Operations Management in Sweden and the UK - Case Study Example

Executive Summary

Sweden differs from the UK in performance management through the nature and use of performance indicators and the extent of integration of performance information with the other management systems such as financial and non-financial systems (Holzer & Yang, 2004: 17-19). The Swedish labor market pegs performance management on the relationships with stakeholders while in the UK performance management is centered on individual goals and indicators. On the other hand, as opposed to the UK, Sweden considers performance pay as divisive and unfair (Pollitt & Bouckaert, 2004: 54).

Needless to say, there are distinctions between employee compensation in both Sweden and the UK. The UK has a minimum wage rate while Sweden does not have. However, the wages of employees are determined by collective bargain agreements (Gowling, 2016). Additionally, there are notable employment relations distinctions between the UK and Sweden. These differences range from the formation and submission of an employment contract to the termination of the employment contract. In Sweden, an organization is required to submit written information about the employment to authorities within a month after commencement of work while the UK requires an employer to provide such information within two months (Gowling, 2016).

Remarkably, Sweden is the leading EU member in gender and racial equality at workplaces. The equality and diversity within the nation are attributed to the distinct aspects of Swedish culture, which every organization has to consider before entering the market (Svensson & Gunnarsson, 2012).

Introduction

It is imperative for all organizations to evaluate the labor market of a foreign market before expanding its operations. Human resources are indispensable in the functioning of a company and as a result, the practices and policies of human resources differ across nations (Armstrong, 2012: 23). As Lancashire Electronics seeks to expand its operations to Sweden, it is imperative to consider the differences that exist between Swedish and the UK human resources practices and policies. This discussion seeks to highlight the primary differences in performance management, employee compensation and employee relations between the United Kingdom and Sweden. Also, this discussion seeks to identify the aspects that Lancashire Electronics will need to consider regarding equality and diversity in Sweden.

Operations Management in Sweden and UK

The introduction of performance management, over the past three decades, is one of the most extensive global inclinations in public management (Pollit & Bouckaert, 2004: 57). According to Pierre (2004), performance management refers to the system of keeping or enhancing the job performance of workers through the use of performance planning process, together with training, mentoring and offering constant responses (p. 206). Performance management has been widely adopted by organizations (Bach & Edwards, 2013: 71).

The performance planning processes that have been adopted by organizations are tailored to center on appraising the worker’s performance by the trainer, in most cases the managers or the supervisors. The primary aim of performance management is the worker and the supervisor to measure, at least annually, the worker’s responsibilities, capabilities and achievements (Armstrong, 2012: 61). Additionally, performance review offers an opportunity to come up with targets for the coming year and discuss career advancement matters to guarantee the employee’s advancement and growth. However, performance management differs across nations. In our case, performance management in the UK differs from that in Sweden in numerous ways.

One of the primary difference between Sweden and UK is the nature and use of performance indicators (Piere, 2004: 208). Performance indicators assess the success of an employee towards a set target. Though performance indicators vary across organizations, they are in most cases entrenched on the company’s targets and goals. Though performance indicators have been novel to almost all companies and nations, they have operated for years with them undergoing incessant improvements. A review of the public sectors of both UK and Sweden reveals that Sweden and the UK differ in their outlooks to performance measurement (Pollit & Bouckaert, 2004: 109). Performance measurement in Sweden is a little vague, and the set targets are pegged on the relationships with stakeholders. On the other hand, performance measurement in the UK is centered on the individual company goals and indicators (Piere, 2004: 210). In Sweden, company’s performance management focuses on creating a cozy association with the stakeholders. Notably, UK mangers are more precise with their organization’s performance indicators and goals and refer to them as consequential to their responsibilities as managers (Pollit & Bouckaert, 2004: 156).

The other primary difference between UK and Sweden is the extent of incorporation of performance information with the other management systems. A review of the Swedish performance management shows that there are weak linkages between the non-financial performance indicators, and the human resource management and planning systems. Notably, Pollit and Bouckaert (2004: 162) acknowledge that there is significant resistance to performance pay in Sweden, which is observed as potentially unfair and divisive. Arguably, there is no connection between performance indicators and targets and the budget. On the other hand, there is a strong relationship between performance indicators and targets and financial planning among UK firms (Bruel, 2010). This explains why British senior managers in the UK are paid bonuses for attaining their targets and any other performance indicator. Arguably, UK administrators can thrust performance measurement faster and further since the government itself is a majoritarian, one party system, with fewer veto points and more likelihood of enforcing losses on powerful groups. Additionally, the individualistic and risk accommodating culture permits a dynamic use of tools such as performance-centered pay and transparent public reporting of the achievements and targets (Rodney et al., 2005: 261-5). On the other hand, Sweden appears as more collectivist and consensual nation. Performance management is acknowledged as a legitimate contemporary technique but employed within a more negotiated, consensus-seeking cultural climate. In reference to Pierre (2004: 211), Sweden has strong corporatist attributes, which implies that policies are drafted informally, through networks of main institutions that snip within a consensual culture. In this regard, such bargain within a consensual hardnosed performance piloting can intimidate significant relationships and interests. This is part of the elucidation for the sluggish application of performance-centered pay in Sweden, and the lack of incorporation of performance with human resources.

The UK has a highly centralized system that allows the quick spread of ideas from the central executive to the sectors within the country. The British government promotes performance management. Pollit and Bouckaert (2004: 181) assert that the long-term institutional aspects of United Kingdom have aided the authorities within the country to promote widespread and rapid adoption of performance management. While these reforms have been exposed to changes as governments change, the primary direction has not been affected because both the New Labor and Conservative administrations have adopted performance doctrines. Even though performance management has been a primary policy priority in all the countries, Sweden seems to have lagged behind (Pollit & Bouckaert, 2004: 201). The UK seems to be further on the learning curve than Sweden with performance management. Therefore, as the business seeks to expand its operations to Sweden, it is essential to note that there are major differences in performance management between UK and Sweden. This is seen through the application of the performance indicators and the incorporation of performance information with the other management systems.

Employee compensation Differences between UK and Sweden

Sweden has been on its economic recovery and trade relations, and investment between UK and Sweden has been considerable. UK presents Swedish investors with exciting opportunities while Sweden, on the other hand, offers UK investors with exciting opportunities (Gowling, 2016). Any company that seeks to expand its operations to Sweden should understand and comply with the complex employment and compensation law structure. In this regard, a UK company needs to apprehend the unique legal structure that concerns the employment law and collective bargain agreements. To understand how employees are compensated in UK and Sweden, it is more important to understand the labor laws in both nations (Gowling, 2016).

In Sweden, all employment relationships are administered by contract law, within the constitutional structure consisting of both domestic and the EU law. All the new players to the Swedish employment market need to be conscious of the primary labor statutes such as the Employment Protection Act (1982), which normalizes the contractual associations between the workers and the employer. Additionally, new employers need to be aware of the Employment Co-Determination in the Workplace Act (1976) that engrosses the statutory structure concerning collective employment regulation, including collective bargaining arrangements. It is also imperative for new employers in Sweden to be conscious of the collective bargaining arrangements and their role in the Swedish employment law system, as an ancillary for regulation (Gowling, 2016).

Notably, an employer in Sweden who is not bound by the collective agreement may to some degree, establish the employment and working conditions of the workers. The degree of this freedom is fairly exceptional for Sweden and is restricted by mandatory edicts and the labor union’s right to take industrial action. Additionally, any employer in Sweden may become bound by a collective bargaining arrangement either through membership to an employers’ organization, direct agreement with a labor union or through a business transfer connection (Gowling, 2016). It is important to note that a labor union in Sweden has unrestricted rights to take industrial action against an employer who is not bound by any collective bargaining arrangement (CIPD, 2016).

On the other hand, the employment associations in the United Kingdom are administered by contract law within the constitutional structure that consists of both domestic and EU regulations. For any employer within the United Kingdom, he or she needs to be conscious of labor statutes such as the Trade Union and Labor Relations Act 1992, the Employment Rights Act (1996) and the Equality Act 2010. As opposed to Sweden, the United Kingdom has only 25% of its workforce covered by collective agreement (Gowling, 2016).

Notably, Sweden has an exceptionally good working conditions than many other European nations with very few social conflicts. Unlike the United Kingdom, Sweden does not have a minimum wage rate and all salaries are negotiated by collective arrangements between the employers and the trade unions. Sweden has more than 60 trade unions and 55 employers’ organizations with about 600 collective arrangements. In the early 90’s, most of the collective arrangements were created at a consolidated level for all sectors between the primary employer organizations and trade unions. Since then, the process has decentralized, especially for the white color employees (Gowling, 2016). Many of the arrangements are currently being made at an organization level. In the case of disagreements between the parties, the National Mediation Office comes in between to mediate between them. The National Mediation Office is also responsible for publishing integrated information on wage increment and the general tendencies in the labor market. Most collective arrangements engross a minimum wage, which is comparatively higher than that of United Kingdom. 95% of all employees in Sweden have a minimum wage in their collective arrangement, which is in most cases 70% of the average wage. Additionally, all employees in Sweden are members of a trade union, and they are always encouraged by the National Mediation Office to learn about their trade union and how the new organization regulates collective agreements (Gowling, 2016).

The working hours are also determined through collective agreement, though the standard working week set by the Swedish policy makers is 40 hours. The Swedish regulations also guarantee 16 paid public holidays, six off days and 25 days of paid leave in a year. Additionally, a collective agreement requires that employees be paid overtime. In most cases, the collective agreement requires that overtime is paid between 150% and 200% of the normal wage. However, collective agreements give the employees an opportunity to exchange overtime with a holiday or an off-day (Gowling, 2016). As opposed to Sweden, United Kingdom has a minimum wage that is determined by the authorities every year. The national minimum wages are not constant, and they always change annually every October. In the UK, the minimum wage is depended on whether the worker is an apprentice and his or her age (UK Gov., 2016). The UK government requires that an individual is of school leaving age to be covered by the National Minimum Wage. As of October 2015, the minimum wage rate for the ages 25 and above are £7.20, 21 to 24 years at £6.70, 18 years to 20 years at £5.30 (UK Gov., 2016).

It is imperative also to acknowledge that Lancashire Electronics is involved in nanotechnology and any bodily harm that an employee encounters in the line of duty is claimable by the worker in both United Kingdom and Sweden. All nations in Europe are bound by the industrial injuries compensation scheme. In this regard, there is no ‘employer privilege’ that prohibits a worker from worker’s compensation and tort. For this reason, the company has to be ready to be liable for any damages in case a worker proves that he encountered physical harm in the line of duty (Oliphant, 2012).

From the above review, it is noteworthy to note that there are significant differences between UK and Sweden. Even though both countries are EU members, there are differences in labor laws and how employees are compensated. The primary difference is the responsibilities towards labor unions and collective bargaining arrangements. It is, therefore, imperative for employers planning to expand their operations to Sweden to be aware of the regulations. Hiring locally may offer the myriad company benefits and cost-cutting advantages, but failing to understand and adopt the labor laws can prevent the company from realizing these gains.

Employment Relations Differences between UK and Sweden

As discussed above, Sweden differs from the United Kingdom in its employment relations. Employment relations refers to an organization’s efforts to manage associations between workers and the employers. Employee relations also encompasses the communications between management and workers on the workplace decisions, conflicts, grievances, unions, problem resolutions and collective bargaining. Employment relations is the lawful link between workers and employers (CIPD, 2016). It is through this relationship that joint rights and responsibilities are generated between the worker and the employer. Employee relations create the lee way through which an employee can attain access to the privileges and benefits linked with employment. The Swedish employment relationships are chiefly administered by the contract law that engrosses both the European Union law and domestic statutes. Before entering the Swedish market, an employer should be aware of the Employment Protection Act (1982), the Employment Co-Determination in the Work Place Act (1976) and the collective bargaining arrangements that play a key role in the Swedish employment regulation system (Gowling, 2016).

Sweden also differs from the United Kingdom on the employment contract basics. In Sweden, an employer is required to provide written information on all the terms and conditions that are pertinent to the employment contract such as the job description, place of work, job title and the working hours within one month from the time the employee started work. This is opposed to the United Kingdom that requires the employer to provide the written information to be submitted within two months from the time the employee started work (Gowling, 2016). Additionally, Sweden protects the interests of the employer by calling for a detailed form of contract that normally sets out a variety of additional provisions that administer issues such as privacy, intellectual property rights and the provision of extra benefits to workers. If a collective agreement functions as an addition to the employment contract. Notably, if the contract does not cover a particular area of the employment terms such as the number of off days, the regulations determined by the collective bargaining agreement take effect (Gowling, 2016).

Employment relations also engross termination of contracts. Therefore, it is significant for Lancashire Electronics to consider the termination of employment contracts of its workers. In Sweden, an employer is required to negotiate with the labor unions the employer has collective bargaining agreement with before taking any decision to terminate the contract of an employee. However, an employee is free to terminate his or her employment at any time by submitting a written notice within a minimum period of one month. On the other hand, an employee may terminate his or her employment any time through a written notice within a minimum of one week (Gowling, 2016). On the other hand, Sweden also differs with UK on how an employer can terminate the services of an employee. Sweden requires a company to give a written notice to a worker within a minimum period of one to six months, depending on the rank of the employee if they had been employed between 1 month and two years, and two months for two years of employment to four years and 6 months’ notice to a worker employed for a period of ten years. This is distinct from UK where the employer is required to give a week’s notice to an employee of between one month and two years’ service and an additional week’s notice for every additional year of service. The other part of the employment relations is on the provisions that govern collective dismissal. Both Sweden and UK differ in collective dismissal (CIPD, 2016). Sweden defines collective dismissal as a condition that arises when a company reduces its workforce by five or more of its employees. This may arise when the company faces challenging economic times (Gowling, 2016).

Issues to consider in equality and Diversity

Generally, the European Union Commission promotes policies and programs that foster diversity and equality. The EU commission, in 2006, declared that all union members needed to institute legislation that supported equality and diversity at workplaces (Svensson & Gunnarsson, 2012). As a result, Sweden is has since been well known for its fair approach to gender, ethnic and racial diversity. One of the primary matters to consider before moving into Sweden is the country’s culture (Lamson, 2014). In reference to the intercultural theory presented by Hofstede, there are three cultural values that affect Swedish business behavior, which the company will need to put into consideration. These include low power distance, femininity and uncertainty avoidance. Under low power distance, a Swedish employee expects to get easy access to their manager or supervisor. On the other hand, femininity implies that work/life balance is fundamental and is a measure of a person’s success while uncertainty avoidance implies that the Swedish nationals have a flexible outlook of life and work (Klarsfeld, 2010: 176-8). By planning to expand operations into Sweden, the company will need to consider the parental leave that Swedish nationals consider as healthy for a work-life balance.

Sweden is the leader of gender and racial equality in Europe. This is partly contributed by the Swedish culture and the positive attitudes towards work and life (Good kind, 2013: 249-250). As opposed to United Kingdom, Sweden inculcates equality early in the lives of its citizens through teaching equality at schools. Additionally, the Swedish government promotes equal access to education, opportunities and pay for all Swedish nationals. In this regard, it is essential for Lancashire Electronics to adopt active programs that support equal opportunities for both men and women of all races (Lamson, 2014). Notably, almost 30% of the companies in Sweden are women owned and the Swedish parliament consists of 50% women legislators. Sweden has a high rate of immigrants and employees from other parts of the world, making it a highly culturally diverse nation. Statistics indicate that twelve percent of the nation’s population was born outside the country.

Conclusion

Expansion of businesses internationally can bring an organization numerous benefits such as increased revenues, increased customer base and a stable business infrastructure. However, it is imperative for the organization to do its homework well and understand the foreign market and its implications on the operations of the company. One of the important facets of an organization is human resources. Human resource operations are immensely affected by regulations and the cultures of distinct nations. As Lancashire seeks to expand its operations to Sweden, it is imperative to consider the nation’s performance management, employee compensation, employment relations and the equality and diversity in the employment sector. As highlighted in the review, Sweden differs from the United Kingdom in the way performance indicators are incorporated in performance information with the other management systems. There is substantial evidence that shows that Sweden does not support performance pay, which is deemed divisive and unfair. In this case, the business needs to be ready to adopt the performance management that does not integrate with the other systems within the organization (Pollitt & Bouckaert, 2004: 54). Arguably, this implies that the international British managers will need to be ready to part with bonus payments that are not widely accepted within the nation. Additionally, the Lancashire Electronics will also need to familiarize itself with the complex employment and compensation provisions in Sweden before expanding.

Since all the employment relationships in Sweden are controlled by contract law, it is imperative for the organization to familiarize itself with the Swedish employment market by considering the numerous labor law frameworks. Most importantly, Lancashire Electronics will need to consider and abide by the Employment Co-Determination in the Workplace Act (1976) that engrosses the statutory structure concerning collective employment regulation, including collective bargaining arrangements. This is because employee compensation is determined through collective bargaining agreements. For this reasons, it is imperative for the company to familiarize itself with the labor regulations in Sweden, which are distinct from those of United Kingdom. These differences are also seen through employment relations such as submission of written information on the employment contract and the termination of the contract. Additionally, Lancashire Electronics will be required to consider the Swedish culture and its role in the equality and diversity in workplaces.