HARM Cultural Differences BY Ret-ninth HARM & Change Management Explain the extent, to which various HRS practices work differently (better? ) in different countries. Bring evidence from empirical studies. Increasing research states that HRS practices have different effects in different countries because of institutional/cultural differences. Hence, companies that shape their HRS practices based upon these geographical differences should have better firm performance according to Fey et al. (2008). Fey et al. (2008) made a choice of the five most popular HRS practices in research, being: Performance appraisal
Employee training Performance-based compensation Merit-based promotion Internal communication Selective recruitment, however prominently present in literature, was deemed irrelevant based upon the argumentation that selective recruitment would: “not directly influence affect a firm’s efforts to make employees an effective asset for the organization” Fey et al. (2008, p. 692). This contradicts findings by for example Luau & Wee (2008), that state Chinese firms struggle to realize organizational goals because of government constraints on recruiting qualified personnel.
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Fey et al. 2008) choose motivation and ability as mediating variables between HRS practices and firm performance, perhaps overlooking the importance of ‘opportunity’ companies create for employees. The three countries in the research of Fey et al. (2008) are compared solely based upon the ‘power distance’ dimension by Hefted because this dimension divides the countries the most, this however limits the conclusions found. Regardless of the stated concerns in the model construction Fey et al. 2008) came with the comparison based upon power distance. This division is the following: Russia (high power distance), USA (medium power distance) and Finland (low power distance). Combined with the five selected HRS practices earlier stated, the following differences based upon cultural influence were found. Training Employee training is mostly affected by national institutional differences. In Russia there is a historical lack of capitalist-style business knowledge leaving a need for training and development.
Theoretical knowledge taught in universities does not line up with practical skills necessary in the business environment nowadays, resulting in people not working in the area they studied for, contrary to Finland and the USA. There is however a high motivation by Russian employees to develop themselves according to some research. Fey et al. (2008) therefore state that extensive training have a greater positive effect on the abilities of employees. This statement is supported ATA p < 0. 01.
Performance appraisal Performance appraisals have a tendency to work better in countries with lower power Olsten Like Hanna Ana ten USA, newer employees openly express tenet flews Ana actively participate in goal setting and other relevant discussions. In countries with a higher power distance like Russia, but also China from the study of Luau & Wee (2008), performance appraisal is more difficult. Employees are, in line with societal norms, in general less open in discussions because of an historical fear of oppression. It is thus stated by Fey et al. 2008) that performance appraisals have a bigger positive effect in Finland and the USA than in Russia. However, this hypothesis is not supported at p < 0. 05. Performance-based compensation Fey et al. (2008) discuss the way is which bonuses might be used by employees in the ifferent countries based upon institutional differences. It is argued that in Russia, bonuses are used for more day-to-day consumption like for example additional groceries. This would contrast Finland and the USA, where the bonuses would be used more for savings on the long term.
Hence, it is suggested that performance- based compensation would have a bigger effect on employees motivation in Russia than in the USA and Finland. This is however not supported at p < 0. 05. Merit-based promotion It is stated by Fey et al. (2008) that in countries with a social-market economy like Finland, the labor market is more closed. Job vacancies are often filled by internal promotion and employees have a bigger tendency to remain within one firm their whole careers.
Countries with a social-market economy (primarily Rangeland and Scandinavian) often have a strict legislation that discourages the firing of employees. In Russia, with an open labor market, people switch Jobs almost at the speed of light. It is considered ‘normal’ to have multiple Jobs in Just a few years rather than seen as a sign of incompatibility. The USA lies somewhere in between Finland and Russia. Therefore, it is suggested by Fey et al. (2008) that Merit-based promotion is more important in Finland than it is in the USA or Russia.
This statement is supported at p < 0. 01. According to Fey et al. (2008), the higher the power distance, the less employees know what is going on in different parts of the company, or what the underlying strategy is within the firm that shapes their Jobs. In Russia there is also a institutional factor coming from a historical 'spying' tradition that constructs a matter of secrecy (if this is true it would be interesting to find out what consequences the recent NSA spying candal has upon secrecy in the USA).
Finland, with a low power distance should thus have a more positive response to extensive internal communication. This is supported a p < 0. 05. Summarized, training and merit-based promotion as HR practices thus have the biggest difference among different countries, followed by internal communication at a lower level. Performance-based compensation and performance appraisal are less guided by geographical differences. Extensive training and development of employees would thus benefit Russian subsidiaries while merit-based promotion would benefit Finnish subsidiaries.