality. It also helps to explain what we observe. Second, the empiri-cal findings will, together with the theoretical findings of the previous chapter, serve as a basis for the normative analysis pursued in Chapter IV, which looks at the practical implications of our study. The empirical analysis helps us to iden-tify areas where there may be scope for increased standardisation and where this scope is unlikely to exist.

1.3 Choice of Methodology One of the main goals of the empirical research that follows is to provide a sys-tematic analysis of EHRM approaches within practice. The scientific findings are explorative and the research questions relate to a concrete problem within practice. Due to this explorative characteristic and the complexity of the re-search problem, a combined approach of both qualitative and quantitative re-search is selected (see Figure III.1).

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Figure III.1: Research Methodology206 Indeed, the choice of the methodological approach depends on various factors and according to Yin each research approach has particular advantages and dis-advantages, depending on the following three conditions: • The type of the research question, • the control the researcher has over actual behavioural events, and • the focus on contemporary, as opposed to historical, phenomena. Yin identified five different research strategies (see Figure III.2). Although these strategies are not mutually exclusive and in some research projects a com-bined approach might be appropriate, Yin postulates specific situations in which a specific strategy has a distinct advantage.

206 This table is based on an overview of quantitative and qualitative research methodology by von Keller

(1981) and supplemented by a third component of the mixed approach of both qualitative and quantitative methodology by Hilb (1995). The table was translated by the author and slightly modified for the pur-poses of the research question.

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Figure III.2: Relevant Situations for Various Research Strategies Source207 According to Yin208 a quantitative survey data analysis is the preferred strategy when “who, what, where, how many and how much” research questions are be-ing posed. In order to obtain general pattern and to identify objective correlations regarding the degree of standardisation of HR policies and practices in Europe, a quantita-tive survey, making use of statistical procedures, is helpful. In the context of our analysis the survey data provide us with information on, for instance, how many multinational organisations use a certain HR policy or prac-tice within a certain European country? This information allows us to draw con-clusions regarding the degree of standardisation of HR policies and practices operated in Europe. However, a quantitative survey data analysis does not allow us to give answers to the “how and why” type of research questions. Therefore, in order to under-stand the character of the information we gained and to understand the intention of the multinational organisations within Europe, a qualitative methodology is often superior. We have, therefore, chosen a combined approach. Interviews with multinational organisations in Europe provide us with more detailed information on how and why they standardise certain HR policies and practices across Europe, or why they prefer not to. In order to identify a regular pattern on the one hand and to

207 Yin, (1994, p. 6). 208 Yin (1994).

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understand the logic behind them, a combination of both a quantitative as well as a qualitative investigation of our research question is sensible. While the qualitative research sample concentrates on ten selected multinational organisations that operate across various European countries, the quantitative research sample contains overall 1095 data sets from national and multinational organisations within four different European countries. Both research samples were collected at around the same time in 1999 and 2000, which increases the comparability of the information gained from both data sets. The qualitative research sample provides a more detailed description of the HRM approach taken by multinational organisations operating in Europe and provides information on how far they standardise their HR policies and practices across the various European countries, and why. Moreover, by asking organisa-tions, we can directly address the question of the degree of standardisation cho-sen within an organisation. The quantitative research sample allows us to compare the HR policies and practices of a large amount of multinationals operating within different Euro-pean countries. However, we can only indirectly infer conclusions on the degree of standardisation within an organisation. The survey provides information on how different organisations differ across countries and does not address the is-sue of standardisation within an organisation directly. Figure III.3 illustrates the main research questions, the quantitative and qualita-tive information analysed and the various research perspectives.

Quantitative Analysis

Qualitative Analysis

Research Questions

What does the HRM approach of multinational organisations across various countries look like? To what extent do they standardise their HR policies and prac-tices?

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Type of Information

Survey data

Case study interviews with EHRM practitioners

Research Perspective

Comparative perspective of HRM approaches practised in various European countries: - country-comparative per-

spective - inner-country and organisa-

tion comparative perspec-tive

Perspective from the point of view of single multinational organisation: - transnational, company

perspective

Figure III.3: Main Research Question and Perspectives By choosing a two-pronged approach, we hope to overcome the limitations of choosing either. This does not imply that our approach is without limitations. Indeed, one of our purposes is served if we can show how future empirical re-search can be improved and more focused. For instance, we would hope that fu-ture surveys on international HRM will be designed to distinguish more clearly the differences within an organisation and across organisations. We will address the implications of our findings for future research more extensively, at the end of this chapter in Section 4. In the following section we present the quantitative part, and in Section 3.3 we continue with the qualitative analysis. The main results of the quantitative and the qualitative analyses are compared and jointly interpreted in Section 3.4.

2 Quantitative Empirical Analysis: The Cranet-E Survey

2.1 Introduction On the basis of previous research results and according to European HRM literature, the starting point of the empirical analysis is the finding that no unified European HRM approach exists and that the majority of organisations in a country show a distinct country pattern, being influenced by national factors like legislation or common practice. Taking these results into consideration, the question arises how multinational organisations, operating in the European context of HR diversity, react to these environmental circumstances? To which extent are HR policies and practices

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standardised? Standardisation implies a company-specific approach irrespective of country-specific factors, whereas differentiation allows it to adapt to the local circumstances of every single country, implying the subordination of factors such as company-culture.209 We also investigate why multinationals choose, or prefer not to choose, a standardisation strategy for the different HR policy areas. In order to find answers to the above questions, the goal of the quantitative analysis is to gain information on particular human resource management poli-cies and practices of multinational organisation in various European countries. We investigate whether multinational organisations have a similar HRM ap-proach in the various European countries or not? This question is asked for a number of selected HR policies and practices. Due to data restrictions, the quantitative analysis can, in most cases, only iden-tify whether a certain policy or practice has been adopted by an organisation, and not why and how. Moreover, the data contains a different set of organisa-tions in each country. As a result we cannot directly measure the extent to which a particular multinational organisation has standardised its HR policies and practices across Europe. Effectively, we can only compare the penetration of the use of a certain instrument for, say, multinationals in one country with the per-centage of multinationals that use this same instrument in another country. While these data restrictions put serious limitations on our analysis, we believe that the results are nevertheless valuable. First, our database provides a very detailed set of HR policies and practices. Thus, it goes a long way in answering the “how” question. Second, when we find that a certain policy or practice has been chosen by a similar percentage of multinationals in all countries, this not only suggests, indirectly, that each single multinational has standardised, but also that all multinationals have chosen the same instrument. We believe that this provides a very powerful result, as it shows that European-wide standardisation appears to be achievable. Third, by complementing our quantitative analysis with the qualitative analysis, we can underpin some of the results with information that does not suffer from the re-strictions listed above. Moreover, we can compare the use of a certain instrument by multinational or-ganisations in one country with the use by domestic organisations and draw fur-ther conclusions based on this comparison. The following sections introduce the research sample, present the methodology and discuss the results from the quantitative survey data analysis.

209 The word “factor” is used in this context for either company or country-specific characteristics. In this

context, e.g. country-specific factors might imply national legislation or common practices as well as hab-its within the countries, while company-specific factors imply company culture, corporate identity as well as the company’s size or sector.

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2.2 Research Sample

In order to find answers to the above-outlined research questions, data from the written survey by the Cranfield Network for the study of Human Resource Management in Europe (Cranet-E), carried out in 1999/2000, were analysed. The Cranet-E dataset is based on a questionnaire,210 covering the following ar-eas of Human Resource Management: personnel/human resources function; staffing practices; employee development; compensation and benefits; as well as employee relations and communication. The questionnaire was sent out by the member organisations of the Cranet-E Research network to organisations within their country. More than 20 European countries participated in the international survey. For the underlying research purpose a specific sample was selected on the basis of certain criteria outlined below.211

2.2.1 Selection of the Research Sample Our analysis will focus on four selected European countries. The selection is based on the integration – devolvement matrix by Brewster and Larsen (see Chapter I). In order to maintain the scope of various HRM policies and practices operated within Europe, one country out of each category was analysed. The se-lected countries are: • Germany represents the professional mechanic position. This approach is

characterised by operative personnel administration in “traditional”- style personnel departments.

• Great Britain has also been classified as professional mechanic. However,

it is close to the guarded strategist position. The latter implies the use of stra-tegic personnel management concepts, but being operated in “traditional” personnel departments.212

• Denmark characterises the wild-west position. Hereby, the personnel-work

is mainly done decentrally by line management, but without strategic orien-tation.

• Switzerland represents the pivotal position. This position combines a strate-

gic-oriented personnel function with line management responsibility.

210 The questionnaire was developed by the Cranet-E research team. A copy of the 1999 questionnaire can be

found in Appendix I. 211 The selected questions for the underlying research investigation are listed in Appendix III. 212 At the time of the data analysis no data set of a country that represents the guarded strategist position was

available. This is why Great Britain was chosen as an approximation.

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The goal is to explore the HRM approach of multinational organisations in four different European countries and to draw conclusions for the development of a European HRM approach for multinational companies. A further aim is to ana-lyse how far multinational organisations differ from “domestic” companies in their HRM. Therefore, as a second stage, the database was divided into three main groups: one containing all national organisations and two for the multina-tional organisations. We distinguish those multinationals that have their head-quarters in the country where the questionnaire was filled out and those that are subsidiaries of multinational organisations that have their headquarters in an-other country (see Appendix II). This categorisation allows us to compare the HR policies and practices of national firms with those of subsidiaries of foreign parent organisations. If we find differences, this supports the conjecture that the multinationals do not fully adapt to the local policies and practices. A finding we could not reach when comparing the nationals with those multinationals that have their headquarters within the same country.

2.2.2 Description of the Research Sample Finally, a dataset containing 1,095 questionnaires covering 4 different countries was selected for further analysis. Hereby 352 companies were categorised as na-tional (NAT) and 743 as multinational organisations with 382 having their headquarters in the country where the questionnaire was filled out (MHQ) and 361 subsidiaries of multinationals with their headquarters outside the country where the questionnaire was answered (MSUB). Figure III.4 provides an over-view of the selected sample.

Figure III.4: Description of the Research Sample

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The proportion of UK and German questionnaires in the dataset is higher (UK: 40% and Germany: 35%) compared to Denmark (17%) and Switzerland (9%). The distribution of the three groups of organisations is almost equal with 33% MSUB, 35% MHQ and 32% national organisations. Organisations’ Headquarters By definition of the three main groups of organisations: • National companies, • multinational companies with domestic headquarters, and • subsidiaries of multinational companies with headquarters outside the coun-

try in which the questionnaire was filled out, the headquarters of the first two types of organisations lies within the country in which the questionnaire was filled out. The corporate headquarters of the third group of companies lie within the following six countries (see Figure III.5).

Figure III.5: Country of Corporate Headquarters It is noteworthy that there is a large fraction of subsidiaries of US-American or-ganisations in the set MSUB. We will take this into account when evaluating the results. Sector The organisations in the research sample operate in different sectors (see Figure III.6).

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Figure III.6: Sector Almost two thirds of the organisations operate in production, which comprises of energy and water, non-energy chemicals, metal manufacture, other manufac-turing and building and civil engineering. Almost a quarter is in services, which includes distribution trades, transport and communication as well as banking and finance. The sector public includes personal services, other services, health, and education. Note also that we have excluded all (fully or partly) state-owned organisations and focused exclusively on private companies. Thus, in the re-mainder of this section, we will use the terms "company" and "organisation" in-terchangeably. Company Size Around one third of the firms in the research sample have up to 300 employees (34%), another third between 301 and 750 employees (31%), and the last third more than 751 employees (35%). While around 40% of both national (40%) and MSUB organisations (39%) em-ploy up to 300 employees, only 23% of the MHQ sample belong to this category of small organisations. If we compare the two types of multinational organisations in terms of their worldwide size, we find that MSUB companies are substantially larger than MHQ companies. MSUB organisations, though rather small in their national size, are large worldwide. 37% of the MSUB companies have 4,500 – 27,000 employees worldwide and 42% have more than 27,000 employees. Thus, almost 80% of all MSUB companies have more than 4,500 employees. This is true for only 49% of the MHQ organisations.

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Size of the HR Department All organisations within the research sample have an HR department. Thereof 48% have up to five employees, 36% between six and 20 employees and 16% more than 21 employees working in their HR department. Compared to national and MSUB companies, MHQ organisations have larger HR departments. This fact correlates with the overall size of MHQ companies within the country where the questionnaire was filled out. Since both the worldwide company size and the size of the HR departments may have an impact on the structure and policies of the HR department, we have to keep the differences described here in mind, when interpreting our results.

2.3 Analytical Framework for the Quantitative Analysis In the following, we develop an analytical framework for the quantitative analy-sis. Our aim is to make as much use of the available data as possible. Moreover, we intend to explore questions that were not explicitly addressed in the Cranet-E questionnaire. As a result, the analytical framework is more complex than usual. However, we believe that it is worth the effort since it is the only way to evalu-ate the current state of affairs, making use of the most extensive survey avail-able. Furthermore, it will help future efforts to improve this survey. Indeed, the survey is constantly worked on and it will adapt to the new research questions raised. We are certain that questions like those raised in our analysis will be-come more prominent in the future.

2.3.1 Definition of Organisational Types and Concepts of Standardisation The research sample contains information about companies in four different European countries. Their HR policies and practices are compared under spe-cific consideration of the three different types of organisations: multinational organisations with their headquarters outside the country where the question-naire was filled out (MSUB), multinational organisations with their headquar-ters within the country where the questionnaire was filled out (MHQ) and na-tional companies (NAT). The categorisation into the three main groups of organisations is based on the assumption that according to the discussion in the theoretical part, the following three factors have an impact on the management of human resources: a) The host-country. b) The country of origin. c) The type of organisation (national vs. multinational organisation).

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The sample with national organisations provides information on how HR poli-cies and practices are used within the country where the questionnaire was filled out. As these companies operate on a national basis only, the impact on their HRM from other countries is assumed as being minor. They might only face the problems of standardisation and differentiation of their HR policies and prac-tices on a national basis but not on an international basis. Therefore, they repre-sent their country mode well. The MSUB sample on the other hand represents organisations, which operate on a European or international scale and need to decide whether or not to standard-ise their HR policies and practices across the various countries. Furthermore, they have their companies, headquarters outside the country where the question-naire was filled out. The MHQ sample more or less stands in between the two groups introduced above. On the one hand, they have their companies headquarters in the country where the questionnaire was filled out, and on the other, they are multinational organisations operating European-, or worldwide. This means that while they might be influenced by the country (of origin) specific mode, they also adapt to the multinational (external and internal) environment they are operating in. Having distinguished these three groups we can analyse the data in order to identify three different types of standardisation. 1. The most complete form of standardisation is that, across the four coun-

tries, all types of organisations show the same pattern regarding the use of a particular HR policy or practice. We will reserve the term “Euro-pean standardisation” for this kind of standardisation.

2. Alternatively, multinational organisations may standardise, but do so

with an ethnocentric approach. If national approaches differ, we would then expect that the policies and practices of a multinational with its headquarters in, say, Germany differ from the policies and practices of a UK multinational. At the same time the policies and practices per firm will not differ across countries. We denote this type of standardisation “headquarters standardisation”.

3. Finally, multinational organisations may adopt the same common ap-

proach across all countries, while national organisations use different policies and practices. We will term this “multinational standardisa-tion”.

With the available data we can identify the different types of standardisation, as follows. The findings support a European standardisation, if all types of organi-sations do not differ across countries. Moreover, we would then expect that

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when taking a “per country perspective” all three types of organisations do not differ from each other as well (see Figure III.7).

Figure III.7: European Standardisation The empirical findings support multinational standardisation, if the nationals’ policies differ across countries but the policies of headquarters of multinationals do not (see Figure III.8). By way of underpinning this result, we would then also expect that the subsidiaries of multinationals do not adopt differing policies across countries either (this finding alone would also be compatible with no standardisation). Moreover, when taking a per country perspective we would expect that headquarters of multinationals and nationals differ from each other, as do subsidiaries of multinationals and nationals. Subsidiaries and headquar-ters, on the other hand, should not differ from each other per country.

Figure III.8: Multinational Standardisation

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We will conjecture a headquarters standardisation, if the policies of nationals differ across countries and the policies of headquarters of multinationals do so too (see Figure III.9). This conclusion is confirmed, if the subsidiaries of multi-nationals do not differ (provided that the distribution of the parent organisations is similar in each country). From a per country perspective we would expect that the headquarters of multinationals and nationals do not differ from each other, whereas the subsidiaries differ from the headquarters and the subsidiaries differ from the nationals.

Figure III.9: Headquarters Standardisation Finally, when firms do not standardise but adopt the “country mode”, we ex-pect that both the subsidiaries and the headquarters of multinationals differ in their HR policies across countries. This conjecture is confirmed, if organisa-tional types do not differ per country (see Figure III.10).

Figure III.10: No Standardisation

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Note that multinational standardisation is closely related to the geocentric ap-proach. The geocentric approach suggests standardisation where possible. How-ever, there is an important difference. As discussed in Chapter II, the geocentric approach explicitly allows for national differences, where required. Multina-tional standardisation is therefore more “restrictive” than the geocentric ap-proach, in two ways. First, it implies full standardisation across countries, whereas the geocentric approach is compatible with diversity, where required. Second, due to the data limitations, we can only identify those practices as mul-tinational standardisation that are applied across multinationals, while the geo-centric approach would allow different practices for each multinational firm. Note further that the finding of headquarters standardisation and multinational standardisation has an immediate normative implication. The fact that multina-tional organisations standardise these policies and practices shows that there are no insurmountable obstacles to standardisation. This raises the question why na-tional organisations choose not to standardise these policies and practices. While it would be too simplistic to suggest that for all these policies and prac-tices nationals should adopt a common strategy, our findings give some indica-tion with regard to the practices where nationals could potentially implement a best practice that works well in other countries. We deliberately use cautious language. For two reasons this finding is only an indication for areas where na-tionals may look for European best practices: • First, multinationals have to consider the trade-off between the benefits of

standardisation within an organisation and a good cultural and institutional fit with the local external environment in each country. This is not true for national organisations. They can concentrate on optimising their organisa-tion for the local environment. This caveat is relevant for headquarters stan-dardisation. However, it is less so for multinational standardisation, which implies not only standardisation within, but also across, organisations.

• Second, multinationals may have other organisational characteristics that

imply a value of standardisation which does not exist for nationals, e.g. they may tend to be larger which may increase the value of more standardisation relative to the loss of flexibility that goes along with it.

Having said this, we still believe that it is of great value to find that standardisa-tion is feasible. If organisations look for areas where they could potentially learn from experiences in other countries, it makes sense to focus on those where we find headquarters or multinational standardisation. The following section describes the statistical procedures in more detail. We not only conduct the tests suggested by our new framework. We also analyse our sample with reference to more standard methods of analysis.

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2.3.2 Statistical Procedures

Four types of Chi-Square tests were undertaken. They can be seen as a “mosaic” (see Figure III.11).

Figure III.11: Mosaic: Four Type of Chi-Square Tests The results of the Chi-Square tests “country differences (all types)” provide in-formation, on how far the organisations in the four different countries within the research sample differ in their use of specific HR policies and practices. That is, we compare all organisations in Switzerland with all organisations in the UK, with all organisations in Germany and with all organisations in Denmark. This analysis is conducted mainly to generate a benchmark that reflects the tradi-tional approach to investigate European HRM. The results of the Chi-Square test “type differences (all countries)” provide in-formation on whether the different type sets, NAT, MHQ, and MSUB, differ from each other in their use of specific HR policies and practices. The set used for each type of organisation contains organisations from all four European countries in the research sample. This analysis gives a first idea as to whether the types of organisation are distinct. These results represent the traditional approach to analysing European HRM. However, they can only be interpreted to a limited extent. For example, country differences being discovered in the first round of Chi-Square tests might be caused by one type of organisation only, whereas organisations that belong to another type do not show significant differences. In order to avoid this problem the other two types of Chi-Square tests divide the research sample into comparable sub-groups, and hence allow a more qualified interpretation than the first two types of tests. Chi-Square tests were undertaken in order to analyse each type of organisation separately. Here, we take the sub-sample that contains all organisations of one

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type, say MSUB, and investigate whether the distribution of a variable differs significantly across the four European countries. Again, this was pursued for all variables. For some selected variables further Chi-Square tests were undertaken, investi-gating the distribution of the three types of organisation within a country. We will make use of all testing procedures. However, the focus of our analysis will be on the Chi-Square test that tests the differences across countries for each type of organisation separately. In the following, we present the general results (Section 2.4) for all types of Chi-Square tests shown in Figure III.11. Then, we discuss the results for each variable in more detail (Section 2.5).

2.4 General Results

2.4.1 Chi-Square Tests “Country Differences (All Types of Organisation)” At the first stage, it is analysed whether the four countries show significant dif-ferences in their use of specific HR policies and practices. We use the following Chi-Square test for each variable: H0: µUK = µDK = µG = µCH Based on both previous empirical research and the theoretical analysis presented above, we expect a high degree of European-wide diversity. The selected research sample confirms this expectation. The Chi-Square tests for each variable show that in the majority of all variables (n=84 out of 98 vari-ables) the four European countries show significant differences. Taking the system-theoretical frame (Chapter II) of the various external and in-ternal factors impacting multinational organisations into consideration, these cross-country differences point to the importance of the external, country-specific factors including economic, political-legal, technological or social as-pects. However, the results that are presented below will paint a much more sub-tle picture of these findings.

2.4.2 Chi-Square Tests “Organisational Type Differences (All Countries)” At the second stage, it is analysed whether the three types of organisations show significant differences in their use of specific HR policies and practices. We use

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the following Chi-Square test for each variable: H0: µMSUB = µMHQ = µNAT The results of the various Chi-Square tests show that for more than half of the variables (n=56 out of 98 variables) the three types of organisations show sig-nificant differences. These differences might be explained according to the sys-tem-theoretical model by company-specific internal factors like the interest of the various stakeholders, the size of the company or the qualification of the em-ployees etc. influencing the management of human resources within these or-ganisations.

2.4.3 Joint Interpretation of “Country Differences” and “Type Differences” The results of these Chi-Square tests, those by country and those by type of or-ganisation, can be categorised into the four main groups, being summarised into the following matrix:

Figure III.12: Combined Results of the Tests by Country and Organisation The first quarter (A) represents all variables (m= 52) showing significant varia-tions across both, the four countries and the three types of organisation. This means that both countries and organisations show differences, e.g. in their use of a specific HR policy or practice. Therefore, one can conclude that the use of a specific HR policy might be influenced by both company- and country-specific factors. The second quarter (B) contains all variables (m=32), which show significant variations across the four countries, but no significant differences across the

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three types of organisation in their distribution of the selected variables. This means that the countries show differences in their use of e.g. a specific HR pol-icy, while the three types of organisations are similar. Therefore, differences in the use of a specific HR policy might be explained by country- rather than by organisation-specific factors. The third quarter (C) contains all variables (m=4), showing no mentionable variations across the four European countries, but significant variations across the three types of organisations e.g. in their use of a specific HR policy. The fourth quarter (D) shows all variables (m=10) that neither differ across the four countries nor across the three type of organisations. Due to former research results and the selection of the four respective countries on the basis of the devolvement – integration matrix, it was anticipated that the majority of all variables would show significant differences across the countries. Hence, in order to investigate how multinational organisations react in the European environment of HR diversity, the first two quarters (a & b) build the main focus of analysis. Furthermore, across the first two quarters, the sample either shows significant variations across the three types of organisations or not. This shows that the type of organisation might also influence variations in the use of a specific HR policy or practice. These results are enriched with the outcome of a more detailed or-ganisation-by-organisation analysis across the four countries, being discussed below.

2.4.4 Chi-Square Tests: Country Differences per Organisational Type While the previous analysis reflects the general research approach adopted in the existing empirical literature, we now move on to analyse the question, which is of particular importance in the context of our study: what are the country dif-ferences, if we consider each type of organisation in turn? By analysing each type individually, we can control a possible impact of the type of organisation on the selection of a specific HR policy or practice. We use the following Chi-Square tests for each variable:

H0: µMSUBUK = µMSUBDK = µMSUBG = µMSUBCH H0: µMNATUK = µMNATDK = µMNATG = µMNATCH

H0: µMHQUK = µMHQDK = µMHQG = µMHQCH Figure III.13 shows the possible outcomes. In the table a “#” indicates that we found significant differences between the countries for the respective organisa-tional type. The “=” sign indicates that we found no significant differences.

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MSUB MHQ NAT F Interpretation

= = = 11 A. European standardisation = = # 6 B. Multinational standardisation = # # 11 C. Headquarters standardisation # # # 50 D. No standardisation = # = 10 E. Organisational differences # = = 3 F. Organisational differences # # = 4 G. Organisational differences # = # 3 H. Organisational differences

Figure III.13: Results and Interpretation A: European standardisation: NATs, MSUBs, MHQs are equal across countries If all types of organisations show an equal pattern across all countries, then this suggests that, for these policies and practices, a common European HRM ap-proach has evolved. We find this “European standardisation” for 11 out of the 98 variables analysed. As it was to be expected, European standardisation is most common for strategy and policy. Almost a quarter of all questions in this field were answered without significant differences across countries – irrespec-tive of the organisational type. Also in line with the theoretical expectations, we find the least degree of Euro-pean standardisation in the area of compensation and benefits. Only one out of the 38 compensation and benefits questions showed this outcome. Altogether, our finding clearly shows that Europe is a long way from having a standardised approach across organisations and countries. However, this is what we would expect, given the findings of previous research. More interesting are the next two constellations. Do we find any evidence that multinationals choose similar approaches – either across organisations in different countries or within the multinational organisation? B: Multinational standardisation: NATs differ but MHQs and MSUBs are equal across countries The finding that nationals differ but MSUBs and MHQs are equal across coun-tries suggests that standardisation is possible and that the observed differences in the practices of the national organisations may be due to historical reasons. Thus, although previous research found a continent of diversity, finding that the subsidiaries of multinational organisations choose a similar approach suggests that a European HRM approach is feasible.

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Contrary to a comparison of the MSUB sample only, the homogeneity213 of MHQs allows us to draw a conclusion regarding the type of standardisation. Homogeneity of headquarters policies across countries is not compatible with the ethnocentric headquarters standardisation if national approaches differ. Thus, this finding allows the conclusion that multinationals adopt multinational standardisation. Indeed, we find evidence of multinational standardisation: 6 out of 98 variables show significant variation between the national organisations, but similar ap-proaches across countries for multinational headquarters and subsidiaries alike. This is particularly relevant for recruitment and selection where 17% of the variables show this pattern. Thus, although previous research found a continent of diversity, findings that the subsidiaries and headquarters of multinational organisations choose a similar approach suggest that a European HRM is feasible. Nevertheless, some remarks are due. If we find that the MSUBs show equal dis-tribution for a variable, then this implies only that the penetration of a policy is similar among MSUBs in all countries. The same applies for MHQs. For exam-ple, if in all countries only ten percent of the subsidiaries of multinational or-ganisations use a certain policy, then this suggests homogeneity in the distribu-tions but does not necessarily imply that firms have standardised their policies and practices. What does this mean for our analysis? We believe that the strengths of the results stem from the fact that the question-naire is very detailed. Thus, if we find a common pattern, for instance about whether an assessment centre or a personal interview is used for recruitment and selection, this goes a long way in suggesting that policies and practices are stan-dardised. However, when interpreting variables that cover broader questions, like the existence of an R&S strategy, we have to be more cautious. If a com-mon large percentage of firms answer with yes, then this does not yet suggest standardisation. C: Headquarters standardisation: MSUBs equal, but MHQs and NATs are different across countries A further type of standardisation that could be hidden in the finding of a “conti-nent of diversity” is headquarters standardisation. If the policies of nationals dif-fer across countries and the policies of headquarters of multinationals do so too, this evidence is consistent with headquarters standardisation. This conclusion is confirmed if the subsidiaries of multinationals do not differ (provided that the

213 We use the term “homogeneity” as a shorthand for the empirical finding that there are no significant dif-

ferences across countries. Similarly we use “heterogeneity” when we find significant differences.

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distribution of the parent organisations is similar in each country). From a per country perspective, we would expect that the headquarters of multinationals and nationals do not differ from each other, whereas the subsidiaries differ from the headquarters and the subsidiaries differ from the nationals. We find headquarters standardisation for eleven out of 98 variables – and it is interesting to see where. While only one percent of the recruitment and selection variables show this characteristic, we find it for more than ten percent of the training and development and over 15 percent of the compensation and benefits variables. This finding is interesting, since we know that national legislation is particularly relevant for C&B. It shows that multinationals are eager to standardise C&B where possible. This is in line with our theoretical discussion of the difficulties that arise within multinational organisations when C&B policies vary significantly across the various locations of the organisation (see Section 2.5.2). D: No standardisation: NATs, MHQs and MSUBs differ across countries If both the subsidiaries of multinational firms and the national firms show sig-nificant differences in their HR policies and practices across countries, then this not only confirms the general results in the literature (“continent of diversity”) but also suggests that there are obstacles to standardisation, which hinder multi-national organisations from standardising. Or, to put it differently, even multina-tionals seem to perceive benefits to adopting the country mode that outweigh the benefits of standardisation. We find “no standardisation” for about half of the 98 variables. While this con-firms to some extent the “continent of diversity” finding, our analysis provides a much more subtle picture. However, this result is to some extent driven by the high level of diversity in compensation and benefits, where over 70% of the variables show no standardisation. Taking C&B out we find that the no-standardisation result is true for less than 40% of the variables. However, a qualification is warranted. We do not measure standardisation di-rectly, since the samples do not contain data on the policies and practices per multinational firm across Europe. Rather, in each country there is a different set of organisations. Thus, what we really measure is the homogeneity (heterogene-ity) among multinational organisations. So, how can we be so firm about the implication that if both nationals and sub-sidiaries of multinationals differ in their country policy, that this suggests a lack of standardisation? Consider European and multinational standardisation first. Clearly, these two types of standardisation are not compatible with the finding that the subsidiaries of multinationals differ across countries. Now consider headquarters standardisation. Then subsidiaries of, say, British multinationals

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may well have chosen different approaches than subsidiaries of Swiss multina-tionals. Still, we argue the result that the subsidiaries in the country samples dif-fer significantly, which suggests that they have adopted the host country’s poli-cies. The reason for this, is as follows. Assume that the distribution of the country of origin of the subsidiaries parent organisation is similar across all countries. We would then expect a similar average use of a particular HR policy in each coun-try. There may be minor differences, though. Say we compare the subsidiaries of foreign multinationals in the UK with subsidiaries of foreign multinationals in Switzerland. Then, the mix of mother country origins differs slightly since the UK MSUBs do not contain UK firms but, among others, subsidiaries of Swiss firms and, similarly, the Swiss MSUBs do not contain Swiss firms but subsidiar-ies of UK firms. The data show that the effect of these differences is minor. The distribution of mother countries origins in the different MSUB samples is simi-lar. Note that the separation of the subsidiaries from the headquarters of multina-tionals is crucial for generating the conclusion suggested above. Had we in-cluded the headquarters and then found differences across countries, this differ-ence could have been compatible with headquarters standardisation. By looking at the subsidiaries only, we can conclude more firmly that differences between countries reflect that each multinational adopts host country-specific policies and practices in each subsidiary. In order to confirm the result that a multinational firm adopts the host country policy if we find that MSUBs and NATs differ across countries, we pursue three more analyses in the more detailed discussion of the variables that follows in the next section. First, we complement our findings with results from the comparison of organ-isational types within a country. Suppose that we find that the policies and prac-tices of national firms in one country are similar to those of a foreign subsidiary in that country. Then this would confirm the conjecture that there are major ob-stacles to standardisation. If we do not find a similarity between nationals and subsidiaries of multinationals, then this suggests a more cautious assessment of the differences. Note, however, that such a finding is not sufficient to reject the possibility of major obstacles to standardisation, as the differences between na-tionals and multinationals may be due to organisational differences and, there-fore, do not indicate a degree of freedom for the multinationals. As a second measure, we analyse the respective variables in a more detailed way in order to make use of the findings of the theoretical analysis. As it turns out, this kind of more additional analysis eases the interpretation of the data.

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Third, in Section 3 we will look for supporting or contradicting evidence by supplementing the quantitative analysis with a qualitative empirical analysis. The latter does not suffer from the data restrictions that are relevant here, since we have interviewed multinational organisations and could address the ques-tions of standardisation and centralisation directly. We presented and discussed the high-level evidence that suggests standardisa-tion or no standardisation. We now move on to results that suggest that internal organisational factors play a role too. E to H: Organisational factors E: MHQs differ, but NATs and MSUBs are equal across countries If headquarters of multinationals choose different policies or practices across a country but nationals and subsidiaries do not, it is likely that this is due to or-ganisational differences. This is not a rare result; we find it for ten out of 98 variables. The following interpretations may explain the finding. If a certain policy or practice is, in general, not relevant for national organisations, the common an-swer of national organisations or subsidiaries across all countries is that they have not adopted this policy. Multinationals on the other hand may or may not use this instrument and can, therefore, show different penetration patterns across the countries. A related reason can follow from the fact that the national organi-sations and subsidiaries in the research sample tend to be much smaller organi-sations (see Section 2.2.2). This could also imply that some instruments are ir-relevant for smaller firms but optional for large multinationals. Finally, it may also reflect the fact that, in the headquarters, the answers reflect organisation-wide policies and practices, which level out. In the next section, we will discuss all variables in more detail. However, before we move on, we will discuss some other, although very rare, findings, which may also be primarily due to organisational differences. F: MSUBs differ but NATs and MHQs are equal and across countries Equality among national organisations and headquarters in various countries but inequality among the subsidiaries of multinationals is certainly not a result that we expect to play an important role. Indeed, we find this for only three out of the 98 variables. If a certain policy or practice is, in general, not relevant for na-tional organisations, the common answer of national organisations across all countries is that they have not adopted this policy. Multinationals may or may not use this instrument and can, therefore, show different penetration patterns across the countries. Again organisational differences can explain the finding.

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G: NATs are equal, MSUBs and MHQs differ across countries Equality among national organisations in various countries but inequality among the headquarters and subsidiaries of multinationals suggests that there are organ-isational differences between multinational and national organisations. We find this for four out of 98 variables. This also points to organisational factors, if a certain policy or practice is, in general, not relevant for national organisations, then there is no variation across national organisations, while multinationals may well show different penetration patterns across the countries. H: MSUBs and NATs differ, but MHQs are equal and across countries For three out of 98 variables, we find that headquarters of multinationals choose the same policy or practice across a country, but nationals and subsidiaries do not. Again, this is most likely due to organisational differences. It may also re-flect the fact that in the headquarters the answers reflect organisation-wide poli-cies and practices, which level out. In the next section, we will discuss these findings by considering the concrete variables for which they were obtained. This helps to interpret the result.

2.5 HR-Specific Results In this section we present and discuss the empirical findings by the field of HRM. First, we analyse the results with respect to the existence and the devel-opment of corporate and HR strategies and policies. Then, we discuss the results for each practice area, recruitment and selection (R&S), training and develop-ment (T&D), and compensation and benefits (C&B). A summary of the results is provided in table format in Appendix IV.

2.5.1 Strategy and Policy Regarding the use of corporate and HR strategies by multinational organisa-tions we find a clear and consistent result: The share of multinationals (MHQ and MSUB) that have developed strategies and policies does not differ signifi-cantly across countries. Almost all multinational organisations in the sample have a corporate strategy and some 80% have an HR strategy. Indeed, having a corporate strategy is common among all organisations and does not depend on the headquarters’ country of origin or the type of organisa-tion. This is not true for the existence of an HR strategy. Here the average share

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of nationals that have an HR strategy is lower (73%) than that of the multina-tionals and this share varies significantly across the four countries. Making use of our evaluation framework developed above, we find that this indicates a mul-tinational approach for multinationals. Regarding the existence of HR policies214, we also find that most organisations have HR policies and, that there are little differences across organisational types and across countries: Around 90% of all organisations have a policy for training and development, we obtain similar figures for compensation and benefits. There is no significant variation across the four countries per organisation or across the three types of organisations. The only exception is recruitment and selection. Whether organisations have an HR policy for R&S varies significantly across the four countries, ranging from 75% in Germany to 93% in the UK. Furthermore, all national and MHQ compa-nies differ significantly across the four countries, while the MSUB sample shows no significant differences across the countries. Within our evaluation scheme this result suggests that multinationals follow a headquarters approach in their use of an HR policy for R&S. Having recorded this noteworthy exception, we do find in the general picture, however, that the use of strategies and policies is common among organisations. The next results show that the way they are developed is more diverse. About half of the companies involve the HR department in the development of the corporate strategy from the outset. Only some 13% of firms do not consult the HR department at all. The remainder consults the HR department (27%) or involve it for implementation (10%). The degree of involvement varies signifi-cantly across countries and for each organisational type. Since the types do not differ significantly, this suggests that multinational firms adapt to the country’s practice, which differs. One important aspect is where HR policies are determined. On average it turns out that around half of the organisations develop the HR policies for each of the three areas centrally. Comparing the degree of centralisation across the different policy areas, we find that a higher share of organisations determines C&B policies centrally (63%) than T&D (49%) or R&S (46%). We also obtain this ranking if we look at multinationals only. From a theoretical point of view, this result is unexpected, since for multinationals we had expected that C&B in particular requires local input due to the diversity and importance of tax regimes and industrial relations across countries in Europe.

214 The variable was categorised into those companies having HR policies, including written or unwritten and

in those companies without HR policies. For more information on the categorisation of the single vari-ables analysed see Appendix III.

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Making use of the evaluation scheme, we find a plausible result. Headquarters and nationals tend to have different attitudes towards centralisation across coun-tries. The share of MSUBs that centralise is similar across countries, showing no significant difference for each policy area. Using our terminology, this suggests headquarters standardisation, i.e. if policies are determined locally in one sub-sidiary of a multinational, then this tends to be true for all subsidiaries and vice versa. However, whether headquarters choose to determine policies centrally, is an issue that depends on the country of origin. Comparing the types of organisations, we have a surprising ranking for each area: MSUBs have the highest and the NATs have the lowest degree of centrali-sation in the development of the policies. Since the nationals operate in a less diverse environment, we expected a higher degree of centralisation than for multinational organisations. While unexpected, this result may be explained by the fact that in multinational organisations HR departments have a greater say in determining the policies. First, a higher share of multinational companies has an HR director. In particu-lar the MSUBs, which are larger organisations on average, contain a signifi-cantly larger percentage of firms with HR directors (60%), than the national firms (45%). Second, in multinational organisations the HR departments tend to have more responsibility for major policy decisions, as the next results show. We discuss each aspect in turn. According to HRM literature, the existence of an HR director on board is an important difference between Human Resource Management and traditional Personnel Management. As an HR director on board is often described as a common practice of US-American companies, the question arises, where those MSUB companies, having an HR director on board, come from. The results from the survey data shows that the majority of all companies from the MSUB sample having an HR director on board are non-European organisations, mainly from the United States of America. This explains, for example, the significant difference in the UK sample, as the amount of US American MSUB companies, is particularly high within this sample. But in addition to the country of origin, other company-specific factors like the overall, world-wide size of MSUB companies, as well as the international nature of these companies might be im-portant factors on the decision as to whether a multinational organisation has an HR director on their board or not. Comparing, for each type of organisation, the proportion of companies having an HR director on board, we find no significant differences. This suggests that, within Europe, the likelihood that an organisa-tion has an HR director does not depend on the country. On average in about half of the organisations the primary responsibility for major policy decisions on the three practice areas lies with the HR department and not with line management. However, the allocation of responsibility be-tween HR and line management varies significantly across countries for all ar-

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eas and all types of organisations. This is an interesting result, as it shows that the role of the HR department is determined by the external environment of the organisation. Given that there are neither political-legal, nor obvious techno-logical or economic factors that would suggest a particular allocation of respon-sibility to HR or line management, we conclude that the role of the HR depart-ment is determined by socio-cultural factors. A similar result appears for the use of external providers. While, as expected, multinational organisations tend to make more use of external providers than na-tional organisations on average, there is noteworthy diversity across the coun-tries for all types of organisations. Let us investigate the organisational differences first. Take training and devel-opment: while 80% of MSUB and 79% of MHQ companies use an external pro-vider for training and development, only 68% of the national companies do so. The number of multinational organisations using external providers, is across all three areas of HR policies significantly higher than those of national companies. This might be explained by the necessity, particularly for the MSUB sample, to adapt to local circumstances and hence, to use local HR expertise. In particular, by using e.g. local trainer, companies avoid the problem of language, different culture, and knowledge or education system. By using e.g. recruitment agencies, they might adapt to local practices like adverts in local newspaper or application forms. Compensation and benefits specialists provide the necessary local exper-tise in terms of tax systems, pension schemes etc. Comparing the use of external providers across the practice areas, we find that external providers are involved by a large share of firms for training and devel-opment (76%) and recruitment and selection (64%). Only a quarter of all firms uses external providers for compensation and benefits. For each practice area, the differences between the organisational types are significant with MSUBs making the most, and NATs making the least, use of external providers. This is a plausible result, since outsourcing is one way multinational firms can adapt to the country environment and since multinationals are likely to face more com-plex problems than nationals. Probably more interesting is the finding that the use of external providers by multinationals differs significantly across countries for all three areas (with the exception of MSUBs use of external providers for R&S). Thus, similar to the role of the HR department with respect to primary responsibility for major pol-icy decisions, the degree of outsourcing seems to be determined by socio-cultural factors. A similar diversity emerges with regard to the background of the most senior HR-manager. While some 70% of multinationals recruit their most senior HR-managers from the personnel department or external personnel specialists, this share is lower for national firms (62%). However, the background of the most

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senior HR-manager varies significantly across countries for all types of organi-sations. The preference of multinational organisations towards HR specialists might re-sult from the complexity of international HRM, compared to national HRM dis-cussed in the theoretical part. This means that, due to the complexity of HRM at international level, the necessity of specialist HR expertise might become more important and particularly HR specialists from outside the organisation might also bring international HR experience in addition to national-oriented, com-pany-specific knowledge. Summary (of Quantitative Results for Strategy) Overall, the analysis reveals a clear message. There are almost no differences regarding the existence of a corporate strategy, HR-strategy, and HR-policies (with the exception of R&S policy) across countries. Moreover, the use of strategies and policies is widespread for all types of organisations; as a fairly general rule at least 80% have a strategy or policy irrespective of the country of origin, the organisational type or the policy area covered. Although less com-mon, the existence of an HR-director position does, within Europe, not depend on the country. However, the way strategies and policies are implemented and the positioning of the HR-department within that process depends on the country where the organ-isational unit operates. This is true for the background of the most senior HR-manager, the use of external providers and the responsibility for major policy decisions. Since, for each of these areas, we tend to find the diversity across countries for all types of organisations, it seems very unlikely that the differences are due to the internal context of an organisation. Rather the differences are likely to be de-termined by the external context. However, since we can exclude technological, economic, or political-legal reasons for internal decisions on the style of HR-implementation, we conclude that the style of implementation is still very much determined by local customs. Thus, although we find significant differences across the countries, the differences uncovered could, in principle, be overcome. Whether firms should choose a common approach, is a question we cannot an-swer, since it depends on a number of other factors, some of which we will ad-dress in Chapter IV. However, we take our finding as an interesting question for future research. If it makes sense, say, to use external providers to recruit personnel specialists or to allocate responsibility to the HR department in one country, then there is no ob-vious reason why this should not be optimal in another. Our research suggests that the differences seem to be determined by custom, not by external forces that

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prohibit standardisation. If future research supports these findings, then there seems to be scope for implementing European best practices. Another interesting finding is that the share of nationals who have policies and strategies is consistently lower than the proportion of multinationals. This is true for HR policies for R&S, T&D, C&B as well as for corporate and HR-strategies. Also a larger proportion of multinationals • has an HR director on board, • determines policies centrally, • recruits their most senior HR manager from personnel specialists, and • uses external providers for R&S, T&D and C&B. We take this as an indication that HR-departments play a more important role in multinational than in national organisations. Some of the findings on strategy and policy are of relevance for the analysis of the HR practices, which we discuss in the ensuing sections. While for all areas, most organisations have general policies in place and the way these are devel-oped does not differ much across the areas, the use of external providers varies. While the use of external providers is common for recruitment and selection as well as training and development, compensation and benefits is, for most or-ganisations, an internal matter. This is particularly true for national organisa-tions, where less than 20% of firms make use of outsourcing.

2.5.2 HR Practices After the HR strategies and policies were analysed in more detail, this section examines HR practices of the following three core HR subfunctions: recruitment and selection, training and development, as well as compensation and benefits. Selected questions from the Cranet-E questionnaire are analysed, providing more detailed information on the use of specific HR practices within the three subfunctions. Recruitment and Selection As argued in the theoretical analysis, recruitment and selection is clearly influ-enced by the external context of an organisation, which is most obvious with re-spect to the external recruitment of employees. However, from a theoretical per-spective recruitment and selection also offers scope for common practices, in

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particular regarding the selection of employees or the relative importance of in-ternal recruitment. Our empirical analysis shows a striking result. Not only the way multinationals fill external positions varies across countries (as expected), but also selection techniques. We first focus on recruitment and then move on to discuss selection. The empirical results regarding recruitment show a number of interesting and plausible patterns: • Recruitment consultants are the most important way to fill senior manage-

ment positions. 72% of all firms use recruitment consultants. However, about half of all firms recruit senior management internally. Newspaper ad-vertisements (34%) and word of mouth (12%) play a minor role.

• Internal recruitment (81%) and newspaper advertisements (71%) are the

most important ways to fill middle management positions. Here, recruitment consultants are much less important (42%). A similar picture emerges for junior management positions, with the role of recruitment consultants being even less pronounced (18%).

• Multinational organisations tend to use a greater variety of recruitment

sources and rely relatively less on newspaper advertisements than national organisations. In most cases a direct comparison of the organisational types shows significant differences.

A less clear picture emerges with regard to the variation of practices across countries. We find that recruitment practices vary from country to country and in most cases the variation is significant. However, there are also a non-negligible number of cases where there are no significant differences. We suspect that this somewhat mudded result is due to the great number of in-fluences. On the one hand, organisational factors clearly play a role. A much higher share of multinational organisations (almost 70%) report that they ex-perience difficulties recruiting IT staff, whereas fewer nationals (52%) report difficulties here. On the other hand, local economic factors play a role (the number of multinational firms that report difficulties in recruiting management and professionals varies significantly across countries). Moreover, it is well known that local practices follow different traditions and that the acceptance of certain techniques varies across countries. An analysis of the selection techniques shows a clearer, but at first glance, po-tentially surprising result: the use of selection techniques varies significantly across countries for all organisational types. There are only two exceptions. First, and obviously, one-to-one interviews are used by all organisations at one

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stage and the common approach found here is not surprising. Second, MSUBs’ use of interview panels does not differ significantly across countries. Looking at the patterns more generally, we find that the use of references (93%), application forms (77%) and interview panels (75%) is now widely spread across organisations. Less commonly used techniques include assessment cen-tres, which are known as a selection technique for managerial position and used by 42% of firms. The use of psychometric tests is also widespread with 56%, while the more controversial method of graphology is only used by 10% of firms. With the exception of the interview panels reported above, we find that the use of each of these techniques varies significantly across countries. As we have these findings for multinationals and for nationals, this suggests significant ob-stacles to standardisation. Since the organisational types do not differ, these ob-stacles are likely to be due to the external context of the organisations. Again there are neither obvious political-legal, nor technological or economic factors that are good reasons for explaining these findings. Thus, we conclude that socio-cultural differences are the main drivers of this diversity. In the following, we present the results in more detail. The use of application forms varies significantly across the four European countries, being less used in Germany (63%), but in the majority of all compa-nies in the UK (92%). Furthermore, all three types of organisations differ sig-nificantly across the countries. Although the three types of organisations do not differ significantly from each other, they show the following trend: MSUB>MHQ>NAT. The use of one-to-one interviews is widespread across the research sample (96%) and does not show mentionable variations, either across the countries, or across the types of organisation. This result might be explained by the general value of selection interviews, which are used across all staff levels. Further-more, interviews are also a common component in sets of selection procedures as well as specially designed selection processes, like the assessment centre. Furthermore, interview panels are also used by 75% of organisations in the re-search sample, but with significant variations across the countries. In Denmark 69% of the companies use interview panels as a selection method, while 83% of the Swiss sample do so. While the types of organisation do not differ signifi-cantly from each other, national organisations show highly significant variations across the countries. This variation is less extreme but still significant for the MHQ sample and almost non-existent in the MSUB sample. While national organisations differ significantly across the four European coun-tries, it seems that the use of interview panels is strongly influenced by country-specific factors. Furthermore, the fact that these variations are less for the MHQ

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sample and not even present for the MSUB sample shows that multinational or-ganisation do not necessarily need to adopt the practices of the (host)country in their use of interview panels. Nevertheless, the MHQ sample reflects both com-pany and country-specific factors, while the MSUB sample shows a rather com-pany-specific, equal approach across the four countries and hence favour inter-view panels more. Assessment centres (AC) are used in 42% of the research sample. There from, the minority of organisations (20%) in Denmark uses assessment centres, while they are more common in Switzerland (64%). The country differences are sig-nificant and each individual type of organisation shows significant variations across the four countries. Furthermore, the three types of organisation differ significantly from each other, by showing the following trend: MHQ>MSUB>NAT (47%, 41%, 36%). This leads to the interpretation that the use of AC is more common for multinational organisations and, in particular, at their company’s HQ. This effect might be explained by the size of MHQ com-panies and the centrality of recruitment activities at the company’s headquarters particularly for (senior) managers and expatriates. The use of psychometric tests for employee selection varies significantly across the four countries. While in Germany only 16% of organisations use psy-chometric testing, 60.2% in Switzerland, 77% in the UK and 79% in Denmark do so. Furthermore, each individual type of organisation shows significant variations across the countries. In addition, the organisational types also vary significantly from each other. The use of psychometric tests is more common in multinational organisation (67% MSUB and 58% MHQ) than in national com-panies (47%). Graphology, as a selection technique, is only used in 10% of all companies. Thereby, significant differences can be observed between the UK (2%), Den-mark (3%) and Germany (6%) on the one hand and Switzerland (71%) on the other. Also, results for each organisational type does vary extremely across countries. The three types of organisations also differ significantly from each other, whereby graphology is less used among MSUB companies than among domestic organisations - MHQ and national companies. References are a common selection method, used in 93% of all cases. Both the countries and the three types of organisations across the four countries show significant variations, while the types of organisation do not vary much from each other. On a more detailed level, there seem to be three potential sources for the persis-tence of local differences. First, local HR-personnel may be used for certain practices, and this preserves the custom. A good example for this is the exten-sive use of graphological analyses in Switzerland. Second, and more important as an obstacle to standardisation, the acceptance of selection techniques among

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applicants may play a non-negligible role in the recruitment procedure. For ex-ample, filling in application forms in Germany is seen, for candidates for most staff levels, as an extra burden. In the UK, however, such a procedure is stan-dard, at least for junior staff. A third obstacle for standardisation is the overall common practice in the country. While it is standard for employers to write let-ters of reference for staff in Germany, asking a UK manager to provide written evidence of the performance of an employee can cause surprises. Summary (of Recruitment and Selection) Altogether, the analysis of recruitment and selection practices underlines the “continent of diversity” findings of previous studies. Even in those areas where one would suspect scope for standardisation, it turns out that the differences be-tween countries are significant. Since these differences tend to exist for all or-ganisational types, we conclude that the obstacles to standardisation are signifi-cant. This is true for 9 out of the 24 R&S variables, whereas a common Euro-pean approach (“European standardisation”) is chosen for only three variables. Nevertheless, a more detailed analysis reveals that there are some areas where it is likely that the lack of standardisation may be due to adherence of customs and traditions. This is also reflected in the finding of multinational standardisation (in four cases) and headquarters standardisation (in one case). However, before turning this into a normative conclusion that the organisations might standardise more, we are required to speculate as we reach the methodological limits of the quantitative analysis. Clearly, we expect the case studies to provide further evi-dence on these conjectures. Another interesting finding is that multinational organisations tend to use a broader range of techniques for recruitment and selection. For fifteen out of nineteen techniques, the share of multinationals that use the technique is higher than the proportion of nationals that use them. Training and Development The Cranet-E Survey questionnaire covers the way organisations analyse train-ing needs and evaluate training as well as development techniques employed. Before beginning the discussion of the practices, let us briefly recall the results on T&D policy. The majority of organisations in the research sample have a policy for training and development (89%). Of these, around half (51%) determine their training and development policies decentrally, at their subsidiaries or sites. The main re-sponsibility for training and development lies in 53% of all cases with the HR department, with significant variations across the four countries.

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The analysis of training needs is common among all organisations. On average 76% pursue such an analysis. However, there are significant differences across the organisations. A higher share of multinationals (76% MSUB, 81% MHQ) than nationals (69%) analyses training needs. Moreover, each organisational type shows significant variation across countries in answering whether training needs are analysed. Thus, the necessity to analyse training needs seems to be judged differently in each country. However, almost all firms that have decided to analyse training needs do this by taking into ac-count line management (100%) and employee requests (99%). Due to the high amount of companies using these methods, it is obvious that neither the coun-tries nor the three types of organisation differ significantly from each other. Also for the more pro-active methods performance appraisal (93%), training audits (91%) and the analysis of projected business plans (91%), the amount of companies using these techniques is quite high among the research sample. With the exception of MHQ, the use of projected business plans does not differ significantly across countries. However, the use of training audits and perform-ance appraisals seems much more diverse across countries. This leaves training audits and performance appraisals as the two techniques that seem to be influ-enced the most by local customs. Indeed the national sample shows significant variation across countries for both methods and the same is true for the two mul-tinational samples with the exception of MHQ showing no significant variation across countries, regarding the use of training audits. This is an interesting result as it shows that the use of pro-active techniques, which typically involve and require the participation of employees, still varies across countries. This finding is a rather general pattern across organisational types and we do not see any obvious political-legal, technological or economic reasons that would prevent standardisation. Thus, we have again a finding that suggests that diversity is due to socio-cultural factors, but seems to be driven by custom rather than the necessity to adapt to local circumstances. This underpins some similar results obtained in the analysis of recruitment and selection prac-tices. A subtler picture emerges regarding the evaluation of the effectiveness of the training pursued. While the results also show significant variation across coun-tries regarding the question whether the effectiveness of training is monitored, the techniques to do this seem to be standardised using a headquarters approach. In fact, the monitoring of the effectiveness of training is not common practice. On average only 63% of all organisations pursue such an analysis with the per-centage being higher for multinational organisations than for nationals. Interest-ingly, the share of firms that monitor effectiveness varies significantly across countries for all types of organisations. This suggests that the importance of monitoring is driven by socio-cultural differences. Indeed, the country differ-

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ences are extreme. While 83% of the companies in the UK monitor the effec-tiveness of their training, only 35% in Denmark do so. If training effectiveness is monitored, however, the results consistently indicate that firms apply evaluation techniques developed centrally according to the country preferences of the headquarters and being then applied across all sub-sidiaries (headquarters standardisation). This interpretation is due to the fact that, while the techniques used by nationals and MHQ vary significantly across countries, MSUBs show a similar distribution across countries. This pattern is true in the use of all four techniques: checking employees’ reactions, measuring changes in job performance, in organisational performance and in learning. On a more descriptive level, we observe that of those companies that evaluate training, 98% pursue the evaluation immediately after the training and 89% pur-sue (another) evaluation some months later. The most often used technique is to ask participants in the training for their re-action (88% of all companies). Also a high share of firms monitor changes in job performance (74%) and organisational performance (63%). Only a third of the firms measure the effect on learning, e.g. assessed by tests. There is no common development technique that is used intensively by all or-ganisations. The technique used by the highest share of companies is a succes-sion plan (57%), followed by high-flyer schemes (43%), formal career plans (30%), job rotation (29%), international experience schemes (27%) and internal assessment centres (25%). With a few exceptions, the use of all techniques varies significantly across coun-tries, irrespective of the type of organisation we study. Thus, we find again a re-sult that shows significant diversity across countries, even for multinational or-ganisations, although this practice seems independent from external forces that limit the degree of freedom of the organisations. Summary (of Training and Development) Overall, the results from the analysis of training and development underpin the broad finding that resulted from the analysis of recruitment and selection: even in those areas where standardisation seems possible, there is an adherence to lo-cal traditions and customs. However, we did find some standardisation. In par-ticular, the techniques used to evaluate the success of training show a clear pat-tern of headquarters standardisation - a result that we had expected to see more often. Some techniques that are used to identify training needs are used by all organisations and in all countries to a similar extent. However, with the excep-tion of one more variable, this is the only area where we find European stan-dardisation.

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Another interesting finding is that the proportion of multinational firms that ap-ply a particular T&D practice is consistently higher than the share of nationals. Only in two out of nineteen practices do we find the reverse result. Again this is a finding that is consistent with the result obtained in the analysis of R&S. Compensation and Benefits In this section, we analyse how basic pay is determined and the use of incentive schemes. Before analysing the practices, we briefly recall the results for C&B policies. In general, 90% of the organisations in the research sample have a pol-icy for compensation and benefits, mainly being determined at the company’s national or international headquarters (63%). In 52% the responsibility for com-pensation and benefits policies lies with the HR department and in 48% with line management, with significant variations across the countries and types of organisation. For all levels of pay determination, national, regional, company, establishment and individual level, the four European countries show significant variations for all four types of staff level: management, professional, clerical and manual em-ployees. Furthermore, with the exception of a few cases, all three types of or-ganisations differ significantly across the four countries as well. For example, the share of companies that determine their basic pay for managers at the individual level varies from 45% of companies in the UK to 89% compa-nies in Germany. Hereby, all three types of organisations show significant varia-tions across the countries as well, and hence, multinational organisations are more or less in line with country-specific practices. A similar picture emerges with regard to incentive schemes. For all four differ-ent incentive schemes: share options, profit-sharing, group bonus and merit pay, again the four European countries vary significantly for all four types of staff levels: management, professional, clerical and manual employees. The amount of companies providing their employees with share options de-creases from management level (35%) to manual level (17%). Hereby, except for manual employees the MHQ and the national sample differ significantly across the countries, while the MSUB sample shows a rather equal distribution. This leads to the interpretation that at lower staff levels the MSUB sample is more in line with the practices of the host country, while it seems rather inde-pendent from country-specific variations for higher staff groups. Furthermore, for all four staff groups, the three types of organisation vary significantly from each other, whereby the share of companies, which offer share options, is in all four cases higher among the MHQ sample than for MSUB or national compa-

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nies. This effect might be explained with the severe country variations of the MHQ sample, ranging from 25.4% of German companies to 77.3% UK organi-sations. Other factors, like company size or HQ, may also play a role. The amount of organisations using profit sharing decreases with the staff level, from 54% for management to 23% for manual staff. Profit sharing varies sig-nificantly across the four European countries and both multinational samples vary significantly across the countries for all staff levels, while the national sample only shows significant country variations for the management and the clerical employee group. In all four cases, although not always significant, the following trend can be re-garded: the share of domestic organisation (MHQ & NAT) offering profit shar-ing is higher than the share of MSUBs. This result shows that a country-specific impact can be found, leading to the interpretation that the use of profit sharing is more common for “domestic” organisations rather than for “foreign”-country organisations. This result might be explained with the high amount of expatri-ates in MSUB organisations, who might have, due to tax reasons for example, other compensation packages than the host-country’s profit sharing. The use of group bonus shows significant variations across the four countries for the three staff groups: management, professional and clerical. For manual employees, the distribution is rather equal across the countries. Furthermore, all three types of organisations also show significant variations across the countries for the above-mentioned three staff groups. Thus, the use of group bonus schemes shows country-specific differences for the higher staff level, whereby the use for manual employees seems to be rather common in the four countries and in all three types of companies. Furthermore, for the first three staff groups the following trend can be regarded: MSUB>MHQ>NAT, being significantly different. This shows that next to country-specific differences the use of group bonuses depends on company-specific factors (e.g. size). Performance-related pay is the most commonly used incentive scheme for all four staff groups. But, again, the four countries show, for all staff levels, signifi-cant variations. These country-specific differences are also reflected by signifi-cant variations of all three types of organisations across the countries. This shows that the use of performance-related pay by multinationals is influenced by country-specific factors. Summary (of Compensation and Benefits) In the area of compensation and benefits, we did expect significant variations across countries as this area seems to be influenced significantly by the politi-

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cal-legal and economic environment in each country. Indeed, we do find signifi-cant variations across countries for all organisational types: over two thirds of the variables fall into the category “no standardisation”. Contrary, to R&S and T&D, however, compensation and benefits are influenced by the local political-legal environment of an organisational unit. This is par-ticularly true for the question at which level basic pay is determined. But it also applies, albeit to a less significant extent, to the incentive schemes employed. Here the tax system is a relevant parameter that may favour one incentive scheme relative to another. Thus, we believe that the scope for standardisation is probably less pronounced for compensation and benefits, unless EU legislation leads to further harmonisa-tion of the tax systems and the industrial relations regimes employed across Europe. However, we do also find relevant evidence of headquarters standardisation. Six out of 38 C&B variables (i.e. 15%) fall into this category. This is in stark con-trast to other forms of standardisation, which we observed very rarely (no multi-national standardisation, only one variable shows European standardisation). This may show that multinational firms undertake all efforts to standardise within the organisations, whenever this is possible.

2.6 Summary of Quantitative Analysis The quantitative analysis is useful, since it allows for the evaluation of data for a large number of firms, which enables us to draw more representative conclu-sions from the analysis compared to what we can infer from a limited number of case studies. However, in the context of our study the availability of data did lead to methodological constraints. While one of the key questions in this study is the degree of standardisation of multinationals firms, we had no data that measures the practices of each multinational in a number of host countries. We overcame this limitation by distinguishing three types of organisations. With this distinction, we could infer whether certain practices were standardised or not. Moreover, it allowed us to draw further conclusions regarding the stan-dardisation: Do multinationals follow a headquarters or a multinational ap-proach to standardisation or do we observe a common European approach shared, by nationals and multinationals? Broadly speaking, our quantitative empirical analysis confirms the finding of a “continent of diversity”. However, the methodology chosen allows us to provide a subtler picture. While national firms do, indeed, differ in 70 out of 98 cases, the analysis of the multinational organisations shows that for 17 of these 70 variables, multinational organisations choose some form of standardisation. For 11 variables the evidence suggests that multinationals choose a common ap-

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proach within the organisations (headquarters standardisation) and for six poli-cies and practices, we find that multinationals choose the same approach across the countries we analysed. Indeed, for 15 cases, the standard approach in the empirical literature, which compares all organisations in each country across countries, would have yielded the continent of diversity result, whereas we find that multinationals do stan-dardise. This finding is important. Not only does it provide a more differentiated picture of the diversity finding, it also points to areas where national organisations could, in principle, adopt an approach that is popular in another country. While we have been careful not to argue that this implies that national organisations should do this, the finding that they could do so is, itself, of considerable impor-tance for the normative analysis that follows in Chapter IV. This does not necessarily imply that multinational organisations choose to stan-dardise where they can. Indeed, the more detailed evaluation of the variables in the light of our theoretical approach has identified a number of areas where the external and the internal environment of the multinational organisations should not restrict efforts to harmonise policies and practices within an organisation. However, let us discuss the main results of the detailed analysis step by step. The first interesting finding of our analysis is that the use of strategies and poli-cies is common across all countries and all organisational types. However, while the existence is common, the way they are implemented (role of the HR-department, background of HR-managers, etc.) differs. Moreover, as the analy-sis of the three practice areas shows, there are significant differences in the ac-tual practices chosen for implementing the policies and strategies. Another interesting result is that multinationals tend to use a broader range of HR practices in the areas of training and development and recruitment and se-lection. Overall, we find that the role of the HR-departments seems to be more prominent in multinational organisations. In the preceding theoretical analysis, we developed the conjecture that multina-tionals should have an incentive to standardise wherever the obstacles to stan-dardisation are low. In particular, in the fields of T&D and R&S we identified a number of activities and practices that are potential candidates for standardisa-tion. With a few exceptions, the quantitative analysis suggests that multinationals standardise to a less extent than they could according to the conjectures devel-oped in the theoretical analysis. This is true for: • The way HR-policies are implemented locally,

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• a large number of recruitment practices, • almost all selection techniques, • whether training needs are analysed, • most pro-active techniques to analyse training needs, • whether training is evaluated, • most development techniques, • where pay is determined, and • the types of incentive schemes used. On the other hand we do find some areas where there is either a common Euro-pean approach or a headquarters approach: • Having a corporate strategy, an HR strategy and HR policies are generally

not an issue that depends on local influences (European standardisation). • If training is evaluated, it is done with a centrally determined set of tech-

niques (headquarters standardisation). With respect to compensation and benefits, we find the results less surprising. Here it is well known that the industrial relations systems vary across countries as do the tax regimes. Both have a direct impact on how pay is determined and what incentive schemes are used. And indeed, we tend to find significant varia-tions across countries for all types of organisations. We can offer four explanations for the finding of very limited standardisation of multinationals across countries. First, we find the diversity result for practices. In fact a lower degree of stan-dardisation for practices than for policies is in line with the theory. Still, we be-lieve that for the practices described above, there should be benefits to stan-dardisation. Moreover, there is a danger that common policies either exist only on paper or are meaningless, if practices are not aligned. Second, the Cranet-E survey naturally covers only a selection of practices. For instance, we have no information on whether the training content or application forms are standardised across countries. Moreover, the questionnaire does not always distinguish practices by staff groups. Thus, existing standardisation for higher-level staff groups may not be picked up, if dominated by differing ap-

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proaches for lower level staff groups. Although these are limitations, the Cranet-E survey provides, we believe, a good sample of practices, in particular bearing in mind the large number of firms that participated. Third, there may simply be more and significant obstacles to standardisation, than conjectured in the theoretical analysis. Fourth, the data intentionally covered a wide range of organisations, not system-atically focusing on firms that have implemented best practices. Thus, the re-sults may reflect a lack of initiative on the side of the headquarters’ HR depart-ments that should strive to develop (jointly with subsidiaries) HR policies and practices for European operation. If HR departments restrict themselves to de-fining common policies and delegate practices to local staff, then this may lead to local staff simply following local customs. While this may not be bad in all cases, it raises three important concerns: 1. If practices are adapted to host country policies in all subsidiaries, they

may often not be in line with the policies formulated for the entire or-ganisation.

2. Differentiation of those practices that could be easily standardised poten-

tially implies foregone economies of scale or scope. 3. Local practices that have evolved by tradition may differ in their quali-

ties. Thus, standardisation offers the chance to pick the best practice and spread this across the organisation. This is clearly a missed opportunity, if HR practices simply follow local customs.

These comments should not be misunderstood as a request for a central dictate that would most likely lead to an ethnocentric headquarters approach with all the known, socio-cultural and other problems to follow. Rather, standardisation has to be pursued carefully, with the participation of local staff, only where it brings a net-benefit. In Chapter IV we make a number of suggestions to this end. Having said this, the quantitative empirical results, combined with our theoretical analysis, strongly suggest that for a number of multinationals there exists room for improvement by looking for and implementing best practices in HR. We expect that in the future standardisation will increase. In particular, we see the following drivers: • We expect that as HR departments become more sophisticated, • the external environment is harmonised, • firms reach later stages of internationalisation, and

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• the international mobility of employees increases. Thus, it will be interesting to see whether firms will choose a headquarters or a multinational approach to standardisation. Capturing the dynamic effects in the development of European HRM would be an interesting and demanding project for research that would pursue time series analysis. In the next section, we make a first step towards identifying the potential scope for standardisation. We have interviewed ten organisations that claim to imple-ment best practices in HR.

3 Qualitative Empirical Analysis - Case Study Interviews

3.1 Introduction The case study approach constitutes the core of the qualitative empirical re-search undertaken in this project. The in-depth case study interviews aim to generate research results that provide a holistic and realistic picture of the cur-rent EHRM approaches taken by selected multinational organisations. Since Human Resource Management, from a transnational perspective, is a relatively new field of research, the intention of the case studies is to provide a picture of reality, which allows us to explore the research field in order to reach a deeper understanding of the research context. One of the main characteristics of the case study approach is that the research objective is analysed in its whole com-plexity and within the specific context of the operation. Yin proposes that „case studies are the preferred strategy when ‚How‘ or ‚When‘ questions are being posed, when the investigator has little control over events and when the focus is on a contemporary phenomenon within some real-life context.“215 In the particular context of the research project presented here, the case study in-terviews aim at identifying the achievements of, and potential obstacles to, a successful development, implementation and management of EHRM strategies, policies and practices. The knowledge gained from the experience of practitio-ners is systemised and typical problems are analysed. The results reflect typical EHRM approaches and illustrate successful strategies, problems of implementa-tion as well as solutions developed within practice.

215 Yin (1994, p. 1).

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3.1.1 Interview Guideline Therefore, as a first step, an interview guideline216 was developed on the basis of both the theoretical hypotheses developed in Chapter II and a brainstorming ex-ercise with a number of HRM experts.217 These experts are e.g. HR consultants, researchers or HR managers of multinational organisations, who are familiar with European Human Resource Management from different Angles. Overall, the views of 15 experts are considered, supplemented with the attendance at in-ternational conferences covering the research topic as well as actual publica-tions. The interview guideline covers the following HRM functions: structure and strategy, recruitment and selection, training and development, compensation and benefits as well as staff assessment. During the interview process outlined below, the guideline was assessed step-by-step and revised, in order to con-stantly develop the research design and to gain a broader and deeper understand-ing of the research problem.218

3.1.2 Research Sample By making use of the guideline, ten semi-structured, face-to-face interviews219 were conducted at the most senior HR levels in multinational organisations. The selection of the companies was based on the following criteria: • Multinational organisations, being one of the top 500 international organisa-

tions within Europe according to the Financial Times Top 500 Index, and/or • Multinational organisations with extensive European-wide operations. • Multinational organisations that claim to implement best practices. In the selection of case study interviews, factors like country of origin or sector were not considered as specific selection criteria. Figure III.14 provides an overview of the companies, which participated in the research project, by coun-try of origin and their main sector of operation.

216 See Appendix VI. 217 See Appendix V. 218 Becker/Geer (1979); Girtler (1988). 219 See Appendix V.

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Figure III.14: Research Sample by Sector and Country of Origin

The companies were approached with a letter to the HR director, describing the research project and the intention of the interviews. One week after the letters were sent to the various organisations, they were followed up with a telephone call, asking the organisation for their co-operation within the research project. The interviews were conducted in 1999 and 2000, lasting between 90 and 120 minutes. The results of the interviews were transcribed and categorised under specific headlines like structure of the European HR function, standardisation vs. differentiation of HR strategies, policies and practices, as well as according to a single HR subfunction like recruitment and selection, training and devel-opment as well as compensation and benefits.

3.2 Methodology: Case Study Interviews By making use of the guideline, the HRM practitioners were encouraged to de-scribe their current EHRM approaches and to talk about their experience in the field of European Human Resource Management. This process was emphasised by posing open questions, with the goal of building a natural and open commu-nication atmosphere and to leave room for the interviewee to mention what he/she finds important.220 Furthermore, the face-to-face interviews allowed more room for actual aspects and for individual experiences of the interviewee. Addi-tionally, the use of semi-structured interviews allowed the interviewer a higher degree of flexibility e.g. by posing additional questions and to reach deeper sci-entific results and a better understanding of complex interrelations. These ad-

220 See Osterloh (1982).

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vantages are of particular interest due to the novelty of the research problem. Closed questions, providing the interviewee a selection of different answers were used in order to gain more comparable information for some specific top-ics and to help the respondent to get ideas. In addition, where possible, interviews were held with employees in the com-pany, either in the HQ office or in a national HR department. As these inter-views were mainly in order to confirm the results of the main case study inter-view, they were, in the majority of all cases, short telephone interviews. The in-formation gained from the various personal interviews was supplemented by the study of internal documentation on the research topic. Overall, the main content of the case study interviews is the EHRM approaches of the multinational organisations. The analysis of more than one case allows for a broader picture of different influencing factors as well as a comparison of dif-ferent procedures and actions taken. The limitation of a small number of com-panies interviewed allows for a more detailed analysis of the respective cases. The case study interviews aimed at identifying the achievements of, and poten-tial obstacles to, a successful development, implementation and management of EHRM strategies, policies and practices. The knowledge gained from the ex-periences of the practitioners is systemised and typical problems are analysed. The results reflect typical EHRM approaches and illustrate successful strategies, problems of implementation, as well as solutions developed within practice. Figure III.15 provides an overview of the various steps of the qualitative analy-sis taken.

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Figure III.15: Steps of the Qualitative Analysis After the research methodology of the qualitative analysis was introduced and the research sample of the case study interviews were described, the following section now discusses the results.

3.3 Results

3.3.1 Structure of the Human Resource Management Functions in Europe The structure of the HR functions of almost all221 multinational organisations in-terviewed is primarily organised alongside business rather than country lines. In general, three distinct structural layers can be differentiated: Business Line All organisations are (primarily) organised by business lines. In most cases the HR function is divided according to business lines too. As a result, HR policies and practices might vary from business line to business line, due to different needs of each business area. Therefore, although the overall philosophy/strategy of the organisation of the way in which they manage their human resources might be identical, a single business might use different HR approaches. This means, although HR policies and practices may be consistent within each busi-

221 In order to avoid the impression of statistical validity of the qualitative research results, the author has

decided to use a broad categorisation of the results of the ten case studies like „almost all“, „the majority of“, or „only a few.“

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ness line and might also be consistent across various countries within these lines, they nevertheless might vary from business line to business line, in order to serve the needs of the business.

Figure III.16: Business Lines Functional Line All organisations have a central HR department or co-ordinating HR manager to provide assistance to the business units in the different countries/regions where the organisation operates. They are mainly divided into functional areas, like compensation and benefits, management development or recruitment, and have generalists as well as specialists serving the business. In some organisations, the HR function works on an entirely global basis and HR-managers have responsibility for every HR activity worldwide. Europe, in this model, is regarded as one part of the worldwide organisation. Other organisations have a particular European HR team, headed by a European HR director and specialists, dedicated to individual European countries or groups of countries. Regardless of the geographical differences between global or European, the re-sponsibility of these central HR functions is to develop HRM strategies as well as to co-ordinate the HR activities across the various countries. In most cases, the policies and practices of the various functions are integrated with each other.

Figure III.17: European Human Resource Department

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Country or Region Line Additionally, most companies operate national HR departments in some coun-tries of operation. This is restricted to countries with substantial business and staff of at least 15 to 100 employees, depending on the organisation. The idea of local HR functions is to provide the necessary local HR expertise and to imple-ment HRM policies and practices. Although the local HR functions might be in-volved in developing strategy and HR policies and practices to a certain extent, in most cases their role is restricted to the implementation of HRM and the ad-aptation to the local employment conditions. The organisation has to decide how far the policies and practice across the various countries are either standardised or differentiated.

Figure III.18: Country/Region Line In general, the structure of the HRM activities of multinational organisations in Europe can be illustrated by the following figure. It shows a rather simplified organisational structure of the HR functions of multinational organisations.

Figure III.19: Structure of the European Human Resource Management Function In general, the European/Global HR director has overall responsibility for all HR business in this respective region. Local HR managers mainly have two re-porting lines, one to the European HR department and one to the manager of their business line. Some also have dotted lines to some HR specialists, provid-ing particular services to their country or region. The relationship between HR director and business unit director is usually on an equal level. In most cases,

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the HR departments work in a business partner relationship with the business lines.

3.3.2 Relationship between Central and Local Human Resource Functions The core activity of local HR functions generally covers the day-to-day adminis-trative personnel responsibility as well as the implementation of centrally devel-oped HRM policies and practices in line with the overall strategy of the organi-sation and with local employment conditions. Historically, at an earlier stage of internationalisation of the various companies, at the time the companies ex-panded their business into the different countries, the local HR departments had a wider range of responsibility and greater autonomy. At a later stage of interna-tionalisation, when the organisations were already settled in the various host countries, the companies tended to prefer a more centralised HRM structure with HR strategy development at the top (centrally) and HR implementation at the bottom (country level). In general, the HR activities tend to revolve around a European or globally shared plan, which is interpreted at local level. Communication of the various countries with the central HR team is given high priority by all firms. It is regarded as significant, especially in order to empower people and to gain their involvement. However, in general, the problem of communication increases with the number of countries the company operates in, because „the more countries you have involved, the more angles you have to re-solve and the more difficult it becomes“- as one HR-director put it. In general, due to geographical distances between the various HR departments, the communication process is not easy to handle. Although direct, face-to-face communication is the preferred communication technique, it is reduced due to geographical distances and costs. In general, meetings with the principle local HR staff are held every two to four months. Local HR staff tends to be involved in the decision-making process, when appropriate. Next to direct communica-tion, techniques like teleconferences, e-mail or Internet are widely used tools to communicate and to share information on various HR topics.

3.3.3 Human Resource Strategy None of the interviewed multinational organisations has a specific HRM strat-egy for Europe. They either have a global HR strategy, which is also transferred to their European operations or they are currently in the process of developing a global HR strategy. The HR strategy covers general aspects like supporting the business, working as partners with line managers to maximise human capital or ethical principles. Generally, it is implemented in all countries. There is a shared view, that the HR strategy should be consistent across the whole organisation,

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by being flexible enough of being capable for individual country or business needs. Almost all organisations describe their overall HRM approach in practice as an ongoing process of continuously developing new policies and practices or rede-fining those in operation. Most interviewees said that they moved, or intend to move, away from a differentiated, country-oriented HR approach to a more stan-dardised, integrated HR approach. Their former HR approaches were more reac-tive, while they now demand a more proactive approach in order to support the process of ongoing change. The majority of companies interviewed prefer a high degree of standardisation among their HRM strategy, policies and practices across the various countries they operate in: here is a clear trend toward more standardisation. Companies are very much in favour of standardisation and hence like to stan-dardise their HR policies and practices as much as they can. Proponents of a high degree of standardisation said: • „... to the greatest extent possible we develop standard policies and (...) the

only reason for diversion is the local legislative requirement.“ • „...we try to standardise as much as possible (up to 100%) (...) and we use

the same practices unless we are forced for legal reasons to do this or (...) by strong local conditions...“

• „...we are looking to standardise as much as possible (...) we are less inter-

ested in individual countries (...) we have to look at what is good for the business.“

Differences in the environment at national level are seen as a major obstacle to standardisation. Some interviewees argue that standard policies will not always work and in some cases standardisation might cause more problems than it might resolve. Therefore, they describe their approach as a mix of standardised and differentiated HR policies, but with the intention of finding common ap-proaches and share best practices where possible. Overall, the majority of com-panies interviewed shared this point of view.

3.3.4 Degree of Standardisation of HRM Strategy, Policies and Practices While almost all organisations have standard European-wide or global HR strategies, the degree of standardisation decreases at the level of HR policies and again at the level of HR practices. This means, that the highest degree of stan-dardisation is reached/practised at the level of HR strategy and the lowest de-gree of standardisation at the level of actual HRM practices. The following chart

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demonstrates the various degrees of standardisation vs. differentiation among the three categories: HR strategy, HR policies and HR practices.

Figure III.20: Degree of Standardisation According to Strategy, Policies and Practices This outcome reflects the overall development and implementation process of HRM strategies, policies and practices in the majority of organisations inter-viewed. In general, the multinational companies develop an overall HRM strat-egy, at their organisation’s central HR function. In just a few cases are the coun-try HR managers involved in this process. The HRM strategy is then communi-cated to the local HR staffs, who follow the strategic guidelines that cover gen-eral principles of the organisation. In most cases, specific HRM policies are developed at the central HRM function of the organisation. At this level, the involvement of the national HR staff in the development process increases, in order to provide local HR (legislative) exper-tise like „...there are global policies being developed where everybody is in-volved to a great extent and gives input...“ or „...we do not sit in a vacuum (...) involvement is important (...) and people that are affected by the policies have an input.“ HRM policies cover general guidelines in order to underpin corporate culture on issues like equal opportunities or the way information is handled. Finally, HRM practices are the most differentiated, due to their need of adapta-tion to local circumstances and common practices within the different countries. In general, HRM strategies and policies are developed centrally and then com-municated to the local HR department, which puts them into practice at the local level, like „we develop overall strategies and policies (centrally) (...) and the rest is local adaptation.“

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3.3.5 Degree of Standardisation at Various Staff Levels Differences in the degree of standardisation can also be identified across various staff levels. A higher degree of standardisation can be analysed for HRM poli-cies and practices at senior management levels compared to the management level and an even lower degree at the non-managerial staff level. Figure III.21 gives an overview of the differences across the various staff levels.

Figure III.21: Degree of Standardisation According to Staff Levels This tendency seems to evolve due to various factors. The overall staff popula-tion tends to be smaller, the higher up the staff is located in the organisational hierarchy. Therefore, overall HRM policies and practices seem to be easier to implement and manage for a small proportion of staff. Furthermore, specific HRM policies and practices, like special management development programmes or competencies, seem to be more commonly used at management level and above, due to their high costs of development and implementation, as well as to special treatment of the respective groups of employees. A few organisations ar-ticulated that they developed a framework in order to standardise their HRM policies and practices, which was implemented at the senior management level first. This means they started their standardisation process at the top senior level and then put the framework down the different layers of the organisation, while reviewing and adapting it to the various staff levels.

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3.3.6 Degree of Standardisation according to Stages of Internationalisation Most organisations interviewed either changed or are currently changing their HR approach from a more country-oriented to a more centralised, standardised, European/global approach. In general, the following three stages of internation-alisation, as well as the HRM approaches practised during these different stages, were reported by most of the multinational companies: A) At their early stage of internationalisation (Stage I), most organisations

operated an ethnocentric approach towards internationalisation, based on a universalistic attitude. Therefore, HRM strategies, policies and prac-tices of the parent organisation were transferred to all subsidiaries. This point of view disregards the national as well as the cultural differences of the various countries and asks for a high degree of standardisation of per-sonnel policies in line with the practices of the parent organisation. In particular, US-based organisations faced the following problems during their early stages of internationalisation into the European market: “...we have suffered in the past by policies being developed and transferred from the US, which were then implemented without great discussion in the countries outside (...) and we spend all our time unwinding them...”. None of the organisations interviewed was still in this period of interna-tionalisation.

B) At the second stage of internationalisation (Stage II), usually due to busi-

ness expansion into the single countries of operation, more staff was hired locally. HR departments were implemented in countries with se-vere operations and “...we were increasing our businesses and it was be-coming more and more difficult with the complexity of the local labour law to support that from an HR perspective out of London...”. The single country HR departments became far more independent, with policies and practices developed and managed nationally.

C) At the third stage of internationalisation (Stage III), which is the stage

almost all the companies interviewed are either in or are heading for, or-ganisations tend toward greater global business integration. The HR re-sponsibility again is more centralised, generally at the organisation’s headquarters. In contrast to the first, ethnocentric strategy, organisations now develop overall, European or global policies in co-operation with their national HR departments e.g. “...today there is a global policy being developed where everybody is involved to a great extent and gives input (...) this means the involvement changed (in comparison to the first, eth-nocentric stage of internationalisation) because before we were not in-volved to a great extent”.

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Furthermore, instead of transferring HR practices from the head office to the countries, the approach now intends to develop an HRM framework including certain underlying principles. These principles should be implemented and in-terpreted in the light of the particular circumstances and individual regulations and legislation of each country. Nevertheless, the responsibility and independ-ence of national HR department mainly decreased and „...people who set the policies, who make the policies and make the big decisions are global...“ and the HR functions might return to a more administrative role. The degree of stan-dardisation of HRM policies and practices increased from Stage two to Stage three, although the two approaches discussed in part 3.5. (Standardisation vs. Differentiation of Human Resource Policies and Practices) can be differentiated (Stage IIIa and Stage IIIb). They are different in their degree of standardisation. Overall, the degree of standardisation varied according to the different stages of internationalisation, which almost all interviewed organisations experienced. Figure III.22 provides an overview of the identified process.

Figure III.22: Degree of Standardisation According to Stage of Internationalisation

3.3.7 Reasons for Standardisation of HRM Policies and Practices In general, the multinational organisations interviewed now tend towards greater transparency of their HRM policies and practices than they did before. The ma-jority of companies see the necessity for a high degree of communication and the creation of a good atmosphere and company culture by involving local HR people in the decision-making process.222 The overall trend towards standardisa-

222 Note the conflict of this statement and the more administrative role of local HR functions, which is a

result of the standardisation process.

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tion is faced with the goal to reach a common set of standards e.g. by develop-ing an overall company framework, which „...is easy to work with and (...) that fits in with the local organisation of that specific country and than also fits into a global environment and global organisation“. The main reasons for a high de-gree of standardisation mentioned in the interviews are (by frequency of occur-rence): • Ease of administration and ease of management, • cost reduction, • increased mobility of employees within Europe, and • transparency. Multinational organisations see a particular advantage in standardisation, be-cause of the possibility for senior management to manage one organisation across, e.g. 7 or 8 countries rather than to manage 7 or 8 individual businesses. Therefore, standardisation is not only seen as an advantage, it is regarded as a requirement, because „people do not want to see seven different styles of per-formance reviews, if they are all working for the same boss around the globe...“.

3.3.8 Obstacles to Standardisation and Problems faced at National Level The main obstacles toward a high degree of standardisation mentioned are: • national legislation in the single countries, • different common practices of the countries, as well as • the employees’ ”mind-set“. National legislation is regarded as the main influencing factor for the develop-ment of an overall company-wide HRM approach across various countries. This finding reflects the results of the Cranet-E database that the various HRM poli-cies and practices identified across Europe are strongly determined by national legislation. Although multinational organisations tend to have a common set of terms, the legal framework within Europe does not support it. It is anticipated that the legislation in the countries will not change in the near future and hence HRM policies and practices remain effected by national laws, particularly as many HRM issues are legislatively provided. The second frequent obstacle to standardisation mentioned, is the different prac-tices that are common to the various countries like different tax regimes, lan-guages, as well as information management. They confront multinational or-

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ganisations with major logistical problems and a burden of administration, e.g. in order to gain the relevant information necessary. The third obstacle mentioned, the „mind-set“ of employees within the different countries is regarded as a main influencing factor towards standardisation by more than half of the companies interviewed. These organisations favour a change of their employees mind-set from a country/national specific way of thinking towards a more European or global mind-set. They try to encourage their employees to be more business-oriented, although they realise that people like to be different and certain expectations that employees have are very hard to overcome. A solution for this specific problem is seen within the following ex-ample: „...I cannot think of an HR policy which we implemented everywhere, that has satisfied everybody (...) but people have to be willing to try things (...) on the basis that if they do not work we will review and change them (but) it has been helpful that these policies have been developed in co-ordination with the HR people in each country...“

3.3.9 Standardisation of Human Resource Management Practices If we compare the degree of standardisation among the three core HRM sub-units, recruitment and selection, training and development as well as compensa-tion and benefits the following differences, illustrated in the Figure III.23, can be identified.

Figure III.23: Degree of Standardisation According to HR-Subfunctions In almost all cases, training and development is regarded as the most standard-ised HRM subfunction, due to less influence of national legislation and national restrictions. Companies argue that „...it is easier to be more standardised be-

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cause of less impact by legislation and (...) you train people on certain issues or products, or a skill (...) much more general things...“ The main impact on HR practices is experienced on compensation and benefits practices due to national systems like taxes or state pension schemes, etc. In the following, the various subfunctions will be discussed on an individual basis. We begin with recruitment and selection, continue with training and development, and then discuss compensation and benefits. Recruitment and Selection Recruitment and selection practices seemed to be more country-specific com-pared to training and development. Nevertheless, their degree of standardisation is valued relatively high among most of the companies interviewed. Although most of the organisations share overall objectives regarding recruitment and se-lection, like „to hire individuals that can add value to the business“ or „to find the best fit to the job“, each country might operate in different ways. Those practices that are mentioned as being standardised to the highest degree are: • Graduate recruitment activities, • competency based selection, and • use of specific techniques such as assessment centre. A lot of organisations mentioned that the actual procedures in practice are dominated by the individual style of the different countries. The reason why a large part of the recruitment and selection activities are differentiated and adapted to the different countries is mainly because of local employment legisla-tion and common practices. People on the job market might not be willing to ac-cept company-specific recruitment procedures, and techniques like application forms or references might be handled differently across the countries. In a lot of organisations there seems to be a gap between strategies and reality in terms of recruiting practices: although they would like to have more standardisation, pragmatically, they are in the situation that the local practices and laws force them toward more differentiation. Organisations seem to prefer recruitment at national level in Europe, while in the long-term European-wide recruitment activities are envisaged. Nevertheless, most organisations interviewed do not look for a specific „Euro-Manager“ and most companies expect their graduate intake to cover the vast majority of their future European managers. Therefore, in some organisations this intention is re-flected in the profile of their graduates as well as in special training pro-grammes.

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Recruitment and selection activities for senior management staff and graduates seem to be quite standardised and mainly centrally organised. The recruitment procedures are usually joined processes of local HR departments in co-operation with the central HR team. This means that, for example, the actual recruitment process is very much locally driven, while the final selection tends to be a con-sensus of people in various locations, depending on the working relationships of the actual positions. Local managers and non-managerial staff are mainly re-cruited and selected at the national level. In general, although practices vary at the country level, most organisations apply an overall consistent and standardised recruitment and selection approach, e.g. the way that vacancies are advertised, whether positions are filled by internal and external candidates, or the use of specific selection criteria for specific groups of employees like competency-based interviews. This means, generally, a common shared framework is in place but the actual techniques used are inter-preted in various ways. Training and Development A lot of organisations offer company-specific training courses, which they in-tend to apply consistently across their operations. These training courses usually contain aspects in order to create a strong company culture or a “global mind-set”. They involve programmes like induction courses for all employees as well as specific graduate or management development programmes. In general, they are developed centrally and translated and transferred into the specific countries. Some of them, like induction weeks for graduates, might also be held at the company’s head office. The following list provides an overview of the most standardised training and development policies mentioned in the interviews: • Management development programmes, • performance management systems, • career planning and promotion criteria, and • technical skills or product knowledge. Most organisations offer both internal and external management development programmes. While the internal training courses concentrate on more company- specific topics or competence-related areas, external training covers specific management skills. Especially at manager level, companies see the importance of bringing employees from all over Europe together in order to share interna-tional information and to enhance the global network and flow of communica-tion.

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Nevertheless, quite a substantial number of companies complain about problems with low willingness towards mobility among their management staff and par-ticular problems with expatriation. Therefore, they would like to see more mo-bility across Europe, but find it difficult to persuade managers to take this op-portunity. They therefore encourage employees to share their experience and exchange skills across Europe as much as possible via European-wide or global training events or management conferences. Furthermore, they also encourage them to enhance their language skills, although in almost all organisations inter-viewed English is the official business language. Training and development at senior management level is generally developed and organised at the central HR function, while management programmes, in general, are both organised at the central function as well as locally. Most or-ganisations offer specific skill training to their employees at the national level of the organisation. While some of them might be developed centrally and trans-lated into the specific languages, most courses tend to be at national level, par-ticularly the practical on the job day-to-day training. Although the actual train-ing delivered might vary from country to country, the overall process for train-ing and development seems to be consistent across most of the organisations in-terviewed. This means that procedures, like identification of training needs by line managers or delivery of training from either the centralised training unit or the country’s training team, are similar. If possible, some organisations share training materials among the various countries or implement regional training centres. Most organisations do not offer European-specific training courses except for European languages or seminars on issues around the European legislative area. Compensation and Benefits Although some organisations use standardised compensation and benefits pro-cedures across Europe, like variable compensation packages, the actual mecha-nism of how people are getting paid is country-specific. The majority of compa-nies try to implement European-wide or global policies and practices, like per-formance-related pay, share options, profit sharing, bonus schemes, company cars or pension schemes, but they are very much limited by national legislation and common practices in the various countries. This means that, although they try to use the same formula across their European operations, the way they actu-ally realise it is different in each case. Overall, the compensation and benefits procedures are regarded in almost all companies as the least standardised or most differentiated. Especially the expectation of employees in the different countries regarding certain common practices within their countries, like com-pany cars or annual bonus schemes, makes it particularly hard not to offer these benefits even though they might not be in line with the overall company policy. In general, organisations tend to have an overall framework, but nevertheless

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different national markets and staff groups have to be considered. Some organi-sations try to ensure that employees that held similar positions across the vari-ous countries are paid around the same amount, but in order to pay employees effectively according to local conditions, they need to take local advantages, like tax opportunities into account, which makes the whole process very complex. The high degree of differentiation of employee compensation and benefits across the various countries, cause particular problems in the use of expatriates as well as the management of international teams. In general, the compensation and benefits packages tend to be less transparent and comparable across the countries and show a high degree of differentiation.

3.3.10 Influencing Factors in Europe and Main Problems The main factors influencing multinational organisations in Europe and their management of human resources are as follows: • European legislation, • different national systems, • economic situation, and • environment of change and increase in competition. European legislation, including the social chapter and the various EU-directives, are seen as the main factor of influence on HRM in Europe among almost all companies. This is mentioned in statements like “ten to twenty statutes coming in and we have to do something (...) that is big for us...”. Organisations see that they have to be very conscious of existing and forthcoming EU social legisla-tion, which they have to take into account when developing new policies. The majority of companies see the necessity to keep abreast of EU-employment leg-islation and, hence, use various forums to monitor European legislative issues such as legal groups, advice from agencies as well as professional bodies like the IPD. The European Works Council Directive as well as the Working Time Directive affect most organisations interviewed, which is a major topic at the moment. The Working Time Directive causes for some companies severe prob-lems and additional administration. Next to the impact of the overall European social chapter legislation, companies are affected by the various national legal systems in the different countries where they operate. Therefore, the necessity increases for the development of local HR departments, providing local expertise. Most companies see the impor-tance of a good understanding of each country's employment legislation and work practices. Although some organisations take external advice on specific

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topics, they complain that agencies provide legal information more often than operational. Furthermore, country-specific common practices, like social secu-rity systems or tax regimes are regarded as significant for European-wide HRM. The economic situation in Europe, like low interest rates, changes in demo-graphics, skill shortage and unemployment, are regarded by almost all organisa-tions as an impact on their business in general, as well on the management of human resources in particular. Furthermore, increased competition in Europe as well as an ongoing change in the business environment are also factors that were mentioned by some multinational organisations. They argue that because of the changing environment the necessity for a more pro-active and flexible HRM ap-proach across Europe is increasing. European-wide standards allow companies to be more flexible, because they would design special HR solutions for every single country. The likelihood that these have to be changed is much higher than it would be by having more flexible policies and practices.

3.3.11 Recommendations by Practitioners Most interview partners recommended that it is important for multinational or-ganisations to anticipate future changes in the European environment and to be pro-active, flexible and willing to adapt to various and changing conditions. Therefore, companies should see the importance of continuously refining and developing HR policies and practices and agree on company-wide overall HRM frameworks and company templates.

3. 4 Summary of Qualitative Analysis The objectives of the qualitative analysis were, to a large extent, complementary to those of the quantitative analysis. While the latter focused on the status quo of European HRM, the focus of the qualitative analysis was on the reasons for the policy choices and the experience gained with the implementation and manage-ment of European HRM. With a view to the normative analysis (Chapter IV), we deliberately chose multinational organisations that claim to implement best practices. All of the ten firms interviewed have an HR director on board and base their management on a firm-wide strategy. However, none of them has a special European approach, it always reflects the global reach of the firm. The HR di-rectors generally have a view towards the HRM process that reflects the follow-ing understanding of the HRM process: The headquarters develops the HRM policies and practices in line with the overall strategy of the organisation, while local HR functions generally cover the day-to-day administrative personnel re-sponsibility.

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It is interesting to note the strong desire to standardise whenever possible. In-deed, the interviewees saw a clear trend towards standardisation. They backed up their desire by naming a number of advantages of standardisation, including ease of administration and management, cost reduction, increased mobility of employees within Europe and transparency. With this desire in mind, why do we not observe a higher degree of standardisa-tion? Three main obstacles where highlighted, the national legislation in various countries, different common practice and the employees’ “mind-set”. The more detailed questions about the approach to standardisation revealed a number of interesting findings. First, in line with their ideal to have a centrally defined HR strategy and to standardise policies as much as possible, HR direc-tors see the highest degree of standardisation in HRM strategy, a lower degree of standardisation in HRM policies and the lowest degree of standardisation in HRM practices. There is an obvious logic to this approach, which was usually mentioned in the interviews on a number of occasions. HR departments try to provide the general framework and then adapt as much as is needed to local cir-cumstances. To some extent, this is consistent with a finding in the quantitative analysis. Compensation and benefits is an interesting example. While C&B policies are, in the vast majority of organisations, determined centrally, the actual practices vary significantly. This finding reappears in the case studies. A number of or-ganisations pointed out that they use standardised compensation and benefits procedures across Europe, like variable compensation packages, the actual mechanism of how people are getting paid is country-specific. Thus, despite the central determination of the framework, the compensation and benefits practices are seen as the least standardised HRM field - a problem, in particular with re-gard to the desire to increase mobility within the organisation. Similar arguments were made in relation to training and development. However, here another factor appeared to be important: the level of the staff affected. Training and development at senior management level is generally developed and organised at the central HR functions, while management programmes often involve local input. This reflects a more general finding, that the degree of standardisation is at sen-ior management level rather than at management level, which in turn shows a higher degree of standardisation than non-managerial staff. A number of factors were identified as causes for this. The higher staff is located in the organisa-tional hierarchy the smaller are the number of people to administer. Moreover, managerial groups are often addressees for company-specific training asking for standardisation and some HR directors argued that they would start a process of standardisation at the senior level, in order to start a top-down procedure.

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For recruitment and selection, we find again that the organisations claim to have an overall consistent and standardised approach, but that the actual techniques used are interpreted in various ways. Clearly, one interesting finding is the emphasis that the HR directors put on flexibility. This is reflected in their recommendation to anticipate future changes and to be pro-active and flexible. However, it is also reflected in the dynamic view of the HR approach depending on the stage of internationalisation. We identified that, at the beginning of internationalisation, firms have a high degree of standardisation. This is usually followed by a significant increase in differen-tiation and only in the third stage of internationalisation, a higher degree of standardisation is again achieved. We will pick up this dynamic process in Chapter IV, when we analyse ways to manage this process more effectively.

4 Overall Summary of the Empirical Analysis

European HRM has many facets. In this study we focus on multinational organi-sations. The starting-point and the main emphasis of our empirical analysis was to explore their HRM approaches, to analyse why these approaches have been taken and how they are implemented. This wide-ranging explorative ambition determined the choice of the empirical research methods. While a quantitative analysis performs well with regard to the more simple factual questions regarding who does what and where, it performs less well in the analysis of the how and why questions. Thus, we decided to pur-sue a two-pronged approach and conducted both a quantitative and a qualitative analysis. In this way, we aimed at overcoming some of the limitations of either approach. In this conclusion of the empirical analysis we attempt to integrate and compare the main results from both analyses. However, we also want to highlight the re-maining limitations, which have immediate consequences for future empirical research. We put less emphasis here on the normative implications of our empirical analysis, as these will be dealt with extensively in the next chapter. Moreover, the focus is on the empirical results, the integration of theoretical and empirical results will be pursued in the overall conclusion of this study (Chapter V).

4.1 Continent of Diversity and the Desire to Standardise In line with the strengths and weaknesses of the two empirical methods, the con-tributions to our analysis vary. One of the key findings that comes out of the quantitative research is that the general picture of the continent of diversity pre-

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vails. This is true although our approach allows us to detect forms of standardi-sation that would not have been picked up by standard country-by-country com-parisons that do not distinguish organisational forms. Indeed, the quantitative analysis shows a higher degree of standardisation for subsidiaries of multina-tional organisations (38 variables do not vary across countries) than for national organisations (24 variables do not vary across countries). The diversity finding is interesting if compared to one important result of the qualitative analysis. The interviewees stressed the importance of standardisation and were well aware of its advantages (including ease of administration and management, cost reduction, increased mobility of employees within Europe, and transparency). The interviewees suggested three explanations: for the persistence of diversity, despite the desire to standardise. In the order of importance, these are: the na-tional legislation in various countries, different common practice, and the em-ployees’ “mind-set”. In this context the quantitative analysis provides interesting complementary evi-dence. Multinational organisations standardise to a less extent than they could. This is true for the way HR-policies are implemented locally, a large number of recruitment practices, almost all selection techniques, whether training needs are analysed, most pro-active techniques to analyse training needs, whether training is evaluated, most development techniques, where pay is determined, and the types of incentive schemes used. For these policies and practices, there are no insurmountable legal reasons for a lack of standardisation. While the analysis also reveals a large number of areas where there seem to be significant obstacles to standardisation – many of which are legal – other factors must also play an important role. The interviewees offered two alternative explanations, the different common practices and the mind-set of the employees. Indeed, both may lead to signifi-cant impediments to standardisation. We discussed a number of examples (e.g. if it is local custom to recruit via newspaper advertisement, it may make little sense to employ an external agent, even if this is the preferred approach). How-ever, while this is true for a number of areas, there are still a number of policies and practices that could be more standardised. The quantitative analysis also has some interesting implications for national or-ganisations. In those areas where we find headquarters or multinational stan-dardisation, standardisation is possible. While this does not suggest that it is de-sirable, the finding is interesting.

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4.2 Can We Reconcile the Findings? The clear desire to standardise that was expressed in the interviews seems to be in contrast to the factual implementation of standardisation revealed in the Cra-net-E survey. Is this an interesting tension between objectives and reality? In the following we anticipate a number of possible reactions to, or explanations for, the finding of very limited standardisation of multinationals across countries, and offer our comments. • It is best practice not to standardise. We feel that for a large number of poli-

cies and practices, this is the correct interpretation. First, the finding of di-versity for practices rather than strategies and policies, is what is predicted by theory. Indeed, practices should, and to a large extent still must, be dif-ferent, in order to accommodate differences that are due to local differences in the external and internal environment. However, while this explanation is often correct, we have identified policies and practices for which it seems likely that the prevailing diversity misses the opportunity to choose a best practice.

• Standardisation prevails, but is, to a large extent, not measured by the Cra-

net-E survey. As with any empirical method, the survey method also has its limitations. In section 2.6, we provide a detailed discussion of the methodo-logical limitations that go along with a survey in general and with using the Cranet-E survey for the questions addressed here, in particular.

• There are more significant obstacles to standardisation, than conjectured in

the theoretical analysis. While this may well be true, we trust the theoretical analysis and we tend to favour different explanations.

• The desire to standardise as much as possible reflects the wishes of the inter-

viewees but not reality. This would refer to the methodological limitations of the qualitative empirical methods and, again, we address these more fully in the next section.

• The interviewed firms are special. They have been selected on the grounds

of them claiming to have implemented good practices. This is not true for the organisations in the Cranet-E survey. Moreover, all organisations have been quite advanced in the internationalisation process. Again, this is some-thing that need not reflect the average multinational firm in Europe. This point is correct and important. We have chosen the case study organisations to see what those organisations do, which appear to be advanced. Thus, we would expect that their efforts to implement best practices are more ad-vanced. However, we believe that the general desire to standardise is an in-teresting finding from the qualitative analysis that may be of wider relevance to the average multinational, as well. We therefore believe that the tension that stems from the perceived need to standardise and the actual lack of

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standardisation contains a truly interesting question. The results may indeed show that there is room for improvement for a number of multinational or-ganisations and a number of practices and policies.

4.3 Implementation of HR Before we move on to discuss some potential explanations of the lack of stan-dardisation, we will review some of the evidence that is available, regarding the HRM process. First, the quantitative analysis reveals that having a corporate strategy, an HR strategy and HR policies is generally not an issue that depends on local influ-ences (European standardisation). Second, most multinationals have an HR director on board and, more generally, the role of the HR department seemed to carry more weight in the multinational organisations, if compared to the national organisations. These findings of the quantitative analysis are supported by the qualitative analysis. All organisations interviewed had an HR director. Indeed, the interviewees had a very clear idea of the process of HRM. The headquarters would determine the HR strategies for the entire firm (no organisa-tion had a specific “European” approach) and aim at standardising HR policies as much as possible. The practices would then be adapted to local circumstances as much as necessary. The main function of the local HR departments is seen as an administrative one. While the interviewees stressed the importance of communication, the way the HRM process is presented by them may point to one important area of im-provement that is of relevance to the normative analysis that follows in the next chapter. The perception of the process seems to be very much one-way. The headquarters develop strategies and policies and pass them on to all other coun-tries. The local HR departments then need to find practices that somehow fit in. An alternative approach would be to involve the local know-how from the out-set, and develop strategies and policies that take into account local experiences and local restrictions.

4.4 What Drives Standardisation One of the important contributions of the qualitative analysis is to identify a number of key drivers of standardisation. First, and most expected, they stressed the importance of the national legislative environment.

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Second, independent of the practice area we discussed, one argument was made very frequently: the degree of standardisation is higher at senior management level than at management level, which in turn shows a higher degree of stan-dardisation than non-managerial staff. This is in line with theoretical conjectures and a number of good arguments were put forward for this. Third, the interviews also highlighted another important driver of standardisa-tion: the stage of internationalisation. It is noteworthy that most organisations interviewed either changed or are currently changing their HR approach towards a more standardised approach. Moreover, most organisations mentioned that they had started off from an ethnocentric approach towards internationalisation. Finally, the interviewees, pointed to “common national practices” and the “mind-set” of their employees.

4.5 Outlook and Implications for Future Empirical Work The empirical analysis in this study is characterised by a two-pronged approach, which combines the quantitative analysis of the most extensive survey of HRM in Europe with a qualitative analysis that concentrates on the experiences gained by a small sample of multinational organisations. We are convinced that this combined approach overcomes a number of the limitations that we would have faced had we based our research on one method only. This does not imply, either, that we can ignore the limitations of each approach, nor does it suggest that we see no room for improved future research. Quite on the contrary, we feel that our analysis raises a number of interesting issues and has some important implications for future qualitative and quantitative research in the field. The most obvious limitation of our empirical research is the scope. While it is always tempting to do more, we had to focus our analysis in order to keep the analysis tractable. In the quantitative survey this resulted in a selection of four countries. While we carefully selected the four countries to represent as much variety as possible, including more countries would be one obvious way to im-prove future research. The same is true, of course, for the qualitative analysis. We interviewed the HR directors of ten multinational organisations. A number of extensions are possible. First, one could crosscheck results by pursuing inter-views with representatives of subsidiaries. Second, while we have deliberately focused on organisations that considered themselves as being “advanced”, one could extend the sample to provide a more representative picture. While it is necessary to point to these limitations, we feel that our empirical coverage is quite extensive and suffices to provide a solid foundation to the conclusions we draw.

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In the following, we discuss more technical issues for the quantitative and quali-tative analysis separately. Quantitative analysis One of the main obstacles of the quantitative analysis is that the Cranet-E survey was not designed to address the question of standardisation directly. Rather than exploring which policies and practices are standardised within a multinational organisation the questions focus on whether certain policies and practices exist. For our research question this raises a number of important issues: • We have to address the issue of standardisation within organisations indi-

rectly by use of the concepts of the headquarters and multinational stan-dardisation. For 11 out of 98 variables, the evidence suggests that multina-tionals choose a common approach within the organisations (headquarters standardisation) and for six policies and practices, we find that multination-als choose the same approach across the countries we analysed (multina-tional standardisation). These types of standardisation are not normally picked up in cross-country comparisons. The evidence of these “hidden” forms of standardisation suggests that it would be worth, in future empirical research, to address the question of standardisation directly. This would sig-nificantly reduce the complexity of the analysis.

• Moreover, the questionnaire does not always distinguish practices by staff

groups. Thus, existing standardisation for higher-level staff groups may not be picked up if dominated by differing approaches for lower level staff groups.

• Many questions focus on whether a certain policy or practice exists, but not

on the intensity of its use or the content. This somewhat limits the inferences we can draw.

• Like any survey, the Cranet-E survey is incomplete in the sense that it can-

not cover all policies and practices that are relevant. It cannot be denied, however, that it covers a range of important policies and practices.

• Furthermore, there are some methodological limitations that are inherent in

the survey methodology. First, the questionnaire does not ask “why” certain policies and practices have been adopted or not. Such an open-ended ques-tion is difficult to address in a questionnaire framework. Second, it is not al-ways exactly clear, what the respondents had in mind. For example, some respondents may have answered what they feel is correct for the entire or-ganisation, whereas others may have answered what they believed to be cor-rect for the organisational unit they represent (e.g. the subsidiary). If there is

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a systematic bias, in the sense that representatives of headquarters provide the correct answers having the entire organisation in mind, while representa-tives of subsidiaries may answer having only the subsidiary in mind, this may have an impact on results.

Although all limitations mentioned are serious, the Cranet-E survey provides, we believe, a good sample of practices, in particular bearing in mind the large number of firms that participated. However, we hope that some of the points ad-dressed above could lead to improvements in future research. Qualitative analysis The main methodological problem of the interviews is the filtered view that we obtain by asking the HR directors of the chosen multinational organisations: • All interview partners are senior HR staff that predominantly deals with stra-

tegic issues. Thus, they may lack knowledge of the reality with regard to im-plementation of policies and practices.

• The answers may reflect to some extent what is socially required rather than

what is the known reality.

• The interviews were conducted with headquarters only. Future research could focus on subsidiaries and compare the perception of both.

Our comments with regard to the limitation of our empirical approaches could be put into four categories. First, there is always an issue of extending the scope of the work by extending the sample and asking more questions. Second, there is an issue about the precision with which the questions are asked and how clearly they address the relevant research questions. Third, there are inherent methodological issues that cannot really be overcome. Fourth, new research questions develop and put new demands to the questions asked. While the first and third categories are desirable, there is always a limit to what is tractable in a research project. We believe that it is the second and third which may help in improving future research.

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Chapter IV: Implications for the Implementation of HRM in Europe

1 Introduction The harmonisation of the European employment legislation and the trend to-ward integration among the European Member States on the one hand and the variety of different Human Resource Management approaches practised at na-tional level on the other hand have been the starting point of this research inves-tigation. The goal of this research was to investigate how multinational organi-sations operating in Europe react to these external circumstances and what effect they have on their European-wide organisational integration and co-ordination. On the basis of the results generated in the previous chapters, this section sketches a guideline for practitioners. For this purpose the following findings are key in determining our approach: • There is a willingness of HR Directors of multinational organisations to seek

a higher degree of standardisation and an awareness of the benefits that this could bring. This became very clear during the interviews we conducted with ten multinational organisations.

• The choice of policies and practices should be informed by an analysis of the

external and internal environments. These environments are likely to differ by staff level, type of policy and practice, stage of standardisation, level of HR, and organisational characteristics. This implies that standardisation is not appropriate for all HR functions – even if the national legislatives frameworks would allow such an approach. This result is supported both by theory and by our quantitative and qualitative empirical research.

• There are a number of areas where the quantitative analysis revealed that

multinational organisations choose a common approach (multinational stan-dardisation) while nationals are characterised by significant variety. We have emphasised that this finding is not sufficient to deduct the normative conclu-sion that national organisations should follow the multinationals. However, it suggests that nationals should focus on these areas when analysing the po-tential for change and improvement.

• We have, in the quantitative analysis, identified a number of areas where

multinational organisations do not standardise to a significant extent, whereas theoretical arguments suggest that they could. There appears to be unexploited areas for economies of scale and scope.

• The interviews pointed to some interesting possible explanations for this.

While most HR directors named external, legislative factors and national

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common practices as the most important reason for the observed diversity, it has also often been highlighted that the mind-set of the employees may be an important obstacle.

We see a crucial connection between two of these findings that may not have received the attention in the HR literature and practice that it deserves: the path of internationalisation will affect the mind-set of the employees. Indeed, it became quite clear in our interviews that in most HR headquarters there still is a perception of the HR process that is characterised by an active headquarters that determines the strategy, most policies and as many practices as possible. While at first glance this may seem perfectly in line with a method to find the optimal degree of standardisation, very often it is not. In many cases it reflects the national origins of the multinational organisation. It ignores the strategic value that can be contributed by the national HR functions that are downgraded to purely administrative work. Indeed, we feel that a good HR approach needs to be characterised by flexibility and by learning. There is incredible potential in a multinational organisation to identify best practices. This potential is overlooked by an obsession to imple-ment the headquarters’ approach where local diversity is seen as an obstacle and a hindrance, rather than as a pool of inspiration. Thus, we shall not attempt to develop a blue print for HRM in Europe. Rather the guidelines that are developed here, focus on the process of improving HRM in Europe with particular emphasis on issues related to standardisation. Many HR directors observe how their HR policies and practices evolve over time. The stages of internationalisation have an influence on the HR approach taken. Thus, the requirement of flexibility is not an issue that will surprise HR managers – they know that it is key. What is of interest, however, is that the classic evolution of HR within the various stages of internationalisation is likely to be sub-optimal in a large number of cases. The headquarters approach, which is the source of the multinational organisation’s HR, is always the natural his-torical starting point. While this is fine in terms of content, it is not in relation to process. The first thing HR departments of multinational organisations will need to learn in the stages of international infancy is to learn and to listen. This way they can avoid what is the typical path of HR as internationalisation proceeds: the move into an HR mess that is characterised by excessive diversity. Clearly, this is particularly an issue in Europe, where countries are small and differences between nations that are contiguous are potentially great. In the fol-lowing, we propose a management process that attempts to avoid the pitfalls of internationalisation and pays particular attention to the underestimated obstacle to implement best practices – the mind-set of the employees. To have a clearly defined concept we will term our approach “flexible standardisation”. This in-

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tends to signal not only the fact that not all and everything can, or should be, standardised, but also that the process of standardisation needs to be dynamic and responsive to the fact of multinationality. With a growing awareness of the headquarters, there is a chance to move to a truly multinational organisation that is not defined by the headquarters culture but by the organisational culture of the firm. This is, in our view, the key to ac-ceptance by locals and, therefore, the key to tackle the issue of “the mind-set” being perceived as a critical obstacle for the implementation of best practices. In the following, each step within the strategic human resource management process is investigated. On the basis of the theoretical model underlying the em-pirical study the following steps for multinational organisations to take are dis-cussed (see Figure IV.1).

Figure IV.1: Management Process for Implementation Each step is discussed individually, although the steps are clearly inter-related. However, the process is continuously evaluated and, hence, at every stage changes within one part of the strategic management process might result in changes within other parts.

2 Definition of the Change Process

We have emphasised that the key implications from our analysis are not related to content but to the process of HRM. We therefore begin by defining the proc-ess of change. The emphasis on the design of the process follows from our em-pirical findings. If it is not the analytical problem to identify best practices for HR but the resistance to change that hinders the development of HRM in Europe, the definition of the process, as such, should be an important element of HRM in Europe. Clearly, the various strategic options, as illustrated by the contingency theoreti-cal strategic concept in the form of the EPRG model from Perlmutter, imply dif-

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ferent attitudes with regard to the process. The four strategic options: ethnocen-tric, regiocentric, polycentric or geocentric strategies influence whether HR de-cision-making should be centralised or decentralised: • The ethnocentric strategic position implies that HR policies and practices are

developed at the organisational HQ and transferred and implemented at the individual international sites. Thus, the process is centralised. This means that strategy decision and policy making are at the headquarters and the role of the local HR department is to adjust those centrally developed HR polices and practices to the local circumstances. This puts the local HR department into a passive role of implementation only.

• In contrast, the other two strategic positions, polycentric and regiocentric,

imply a decentralised HR system. This means that HR strategies, policies and practices are developed and implemented either within every single country or region, according to the national circumstances. This decentral-ised procedure allows the development of a single independent local HR subdivision and bears the danger of conflicting policies and practices within a multinational organisation and the problem of overall cultural building concepts like shared strategies, policies and practices.

• The geocentric position is different in two ways. First, it requires that HR

strategies be developed jointly by an international HR team. Second, it sug-gests the standardisation of the best practices where possible and diversity where necessary.

Based on our analysis, we suggest adopting a geocentric approach, as defined above. Thus, the key implication regarding the process is that all organisational units should be involved from the outset. Note that within our concept of flexi-ble standardisation we view the geocentric approach as compatible with both a high degree of standardisation (e.g. for high-level management) and a low de-gree of standardisation (e.g. for blue-collar workers). Here are a number of examples of what can be done that characterise our ap-proach of flexible standardisation:223 • Involve the local teams – there are many ways to achieve this, for instance

by: quality circle, joint strategy sessions, having trial periods of new policies and practices that involve feedback rounds with local staff;

• Upgrade the local role - move away from the “we develop, they imple-

ment” mind-set of the typical headquarters’ HR department;

223 Note that the following aspects follow the idea of glocalpreneuring as defined by Hilb (2000). However,

flexible standardisation only covers one aspect out of many covered by glocalpreneuring, which is a much wider and more complex model.

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• Become a learning multinational organisation - emphasise organisational learning not the practice as such, have a new role for the headquarters HR, which is the facilitation of the exchange between local outlets and mutual in-spiration.

Multinational organisations may have suffered from an incorrect perspective. By being obsessed with the admittedly daunting difficulties that arise from adapting to the many national external (and in particular legal) environments, they have failed to see the variety of practices as a source of finding the best. This is the opportunity to seize.

3 Identification of Organisational Goals and Values

Organisational goals and values provide guidance for the areas on which the or-ganisation should concentrate. If organisations do not know where they want to go, what they want to reach and why, the basic requirements for strategic action are missing and hence improvisation and ad hoc management follow.224 There-fore, management should either implicitly (e.g. via an organisation philosophy, vision or mission) or explicitly (e.g. via statues, charter or basic rules) have ideal visions of the company’s current and future behaviour. These organisa-tional goals and values have the function of filtering, evaluating and selecting the external and internal environment of the organisation, or as Bühner put it: “The awareness with respect to opportunities and risks due to the organisational environment as well as the consciousness regarding the organisation’s own strengths and weaknesses are pre-determined by [the organisational goals and values]. Information is being perceived, consolidated and processed according to the interests and values.”225 We found that, to date, almost all organisations have a corporate strategy. Thus, the corporate strategy is a natural starting point for identifying the goals and values, which should also drive HRM in Europe. The HR strategy should be in line with the overall business strategy in order to support the goals and values of the company. Here the economic goals of the organisation (profitability) as well as practicability or ethical justifiability are of importance. Moreover, consis-tency with personnel or technical conditions or legal constraints has to be checked. Clearly, there should be feedback from later stages of the management process. If it turns out that certain goals cannot be achieved in practice, they should receive less emphasis.

224 See Staehle (1991, p. 573). 225 Bühner (1985, p. 92).

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4 Analysis of the Organisational Environment: External and Internal

Contexts In order to be able to analyse the complex and variable organisational environ-ment it is important for multinational organisations to reduce complexity. Ac-cording to the model introduced in the theoretical part of this study, the envi-ronment of the multinational organisation can be divided along the following dimensions (see Chapter II): • The internal vs. the external context, • the environment of the parent organisation on the one hand and the various

environments of the subsidiaries on the other. For the external context, we suggested taking the common approach to pre-structure the environment according to the following categories:226 economic, social, technical and political-legal. For the internal context, the approach is to distinguish organisational structure, strategy, stakeholders, and organisational culture. For the analysis227 of the external and internal environment different sources of information228 can be helpful. Figure IV.2 summarises the proposed structure.

226 See Farmer/Richman (1970). Other authors like Gloede (1991) or Dülfer (1991) also consider, next to the

above four “man-made” environmental factors, the natural environment of the organisation implying the climate, essential resources, pollution etc. In addition, some authors like Dill (1958) or Porter (1983) also consider the wider context of the organisation, the specific tasks environment of the organisation including external interaction partner like customer, supplier or competitor.

227 Hilb (2002) provides detailed information for multinational organisations in order to analyse their exter-nal and internal environments and provides a wide set of techniques multinational organisations might use.

228 See Staehle (1991).

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Figure IV.2: Fields of Investigation and Sources of Strategic Information In the following we discuss the external and the internal environment of the or-ganisation in turn.

4.1 Analysis of the External Environment of Multinational Organisations From a systemtheoretical perspective the understanding of organisations as open social systems and the importance of various exchange processes with organisa-tions’ external environments demonstrate the central role of the analysis of the external environment within the strategic management process. This step pro-vides the information needed in order to formulate a successful internationalisa-tion strategy for the management of human resources. The results from the empirical study underpin the importance of continuously analysing the external context of the organisation:

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• Our results replicate the finding of the “continent of diversity”. Clearly, there is a need to analyse the external context not only of the headquarters but also of each subsidiary.

• We also found that, albeit potentially beneficial, in some areas there is no

standardisation. Thus, a careful analysis of the external environment should help identifying scope for implementing best practices.

• Finally, we argued that some external barriers to standardisation, in particu-

lar economical and political legal factors, are likely to be reduced as Euro-pean integration proceeds.

According to Scherm229, HRM at an international level can only be effective in the long-term if all relevant factors of influence from the organisational envi-ronment are considered. This means in particular that all relevant factors within the various countries impacting e.g. personal management decision or the use of specific personal management instruments within the respective countries. Therefore, the main tasks of the analysis of the organisational environment is to identify the relevant factors of influence and to estimate their impact on the management of human resources and the single HR subfunction like R&S, T&D or C&B. The results of this study give some indication as to which factors should be most prominent in the analysis. • The findings suggest that political, legal and socio-cultural factors are likely

to be the most important obstacles to standardisation. • It is likely, however, that the importance of external socio-cultural factors

are being overemphasised by both practitioners and scientists. Based on our research, we believe that internal socio-cultural factors, “the mind-set”, should be considered more carefully.

In order to systemise, and to illustrate the relationships between, and meanings of, the various external factors, it has been recommended to use a multiple-layer-analysis.230 Hereby, within a specially designed matrix, the inter-relations between the organisational environment and its most relevant inter-relations are combined and hence, can be proved and revised where necessary. In addition, in order to evaluate the factors and to weigh their importance for international HRM the results from the analysis of the external factors can be consolidated into a matrix231, which illustrates the relationship between the single environ-mental factors and the HR-subfunction for each country. The next section looks at the analysis of the internal factors.

229 Scherm (1999, p. 37). 230 See Scherm (1999, p. 51); see also Macharzina (1982) and Steinle (1982). 231 See Scherm (1999, p. 53).

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4.2 Analysis of the Internal Environment of Multinational Organisations From a systemtheoretical perspective, the multinational organisation can be re-garded as a system of various sub-systems, each having its own structure, cul-ture etc. But these sub-systems cannot be regarded as single, independent units but rather as one part of the whole system, which stands in a reciprocal relation-ship with its organisational internal and external environment. Therefore, next to the external factors, the internal factors should get the same attention. Different internal structures, sub-cultures or stakeholder intentions confront the HR de-partment with a large number of aspects and conflicts to consider. The results from the quantitative analysis show that the three different types of organisations, national organisations, multinational organisations with domestic HQ and multinational organisations with HQ abroad, differ in around 50% of all cases in their use of specific HR policies and practices and that company-specific factors like the type of organisation, size or country of origin seem to influence the management of human resources. Therefore, the analysis of the internal environment is of specific importance for the strategic planning of the multinational organisation. Again, it is relevant to filter the most important internal aspects from the factors of influence within the European internal organisational environment. Thus, the main task is to struc-ture the internal environment and to identify the relevant factors being aware of the risk of selection. Hence, like the analysis of the external environment the main tasks of analysis of the organisational internal environment are to identify the relevant factors of influence and to estimate their impact on the management of human resources. We follow the approach in the literature and propose to distinguish the organisa-tional structure, the stakeholders and the organisational culture as well as the strategy. The different structure of subsidiaries, compared to headquarters, is clearly of importance for the issue of standardisation. Smaller subsidiaries have different needs with regard to HR practices than large organisational units. In particular, the interests of the organisation’s various stakeholders232 are im-portant to take into account, e.g. how far they might accept or resist the selected HR strategies. In this context, we mean that the interests of: • The owner of the organisation (profit-related perspective), • the employee (human-oriented perspective),

232 For further information see Hilb (1995).

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• the customer (market-oriented perspective), and • the environment (society-related perspective) should be considered. The interests of the organisation’s important stakeholders are not always in line with each other and hence conflicts of interests and priori-ties for the one perspective at the costs of the other, have to be made. This im-plies that in order to reach a certain goal other goals might be limited or not reached at all. Therefore, certain priorities have to be set and final decisions have to be made, being aware of the goal conflicts. In order to reach a high ac-ceptance among the various stakeholders, the different interests have to be con-sidered and have to be made transparent. Only if the single stakeholder can fol-low the decision-making process, he might be in the position to understand the organisational decision-making procedure. In order to successfully implement HR strategies within the organisation, the acceptance of conflicting interests is important as well as the goal of balancing them out. The demands of the organisation’s several stakeholders must be satis-fied within an acceptable frame, and the strategies should lead to a successful realisation from which important stakeholder can profit and whereby the most competitive advantage can be reached. One important factor that influences the way conflicts of interest are resolved within an organisation is its culture. There is a long debate as to which extent culture can be “managed” or “implemented”. Irrespective of this point of view, there is a consensus that by determining the process of how policies and prac-tices are developed and implemented, the organisational culture is determined. The literature on culture has emphasised the importance of flexible organisa-tions with a culture of learning. We find that our research underpins the need for a flexible organisation that is open to learn from all sub-units. Determining the process of developing and implementing policies and practices is not the only way that HRM influences an organisation’s culture. The actual choice of policies and practices is also of importance. Does HR offer induction courses? Is the system of expatriation used and well prepared? What are the in-centives given by compensation and benefits to enhance mobility? This is but to name a few of the relevant questions that will affect an organisation’s culture. One should always bear in mind that the analysis of both the external and inter-nal environmental factors will never be “value-free” and no “objective” factors will be reached. They are always a result of subjective selection and interpreta-tion due to different perception and evaluation results. This explains why identi-cal changes within the environment are, for one organisation, considered as a change, while another organisation perceives them as a threat. Hence, the mis-

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interpretation of the one organisation might be the competitive advantage of the other.233 The distinction into the above-discussed categories of the external and internal environment is, to a certain extent, artificial. In practice inter-relations exist. Nevertheless, such a distinction is helpful in order to reduce complexity. How-ever, interrelations have to be analysed and their impact on international human resource management has to be identified, as well as their fit.234 In order to do this, a number of instruments are available, e.g. a network diagram.

5 Determination of the Best Practices and the Degree of Standardisa-tion Both the theoretical and the empirical analysis have revealed the necessity of standardisation and diversity. Focusing on one or the other is of no value. This shifts the emphasis to the factors that determine what approach is best. This is an area where we see valuable contributions from both, our theoretical and our empirical analysis. In general, the process of identifying the strategic options and choosing a strat-egy requires the weighing up of all relevant pros and cons under consideration: for this purpose, techniques like scenario techniques can be used. As the results of this study show, the optimal degree of standardisation is likely to depend on • the stage of internationalisation, • the staff groups affected, • the level of HR (strategy, policy, practice), • the subfunctions of HR (R&S, T&D, C&B), and • organisational factors (size, regional coverage). Hence, multinational organisations may not agree on one single HR internation-alisation strategy regarding the degree of standardisation, but rather on a mix-ture of different approaches, reflecting the various situations and the level of concern that the organisation faces. The goal of this selection-process is to maximise the objective function and the organisations potential. Based on our research, we would expect a specific relationship between standardisation and

233 Staehle (1991). 234 For a detailed discussion on the fit vs. misfit between environmental factors, the internal and external

environment, and the management of HRM see Scherm (1999, p. 55).

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the factors listed above (see Figure IV.3): a process we named “flexible stan-dardisation”.

Figure IV.3: Expected Degree of Standardisation In this chapter we focus on the process of implementation rather than the con-tent of the resulting practices. For a more detailed discussion of the reasons for the expected degree of standardisation, we refer to Chapter V.

6 Implementation and Evaluation Procedure After the appropriate policies and practices as well as the degree of standardisa-tion have been determined, the way of implementation and the evaluation pro-cedure need to be determined. In order to develop a strategic programme, the organisation should concentrate on certain parts of action, which are regarded as critical for the successful im-plementation of the selected strategies. The whole implementation process is, therefore, selective and concentrates on filtered parts of action only, whereby the strategic programme provides rather a general framework235, than a compre-hensive plan of action. At the stage of realisation of the strategic programme, the process of global co-ordination becomes important and the efficient realisation of the interaction be-tween the HQ and the various subsidiaries is central for the success of the stra-tegic programme in practice. This implies that the responsibilities of the HQ and

235 The concentration on important parts of action stands in contrast to the idea of trying to transfer the strate-

gies into single action steps, which is not only impossible to do but also highly dysfunctional for the whole process.

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the subsidiaries as well as their interaction, communication and co-operation process are arranged and function efficiently. In our research we found that the responsibility regarding major HR policy deci-sions is in about half of all multinational organisations with the line manage-ment. Thus, a crucial aspect of implementation is to design an appropriate ex-change between line management and the respective HR departments. In our case study interviews we found that communication of the various coun-tries with the central HR team was given high priority by all firms, not only in order to empower people but also to gain their involvement. Due to geographi-cal distances and the number of locations involved, the communication process is not easy to handle. Thus, apart from the preferred face-to-face communica-tion, other techniques have to be used. In practice, meetings with the principle local HR staff are held only about every two to four months in the firms we in-terviewed. In the meantime, techniques like teleconferences, e-mail or Internet are widely used tools to communicate. The HR strategies and the resulting policies and practices determine the HR ac-tivities of the multinational organisations in Europe. With resulting action plans, budgets or manpower planning the mental constructions are put into practice. The role of evaluation within the strategic management process is to continu-ously assess the management process, to analyse the certain steps within the process and to initiate changes where appropriate. This means that due to a per-manent assessment process changes within the external environment of the or-ganisation can be taken into consideration as soon as they occur. Problems within the internal communication or co-ordination process can be solved and might result in changes within HR policies and practices. As we know from research236 the process of information gathering, problem formulation and problem solving is not a linear procedure, but rather a cyclical process. Therefore, the steps within the strategic management process are dis-cussed individually for analytical reasons only.237 In general, the more dynamic and turbulent the organisational environment, the less important becomes the strategic planning process and the more important becomes the strategic control and evaluation process, implying organisational adaptation and learning processes.238 In this context Schreyögg and Stein-mann239 differentiate between the following three types of control: strategic monitoring, implementation control and assumption control, which altogether build the strategic control system.

236 See Mintzberg et al. (1976) and Lyles (1987). 237 See Steinmann/Schreyögg (1997). 238 See Staehle (1991, p. 623). 239 Schreyögg/Steinmann (1985).

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Strategic monitoring involves non-directed analysing and, without any control standards, the possible impact of organisational internal or external factors of in-fluence on the selected strategy. The control of assumptions requires a continuous questioning of the validity of strategic core beliefs. Within the whole planning process the setting of premises is necessary in order to structure the decision-making process. But, as making assumptions involves that other factors are not considered, the goal of the con-trol process is to assess whether the selected assumptions are still valid. Finally, there is the control during the implementation phase. If there are problems or unexpected situations, the control process evaluates whether the strategic course is in danger or not. The whole strategic process is based on complex information and uncertainty. In order to be able to agree on certain HR strategies, policies and practices the amount of information has to be reduced to a manageable extent by certain filter procedures, interpretation raster, setting priorities, and so on. This process is characterised by filtering information and is subjective. The se-lection implies a risk of mis-selection.240 The intention of the evaluation process is to minimise this risk. Hence, the task of the evaluation process can be charac-terised as “... a continuous monitoring of the strategic plans and their implementation re-garding their sustainability in order to signal the threats and point to required changes in the strategic path. The risk of selection that is invariably linked to strategic planning implies that strategic plans have to be understood and treated as being potentially risky.”241 A systematic evaluation is an important step within the strategic management concept. It • builds the main ground in order to reach and guarantee high quality and

permanent improvement of the process, • controls the effectiveness of the used and selected techniques and to control

whether the goals set are reached, • provides information, whether the techniques used are efficient and hence

provide an adequate balance between cost or effort and benefit or return, and

240 Steinmann/Schreyögg (1997). 241 Steinmann/Schreyögg (1997, p. 202); translated by the author.

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• provides information of the success of the strategic HRM process in Europe and encourages the information exchange between the various HR-subsidiaries within the multinational organisation.

Overall, evaluation builds a central part within the strategic HR management process and, hence, is important for the successful development, implementation and management of HR at European level.

7 Summary In this chapter, we proposed a process for implementing HRM in Europe with a particular focus on the issue of standardisation. We termed this approach “flexi-ble standardisation”. Flexible standardisation is characterised by two aspects. First, it reflects the fact that standardisation should not occur across the board. Second, it builds on a process of HR that involves the local functions into the development of HR – right from the outset. This approach avoids, we argue, the pitfalls of the often-observed process of in-ternationalisation, which starts with the headquarters approach, then “falls” into diversity, then, improves with increasing attempts to implement best practices. The approach also takes into account the, by now, established finding that the development of HRM strategies, policies and practices requires a careful analy-sis of both the external and internal contexts of the organisation. We have pro-posed a framework that helps in categorising the areas of investigation. More-over, we have identified the key drivers of standardisation in order to provide guidance as to which factors should receive particular attention in the analysis. However, building on the results of the research presented in the previous chap-ters, the main message we intended to convey was that the process of develop-ing HRM in Europe should receive considerable attention and should be devel-oped with care. Involving local staff is a key requirement when best practices are to be identified and, more important, implemented. The headquarters’ HR department may pursue a perfect analysis of the organisational environment and carefully derive optimal policies and practices. This is of little value if it does not succeed in getting local staff on board.

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Chapter V: Conclusions

1 Introduction In this study we explored the HRM approach of multinational organisations in Europe, with a focus on their efforts to implement best practices across Europe. The results of the quantitative and qualitative empirical research, reported in the previous chapter, provide an overview of the strategies, policies and practices adopted in HRM in Europe. In this section we summarize the main results and draw on both the empirical findings and the theoretical results. This enables us not only to report our findings on existing HRM, but also to have an integrated discussion of the key empirical and theoretical findings. The chapter is structured as follows. In Section V.2 the main results regarding the degree of standardisation are discussed on a more general level. Sections V.3 to V.5 then discuss the findings on HRM in Europe for strategy and policy, as well as each of the three practice areas. We then move on to discuss the im-plications of our study for theory and practice.

2 The Issue of Standardisation One important question emphasised in the study is the actual degree of and the potential scope for standardisation. In fact, we started off with the hypothesis that multinational firms have an incentive to standardise policies and practices across the various countries as much as possible. This desire to standardise was strongly confirmed by the HR-managers interviewed when we conducted the case studies. Based on the theoretical and the empirical analysis, our understanding of what should be the “desire to standardise” evolved. We propose a concept of flexible standardisation that is characterised by three elements: contextual variation, dy-namic variation, and an open HRM process. All elements fit well into an HRM approach that is characterised by a geocentric culture. However, we prefer to re-fer to flexible standardisation because the concept is narrower – it does not cover all fields of HRM but focuses on the issue of standardisation. Moreover, concepts like the geocentric approach have not been defined in the same manner by the many authors that refer to this concept: This is a source of confusion we want to avoid. So what is flexible standardisation? First, it is an approach to standardisation that is flexible because it will seek to implement best practices, depending on the external and internal contexts of the organisational units affected, the policy or practice at issue, and the types of employees involved. In this research project

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we found that the degree of standardisation should, and to a large extent does, depend on • the staff groups affected, • the level of HR (strategy, policy, practice), • the HR-subfunctions (R&S, T&D, C&B), and • organisational factors (size, regional coverage). In what follows we will discuss in more detail how we found these factors to in-fluence HRM of multinational organisations in Europe. Second, we have analysed the dynamic variation of standardisation. Based on extensive and insightful literature on the process of internationalisation of mul-tinational organisations, we have been curious to see how the degree of stan-dardisation evolves as the firm expands in more and more countries. We found that there is a significant degree of flexibility – nevertheless, probably not opti-mal. Multinational organisations typically move from an ethno-, to a poly-, to a geocentric approach to HR. While this sounds like a natural process, we believe that it is not, and can be improved. Flexible standardisation aims at avoiding the lack of flexibility that leads to the excessive move into variety and that, we be-lieve, explains one of the main obstacles to implementing those best practices that should be put into action: the mind-set of the employees. The dynamic aspect of flexible standardisation leads directly to the third defin-ing characteristic, the open HRM process. Indeed, it is natural that the content of HRM is determined initially by the policies and practices of the country of ori-gin of the multinational organisation. However, the process of HR should change immediately. Even though we interviewed HR directors of ten organisa-tions that defined themselve as advanced, we still observed a lot of behaviour that seems to reflect a one-way process of HRM. The headquarters defines the strategy, the policies and, as far as possible, the local practices. Only if there are obstacles can local variation be allowed. However, this is not what we mean by flexible standardisation. The very development of HRM should be informed by the variations that exist within the firm’s many subsidiaries and external envi-ronments. Moreover, this process should be informed by the cultural coordination pro-posed by Hilb, which is to apply in each country a mixture of the best transfer-able strengths of the home country, of third countries and of the country of the respective subsidiary.242

242 Hilb (2000, p. 99).

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Such a process should have a direct and positive feedback to the dynamic path of standardisation. Rather than moving from an ethnocentric to a polycentric or-ganisation, it allows a gradual shift to a transnational (geocentric) organisation. This not only avoids a degree of variation that is overly costly from the point of view of the organisation (of which we found significant evidence in our qualita-tive empirical research), but also avoids the difficulties of changing the mind-set of local teams that have began to ask for local variations because of the ethno-centric inflexibility in the headquarters of the early days of internationalisation. Thus, there is a straightforward normative implication for the HR leadership in the headquarters: the first aspect that needs to change is the headquarters’ mind-set – and with it the process of HRM development. Having focused on the normative implications of our research, we now move on to provide a more detailed summary of our main theoretical and empirical re-sults. We begin by briefly reviewing the main findings regarding the external and in-ternal contexts of an organisation. We then move on to discuss each driver of standardisation in turn.

2.1 External Environment Following the theoretical literature an organisation is mainly affected by four external factors: economical, technological, political-legal and socio-cultural. One of the key arguments against standardisation is that these factors may differ from country to country. In the context of European HRM we developed three conjectures: • First, technological factors have a minor impact on the standardisation deci-

sion. • Second, political-legal, as well as economic factors, are likely to become

more homogeneous across European countries in the future. • Third, socio-cultural factors will remain of significant importance for HRM

in Europe. Our first conjecture was clearly supported by the qualitative research. No inter-viewee mentioned technological factors as a major obstacle to standardisation in Europe. Here, the environment of HRM in Europe clearly differs from the envi-ronment multinationals face in developing countries.

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The second conjecture clearly has a normative implication. The judgement, which was confirmed by most interview partners, suggests that HRM in Europe should continuously look for a potential to implement common best practices as legal barriers diminish. This is particularly true since HR-managers interviewed named political-legal factors as the greatest obstacle to standardisation. The quantitative research, however, tends to qualify this assessment to a certain ex-tent. We found a “continent of diversity” for a number of practices that could, in principle, be easily standardised, since neither political-legal, nor economical or technological factors are of any influence. This points to the importance of socio-cultural factors as a barrier to standardi-sation and emphasises the significance of the third conjecture. In fact, the third conjecture has two elements. First, it claims that the importance of socio-cultural factors is high. This is supported by both quantitative and qualitative empirical findings. Second, it claims that this importance will remain as such. Inspired by the results of the quantitative empirical analysis that there are a number of areas that seem “easy to standardise” but are not, we suggest a more subtle analysis of socio-cultural obstacles to standardisation. In fact, socio-cultural aspects are relevant for both the external and the internal contexts of an organisation. We argue that the latter is a true obstacle to standardisation and should be considered carefully when developing HR policies and practices. It clearly makes no sense to base a recruitment campaign exclusively on recruit-ment agencies, when it is common practice in a country to advertise the position in a particular newspaper – to name but one example.

2.2 Internal Context Socio-cultural factors also influence the internal context of an organisation to the extent that staff is recruited locally and follows existing customs and prac-tices. The quantitative research has highlighted that in the areas of training and development as well as recruitment and selection, there is considerable diver-sity, although there is no need to follow local practices. This result is supported by the qualitative research when HR-managers argue that, beside national legis-lation and different common practices, it is the “mind-set” of employees that is a main obstacle to standardisation. In fact, the results of the quantitative analysis raise the suspicion that the politi-cal-legal factors may play a less important role in preventing the implementation of best practices. It may well be that the difficulty of the headquarters’ HR-department to gain local acceptance for the common practices developed is a greater hurdle than legal restrictions. The latter is just a better excuse. This clearly is an element of organisational culture and the headquarters’ HR-department may suffer from the problems created by simply imposing their

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standard practice and not a best practice that was identified and developed jointly with local staff in the host countries. Some interviewees complained about the difficulty of implementing practices developed elsewhere, which were not suitable for the local conditions. One such experience can prevent the accep-tance with regard to a number of useful suggestions. As the qualitative research has underlined, good communication between the headquarters and the subsidi-aries’ HR-department is of key importance. Overall, these results confirm the theoretical conjecture that a strong corporate culture may ease or hinder European HRM. There is only one exception: if there is a culture of developing policies and practices jointly and of being open to change, this is likely to ease the development of the flexible standardisation ap-proach. Organisational culture is only one out of four internal factors covered in this study. We also considered the organisational structure, the stakeholders and the strategy. Due to the differences in the stakeholders, we conjectured in the theoretical analysis that the incentives in subsidiaries and headquarters differ and that this is likely to cause tension and conflict of interest. This again underlines the im-portance of communication and gives another reason why efforts to implement best practices may fail due to the internal context rather than the external con-text of an organisation. While we have identified the resistance to change due to the differences in mind-sets and due to conflicting interests as areas for HR to work on the differ-ences in the organisational structures may require different HR policies and practices. One important point here is that the subsidiaries are often likely to be smaller organisational units in comparison to the headquarters. Thus, less formal and less structured procedures can be potentially employed here. Differences like these have to, and will be, identified if European HR is developed jointly with the subsidiary. Finally, we looked at the HR-strategy for internationalisation in order to analyse standardisation. The literature on HR-strategies for internationalisation provides a useful tool in order to identify different types of standardisation. If each strat-egy were implemented according to pure theory, an ethnocentric strategy would lead to complete standardisation with the standard being the local standard of the headquarters. A polycentric strategy would lead to no standardisation unless the host country’s practices are identical. A regiocentric strategy would lead to complete standardisation in the respective region, but to different policies and practices relative to other regions. A geocentric strategy would lead to stan-dardisation where possible and differentiation where necessary. The standard

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would be developed jointly with the involvement of representatives from all countries. In the case study interviews we found a significant effort of multinational or-ganisations to move from an ethnocentric to a geocentric strategy. The quantita-tive analysis showed that despite the common existence of strategies and poli-cies, the practices are predominantly polycentric. In order to interpret these results and building on the discussion of the external and internal contexts of a multinational organisation, we now move on to ana-lyse each of the five drivers of standardisation identified.

2.3 Stage of Internationalisation Clearly, the finding that resistance to standardisation may be due to a lack of ac-ceptance and different mind-sets of the local employees, supports the theoretical conjecture that adopting an ethnocentric approach to standardisation (“headquarters standardisation”) is not ideal. Nevertheless, firms often adopt such an approach in early stages of internationalisation. The most obvious reason may be that an expatriate, being familiar with the headquarters’ practices, builds up the foreign location. Indeed, we argued that at the beginning of an internationalisation process the use of expatriates is particularly attractive. Another reason is that the benefit to standardisation increases with the number of subsidiaries in different host countries. Thus, in the early stage, when there are only a few foreign subsidiaries, the need to standardise is less obvious. Finally, host country “start-ups” are likely to be much smaller than the parent organisation, thus requiring a different HR-approach. We believe that these are valid arguments for starting with the headquarters’ practices at the very beginning of internationalisation. Indeed, the problems result when more and more local staff is being recruited and the subsidiary grows into a more independent unit. At this stage the “we have to implement the headquarters’ dictate” problem arises and leads to a resis-tance to standardisation. Thus, the key problem of applying an ethnocentric ap-proach seems to be joint improvement of the common practices. A proper flexi-ble standardisation strategy at the beginning of the internationalisation process would probably also start with fairly standardised practices according to the headquarters’ ideas. However, it would distinguish itself from an ethnocentric approach by being open to local influences from the outset, developing the framework in co-operation with local HR- and line managers. Some managers in headquarters said that it is difficult to unfreeze a local behav-iour when it has been implemented in the early stages of internationalisation. We would argue that it is also a necessity to unfreeze the behaviour of the head-

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quarters’ staff in order to open the organisation for an evolution according to the principles of flexible standardisation. In fact, we believe that during the stages of internationalisation the organisation will undergo change. But this should not lead to a change from an ethnocentric to a polycentric to a geocentric approach. The struggles reported by the HR-managers to change attitudes as well as the quantitative findings of existing di-versity suggest that the cost of pursuing such an internationalisation strategy is great. Rather, we suggest an approach that adopts a flexible standardisation strategy from the outset.

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Figure V.1: Stages of Internationalisation Figure V.1 compares the existing dynamic and our proposal. Avoiding the resis-tance to change would hopefully lead to an avoidance of the polycentric ap-proach predominant in the second phase of expansion. In fact, developing a cul-ture of change right at the beginning of the expansion process will train staff to innovate, to co-operate and, finally, to identify with the resulting policies and practices.

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2.4 Staff Groups Affected Theoretical work suggested that the degree of standardisation should depend on the staff group that is affected by the resulting HR policies and practices. This idea has been strongly supported by the interviewees. Interestingly, the quantita-tive research does not always support the idea. For three practice areas the ques-tion asked distinguished senior, middle and junior management or similar staff groupings. Theory would suggest a higher degree of standardisation the greater the seniority. For the way of pay determination, the use of incentive schemes and the recruitment practices, we do not find strong support for this conjecture. Note, however, that the dataset provides only limited information in order to in-vestigate this question. We maintain that from a normative perspective it is useful to distinguish staff groups. The background and the needs of staff will vary significantly depending on the level of the position. With more senior staff being with a higher probabil-ity mobile, recruited internationally, in continuous co-operation with units in other countries, comparing the attractiveness of practices across countries. All arguments for standardisation are less significant for lower staff levels.

2.5 Level of HR (Strategy, Policy and Practice) Both the quantitative and the qualitative empirical analyses support the theoreti-cal conjecture that strategies should be common for the entire organisation, whereas policies and, in particular, practices should reflect the local needs, im-plying a lower degree of standardisation. However, encouraged by the quantitative results that practices are local even when there is scope for standardisation, there seems to be a danger that the dif-ferences in local practices imply that the common strategies and policies exist on paper, but are not implemented locally. Alternatively, policies and strategies may contain meaningless statements that provide no guidance to best practices. It is well known that policies like “equal opportunities” in R&S or “fair com-pensation” in C&S can be rendered meaningless unless there are specific efforts to implement them and to monitor the results.

2.6 Subfunctions of HR (R&S, T&D and C&B) Another driver of standardisation is the subfunction of HR. Here, both theory and the statements made by the interviewees suggest a clear ranking. The scope for standardisation seems to be highest in the area of training and development followed by recruitment and selection. Due to the importance of different tax regimes and industrial relations environments, it is believed that the scope for

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standardisation is the lowest in the area of compensation and benefits. In the quantitative analysis, however, we find that, while it is common to have a policy for each area, the actual practices differ, even where there are no external factors that would suggest a need to differentiate. Notwithstanding this result, there is also clear evidence that external factors matter more for compensation and benefits than for recruitment and selection, and more for recruitment and selection than for training and development. We maintain the normative conclusion that the importance of the external factors, as well as the variance of these factors, should drive the scope for standardisation. This suggests that, in particular, in the area of training and development there is likely to be room for significant improvements in standardisation, which we found only for the techniques used when training was evaluated.

2.7 Organisational Factors (Size, Regional Coverage). It is obvious that a typical headquarters differs in structure from a typical sub-sidiary. One of the most obvious is that subsidiaries tend to employ a smaller number of people and cover a smaller set of tasks. In fact, size differences be-tween the headquarters and subsidiaries can be seen clearly in the description of the research sample for the quantitative analysis. We have argued that these differences will pose a particular challenge for HR in multinational organisations. It leads to a justified demand for diversity and poses particular problems if employees are transferred across organisational units. However, we have also identified opportunities. (Smaller) subsidiaries of-fer the potential to test the skills of employees and can be used as a pool to re-cruit top management.

3 Strategy To date almost all large firms have a corporate strategy, irrespective of the country of origin or whether they operate in several nations or in one only. Over 80% of all firms in the quantitative research sample also have an HR-strategy and in the case study interviews we were told that those who do not have an in-ternational one yet are currently developing one. Thus, in the near future each large European organisation will have thought about its HR approach. Of course, as long as such a strategy covers very general aspects only, like “work-ing as partners with line management” the impact of these strategies are minor. A similar argument applies for the policies. Again, we found that the existence of HR policies for the three practice areas is common and does neither depend on organisational type nor on the country of origin (with the exception of R&S policies, which are not equally common across nations and organisational types).

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Formulating policies and strategies is an opportunity to develop and communi-cate a common HR-approach that reflects best practices and defines the working relationships among those involved in the development of the practices. How-ever, both a number of comments we received during the interviews as well as the quantitative research suggest that the key difficulty is not formulating, but implementing, best practices across Europe. Here, the quantitative analysis showed that the way HR-policies are imple-mented (e.g., line vs. HR-department, use of external providers) depends on the country of the organisational unit. While this may be reasonable to some extent, e.g. if operations are much smaller in one subsidiary than in another, we believe that this is already an indication that, in practice, the differences are often greater than envisaged in the strategies and policies agreed for the organisation. We find this an interesting result, since multinational organisations tend to em-ploy a wider range of practices than national organisations. Thus, there clearly is no lack of knowledge regarding the practices. Still the use of these practices of-ten depends on the host countries local customs and traditions rather than on the quality of a practice. The case study interviews strongly supported a theoretical conjecture. Given the differences in interests and the different socio-cultural backgrounds of the local employees, successful implementation of common best practices is difficult, but of prime importance. Finding a good way to involve local HR-departments seems to be as crucial as identifying the best practice to be implemented. In fact, this question may be at the heart of developing a successful flexible standardisa-tion strategy. There should be an emphasis on good strategies and policies on process, not only on content.

4 HR Subfunctions

4.1 Recruitment and Selection The analysis in this study covered a wide range of aspects regarding recruitment and selection. We looked at the existence of policies for this area, investigated the pros and cons of using expatriates and recruiting externally. Moreover, in the quantitative research we analysed, which recruitment channels (newspaper advertisements, recruitment consultants etc.) firms use and we looked at the use of seven different development techniques. Overall, the pattern that emerged for recruitment and selection is one of diver-sity. The share of firms having a R&S policy varies across countries for each organisational type and the recruitment and selection techniques also appear to be significantly influenced by local practices. Based on the theoretical work we

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expected this result in particular for recruitment. Indeed, external recruitment manages the boundary of the firm, the link between its external and internal contexts. Thus, firms have to adapt to local practices to some extent in order to gain a good local pool of applicants. On a normative level we also found that the use of expatriates is particularly at-tractive at the early phases of internationalisation. Later, we found that firms should (and indeed do) use a greater variety of sources. Moreover, we found that milk rounds are an attractive tool for graduate recruitment of multinational or-ganisations.

4.2 Training and Development Training and development is an area where, according to our theoretical conjec-tures, standardisation could and should be achieved across countries. Indeed, this idea was confirmed in the case study interviews. In the quantitative analysis we looked at the T&D policies, the evaluation of training needs, as well as the monitoring of the effectiveness of training and the use of development tech-niques. Indeed, the existence of T&D policies is common and does not depend on the organisation’s country of origin. However, contrary to our expectation, we found that whether or not training needs or the success of training is evaluated varies from country to country. Generally, the same is true for development techniques and more pro-active evaluation techniques for identifying training needs. Only the techniques used in order to evaluate the effectiveness of train-ing, show headquarters standardisation. In particular, the finding that the development techniques differ is not in line with the practice of the firms that participated in the case study interviews. There, it was stated that the most standardised training and development policies are • management development programmes, • performance management systems, • career planning and promotion criteria, and • technical skills or product knowledge. Firms also often use induction courses in order to create a company culture or “global mind-set.”

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4.3 Compensation and Benefits

In line with theoretical conjectures, we found that compensation and benefits is an area where standardisation is considered difficult to implement. Nevertheless, there are clear efforts to develop European-wide or global policies, like per-formance-related pay, share options or profit sharing. However, the way these policies are implemented depends on the country. Almost all interviewees re-garded compensation and benefits as the area where standardisation is currently the most difficult. An assessment that is confirmed by actual practice, as shown by the quantitative analysis. Clearly, this is the area where one can expect more scope for standardisation in the future, as European integration proceeds. In par-ticular, efforts to harmonise tax regimes and industrial relations across Europe will have an impact on this field.

5 Implications for Future Research Our study aims at exploring HRM of multinational organisations in Europe. However, we also wanted to learn why multinational organisations do what they do and discover whether there is room for improvement. This led us to pursue a two-pronged empirical approach that consists of a quantitative analysis of the most extensive dataset on European HRM which is currently available and a qualitative analysis that is based on interviews with HR directors in ten multina-tional organisations. While we believe that this approach allowed us to overcome some of the meth-odological limitations of applying one empirical approach in isolation, we iden-tified a number of areas which future research can, and should, improve. First, we find the research question, to focus on the degree of standardisation within multinational organisations, important and exciting. However, in order to pursue the quantitative analysis with a given dataset, we had to burden the reader with a number of quite complex definitions (e.g. the distinction of multi-national, headquarters, and European standardisation) and, not less complex, in-ferences from the data. We would hope that the ongoing interest in HRM in Europe will feed into the development of future questionnaires that may then address the question of standardisation directly. We can envisage two main ways in which this could be achieved. First, there are a number of potential questions that could explore standardisation (e.g. ques-tions like “estimate the share of subsidiaries that also follow this practice”). Second, the questionnaires could be sent to headquarters and subsidiaries, trying to explore the different views within an organisation.

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Indeed, we would see the lack of direct comparison within an organisation as an important limitation of our research approach. While we have used a variety of techniques to interpret the quantitative data, the questionnaire used for the quan-titative analysis did not address the standardisation issue directly and while we asked direct questions regarding standardisation in our interviews, these were limited to the most senior HR function of the organisations analysed. Future research could be improved by “holding the organisation constant” and by illuminating it from as many angles as possible. This was not, and could not have been, the approach here, which was a first, to a large extent exploratory, step into the field. However, encouraged by our finding that for those practices that could, and should, be standardised, it is the mind-set of the people that pre-vent this from happening, we believe that future research could generate valu-able new results if it were to explore the HRM approach of multinational or-ganisations from as many view points within the firm as possible. From a theoretical point of view, we believe that the link between the path of HRM during the phases of internationalisation and the obstacles to standardisa-tion could be explored further. We conjectured here that the latter may be a function of the former. This is a start. We also found elements of proof, particu-larly in the interviews. However, much more could be done to explore this issue in more depth. Several questions seem especially interesting. Is it really the eth-nocentric, inflexible attitude of the first phase that leads to excessive variation of a polycentric approach in the second? Is the damage caused, the “organisational trauma” in the subsidiaries, significant enough to create the “mind-set” problem that was reported in the interviews? Moreover, our normative analysis was “high level” and, therefore, represents a first step towards the implementation of “flexible standardisation”. We see, as a future task, exploring in more detail the techniques that can be employed to avoid the pitfalls of HR, which we identified. The investigation focused on three selected subfunctions of HRM: recruitment and selection, training and development, as well as compensation and benefits. Clearly, human resource management needs to address more issues than these, like industrial relations, health, and safety. While many of our findings are likely to be transferable to these fields of HRM, this remains a conjecture until further research covers these other fields as well. Finally, while our research was informed by the ongoing research into European HRM and while we pointed out that some of our normative conclusions are closely related to existing proposals to improve HRM, more can be done to clar-ify the implications of the findings generated in the set-up of our “standardisa-tion” focus to the broader theories of European HRM developed in the literature. While we have tried to raise a number of obvious implications here, we believe

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that future research into “standardisation” will bring up more and fruitful in-sights for European HRM in general.

6 Outlook There are a number of good arguments for standardisation. In the case study in-terviews four main reasons for a high degree of standardisation were put for-ward. Standardisation • eases administration and management, • reduces costs, • increases mobility of employees, and • leads to more transparency. Given the good arguments for standardisation one would expect a high level of standardisation within an organisation, across all countries of operation. Only where national legislation or common practices of the host countries make stan-dardisation costly or infeasible, we would expect differing practices across sub-sidiaries of multinationals. However, the empirical analysis revealed that there are major obstacles to standardisation beyond the external requirements and ne-cessities that force firms to adapt to local circumstances. These obstacles appear to be due to two related factors. First, local staff may simply follow policies and practices that they are used to, unless there is a par-ticular incentive to change them. Second, local staff may resist changes. Resis-tance to change is a common phenomenon, not exclusive to changes of HR poli-cies and practices. However, in the interviews it has been made very clear that bad experiences with an ethnocentric approach of the headquarters, the lack of proper communication across the organisational units, and the lack of identifica-tion with the common purpose increase the impediments to standardisation. We therefore propose a concept of flexible standardisation that is characterised by three elements: • a process of HRM that involves the local HR functions at the start of interna-

tionalisation; • a dynamic path of HRM that avoids the polycentric approach, which many

multinational organisations adopt and which is difficult to change;

• an approach to standardisation that is aware that standardisation needs vary, depending on the context.

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This approach does not imply that multinational firms should not start off with what they have, the policies and practices of the headquarters. It does imply, however, that the headquarters should be prepared to adapt and develop the practices – from the very beginning – jointly, with local staff.

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Appendices Appendix I: Questionnaire HOW TO COMLETE THIS QUESTIONNAIRE This questionnaire is designed to make completion as easy as possible and fast as possible. Most questions can be answered by simply ticking boxes. Very little information will need to be looked up. Wherever it says “you” in the questionnaire please answer from the point of view of your organisation. “Organisation” means your firm, subsidiary or, if you are in a head office, the group in which you work. For the public sector it refers to the specific local or health authority, government, department, etc. “Part of a larger group” refers to subsidiaries or the parent company of a group. For central government departments the “larger group” is the civil service as a whole. The questionnaire has been adapted for simultaneous use by private and public sector employers in 22 countries; some questions may therefore be phrased in a slightly unfamiliar way.

THANK YOU FOR YOUR HELP

SECTION I: PERSONNEL/HUMAN RESOURCES FUNCTION 1. Does your organisation have a personnel or human resource department/manager?

1__ Yes 2__ No 2. Approximately how many people are employed by your organisation in the

personnel/human resources function (including wage administration and training)? a) in total:____ Male_____ Female_____ 1 __ Don’t know

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b) Do you use external providers in any of the following areas?

A. Pay and benefits 1__ B. Recruitment and selection 1__ C. Training and development 1__ D. Workforce outplacement/reduction 1__ E. No external providers used in personnel function 1__

c) How has the use external providers changed during the last three years?

1__ Increased 2__ Same 3__ Decreased 3. Does the head of the personnel/human resources function have a place on the main

Board of Directors or the equivalent?

1__ Yes (If Yes, go to question 5) 2__ No 4. If No, who on the main Board of Directors has responsibility for personnel issues?

A. Chief executive/Managing director 1__ B. Administrative director 2__ C. Finance director 3__ D. Company secretary 4__ E. Production director 5__ F. Other, please specify

5. From where was the most senior personnel of human resources manager recruited?

A. From within the personnel department 1__ B. From non-personnel specialists in your organisation 2__ C. From personnel specialists outside of the organisation 3__ D. From non-personnel specialists outside of the organisation 4__ E. Others, please specify

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Strategy and Corporate Policies 6. Does your organisation have a policy for the following personnel/human resource

management areas: Yes,

written Yes, unwritten

No Don’t know

A Pay and benefits

__1

__2

__3

__4

B Recruitment and selection

__1

__2

__3

__4

C Training and development

__1

__2

__3

__4

D Employee communication

__1

__2

__3

__4

E Equal opportunity / diversity

__1

__2

__3

__4

F Flexible working practices

__1

__2

__3

__4

G Management development

__1

__2

__3

__4

7. Does your organisation have a: Yes,

written Yes, unwritten

No Don’t know

A Mission statement __1

__2

__3

__4

B Corporate strategy __1

__2

__3

__4

C Personnel/HR management strategy

__1

__2

__3

__4

8. If you have a corporate strategy, at what stage is the person responsible for

personnel/human resources involved in its development?

A. From the outset 1__ B. Through consultation 2__ C. On implementation 3__ D. Not consulted 4__

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9. Is the performance of the personnel/human resources function/department

systematically evaluated?

1__ Yes 2__ No 3__ Don’t know (If Yes, go to next question, otherwise go to question 12)

10. Whose views are considered in evaluating the performance?

A. Top management 1__ B. Line management 2__ C. Employees 3__ D. Personnel/HR function/department itself 4__ E. Other, please specify

11. What criteria are used for evaluation?

A. Internal measures of cost effectiveness 1__ B. External benchmarking of cost 1__ C. Performance against objectives 1_ D. Others, please specify

12. If your organisation is part of a larger group of companies/divisions, etc., please

indicate where policies on the following issues are mainly determined. Private sector:

Public sector: International HQ

National HQ Subsidiary Service dept / division

Site / establishment Local offices

A Pay and benefits __1

__2

__3

__4


__1

__2

__3

__4


__1

__2

__3

__4

D Industrial relations __1

__2

__3

__4

E Workforce expansion / reduction

__1

__2

__3

__4

F Management development

__1

__2

__3

__4

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13. With whom does the primary responsibility lie for major policy decisions on the

following issues? Line

management Line mgt in consultation with HR dept

HR dept in consultation with line mgt

HR dept

A Pay and benefits __1

__2

__3

__4


__1

__2

__3

__4


__1

__2

__3

__4

D Industrial relations __1

__2

__3

__4

E Workforce expansion / reduction

__1

__2

__3

__4

14. Has the responsibility of line management changed over the last 3 years for any of

the following issues? Increased Same Decreased

A Pay and benefits

__1

__2

__3 B Recruitment and

selection

__1

__2

__3 C Training and

development

__1

__2

__3 D Industrial relations

__1

__2

__3 E Workforce expansion /

reduction

__1

__2

__3 15. What do you consider to be the major challenge for personnel/human resource

management in your organisation over the next 3 years?

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SECTION II: STAFFING PRACTICES 1a. Has the total number of your employees increased or decreased in excess of 5% in the last three years?

1__ Increased 2__ Same 3__ Decreased 4__ Don’t know 1b. Please provide approximate percentage of change: ________% 2. Is it difficult to recruit/retain employees in the following categories?

A. Management 1__ B1. Professional/technical: Information Technology 1__ B2. Professional/technical: Other 1__ C. Clerical 1__ D. Manual

3. Have you introduced any of the following in relation to recruitment or retention?

A. Recruiting abroad 1__ B Retraining existing employees 1__ C. Increased pay/benefits 1__ D. Relocation of the company 1__ E. Marketing the organisation’s image 1__ F. Other, please specify

4. Have any of the following methods been used to reduce the number of employees?

A. Recruitment freeze 1__ B Early retirement 1__ C. Voluntary redundancies 1__ D. Compulsory redundancies 1__ E. Redeployment 1__ F Outplacement 1__ G. No renewal of fixed term / temporary contracts 1__ H. Outsourcing 1__ I. Others, please specify

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5. How are managerial vacancies generally filled? (Please tick as many as applicable for each management level).

Senior

Management Middle Management

Junior Management

A Internally __1

__1

__1

B Recruitment/head hunters/ consultancies

__1

__1

__1

C Advertise in newspapers __1

__1

__1

D Word of mouth __1

__1

__1

E Others, please specify __1

__1

__1

6. Please indicate how regularly any of the following selection methods are used. For every

appoint-ment

For most appointments

For some appoint-ments

For few appointments

Not used

A Interview panel __1

__2

__3

__4

__5

B One-to-one interviews

__1

__2

__3

__4

__5

C Application forms __1

__2

__3

__4

__5

D Psychometric test __1

__2

__3

__4

__5

E

Assessment centre __1

__2

__3

__4

__5

F

Graphology __1

__2

__3

__4

__5

G

References __1

__2

__3

__4

__5

H Others, please specify

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7. Do you monitor the proportion of the following in your workforce with regard to

recruitment, training and/or promotion? Recruitment Training Promotion Don’t know A People with disabilities

__1

__1

__1

__1 B Women

__1

__1

__1

__1 C People from ethnic

minorities

__1

__1

__1

__1 8. Have you specially targeted any of the following in your recruitment process?

A. Long-term unemployed 1__ B Older people (over 50 years of age) 1__ C. People with disabilities 1__ D. People from ethnic minorities 1__ E. Women 1__ F School leavers 1__ G. University graduates 1__ H. Women returnes 1__

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Flexible Working Practices 9. Has there been a change in the use of the following working arrangements over the

last three years? Increased

Same Decreased Not used

A Weekend work __1

__2

__3

__4

B Shift work __1

__2

__3

__4

C Overtime __1

__2

__3

__4

D Annual hours contract __1

__2

__3

__4

E Part-time work __1

__2

__3

__4

F Job sharing __1

__2

__3

__4

G Flexi-time __1

__2

__3

__4

H Temporary / casual __1

__2

__3

__4

I Fixed-term contracts __1

__2

__3

__4

J Homebased work __1

__2

__3

__4

K Tele-working __1

__2

__3

__4

L Subcontracting / oursourcing

__1

__2

__3

__4

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10. Please indicate the approximate proportion of your workforce who are on the

following working arrangements: Not

used Less than 1%

1 – 5% 6 – 10% 11 – 20%

More than 20%

A. Part-time __1

__2

__3

__4

__5

__6

B. Temporary/casual __1

__2

__3

__4

__5

__6

C. Fixed-term __1

__2

__3

__4

__5

__6

D. Homebased work __1

__2

__3

__4

__5

__6

E. Tele-working

__1

__2

__3

__4

__5

__6

F. Shift working

__1

__2

__3

__4

__5

__6

G. Annual hours contract

__1

__2

__3

__4

__5

__6

11. Has there been a major change in the specification of jobs over the last 3 years?

(Please tick as many as are applicable for each job category). Management

Professional / Technical

Clerical Manual

A Jobs made more specific __1

__1

__1

__1

B No major change __1

__1

__1

__1

C

Jobs made wider / more flexible

__1

__1

__1

__1

D Don’t know __1

__1

__1

__1

192

SECTION III: EMPLOYEE DEVELOPMENT 1a) Approximately what proportion of the annual salaries and wages bill is currently spent on training? % 1__ don’t know 1b) Approximately what proportion of employees have been on internal or external training activities within the last year? % 1__ don’t know 2. How many day’s training per year does each employee in each staff category below

receive on average?

Don’t know

A. Management days per year per employee 1__ B. Professional / technical days per year per employee 1__ C. Clerical days per year per employee 1__ D. Manual days per year per employee 1__

3. Do you systematically analyse employee training needs, how often are the

following methods used? Always Often Sometimes Never A Analysis of projected

business/service plans

__1

__2

__3

__4 B Training audits

__1

__2

__3

__4 C Line management

requests

__1

__2

__3

__4 D Performance appraisel

__1

__2

__3

__4 E Employee requests

__1

__2

__3

__4 F Others, please specify

__1

__2

__3

__4

193

4. Do you monitor the effectiveness of your training?

1__ Yes 2__ No 3__ Don’t know 5. If Yes, how often is formal evaluation used? Always Often Sometimes Never A Immediately after

training

__1

__2

__3

__4 B Some month after

training

__1

__2

__3

__4 6. Do you systematically evaluate training on the basis of: Yes No Don’t know A Learning (usually

assessed by a test)

__1

__2

__3 B Behaviour (changes in

job performance)

__1

__2

__3 C Results (changes in

organisational performance)

__1

__2

__3

D Reaction/evaluation (e.g. satisfaction expressed by employees)

__1

__2

__3

7. Do you regularly use any of the following? Yes No A Formal careers plans

__1

__2 B Assessment centres

__1

__2 C Succession plans

__1

__2 D

Planned job rotation __1

__2

E

“High flyer” schemes for managers

__1

__2

F International experience schemes for managers

__1

__2

194

8. Has there be a change in the use of any of the following to deliver training over the last

three years? Increased Same Decreased Not used

A Internal training staff

__1

__2

__3

__4 B Line managers

__1

__2

__3

__4 C External training

providers

__1

__2

__3

__4 D On-the-job training

__1

__2

__3

__4 E Coaching / mentoring

__1

__2

__3

__4 F Computer based

packages

__1

__2

__3

__4 9. How important do you think the following training areas will be to your organisation

over the next three years? Very Quite Average Not very

Not used

A People management & supervision

__1

__2

__3

__4

__5

B Computers and new technology

__1

__2

__3

__4

__5

C Business administration __1

__2

__3

__4

__5

D Strategy formulation __1

__2

__3

__4

__5

E

Marketing and sales __1

__2

__3

__4

__5

F

Health, safety and work environment

__1

__2

__3

__4

__5

G

Customer service skills __1

__2

__3

__4

__5

H Management of change

__1

__2

__3

__4

__5

I Quality management __1

__2

__3

__4

__5

195

Appraisal 10. Do you have an appraisal system in operation for any of the following staff categories? Yes No A Management

__1

__2 B Professional / Technical

__1

__2 C Clerical

__1

__2 D

Manual __1

__2

11. If you have an appraisal system, do any of the following formally contribute to the

appraisal process?

A. Immediate superior 1__ B Next level superior 1__ C. The employee 1__ D. Subordinates 1__ E. Peers 1__ F Customers 1__ G. Others, please specify 1__

12. Is the appraisal system used to determine any of the following? (Please tick as many as

applicable).

A. Individual training needs 1__ B Organisational training needs 1__ C. Promotion potential 1__ D. Career development 1__ E. Individual performance related pay 1__ F Organisation of work 1__

196

SECTION IV: COMPENSATION AND BENEFITS

1. At what level(s) is basic pay determined? (Please tick as many as applicable for each category of staff).

Management

Professional / Clerical

Clerical / Administrative

Manual

A National / Industry-wide collective bargaining

__1

__1

__1

__1

B Regional collective bargaining

__1

__1

__1

__1

C Company / division, etc. __1

__1

__1

__1

D Establishment / site __1

__1

__1

__1

E Individual __1

__1

__1

__1

F Others, please specify 2. Has there been a change in the share of the following in the total reward package in the

last three years? Management



Manual

A Variable pay __1

__2

__3

__4

B Non-money beneftis __1

__2

__3

__4

197

3. Do you offer any of the following incentive schemes? (Please tick as many as are

applicable for each category of staff). Management



Manual

A Employee share options __1

__1

__1

__1

B Profit sharing __1

__1

__1

__1

C Group bonus __1

__1

__1

__1

D Merit / Performance related pay

__1

__1

__1

__1

4. Do you offer any of the following schemes?

A. Workplace childcare 1__ B Childcare allowance 1__ C. Career break scheme 1__ D. Maternity leave (in excess of statutory requirements) 1__ E. Paternity leave (in excess of statutory requirements) 1__ F Pension scheme 1__ G. Education / training break 1__

198

SECTION V: EMPLOYEE RELATION AND COMMUNICATION 1. What proportion of the total number of employees in your organisation are

members of a trade union?

1__ 0% 2__ 1-10% 3__ 11-25% 4__ 26-50% 5_ 51-75% 6__ 76-100% 7__ Don’t know

2. Has the influence of trade unions on your organisation changed during the last three

years?

1__ Increased 2__ Same 3__ Decreased 4__ No influence 3. Do you have a joint consultative committee or works council?

1__ Yes 2__ No 4. Has there been a change in how you communicate major issues to your employees

during the last 3 years? Increased Same Decreased Not used

A Through representative

staff bodies (eg. Trade unions)

__1

__2

__3

__4

B Verbally, direct to employees

__1

__2

__3

__4

C Written, direct to employees

__1

__2

__3

__4

D Computer / electronic mail systems

__1

__2

__3

__4

E Team briefings __1

__2

__3

__4

F Others, please specify

199

5. Which employee categories are formally briefed about the following issues?

(Please tick as many as applicable), Strategy Financial

Performance Organisation of work

A Management __1

__1

__1

B Professional / technical __1

__1

__1

C Clerical __1

__1

__1

D Manual __1

__1

__1

6. Has there been a change in the way employees communicate their views to

management in the past three years? Increased Same Decreased Not used

A Direct to senior

managers

__1

__2

__3

__4 B Through immediate

superior

__1

__2

__3

__4 C Through trade unions /

works council

__1

__2

__3

__4 D Through regular

workforce meetings

__1

__2

__3

__4 E Team briefings

__1

__2

__3

__4 F

Suggestion schemes __1

__2

__3

__4

G Attitude survey __1

__2

__3

__4

200

SECTION VI: ORGANISATIONAL DETAILS 1. Please indicate the main sector of industry or services in which you operate?

A. Agriculture, hunting, forestry, fishing 1__ B Energy and water 2__ C. Chemical products; extraction and processing of

non-energy minerals 3__ D. Metal manufacturing; mechanical, electrical and instrument

Engineering; office and data processing machinery 4__ E. Other manufacturing, (eg food, drink and tobacco; textiles;

Clothing; paper, printing & publishing etc. 5__ F Building and civil engineering 6__ G. Retail and distribution; hotels; catering; repairs 7__ Transport & communication (eg rail, postal services,

telecoms etc) 8__ I Banking; finance; insurance; business services (eg consultancies,

PR and advertising; law firms etc) 9__ J. Personal, domestic, recreational services 10__ K. Health services 11__ L. Other services (eg television and radio, R&D, charities, etc.) 12__ M Education (including universities and further education) 13__ N. Local government 14__ O. Central government 15__ P. Other, please specify

2. Approximately how many people are employed by your organisation?

A. In total_____ Male___ Female___ B. Part-time _____ Male___ Female___

3. Please provide the following information about your workforce:

A. Annual staff turnover __%turnover per year 1__don’t know B. Age structure __%of employees > 25 years 1__don’t know C. Absenteeism __%average days per year 1__don’t know D. Education structure __%of graduates 1__don’t know __%of post graduates

201

4. Please provide the following information:

A. Manual employees __%workforce 1__don’t know B. Clerical employees __%workforce 1__don’t know C. Professional/technical __%workforce 1__don’t know D.. Managers __%workforce 1__don’t know

5. If your organisation is part of a larger group of companies/divisions, etc,

approximately how many people are employed by the whole group?

A. In the UK 1__don’t know B. World-wide, including UK 1__don’t know

6. What percentage of the operating costs was accounted for by labour costs? __% of operating costs 1__don’t know 7. If you are a private organisation, would you say the gross revenue over the past 3

years has been:

A. Well in excess of costs 1__ B Sufficient to make a small profit 2__ C. Enough to break even 3__ D. Insufficient to cover costs 4__ E. So low as to produce large losses 5__

8. Thinking of competitive success, how important are the following features of the

main products and/or services or your organisation? Very

important Somewhat important

Not important Not applicable

A Price __1

__2

__3

__4

B Quality __1

__2

__3

__4

C Variety (customising products services)

__1

__2

__3

__4

D Service (availability, speed of delivery)

__1

__2

__3

__4

E Innovation __1

__2

__3

__4

202

9. Compared to other organisations in your sector, where would you rate the

performance of your organisation in relation to the following? Top 10% Upper half Lower half Not

applicable

A Service quality __1

__2

__3

__4

B Level of productivity __1

__2

__3

__4

C Profitability __1

__2

__3

__4

D Product to market time __1

__2

__3

__4

E

Rate of innovation __1

__2

__3

__4

F Stock market performance

__1

__2

__3

__4

10. How would you describe the market(s) for your organisation’s products or

services?

A. Local 1__ B Regional 2__ C. National 3__ D. European 4__ E. World-wide 5__

11. Is your organisation a member of an employers association?

1__ Yes 2__ No 12. Is the market you sell into:

1__ Growing 2__ Same 3__ Declining

203

13. Has your organisation been involved in any of the following changes in the last 3

years?

A. Acquisition of another organisation 1__ B Takeover by another organisation 1__ C. Merger 1__ D. Relocation 1__

14. Is your organisation:

1__ Private 2__ State owned 3__ Part-state owned 4__ Other, please specify

15. Where are the corporate headquarters of your organisation based. (Please refer to

ultimate parent company if your organisation is part of larger group).

Denmark __1 Norway __11 Poland __21 France __2 Sweden __12 Other Europe __22 Germany __3 Finland __13 New Zealand __23 Italy __4 Czech Rep. __14 Australia __24 The Netherlands __5 Switzerland __15 Japan __25 Portugal __6 Belgium __16 Other Asia __26 Austria __7 Greece __17 USA __27 Republic of Ireland __8 Turkey __18 Canada __28 Spain __9 Bulgaria __19 Cyprus __29 UK __10 Hungary __20 Tunisia __30 Other, please specify

16. Is your organisation:

A. Corporate headquarters of an International group 1__ B Corporate headquarters of a National group 2__ C. Subsidiary/division of an International group 3__ D. Subsidiary/division of a National group 4__ E. Independent company with more than one site 5__ F. Independent single site organisation 6__ F. Other, please specify

204

17. If you are based in the UK, pleases tick your region:

London __1 Rest of South East __2 East Anglia __3 South West __4 West Midlands __5 East Midlands __6 Yorkshire __7 North West __8 NE & Humberside __9 Scotland _10 Wales _11 Northern Ireland _12

18. If you are based in the Republic of Ireland please tick: __1 19. What year was your organisation established?_____ 1__ don’t know

205

PERSONAL DETAILS 20a) Are you the most senior personnel or human resources manager? 1__ Yes 2__ No b) If No, please give your title:

1__ Personnel/HR Manager/Director 2__ Specialist (training, pay etc.) 3__ Chief executive, company secretary, senior manager 4__ Other, please specify

21. Are you:

1__ Male 2__ Female 22. How long have you been working for the organisation?

___years 1__ not applicable 23. If you are a personnel/human resource management specialist, how long have you

been working in a specialist personnel/human resources or training job?

___years 1__ not applicable 24. Do you have a university degree?

1__ Yes 2__ No If Yes, in what academic field did you study? (tick main one only). A. Business studies 1__ B Economics 2__ C. Social or behavioural sciences 3__ D. Humanities/Art/Languages 4__ E. Law 5__ F. Engineering 6__ G. Natural sciences 7__ H. Other, please specfiy

206

INTERNATIONAL TRAVEL QUESTIONS This year we would like you to answer two additional questions on issues which have not previously been dealt with in the questionnaire. If they are relevant to your organisation we would appreciate your response. 1a. Approximately how many people in your organisation travel to other countries

frequently (more than once per month on average)? ____people 1__None 1b. What are the major HRM problems you face with this group? 2. How many people in your organisation are expatriates (based outside their home

country for more than twelve months)?

___people 1__None To ensure you receive your copy of the Executive Report please complete the details below. Name and Title Job Title Organisation Address Postcode Thank you for taking the time to complete this questionnaire

207

Appendix II: Division of Sample into National and Multinational Organi-sations

In order to divide the dataset into national and multinational organisation the following procedures were undertaken. Companies answering question 16 of part VI of the ques-tionnaire with either: • 1 (corporate headquarters of an International group) or • 3 (subsidiary/division of an International group) were selected for the „multinational group“, while companies answering this question with either • 2 (corporate headquarters of a National group), • 4 (subsidiary/division of a National group) or • 6 (independent single site organisation)243 were put into the „national group“. Companies, answering with • 5 (independent company with more than one site or „other“), were looked at in more detail, as the answer does not imply whether they are a national or a multinational company. Therefore, a table was conducted containing information about the size of these organisations (question s6v2a&b), the number of people em-ployed in the country where the questionnaire was filled out (question s6v5a) and the number of employees worldwide (question s6v5b). On the basis of this table, the plau-sibility of the answers was controlled and hence, further companies were added to the „Multinational group“244. In addition, the following criteria were used to further select this group of respondents: All companies: • answering question 5b with 1 (Don’t know how many people are employed world-

wide); or • not providing information about their number of employees (questions s6v2a&b

and s6v5a&b); or

243 Two cases were deleted, as they mentioned their companies´ headquarters as being outside the country

where the questionnaire was filled out. This answer is not plausible. 244 The selection was is favour of the multinational group only, as the reverse answer to this question does not

imply that the organisation is operating multinational.

208

• with less than 150 employees overall and/or world-wide; or • with wrong or misleading answers like answering question 5 b (How many people

are employed in the UK) with the same amount of employees as question 5 b (How many people are employed world-wide, including the UK); or

• where the difference between the number of national and multinational employees

is marginal like 323 employees in the UK and 335 employees world-wide, includ-ing the UK; or

• where the answers to the above asked questions do not make any sense (e.g. re-

sponr. 101 or 102) were deleted from the dataset, due to mistakes or possible misunderstandings, it was impossible to clearly identify them as either national or multinational organisation. In a next step the group of multinational organisation was further divided into those having their headquarters in the country where the questionnaire was filled out and those having their headquarters outside the country. This division was made on the ba-sis of the country variable and question s6v15, asking for the location of the compa-nies’ headquarters. The idea of this further division was to see, whether multinationals differ depending on the location of their headquarters and hence, due to the impact of the country of origin and the country of operation. In the following, the first group of multinational organisations, those with their HQ in the country where the questionnaire was filled out, are titled as MHQ sample and the second group as MSUB sample. Due to this selection, the following three sub-samples according to the type of organisation and their HQ were finally categorised: • Multinational organisation with their HQ outside the country where the question-

naire was filled out (MSUB), • Multinational organisation with their HQ within the country where the question-

naire was filled out (MHQ) • National sample (NAT). After the database was divided into two main groups of national and multinational or-ganisations plausibility tests were taken. For example, organisations being identified as national organisations but mentioning their companies´ HQ as being outside their coun-try (question s6v15) were also deleted from the data file. Furthermore, companies with e.g. no HR department (question s1v1) or with only one employee being employed by the HR department were as well not considered at all. Additionally, only private owned companies were taken into consideration, in order to minimise the amount of influence on the research results.

209

Appendix III: List of Variables List of variables selected from the Cranet-E questionnaire for secondary analysis (Chi-Square tests). Further variables like country, size of the organisation were also used, e.g. in order to select or describe the research sample underlying this study, but should not be listed here. Variable No. Content of Variable Categorisation of Variable S1v2b1 Use of External Provider for C&B S1v2b2 Use of External Provider for R&S S1v2b3 Use of External Provider for T&D S1v3 HR director S1v5 Background of Senior HR Manager A or C = Personnel specialist

B or D = Non-personnel specialist

S1v6a HR policy for C&B 1 or 2 = yes 3 = no

S1v6b HR policy for R&S 1 or 2 = yes 3 = no

S1v6c HR policy for T&D 1 or 2 = yes 3 = no

S1v7b Corporate Strategy 1 or 2 = yes 3 = no

S1v7c HR Strategy 1 or 2 = yes 3 = no

S1v8 Involvement of HR department in Corporate Strategy

S1v12a Policy determination for C&B 1 or 2 = central (HQ) 3 or 4 = decentral

S1v12b Policy determination for R&S 1 or 2 = central (HQ) 3 or 4 = decentral

S1v12c Policy determination for T&D 1 or 2 = central (HQ) 3 or 4 = decentral

S1v13a Responsibility for C&B policies 1 or 2 = Line management 3 or 4 = HR department

S1v13b Responsibility for R&S policies 1 or 2 = Line management 3 or 4 = HR department

S1v13c Responsibility for T&D policies 1 or 2 = Line management 3 or 4 = HR department

S2v2a Difficulty to recruit management staff S2v2b1 Difficulty to recruit IT staff S2v2b2 Difficulty to recruit professional staff S2v2c Difficulty to recruit clerical staff

210

S2v2d Difficulty to recruit manual staff S2v5a1 Vacancies are filled for senior man-

agement staff: internally

S2v5a2 Vacancies are filled for middle man-agement staff: internally

S2v5a3 Vacancies are filled for junior man-agement staff: internally

S2v5b1 Vacancies are filled for senior man-agement staff: consultancy

S2v5b2 Vacancies are filled for middle man-agement staff: consultancy

S2v5b3 Vacancies are filled for junior man-agement staff: consultancy

S2v5c1 Vacancies are filled for senior man-agement staff: newspaper advert

S2v5c2 Vacancies are filled for middle man-agement staff: newspaper advert

S2v5c3 Vacancies are filled for junior man-agement staff: newspaper advert

S2v5d1 Vacancies are filled for senior man-agement staff: word of mouth

S2v5d2 Vacancies are filled for middle man-agement staff: word of mouth

S2v5d3 Vacancies are filled for junior man-agement staff: word of mouth

S2v6a Use of Interview panel 1 or 2 or 3 or 4 = yes 5 = no

S2v6b Use of One-to-one interview 1 or 2 or 3 or 4 = yes 5 = no

S2v6c Use of Application form 1 or 2 or 3 or 4 = yes 5 = no

S2v6d Use of Psychometric tests 1 or 2 or 3 or 4 = yes 5 = no

S2v6e Use of Assessment Centre 1 or 2 or 3 or 4 = yes 5 = no

S2v6f Use of Graphology 1 or 2 or 3 or 4 = yes 5 = no

S2v6g Use of References 1 or 2 or 3 or 4 = yes 5 = no

S3v3 Analysis of training needs S3v4a Training need analysis: Business plan 1 or 2 or 3 = yes

4 = no S3v4b Training need analysis: Training audits 1 or 2 or 3 = yes

4 = no S3v4c Training need analysis: Line manage- 1 or 2 or 3 = yes

211

ment request 4 = no S3v4d Training need analysis: Performance

appraisal 1 or 2 or 3 = yes 4 = no

S3v4e Training need analysis: Employee re-quest

1 or 2 or 3 = yes 4 = no

S3v5 Monitor effectiveness of training S3v6a Evaluation of training: immediately

after the training 1 or 2 or 3 = yes 4 = no

S3v6b Evaluation of training: some month later

1 or 2 or 3 = yes 4 = no

S3v7a Evaluate training on the basis of: Learning

S3v7b Evaluate training on the basis of: Be-haviour

S3v7c Evaluate training on the basis of: Re-sults

S3v7d Evaluate training on the basis of: Reac-tion

S3v8a Use of Formal Career Plans S3v8b Use of Assessment Centres S3v8c Use of Succession Plans S3v8d Use of Planned Job rotation S3v8e Use of High flier schemes S3v8f Use of International experience

scheme

S4v1a1 Basis pay determination: national level -management staff

S4v1a2 Basis pay determination: national level -professional staff

S4v1a3 Basis pay determination: national level -clerical staff

S4v1a4 Basis pay determination: national level -manual staff

S4v1b1 Basis pay determination: regional col-lective bargaining – management staff

S4v1b2 Basis pay determination: regional col-lective bargaining – professional staff

S4v1b3 Basis pay determination: regional col-lective bargaining – clerical staff

S4v1b4 Basis pay determination: regional col-lective bargaining – manual staff

S4v1c1 Basis pay determination: company level – management staff

S4v1c2 Basis pay determination: company level – professional staff

212

S4v1c3 Basis pay determination: company level – clerical staff

S4v1c4 Basis pay determination: company level – manual staff

S4v1d1 Basis pay determination: establishment level – management staff

S4v1d2 Basis pay determination: establishment level – professional staff

S4v1d3 Basis pay determination: establishment level – clerical staff

S4v1d4 Basis pay determination: establishment level – manual staff

S4v1e1 Basis pay determination: individual level – management staff

S4v1e2 Basis pay determination: individual level – professional staff

S4v1e3 Basis pay determination: individual level – clerical staff

S4v1e4 Basis pay determination: individual level – manual staff

S4v2a Variable pay 1 or 2 or 3 = yes 4 = no

S4v2b Non-money benefits 1 or 2 or 3 = yes 4 = no

S4v3a1 Incentive schemes: Employee share options - Management

S4v3a2 Incentive schemes: Employee share options – Professional

S4v3a3 Incentive schemes: Employee share options – Clerical

S4v3a4 Incentive schemes: Employee share options - Manual

S4v3b1 Incentive schemes: Profit sharing - Management

S4v3b2 Incentive schemes: Profit sharing - Professional

S4v3b3 Incentive schemes: Profit sharing- Clerical

S4v3b4 Incentive schemes: Profit sharing - Manual

S4v3c1 Incentive schemes: Group bonus - Management

S4v3c2 Incentive schemes: Group bonus - Pro-fessional

S4v3c3 Incentive schemes: Group bonus -

213

Clerical S4v3c4 Incentive schemes: Group bonus -

Manual

S4v3d1 Incentive schemes: Merit/Performance related pay - Management

S4v3d2 Incentive schemes: Merit/Performance related pay - Professional

S4v3d3 Incentive schemes: Merit/Performance related pay - Clerical

S4v3d4 Incentive schemes: Merit/Performance related pay - Manual

214

Appendix IV: Results from the Chi-Square Tests The following tables summarise the results from the various Chi-Square tests under-taken with one table for each variable analysed. The table is structured as followed a b c d e f g h i j k l m n a) Variable number and content of variable b) ALL: includes the whole research sample c) MSUB: includes the whole MSUB sample (all multinational organisations of

the research sample with their headquarters outside the country where the ques-tionnaire was filled out)

d) MHQ: includes the whole MHQ sample (all multinational organisations of the research sample with their headquarters in the country where the questionnaire was filled out)

e) NAT: includes the whole NAT sample (all national organisations of the research sample)

f) % of all organisations within the ALL-sample that have the particular strategy, policy or practice asked for within the question analysed

g) % of all organisations within the MSUB-sample that have the particular strat-egy, policy or practice asked for within the question analysed

h) % of all organisations within the MHQ-sample that have the particular strategy, policy or practice asked for within the question analysed

i) % of all organisations within the NAT-sample that have the particular strategy, policy or practice asked for within the question analysed

j) Significance of Chi-Square test of the whole sample (ALL) by type of organisa-tion (MSUB vs. MHQ vs. MNAT)

k) Significance of Chi-Square test of the whole sample (ALL) by country (UK vs. G vs. DK vs. CH)

l) Significance of Chi-Square test of the MSUB sample by country (MSUBUK vs. MSUBG vs. MSUBDK vs. MSUBCH)

m) Significance of Chi-Square test of the MHQ sample by country (MHQUK vs. MHQG vs. MHQDK vs. MHQCH)

n) Significance of Chi-Square test of the NAT sample by country (NATUK vs. NATG vs. NATDK vs. NATCH)

The variables are in the order as they are discussed within the empirical part of this study. Strategies and Policies S1v7b: Organisation has a corporate strategy

215

ALL MSUB MHQ NAT 93% 94% 95% 91% .068 .392 .577 .152 .295 S1v8: Involvement of the HR department in the development of the corporate strategy ALL MSUB MHQ NAT From the outset

50 51 48 52 .784

Consultative 27 27 29 24 Implementa-tion

10 10 11 10

Not con-sulted

13 12 12 14

.000 .002 .000 .013 S1v7c: Organisation has an HR management strategy ALL MSUB MHQ NAT 77% 80% 77% 73% .087 .000 .207 .130 .008 S1v6b: Organisation has a policy for R&S ALL MSUB MHQ NAT 85% 88% 85% 80% .008 .000 .078 .000 .001 S1v6c: Organisation has a policy for T&D ALL MSUB MHQ NAT 89% 90% 90% 87% .287 .645 .889 .132 .763 S1v6a: Organisation has a policy for C&B ALL MSUB MHQ NAT 90% 91% 90% 89% .662

216

.336 .461 .611 .967 S1v12b: Determination of R&S policies: centralised ALL MSUB MHQ NAT 46% 51% 44% 37% .019 .006 .628 .001 .085 S1v12c: Determination of T&D policies: centralised ALL MSUB MHQ NAT 49% 55% 49% 39% .005 .000 .144 .000 .023 S1v12a: Determination of C&B policies: centralised ALL MSUB MHQ NAT 63% 64% 64% 59% .472 .000 .131 .000 .080 S1v13b: Primary responsibility for major R&S decisions with HR ALL MSUB MHQ NAT 46% 49% 43% 48% .249 .000 .000 .000 .000 S1v13c: Primary responsibility for major T&D decisions with HR ALL MSUB MHQ NAT 53% 56% 50% 53% .233 .000 .001 .000 .000 S1v13a: Primary responsibility for major C&B decisions with HR ALL MSUB MHQ NAT 52% 58% 50% 53% .010 .000 .000 .000 .000

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S1v3: Organisation has an HR director ALL MSUB MHQ NAT 50% 60% 46% 45% .000 .275 .364 .757 .095 S1v5: Background of the most senior HR manager: Personnel Specialist ALL MSUB MHQ NAT 68% 72% 69% 62% .015 .000 .000 .037 .000 S1v2b2: Organisation uses external provider for R&S ALL MSUB MHQ NAT 64% 70% 70% 50% .000 .056 .376 .020 .219 S1v2b3: Organisation uses external provider for T&D ALL MSUB MHQ NAT 76% 80% 79% 68% .000 .000 .000 .002 .000 S1v2b1: Organisation uses external provider for C&B ALL MSUB MHQ NAT 25% 31% 24% 19% .001 .000 .000 .009 .137

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Recruitment and Selection: S2v5a1: Vacancies are filled internally for senior management ALL MSUB MHQ NAT 53% 58% 55% 45% .002 .000 .002 .001 .042 S2v5b1: Recruitment consultants are used for senior management ALL MSUB MHQ NAT 72% 74% 78% 65% .000 .000 .008 .931 .000 S2v5c1: Vacancies are advertised in the newspaper for senior management ALL MSUB MHQ NAT 34% 32% 30% 39% .026 .017 .033 .554 .284 S2v5d1: Vacancies are advertised by word of mouth for senior management ALL MSUB MHQ NAT 12% 13% 12% 12% .862 .002 .206 .174 .020 S2v5a2: Vacancies are filled internally for middle management ALL MSUB MHQ NAT 81% 81% 86% 76% .004 .101 .005 .511 .487 S2v5b2: Recruitment consultants are used for middle management ALL MSUB MHQ NAT 42% 52% 41% 33% .000 .000 .123 .008 .000

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S2v5c2: Vacancies are advertised in the newspaper for middle management ALL MSUB MHQ NAT 71% 67% 73% 74% .082 .021 .124 .001 .242 S2v5d2: Vacancies are advertised by word of mouth for middle management ALL MSUB MHQ NAT 21% 22% 22% 19% .531 .013 .533 .621 .005 S2v5a3: Vacancies are filled internally for junior management ALL MSUB MHQ NAT 72% 70% 75% 72% .367 .005 .250 .121 .022 S2v5b3: Recruitment consultants are used for junior management ALL MSUB MHQ NAT 18% 24% 17% 14% .001 .000 .000 .000 .000 S2v5c3: Vacancies are advertised in the newspaper for junior management ALL MSUB MHQ NAT 68% 66% 72% 65% .105 .154 .081 .234 .051 S2v5d3: Vacancies are advertised by word of mouth for junior management ALL MSUB MHQ NAT 32% 33% 33% 28% .317 .086 .609 .122 .668 S2v6c: Organisation uses application form ALL MSUB MHQ NAT

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77% 78% 77% 74% .475 .000 .000 .000 .000 S2v6b: Organisation uses one-to-one interviews ALL MSUB MHQ NAT 96% 97% 96% 94% .258 .394 .996 .425 .579 S2v6a: Organisation uses Interview panel ALL MSUB MHQ NAT 75% 75% 78% 72% .128 .003 .042 .067 .000 S2v6e: Organisation uses assessment centre ALL MSUB MHQ NAT 42% 41% 47% 36% .007 .000 .006 .000 .001 S2v6d: Organisation uses psychometric tests ALL MSUB MHQ NAT 56% 67% 58% 47% .000 .000 .000 .000 .000 S2v6f: Organisation uses graphology ALL MSUB MHQ NAT 10% 7% 13% 11% .035 .000 .000 .000 .000 S2v6g: Organisation uses references ALL MSUB MHQ NAT 93% 94% 94% 92% .348 .000 .000 .000 .000

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S2v2a: Difficulty to recruit management staff ALL MSUB MHQ NAT 37% 30% 38% 43% .007 .000 .006 .000 .001 S2v2b1: Difficulty to recruit IT ALL MSUB MHQ NAT 64% 68% 70% 52% .000 .304 .946 .150 .312 S2v2b2: Difficulty to recruit professional ALL MSUB MHQ NAT 47% 47% 47% 46% .949 .000 .002 .000 .042 S2v2c: Difficulty to recruit clerical ALL MSUB MHQ NAT 8% 11% 6% 7% .070 .005 .622 .040 .202 S2v2d: Difficulty to recruit manual ALL MSUB MHQ NAT 21% 14% 20% 29% .000 .000 .585 .000 .068

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Training and Development: S3v3: Organisation analyse training needs ALL MSUB MHQ NAT 76% 76% 81% 69% .000 .000 .001 .010 .002 S3v5: Organisation monitor the effectiveness of training ALL MSUB MHQ NAT 63% 65% 68% 56% .006 .000 .000 .000 .000 S3v6a: Organisation evaluates training immediately after the training ALL MSUB MHQ NAT 98% 98% 99% 97% .515 .058 .642 .032 .279 S3v6a: Organisation evaluates training some month later ALL MSUB MHQ NAT 89% 90% 90% 85% .177 .012 .090 .550 .287 S3v7a: Organisation evaluates training on the basis of learning ALL MSUB MHQ NAT 33% 35% 33% 32% .793 .000 .396 .001 .004 S3v7b: Organisation evaluates training on the basis of behaviour ALL MSUB MHQ NAT 74% 81% 73% 70% .016 .000 .046 .000 .000

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S3v7c: Organisation evaluates training on the basis of results ALL MSUB MHQ NAT 63% 65% 58% 67% .148 .000 .149 .004 .006 S3v7d: Organisation evaluates training on the basis of reaction ALL MSUB MHQ NAT 88% 92% 90% 81% .001 .000 .590 .175 .000 S3v4c: Organisation uses line management requests for the analysis of training needs ALL MSUB MHQ NAT 100% 100% 100% 100% .305 .574 .717 S3v4e: Organisation uses employee requests for the analysis of training needs ALL MSUB MHQ NAT 99% 99% 100% 98% .232 .538 .617 .669 .544 S3v4a: Organisation analysis projected business plans for the analysis of training needs ALL MSUB MHQ NAT 91% 90% 92% 90% .726 .008 .364 .004 .343 S3v4d: Organisation uses performance appraisal for the analysis of training needs ALL MSUB MHQ NAT 93% 96% 94% 89% .008 .000 .000 .002 .000 S3v4b: Organisation uses training audits for the analysis of training needs ALL MSUB MHQ NAT

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91% 89% 94% 90% .082 .000 .001 .097 .000 S3v8b: Organisation regularly uses assessment centre ALL MSUB MHQ NAT 25% 26% 31% 18% .000 .000 .010 .001 .002 S3v8c: Organisation regularly uses succession plans ALL MSUB MHQ NAT 57% 57% 61% 52% .042 .000 .001 .000 .002 S3v8d: Organisation regularly uses planned job rotation ALL MSUB MHQ NAT 29% 32% 30% 23% .028 .000 .034 .005 .001 S3v8e: Organisation regularly uses high flier schemes ALL MSUB MHQ NAT 43% 49% 45% 33% .000 .000 .000 .002 .003 S3v8f: Organisation regularly uses international experience schemes ALL MSUB MHQ NAT 27% 39% 33% 7% .000 .000 .039 .001 .358 S3v8a: Organisation regularly uses formal career plans ALL MSUB MHQ NAT 30% 33% 30% 25% .080 .000 .166 .002 .238

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Compensation and Benefits: S4v1a1: Basis pay is determined at national level for management ALL MSUB MHQ NAT 6% 5% 3% 9% .001 .013 .019 .538 .612 S4v1a2: Basis pay is determined at national level for professional ALL MSUB MHQ NAT 20% 15% 20% 24% .018 .000 .000 .000 .000 S4v1a3: Basis pay is determined at national level for clerical staff ALL MSUB MHQ NAT 22% 14% 22% 30% .000 .000 .000 .000 .000 S4v1a4: Basis pay is determined at national level for manual staff ALL MSUB MHQ NAT 29% 21% 31% 36% .000 .000 .000 .000 .000 S4v1b1: Basis pay is determined at regional level for management ALL MSUB MHQ NAT 2% 2% 2% 3% .436 .001 .123 .043 .211 S4v1b2: Basis pay is determined at regional level for professional ALL MSUB MHQ NAT 12% 8% 14% 15% .007 .000 .000 .000 .000 S4v1b3: Basis pay is determined at regional level for clerical staff

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ALL MSUB MHQ NAT 14% 9% 15% 18% .002 .000 .000 .000 .000 S4v1b4: Basis pay is determined at regional level for manual staff ALL MSUB MHQ NAT 18% 12% 22% 18% .001 .000 .000 .000 .000 S4v1c1: Basis pay is determined at company level for management ALL MSUB MHQ NAT 30% 36% 30% 23% .001 .000 .000 .000 .000 S4v1c2: Basis pay is determined at company level for professional ALL MSUB MHQ NAT 28% 30% 28% 26% .442 .000 .000 .000 .000 S4v1c3: Basis pay is determined at company level for clerical staff ALL MSUB MHQ NAT 27% 29% 28% 25% .336 .000 .000 .000 .000 S4v1c4: Basis pay is determined at company level for manual staff ALL MSUB MHQ NAT 22% 25% 20% 21% .249 .000 .000 .000 .000 S4v1d1: Basis pay is determined at establishment level for management ALL MSUB MHQ NAT 14% 16% 15% 12% .409

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.000 .002 .004 .000 S4v1d2: Basis pay is determined at establishment level for professional ALL MSUB MHQ NAT 24% 26% 26% 20% .109 .000 .099 .005 .004 S4v1d3: Basis pay is determined at establishment level for clerical staff ALL MSUB MHQ NAT 27% 30% 29% 22% .042 .000 .015 .000 .000 S4v1d4: Basis pay is determined at establishment level for manual staff ALL MSUB MHQ NAT 26% 29% 27% 23% .248 .000 .006 .000 .000 S4v1e1: Basis pay is determined at individual level for management ALL MSUB MHQ NAT 67% 63% 68% 71% .047 .000 .000 .000 .000 S4v1e2: Basis pay is determined at individual level for professional ALL MSUB MHQ NAT 41% 45% 39% 37% .068 .000 .082 .000 .000 S4v1e3: Basis pay is determined at individual level for clerical ALL MSUB MHQ NAT 29% 38% 29% 21% .000 .000 .004 .000 .000

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S4v1e4: Basis pay is determined at individual level for manual staff ALL MSUB MHQ NAT 14% 16% 13% 12% .370 .000 .004 .000 .000 S4v2a: Organisation uses variable pay ALL MSUB MHQ NAT 89% 89% 89% 89% .950 .000 .000 .002 .002 S4v2b: Organisation uses non-monetary benefits ALL MSUB MHQ NAT 94% 95% 94% 93% .525 .001 .091 .028 .043 S4v3b1: Organisation offers profit sharing for management ALL MSUB MHQ NAT 54% 44% 62% 56% .000 .000 .000 .000 .000 S4v3b2: Organisation offers profit sharing for professional ALL MSUB MHQ NAT 37% 32% 41% 36% .049 .000 .000 .001 .074 S4v3b3: Organisation offers profit sharing for clerical staff ALL MSUB MHQ NAT 27% 24% 32% 26% .088 .000 .043 .000 .010 S4v3b4: Organisation offers profit sharing for manual staff ALL MSUB MHQ NAT

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23% 18% 26% 23% .040 .000 .003 .001 .073 S4v3c1: Organisation offers group bonus for management ALL MSUB MHQ NAT 26% 33% 26% 19% .000 .000 .000 .000 .000 S4v3c2: Organisation offers group bonus for professional ALL MSUB MHQ NAT 23% 29% 24% 17% .002 .000 .000 .000 .000 S4v3c3: Organisation offers group bonus for clerical staff ALL MSUB MHQ NAT 20% 24% 19% 16% .034 .000 .000 .000 .001 S4v3c4: Organisation offers group bonus for manual staff ALL MSUB MHQ NAT 24% 22% 27% 23% .196 .134 .168 .632 .270 S4v3d1: Organisation offers merit pay for management ALL MSUB MHQ NAT 61% 72% 60% 46% .000 .000 .009 .004 .001 S4v3d2: Organisation offers merit pay for professional ALL MSUB MHQ NAT 61% 66% 62% 54% .011 .000 .000 .000 .000

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S4v3d3: Organisation offers merit pay for clerical staff ALL MSUB MHQ NAT 53% 52% 57% 49% .180 .000 .000 .000 .000 S4v3d4: Organisation offers merit pay for manual staff ALL MSUB MHQ NAT 43% 34% 47% 49% .001 .000 .000 .000 .000 S4v3a1: Organisation offers share options for management ALL MSUB MHQ NAT 35% 33% 46% 24% .000 .000 .249 .000 .000 S4v3a2: Organisation offers share options for professional ALL MSUB MHQ NAT 24% 21% 31% 18% .000 .000 .134 .000 .000 S4v3a3: Organisation offers share options for clerical staff ALL MSUB MHQ NAT 21% 17% 28% 17% .000 .000 .051 .000 .000 S4v3a4: Organisation offers share options for manual staff ALL MSUB MHQ NAT 17% 11% 24% 16% .000 .000 .011 .000 .000

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Appendix V: HR Experts and Interview Partners In the first step information was exchanged (face-to-face or through telephone inter-views) with HR experts from various multinational organisations and HR consultancies regarding the topic investigated within this study. In addition, the author attended workshops and conferences covering the field of investigation. In the second step case study interviews were held with HR representatives of the fol-lowing multinational organisation: Organisation Main Interview Partner Information exchange with

additional staff 1 Global Head of Strategy,

Compensation and Devel-opment

Yes, and company documen-tation

2 Global Head of Management Development and Training


3 European HR Director Global HR Director


4 European HR Manager Yes, and company documen-tation

5 Account Manager Yes, and company documen-tation

6 HR Director Yes, and company documen-tation

7 HR Director for Global Business


8 HR Manager International Yes, and company documen-tation

9 Senior HR Consultant Yes, and company documen-tation

10 HR Manager Training and Development


With the exception of the last three interviews, all interviews were taped and tran-scribed. During all interviews notes were taken by the interviewer (the author). The information gained from the interviews were categorised, e.g. under the following headlines: - Structure of HR department - Responsibility for development and implementation of policies and practices - Relationship between HQ and subsidiaries - Communication and Coordination - Internationalisation strategy - Reasons and advantages of standardisation

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- HR policies and practices within Europe - Recruitment and Selection Policies and Practices - Training and Development Policies and Practices - Compensation and Benefits Policies and Practices - Standardisation vs. differentiation of HR policies and practices - Problems at national level and obstacles to standardisation - Stages of Internationalisation - General information about the European Union - Factors of influence in Europe - Reactions of the organisation to the European environment - Main problems in Europe - Advantages and disadvantages of EHRM approach in practice - Ideal EHRM approach and further development of current approach - General comments and advise for practice

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Appendix VI: Interview Guideline Interview – Guideline: European Human Resource Management A Introduction: Recent research in the field of EHRM came to the conclusion that European countries ex-ercise a variety of different national HRM practices. No single European HRM approach exists and HRM vary significantly across Europe. HRM seems to be strongly determined by the national legal or institutional framework. Therefore, I would like to investigate, how the EHRM approach of multinational organisations look like which operate on a European-wide scale and, hence, are confronted by a variety of different national HRM policies and practices? Structure: 1. Please describe the structure of your HRM functions across Europe (organisational

chart) 2. Does your organisation have a European HRM department/manager? 3. Where is the department located? 4. Do you have an HR department/manager within every single country you are operating

in? 5. Please describe the relationship between (European-)headquarters and subsidiaries? 6. How does the information and communication process work between head office and

subsidiaries? 7. Do you have European-wide HR meetings? Strategy: 1. Please describe your company’s strategy of HRM within Europe? 2. Does your organisation have a European mission statement, corporate strategy, EHRM

strategy? Do all European countries follow the same strategy? 3. Is your HR strategy translated into specific policies and practices? Standardisation vs. Differentiation 1. Does your organisation have European-wide HRM policies and practices? 2. Which are they? 3. Since when are your current policies and practices in place? 4. Who is in charge for the implementation of new HR policies and practices within

Europe?

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5. What sort of practical problems do arise by implementing European-wide policies and practices?

6. Does your organisation face any resistance at national level concerning European HR policies and practices?

7. Would you describe the EHRM approach of your organisation as rather integrated (standardised) or rather differentiated?

8. What areas of HRM are standardised across countries (or across regions) or differenti-ated and to what degree?

9. Do you see a trend towards standardisation or towards differentiation of HR policies and practices in Europe?

10. What do you think are the main advantages of a high degree of standardisation across European countries?

11. Which are the main reasons for standardisation? - Corporate Identity - Cost reduction - Increased mobility - Transparency - Evaluation/benchmarking - (...) 12. What do you think are the main obstacles to standardisation? - National legislations - Cultural differences - Technology - Flexibility - Lack of Communication - Communication in general like language - (...) 13. Do you prefer a more standardised or a more differentiated approach of HRM within

Europe? Why? 14. Which approach do you think suits the European environment best? 15. In general, what are the main factors influencing HRM within Europe? 16. How do you react to these influences? 17. What are the main problems you are facing within Europe in terms of HRM? Recruitment & Selection: 1. Please describe your European recruitment & selection procedures/process? 2. Since when are your current policies and practices in place? 3. What would you describe as typical European? 4. Do you have one overall European approach or is your r&s organised on national

level? 5. Which policies and practices do you operate on a European-wide scale? 6. Which policies and practices do you differentiate and why? 7. Do you think they suit your current demands and the situation you are facing within

Europe? 8. Where do you think further development is needed?

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9. Do you think your r&s procedures will change in the near future? 10. How does your ideal European r&s approach look like? 11. In general, how far are your r&s policies and practices standardised or differentiated

across Europe? A high degree of standardisation B standardised as well as differentiated to a certain degree C high degree of differentiation Training & Development: 1. Please describe your European training & development procedures/process? 2. Since when are your current policies and practices in place? 3. What would you describe as typical European? 4. Do you have one overall European approach or is your t&d organised at national level? 5. Which policies and practices do you operate on a European-wide scale? 6. Which policies and practices do you differentiate and why? 7. Do you think they suit your current demands and the situation you are facing within

Europe? 8. Where do you think further development is needed? 9. Do you think your t&d procedures will change in the near future? 10. How does your ideal European t&d approach look like? 11. In general, how far are your t&d policies and practices standardised or differentiated

across Europe? A high degree of standardisation B standardised as well as differentiated to a certain degree C high degree of differentiation Compensation & Benefits: 1. Please describe your European compensation & benefits procedures/process? 2. Since when are your current policies and practices in place? 3. What would you describe as typical European? 4. Do you have one overall European approach or is your c&b organised at national level? 5. Which policies and practices do you operate on a European-wide scale? 6. Which policies and practices do you differentiate and why? 7. Do you think they suit your current demands and the situation you are facing within

Europe? 8. Where do you think further development is needed? 9. Do you think your c&b procedures will change in the near future?

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10. How does your ideal European c&b approach look like? European Union and Social Charter: 1. Has your organisation developed an HRM strategy in response to the Single European

Market and Social Charter? 2. How does your organisation keep abreast of EU initiatives and developments? 3. How far is you company effected by the Social Charter directives and how does your

company respond? Evaluation and Future Perspective – Outlook 1. Do you think your current HR approach suit the demands of your organisation and the

situation you are facing within Europe? 2. What are the advantages and disadvantages of your current HR approach? 3. Would you describe your approach as pro-active and why? 4. Where do you see the main areas for improvement? 5. What do you think should be changed in the near future and why? 6. What changes do you anticipate in the near future? 7. What are the main factors which will influence your EHRM within the near future? 8. What do you think will be important for MO to consider in order to prosper and survive

within the European market? 9. How does your company prepare for the future? 10. How does your ideal European HR approach look like and why? B Background Information: Interview partner: 1. Name, Position, Responsibilities Company: 2. Name of the company and main products/services 3. Where is the company’s headquarters located? 4. Do you have a European head-office and where? 5. In which European countries do you operate? 6. How long has the company been involved in European operations? 7. How many employees do you employ on a worldwide and European-wide scale? 8. Approximately how many people are employed in the HRM function - At your European headquarters? - European-wide?

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