You are on page 1of 13

Introduction An in depth study was conducted by Steger T. et. al.

(2009) on the institutionalisation of Human Resource activities of German multinational companies in their Russian subsidiaries. There have been many studies on the importance of role of human resource practices play in the subsidiaries to maintain an order according to parent companies. An impressive amount of research on different aspects of joint venture operations and several recent studies on HRM practices in foreign subsidiaries of multinational corporations (Beechler and Yang, 1994). Globalization and economic openness/free market economy continuously opening up new market opportunities and multinational corporations (MNCs) are continuously expanding businesses everywhere in the world. As markets in most of the developed countries are already saturated, MNCs are now looking for developing and emerging economies. This leads to forming subsidiaries in foreign countries. This study is to explore how institutionalisation of HRM activities goes on in the Russian subsidiaries of German companies. The study is carried out by collected data through conducting interviews based on a conceptual model developed by authors. The data is collected in nine case studies in which responses from expriaets and local employees of subsidiaries are taken. The data analysis is done and it is found that there are four patterns in which institutionalisation are done. Institutional theory is a theoretical lens that has been widely used to study the adoption and diffusion of organisational forms and practices. The basic thesis within the institutional perspective is that organisations are under social influence and pressure to adopt practices-such as HRM--that are viewed as being appropriate for the situation Purpose of Paper This paper aims to review the study conducted by Steger T. et. al. (2009) their journal. This paper critically analyse the methodology and findings of the above mentioned journal. The subject is important as it focus on the various factors which come into play when a company has to institutionalise the HRM activities in their foreign subsidiaries. Study of these factors can help in finding out how they are affect the process and results can be influenced by altering these factors. This can help companies to form policies for their subsidiaries in other countries where the situation is similar to Russia in transformation states. As human resource management student this study will help in understanding how multinationals works in foreign national in relation to their HRM practices. It helps in understanding the behaviour of

employees and expatriates at workplace. Following are the objectives of this study

To what extent the human resource practices are adopted by German companies in their Russian Subsidiaries? What are the factors that influence the level of adoption of these German style HR practices in Russian subsidiaries? How the expatriates and employees working are affected by such incorporation of German HR practices into Russian working environment?

Conceptual Issues Traditionally international HRM has been about managing an international workforceexpatriates, frequent commuters, cross cultural team members and specialists involved in international knowledge transfers (Schuler R. and Jackson S., 2007). This study extends this to finds out how the HRM practices and transferred to subsidiaries in foreign countries. The transfer of human resource practices, Kostova and Roth (2002) note that in institutional theory a key perspective is that organisations sharing the same environment will employ similar practices. The HRM practices implemented in foreign affiliates have received much interest among international HRM scholars. It is framed their analyses in terms of institutional theory and examined how host country regulatory, normative and cognitive institutional processes influence the HRM practices of foreign-owned subsidiaries. In spite of the important contributions of this stream of research, however, little is known about the extent to which high-performance HRM practices are found in foreign subsidiaries across countries. First, rather than examining actual subsidiary practices, most researchers have relied on perceptual measures of the degree of similarity between MNC subsidiary practices and those found in local firms and/or the MNC parent company. Little effort has been made to examine the influence of MNC subsidiary factors on their HRM practices. Fourth, researchers have been repeatedly urged to include groups of organisational actors that may influence the selection of organisational practices and structures in their analyses of institutionalisation processes The transfer process does not end with the adoption of the formal rules describing the practice, but continues until these rules become internalised at the subsidiary. Indeed, a successful adoption depends upon the degree of institutionalisation of the HRM practice at two levels (Kostova 1999, Kostova & Roth 2002). The first level is at the implementation stage when employees simply follow formal rules. This is a relatively shallow level that is

often used to support the concept of HRM convergence (Rowley & Benson 2002). A second, and deeper level is internalisation. This stage is reached when employees have commitment to the new work practices, and acquire perceptions of ownership of the newer work arrangements (Kostova 1999). This latter phenomenon is a less readily visible form of transfer and more difficult and time consuming to research. On the one hand, it may be relatively easy to implement a regime of standard operating procedures, but on the other hand much more difficult to internalise certain practices. Therefore, even if these are 'best practices', they may not bring positive results until people become fully committed to them (Rowley & Benson 2002).

Implementation and internalisation, although different, are likely to be interrelated. Implementation is a necessary condition for internalisation. However, implementation does not automatically result in internalisation. It is possible, that although a practice may be formally implemented and its rules strictly followed, the employees do not internalise it by developing positive attitudes towards the practice. For instance, the employees may disapprove of the practice or some of its aspects, or they simply may not have had the time to develop a positive attitude towards the new work arrangements (Kostova 1999, Rowley & Benson 2002). However, one study of MNEs and their international subsidiaries found that that those subsidiaries that reported lower levels of implementation also perceived themselves to be more dependent on their parent company (Kosova & Roth 2002). These authors argued that the implementation of an organisational practice typically requires some adaptation and modification of the practice at the recipient unit. Units that are less dependent on the parent organisation may have greater freedom and flexibility for making these adaptations and vice versa. Hence, the inverse relationship between dependence and implementation emerges. Closely linked to the question of transfer is the discussion of convergence versus divergence. First, if transfer without adaptation was found to be successful, HRM would converge towards HQ policies and practices. Second, if there was either little acceptance without adaptation, or a downright rejection of some elements of HQ policies and practices, a case for divergence could be argued (Rowley & Benson 2002). Third, if policies were transferable without adaptation, and practices needed significant adaptation, then attention needs to be given to the element that translates policies into practices. Finally, crossvergence, a form of

convergence towards something new that is a blending of various ideas and practices, might be expected in some cases , Fisher & Haertel 2003). Change at any one level does not automatically imply change at another level. Often, people at practice levels resist guiding principles or policies, as they may be unworkable due to local customs and practices, lack of training or even ignorance. At the policy level, operational practices may be tolerated, but not built into policy or philosophy due to ignorance or wider environmental constraints (Rowley & Benson 2002). Universal 'best practice' effects would be expected at the policy level. At the practice level, however, divergent phenomena would be more likely. Therefore, the issue of transferability and convergence of HRM systems becomes more a matter of degree, not of kind, and less about 'all or nothing' and more about 'what aspects and how much' in respect to choices (Dickmann 2004). Nevertheless, with an expectation of converging policies and diverging practice implementations the role of the translator of policy into practice becomes more crucial, because without effective translation of a policy, the risk of transfer failure, that is transferring policies to which few pay attention, becomes greater. For the purpose of this study, translation, application, implementation or deployment of a policy into practice is understood to be roughly the same and the general term used is translation of a policy into practice. In short, there are many difficulties in examining the issue of HRM transfer. A key question is not whether particular practices are being adopted, but at what levels they are implemented and internalised, and what are the limiting factors.

Institutionalisation of HRM practices A conceptual model is developed for the transfer and institutionalisation of HRM activities in subsidiaries. This model has six boxes categorising the factors. The process itself is influenced by contextual factors, organisational factors, and personal and social factors established around the expatriates. The first box shoes the strategy and power of German parent company. These factors are division of power and orientation of parent company towards the subsidiary. The process is influenced by strategy that is formed by parent company for subsidiary. The box two is about the expatriate and various factors related to him which influence his management of HR practices in the subsidiaries. This is his position in parent company and subsidiary. Foreign own subsidiaries may under formal or informal pressure from local institutional agencies to adopt certain HRM practices, there may also be taken for granted for example those of MNC parent organisation that are unconsciously introduced in the subsidiary (Westeney, 1993).

Next box considers the transformation countries and factors related to them such as culture of countries, the size of company. It consists of things like transformation is done on micro or macro level and the organisational contingencies. The box four looks at the modes of transfer that could be coercive, mimetic or professional. The way HRM practices are taken in the company depends a lot on the mode. The fifth box is about what happens in the process of institutionalisation. For example rules are first accepted and adopted by local employees. The processes of transfer, adaptation, modification, re-interpretation, re-combination, re-creation, or even emergence of HRM practices are therefore influenced by actors intentions and personal interests. The last box considers the patterns of HRM activities in the subsidiaries.

Model of Cross national transfer of HRM practices in MNCs One more model in this context is (Liu, 2004) is shown in above figure. A theoretical model of the cross-national transfer of HRM practices in multinational corporations. This model integrates the significant research on transferability, transfer mechanisms, effects of transfer, and reverse transfer to produce a comprehensive analytical framework. A three-fold analysis

of transferability is presented to include national, company and HRM practice level. The transfer mechanisms are categorized into direct and indirect methods. The analysis of reverse transfer is not only a complement to the forward transfer but also an important part of the integrated model. The model reflects the complexity of cross-national transfer HRM practices in MNCs. The propositions presented and suggestions for future research serve to aid further practical studies. This model is quite similar to the model developed in this study except this model is developed in bigger context which include all kinds of MNCs. All the terms in this model can be recognised as corresponding to first model. This is commitment and satisfaction of expatriates is considered in influencing the HRM practices. The national and company level factors include the similar things that are studied in model one. Difference is that, this model also considers the practice level factors like characteristic of innovation and characteristic of knowledge. More or less other factors are same as studied in model one.

Model of the role expatriates in the international diffusion of HR practices The third model spans the interaction of expatriates with both the parent company and the subsidiary. Main dependent variable is the diffusion of HRM practices, mainly from parent to subsidiary. For expatriates to play a key role in the diffusion of HRM practices, they must have a ready knowledge and experience of the parent company's HRM practices. One of the

determinants of the diffusion of HRM practices is the context of expatriation from the perspective of the parent company. In particular this includes the type of subsidiary control by the parent, the parent's international orientation and pattern of globalization, and the mode of subsidiary staffing. This context determines the belief the MNC has in its HRM competence and the degree to which expatriates are transferors of HRM practices. Another determinant of the diffusion of HRM practices is the context of expatriation from the subsidiary's view point. Our model emphasizes the role of the subsidiary, the dependence of it on parent HRM relogical Titles and the cultural and legal distance between parent and subsidiary. This context determines the perceptions of host country nationals (HCNs) regarding expatriates and thereby their willingness to interact with them, to trust them and to commit to a shared vision. The expatriates are at the center of the model. The model indicates that two distinct forces, one conveyed by parent company management, the other by the subsidiary's locals, significantly influence the expatriate's impact of the diffusion of HRM practices. This impact is shaped by the expatriate's role discretion, and his or her intercultural interaction. Methodology The nine case studies are used to find out what are the factors that have been influencing the institutionalization of HRM activities. In this research the actors and company documents are analysed. Expatriates and employees, behaviour of parent company and its strategy is actively observed. The deductive approach is used in which conclusion is made from and results of interviews in workplace based on the conceptual model framework developed by authors. Interviews were designed to collect a problem related information and some additional information from participants. The data in each case study was categorised based on the above mentioned conceptual model. This method intends to test the model. It follows data collection which delivers findings that model. The Paradigm of the research follows the interpretivism approach in which purpose of study is to improvement in way HRM activities are carried out in subsidiaries are carried in foreign countries by parent companies. Blaxter L. el at. (2001) suggests that a research methodology is composed of the underlying paradigm and approach used within a project, as compared to research methods which applies to the specific techniques of data collection. The findings of this study would be able to benefit the German parent companies in Russia as well in other developing regions in implementing the HRM effectively.

Data analysis is done in four steps in which data is categorised in model categories, and then case studies condensed separately. These case studies also got checked for similarities and differences, ultimately reaching to the four patterns of institutionalisation process of HRM activates in these subsidiaries. The method of carrying out the research used by authors is quite reliable and productive as information collected through interviews and active observation. The advantage of such interviews was that participants were able to express their own views in addition to the questions asked. Interviewer is able to form a rapport with respondent Language used in interviews was their first language so; they would have understood the questions correctly. However, sometime interviews cannot provide the very correct information as these answers are momentary or influenced by recent happenings. According to McBurney D. & White T. (2010) the presence of interviewer creates a social situation that may result in biased responses. Moreover there are only nine case studies which is quite small sample size. The significance of deductive approach used here is that this has ensured the coherence of knowledge. The analysis is impartial, predictive and allows remote comparisons using this method. The deductive approach pays attention towards the details and contradiction. The interpretivist paradigm of research is suitable for the social researches. This paradigm attempts to analyse the fact in a systematic way with an open mind so that there are no biased interpretations. The interpretivist is suitable for the social researches as there are number of variables associated with social life which are very difficult to control in combination with the dynamism of social world. Thus this paradigm is able to generalise the findings of this research into the four patterns of institutionalization. Thus a combination of this deductive approach and interpretivist paradigm has resulted into significant findings. Key Findings The results of interviews and data analysis have lead authors to the form of four patters of institutionalisation of HRM practices. The First pattern is in which HRM practices are considerably Russian as expriates in them are in Russia for long time. The Russian practices are continued in them rather than institutionalisation of parent company. This is mainly due to the expriates who does not much career ambition and is at top level. In process of institutionalisation also he is not building any facades towards the parent company and act as translator for it. Parent company try to

convince the subsidiary smoothly to adapt. Activities are Russian and environment at workplace is pleasant for local employees. But if it does not perform well there can be radical change in parent companys policy about the subsidiary. In second pattern the HRM practices are adopted from parent company and are far more German. Expatriates have much less experience in Russia. Employees perceive them not their part but a delegate of parent company. He has ambition in his career to go up in Russia. There are lot of transfers going on in this subsidiary. In this pattern also he does not build facades towards parent company. Infact, the leadership of parent company is quite strict. If performance falls there is possibility that parent company can send new expatriates. The third pattern reveals that the HRM practices are forced to be of German Style as they need in these cases. In this pattern the expatriate is brought into the Subsidiary in times of crisis. He is rather new in company but know about Russian values. There is influence of his career ambitions. Local employees build a faade towards him as they know he is going to be future of company. The leadership of style of parent company is strict to enforce the order for handling the crisis. Though practices are enforced to be German, it is not sure that they remain there for long time as it is not grounded in framework. In the fourth pattern, practices are mix of Russian and German Style. Expatriate is at medium level both regarding his career ambitions and experience in company. He tries to find a middle path for conflicts. The local employees consider his as one of them and like his flexibility. The characteristics of the subsidiary have an impact on the diffusion of HRM practices from the parent company through their impact on locals and their interaction with the expatriates. The interaction between expatriates and locals is pivotal for the diffusion of HRM practices. Indeed it is arguably the most important part of our model. The attitude of parent company is also mix of exploitive and explorative and takes situational leadership style. Sometimes expatriate do build faade toward the parent company when it is needed. The orientation of parent company can change towards subsidiary if it not perform according to expectations. In all of above findings it can be seen that the there is much influence of expatriates values, perceptions, career stage and ambition and reputation in parent company. These things are playing key role in kind of HRM practices followed at workplace. They are the carrier of

parent companys practices in the company. Their position in the parent company and communication with it is affecting the institutionalisation process. The orientation of parent company and success of activities also affects practices. In the nine cases observed as well as with the four patterns of processes, it was found some rather different forms of how to deal with the parent companys directions. It became apparent that these different patterns of behaviour are also consequential for the implementation and further development of both management culture and organisational culture in the company. As demonstrated in pattern 1, the activities of expatriates with strong references to Russia and long-term country-specific experiences may result in a far-reaching separation of the subsidiary from the parent company as well as in a locally adapted corporate culture of the subsidiary. Those practices gain authority through the fit with the expectations of their immediate environment and through the high acceptance the expatriate receives herein. In this study all major factors which influence the HRM practices at a subsidiary are considered by the researchers. These factors parent company orientation, expatriates, stage of subsidiary life cycle, established order and mode of institutionalisation. Thus it can be seen that all major and important factors are covered in carrying out the research. There could be many other minor factors which affect the process but taking all of them in account is not feasible.

Contribution to knowledge This research made some theoretical implication. It suggests a qualitative process analysis which makes it to somewhat simple by developing a model though the institutionalisation of HRM practices in subsidiaries is perceived highly complex as well as very dynamic. This complex process is been explained here with the help of conceptual model which breaks down and categorises the factors. This makes it easy to understand and further study can be initiated with the help if this model.

The responsible management is well advised to ground and support important decisions with the help of scenarios and other instruments of strategic planning. It suggests that the modality and pace of transfer and implementation of HRM practices should be well considered. As it has been demonstrated in our case studies, those processes include some distinctive long-run consequences that can hardly be revoked later. The role and impact of expatriates and their characteristics, such as personal values and orientations as well as career ambitions, on the development and success of foreign subsidiaries is also highlighted by this research. It approves the fact that the selection of an expatriate who will be charged to establish and run a foreign subsidiary must be considered as of strategic importance by the responsible HR management. Also, the high relevance of HR development in the subsidiary should not be underestimated since it deals with the question about what kind of personnel the subsidiary will need in the future. It also makes suggestion that, HR development concept must be well adapted on the one hand to the overall HRM strategy pointed out above and, on the other hand, to the diverse other HRM activities (e.g. remuneration policy and organizational culture) developed in the subsidiary. Finally, the possible changes of business strategy in the long-run have to be taken into account as well. Conclusion This article has attempted to develop an analytical framework for examining the process of transferring HR practice internationally within multinationals by looking at the incentives, the contents, the mechanisms, and the results of the transfer in turn. This study is revealed some undetected factors which is influence the HRM practice at subsidiaries and introduces with their importance. It also throws light on the many shortcomings of earlier researches and tries to fill gap between the reality and their findings. It helps in understanding some important organisation behaviour related to human resource management in multinational companies. This concept is of importance as in the era of globalisation where an employee has work in global environment. Employees get chance to move from one place to other or one country to other where cultures are quite different at workplace. This study helps in understanding how and what influences the HRM practices when they are transferred from one country to other country by a parent company. This study can be helpful for such influences on institutionalisation of HRM activities not only for German multinationals in Russia but in other developing countries also.

References

McBurney D., White T., 2010, Research Methods, 8th Edition, Cenage Learning, England Beechler, Schon, and John Yang, 1994 'The transfer of Japanese-style management to American subsidiaries: contingencies, constraints, and competencies'. Journal of International Business Studies 25/3: 467--492. Liu W., (2004) "The cross-national transfer of HRM practices in MNCs: An integrative research model", International Journal of Manpower, Vol. 25 Iss: 6, pp.500 517 Randall S. Schuler, Susan E. Jackson, 2007, Strategic human resource management, Blackwell Publishing, Australia Blaxter L., Huges U., Tight M., 2001, How to research, Open university press, London