Predominant HR Policies and Practices in UK and Germany - Essay Example

? Topic: Lecturer: Presentation: Introduction Human resource management as a field has evolved over a long period of time and with increased globalisation, issues outside the country gained importance resulting in emergence of international human resource management (IHRM). This is a field which has been a matter of recent debates in HRM. The most debated issues according to Pinnington and Harzing (2011: Ch 1) are “staffing policies, differences between countries, types of employees, and multinational corporations HRM activities.” International HRM also deals with Parent Country Nations (PCN), Host Country Nations (HCN) and Third Country Nations (TCN) as opposed to HRM which is mostly concerned with local business environment. Countries now have to deal with cultural, economic, political, legal and regulatory issues within and outside the country, that is, areas they wish to enter as new markets in making decisions. That means that human resource management has become a very complex activity for managers. This paper is aimed at comparing and contrasting the major cultural and institutional features and predominant HR policies and practices in UK and Germany. To achieve this, the paper will be divided into various sections. The first section will be comparison of ideologies such as neo-liberalism which is predominant in UK and neo-corporatism predominant in Germany. The next section will discuss various cultural theories such as Hofstede’s and Trompenaars perspectives and their effect on HR policies and practices as well as institutional policies such as EU and home/ host country regulations. The question to be answered is; is HRM becoming more similar or different across countries? The last segment will be conclusion. Ideologies Different economic systems of the world are ordered based on their ideologies. These ideologies according to Hollinshead (2009) present a general plan of action for structuring economic and social order and also as a guide to macro-level reforms. These ideologies include: neo-liberalism and neo-corporatism. Neo-liberalism is an ideology dominant in liberal market economies (LME) such as USA and UK. It is based on free market principles of a capitalist system that emphasise on market forces being left to allocate resources efficiently (Hyman, 2004). Actors in this system focus on fulfilling their own interests’ thus producers’ aim at maximising profit and owners of factors of production such as labour, land, capital are concerned with wages, rent, and interest. Government intervention in this type of system is undesirable hence the management has freedom to make decisions. Deregulation is thus a dominant feature. The system is also characterised by privatisation of enterprises, control of organised labour and removal of controls of global financial flows. As such, there is free movement of capital and labour within and outside the country. This is also enhanced by trade liberalisation whereby barriers such as tariffs are eliminated opening the doors of the country to the world. This trade is regulated through institutions such as World Trade organisation (WTO) and European Union (EU). Such a system is also characterised by reduced spending by government on social welfare spending and tax cuts. This is because such nations are concerned with short term investments and employees are considered as liabilities not assets (Hyman, 2004). This explains the difference between HRM policies and practices within and between countries. The neo-liberal ideal is not accommodative to things that would impede the free flow of market forces such as government intervention. All actors must be free to pursue their own interests; for example, labourers are free to work for any company as long as it satisfies their desires or the wage is competitive and in line with the labour market. For this reason, countries like UK are not appreciative of collectivist groups such as trade unions, work councils and worker representatives (Edwards et al. 2005). Britain took a long time to acknowledge the EU charter which makes it a requirement for countries to have work councils, trade unions and representatives for workers who would be involved in making decisions that affect them (Brewster, 2004; Briscoe, 2008). Neo-corporatism on the other hand is the opposite of neo-liberalism. This is the belief in an active role of the state in the economy. As such the state represents the interests of all actors in the system especially the powerful social groups such as workers (Harzing & Pinnington, 2011; Hollinshead, 2009). Though neo-liberalists believe that the market forces can allocate resources efficiently, neo-corporatists dispute this and argue that free markets can fail and often lead to inequalities in the society (Critchley, 2012). They thus view the role of the state as being very crucial in enhancing equity in the society. As such, business systems in this market system are very constrained by laws and regulations and most of them are state owned or public enterprises and quasi-government rather than private enterprises. According to Edwards et al (2005) such economies are very influential in Europe especially Germany and are regarded as coordinated market economies (CME). The business systems in this type of economy have various common features or measures in place. First is the moderation of market forces through government intervention. The government is in a better place to control prices and inflation insulating the economy from effects of market failures such as the global financial crisis as a result of asset bubbles. High tax rates are also apparent to enable the government to provide public goods and services and to maintain the public enterprises (Hyman, 2004). Another common measure is the involvement of all stakeholders in the running of the business. As opposed to LME, employees and other stakeholders are involved in decision making thus the emphasis on trade unions, work councils and worker representatives (Dickmann et al. 2008). These represent the workers in making important decisions such as mergers and acquisitions, takeovers, layoffs and redundancies among other HRM issues. Consensus decision making is thus the norm in this business system. Unlike in liberal economies where social welfare is of less importance, CME incur very high social expenditure to ensure equity in society. Public infrastructures are also well developed since they are maintained by the government through taxes (Hollinshead, 2009). Though these two types of economies are different, some measures taken may be similar in some sense. For example, even though UK is a liberal economy there is presence of trade unions, work councils and worker representatives. These are necessitated by EU regulations and as such institutional factors play a great role in how business systems operate (Brewster et al. 2004). Furthermore, a good employment relationship is crucial for organisational success and modern firms realise this fact. Besides, trade unions now work alongside the management to ensure smooth operations unlike in the past where they played an adversarial role (Johnson et al. 2010). Another critical feature of importance is cultural factors. Whatever the system in place, the national culture has an effect on IHRM. For example, individualistic culture does not entertain collectivist ideals such as use of team working. Cultural theories Different cultural theories impact on the international HRM. Two of the most popular cultural theorists include Hofstede and Trompenaars and Hampden Turner. This section will comprehend and criticise the two theories in trying to compare cultural features in UK and Germany. The first question to ask ourselves is what is culture? Romani (2011) defines culture as a set of norms, beliefs, and values shared by a group although he acknowledges the fact that “culture has as many meanings as there are people using the term.” For Hofstede culture has five dimensions namely: power distance, individualism, masculinity, uncertainty avoidance and short-term culture. Each dimension has a contrary perspective. For Hofstede culture is “the software of our minds’ while the institutions are the hardware (Hollinshead, 2009: 31). Culture helps people to understand and give meaning to symbols and different people from different cultures view similar things differently. National cultures determine ‘how things are done’ hence the need to understand how culture impacts on HRM practices in different countries such as UK and Germany. Both are European nations but have different cultural orientations. Hollinshead (2009) asserted that contextual differences between countries can affect management decision making. High context cultures such as the UK depend on contextual factors in making decisions. Communication is informal preferring face-to-face and word-of-mouth and less emphasis on time management and no division between work and home life. Decisions thus take time to be made. Low context cultures such as Germany depends on formal (written or spoken word) communication. Interaction is formal and emphasis is put on time management and deadlines. As such decisions are made quickly and efficiently (Romani, 2011). Low cultures also emphasize on work and home life. Hofstede cultural perspective includes five dimensions. Power distance relates to whether a nation has hierarchical structures thus accepting inequality or not. This is more pronounced in Britain or liberal economies where inequality is encouraged through competition (Hollinshead, 2009). Each actor acts on own interests thus increasing inequalities in society. Authoritarian management is also apparent and communication is limited. In Germany, management is more participatory and consultative. Uncertainty avoidance relates to risk tolerance. Some countries such as Germany are risk-averse hence insist on laws and regulations to guide their businesses. They also insist on consensus in decision making thus avoiding conflicts (Hofstede, 2001). On the other hand, UK is risk tolerant and thus entrepreneurial. The other dimension is individualism Vs collectivism. Individualistic nations are self-centred in that people are only concerned of themselves. Independent decision making and personal achievements are also essential as opposed to team work. Collectivist nations like Germany are concerned with welfare of groups thus individuals are emotionally dependent on groups (Hofstede, 2001; Hollinshead, 2009). Masculinity Vs feminity indicates the strength attached to male values such as challenging careers, recognition, growth, success and money are important (Hofstede, 2001). Though both countries embrace masculinity, Germany is welfare oriented hence more feminist. It emphasises consensus building and personal relations. The last dimension is long-term versus short-term orientation. German culture appreciates long-term orientation especially to avoid risks thus encourages strategic planning. Britain on the other hand, is short-term oriented thus puts more emphasis on immediate results (Hollinshead, 2009). Hofstedes cultural perspective is criticized on various grounds. The cultural classification has been overtaken by events such as globalisation which have opened the world and it made it a global village. Values and attitudes of nations have therefore tended to converge and become homogenous due to interactions and in some cases a hybrid is achieved (Pinnington, 2011). Furthermore, many social sub-cultures exist within one state making it impossible to generalise the whole nation as having one culture. The use of only one company as a sample for generalisations is also discredited as a representative sample. Culture exists at different levels and business culture is not be the same as national culture. As a result Trompenaars and Hampden-Turner developed cultural dimensions after their investigations in 1997. Trompenaars and Hampden-Turner perspective has seven dimensions and focus on “human interpretations of the world around them” (Hollinshead, 2009: 34). The first dimension is universalism versus particularism. Universal culture focus on fairness while particularism focus on building relationships. German being a collectivist or neo-corporatist emphasises on relationships while UK focuses on following universal principles. The other dimension is similar to Hofstede’s individualism versus communitarianism. UK prefers individual work while German encourages group work and group recognition. Neutral versus affective dimension focuses on how nations show their emotions (Hofstede, 2001). Some nations are very impersonal and rational in their dealings while others (Germany) are emotional and show concern for others. On the dimension of specifity versus diffuseness, people are either involved or not with work and family life. For Germany, work and family life are compartmentalised such that home life does not affect work (Brewster & Mayrhofer, 2011; Dickmann et al. 2008). In UK with diffuse culture, there is no division between work and home life. That is why employees work flexible working hours such a compressed week, flexitime, part-time to balance work and family life. Achieved versus ascribed status relates to how employees get to where they are. In UK achieved status is more important thus hard work is emphasised to achieve social status. Education qualifications and good performance thus merit individual status as opposed to Germany where status is ascribed by birth, family ties, or religion; status is given (Hollinshead, 2009). Some countries also believe in luck and external factors rather than formulation of strategic plans to guide the future and also carry out many activities at the same time instead of sequencing work. All these cultural dimensions and institutions have implications on IHRM policies and practices. For example, recruitment in Germany may be based on nepotism due to importance attached to family ties (Hofstede, 2001). They also affect how pay is determined and also the level of employment regulation. Furthermore, they affect how work is organised in different nations. Individualist countries are less likely to entertain team work and put more emphasis on individual work and competition. Corporate strategies are also affected since management depends on prevalent culture (Johnson et al. 2010). The management of multinational corporations poses the greatest challenge. Managers have to decide whether to apply parent country policies or host country policies while dealing with employees due to differences in culture. What is applicable at the head quarters may not apply in a subsidiary in the host country and affirm is forced to adapt (Briscoe et al. 2008). Use of expatriates or international assignments also requires understanding different cultures and understanding of laws and regulations put in place by bodies such as the EU and the host country. This makes IHRM very complex. Conclusion The paper set out to compare and contrast major cultural and institutional features and predominant HR policies and practices in UK and Germany. It compared different ideologies such as neo-liberalism and neo-corporatism found in UK and Germany consecutively. Neo-liberalism is based on market forces in control of the economy thus strong emphasis on individualism and competition while neo-corporatism advocates for government intervention in the market to ensure equity and competition is not encouraged. The national cultures of the two countries were compared using high and low cultural contextual model, Hofstedes five dimensions and Trompenaars and Hampden-Turner’s seven dimensions. Culture and institutional features such as EU affects various aspects of HRM policies and practices such as recruitment, remuneration, team working, decision making, work-life balance, and management of multinational corporations or cross-border operations. References Brewster, C. 2004. 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