Human Resource Management

Similarities and Differences in Human Resource Management in the European Union Lisbeth Claus

Executive Summary This study explores similarities and differences in human resource management (HRM) in the European Union (EU). Common factors in the development of European HRM are the importance of consultation, the emergence of flexible work patterns, the role of work and the employer in the life of employees, and the introduction of the Euro. National, company, and regional factors create divergence in European HRM. National factors include societal hierarchy, different cultures and mental models, societal structure, and language. Company factors include size of companies, public versus private, and multinational or local. Regional factors differentiate along north-south and east-west axes. The EU had relatively little impact on HRM in terms of harmonization of labor and tax laws but had major impact on the opening up of markets to foreign competition and privatization of public sector companies. While cultural diversity remains strong, the influence of large multinational companies may lead to more regional integration in the practice of HRM. European HRM is much more comfortable operating in a polycentric mode than U.S. HRM, which seeks universality and standardization. © 2003 Wiley Periodicals, Inc.

INTRODUCTION

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here is a simplistic notion among U.S. HR executives that global companies operating in Europe can deal with European Union (EU) countries as a regional entity. This notion has been reinforced by the growing economic and political unification of Europe resulting in the free movement of capital, goods, and people and ongoing harmonization of EU legislation. Some multinational companies assume that their EU subsidiaries can be managed from a regional perspective through shared HR services and that corporate culture and stanLisbeth Claus is an associate professor of global HR at the Atkinson Graduate School of Management at Willamette University. She previously held faculty and administrative positions at the Fisher Graduate School of International Business at the Monterey Institute of International Studies and managerial positions with Safeway Inc. and Maritz Inc. She is president of the SHRM Global Forum. Her research interests lie in international HR, cross-cultural management, global leadership, global teamwork, and global corporate social impact. E-mail: [email protected]

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dardized HR practices can be imposed throughout their European operations without major consequences. Chris Brewster (1994a, 1994b, 1995), a prolific academic writer on the subject, makes the point that while there are substantial differences between the way human resource management (HRM) is understood and operaA theoretical or tionalized in each country, Europe as a whole has a different practice HR model developed approach to HRM than the United States. in the cultural context of one country should not indiscriminately be applied to another country . . .

Keeping in mind this tension between globalization/standardization and localization/adaptation of HR practices as well as the existence of a distinct European regional approach, this article focuses on similarities and differences of HRM in the EU and explores whether or not there is a European model of HRM leading to greater homogeneity of HRM across the EU region.

LITERATURE REVIEW European authors have acknowledged that HRM originally developed in the United States (Brewster & Bournois, 1991; Brewster & Hegewisch, 1994; Brewster & Larsen, 1992). After taking root in the United States, it spread, first to other nations with cultural proximity, then to more culturally distant countries (Clark & Mallory, 1996). The claim has been made that U.S. HR models have dominated HRM research and practice worldwide (Brewster & Harris, 1999; Harris & Brewster, 1999). European writers (Albert, 1989; Bournois, 1991; Conrad & Pieper, 1988; Gaugler, 1988; Guest, 1990; Hendry & Pettigrew, 1990; Legge, 1989) have been critical of applying American HRM views to other countries, especially Europe. Such criticism is entirely valid. A theoretical or practice HR model developed in the cultural context of one country should not indiscriminately be applied to another country without testing the cultural biases of its assumptions. While the hegemony of U.S. influence in HRM has been criticized, there is also a particular fondness among some European HRM academic writers (at least those who publish in English) to compare and contrast European with U.S. HRM (Brewster & Bournois, 1991; Brewster & Hegewisch, 1994; Hegewisch and Brewster, 1993; Pieper, 1990). Brewster and Bournois (1991) posed the following question as a point of departure to justify such a comparison, “To what extent is there sufficient similarity in Europe to require us to question whether there may not be significant differences between 730

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HRM in Europe as a whole and the United States of America?” (p. 34). The comparison points out that in Europe, HRM is less dependent, companies have less autonomy and freedom of action, trade unionism is more important, the social partners have more influence, legal regulations are more important, and there is a stronger tradition “There are of employee involvement. Brewster and Hegewisch (1994) push the identifiable comparison between European and American HRM even further and differences justify the existence of a European HRM model based on these dif- between the way ferences. They conclude that, “There are identifiable differences in which HRM is between the way in which HRM is conducted in Europe and that of conducted in the United States, a difference which allows us to speak of a Europe and that European form of HRM . . .” (p. 5). Brewster and Bournois (1991) of the United also speak of two paradoxical trends that run through HRM in States, a Europe. On the one hand there are clear country differences that can be understood and explained in the context of each national culture difference which allows us to and its manifestations in history, laws, institutions, and employee speak of a organizations. On the other hand, there is an identifiable difference European form between the ways in which HRM is conducted in Europe versus the of HRM . . .” United States (p. 47). Brewster has made an important contribution in pioneering the notion that there is a European HRM tradition distinct from others. He must be credited with being the first to attempt to develop a “European” model of HRM distinct from existing U.S. models. His European HRM model locates organizational issues within sectorial (organization size, structure, culture) and national influences. He also spearheaded the development of a large body of empirical comparative HR research across Europe (Brewster, Hegewisch, & Lockhart, 1991). However, according to Clark and Mallory (1996), Brewster’s European model has four main problems. First, talking about European HRM is an example of reductionism that fails to take into account the cultural diversity of the European nations. Second, Brewster overestimates the level of autonomy enjoyed by HR managers and organizations in the United States. Third, his model is potentially culturally conditioned (as he uses the Anglo-American literature) and inherently ethnocentric (as he perpetuates the view that American notions of HRM can be found to a greater or lesser degree in other countries). Finally, Brewster’s most critical problem is that he does not take into account divergent understandings in different national settings. Responding to his critics, Brewster (1999) later revised his position and shifted his viewpoint from a European HRM

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model to the existence of “models” depending on the paradigm used. This led him to consider a juxtaposition of a “universalistic” paradigm to a “contextual” paradigm. The universal paradigm uses a monothetic approach and tends toward acceptance of convergence while the contextual paradigm is ideographic and seeks to understand differences based on context.

A number of authors talk about Europe as clusters of countries with similarities.

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Another crucial question that needs to be answered is whether one can talk about Europe (i.e., speak of it in a universal manner), or a clustering of various countries with similar characteristics, or whether one must consider Europe as a set of highly diverse and particularistic countries. The HRM literature is mixed regarding this issue. Laurent (1986) pointed out that every culture has developed through its own history specific and unique insights into the management of organizations and their human resources. Pieper (1990) asserted that a single universal model of HRM does not exist. Clark and Mallory (1996) questioned whether it is valid to talk of a European notion or model of HRM given that the nations of Europe do not share a common set of cultural characteristics. They suggested using a polycentric approach in developing an alternative model for understanding European HRM. They argued that the nature of HRM and the type of practices that will predominate in a particular nation would be the result of three factors: the international institutional context, the national culture, and the national institutional context. Sparrow and Hiltrop (1994) opposed any European model of HR and asserted that one can only speak of “HRM in Europe” because of the marked differences in HR practices between European countries. They stress the role of four major dimensions (cultural factors, institutional factors, differences in business structure and system, and factors related to the roles and competencies of HRM professionals), further divided into 23 factors, resulting in distinctive national patterns of European HRM. This HRM model is, so far, the most elaborate theoretical and conceptual framework developed to compare national differences in HRM. A number of authors (Brewster & Larsen, 1992, 2000; Clark & Mallory, 1996; Filella, 1991) talk about Europe as clusters of countries with similarities. A problem with clustering countries is that different researchers use various criteria to cluster and come up with different country configurations. Clark and Mallory (1996) suggest that three factors account for the allocation of nations to particular clusters: (1) geographic and cultural proximity, (2) language; and (3)

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religious traditions. Other authors (Bures & Vloeberghs, 2000; Cazal & Peretti, 1992; Clark & Pugh, 1999; Fenton-O’Creevy, 2001) focus more on differences in European HRM than on similarities. In spite of divergence among HRM practices throughout Europe, there are also some signs of convergence as a result of globalization, the American influence, and the impact of the EU (FentonO’Creevy, 2001). The most important converging factor is thought to be as a result of the EU. In recent years, the EU has been constructing a European “social model” of people management through its European social policy and employment legislation (Teague, 1994). Through its directives and recommendations, the EU is streamlining HR practices related to health and safety, gender equality, employee involvement in work council participation, parental leave, etc. The European Social Fund plays a major role in addressing asymmetries within the EU such as structural unemployment, youth unemployment, and socioeconomic disparity issues (Matthews, 1997).

The most important converging factor is thought to be as a result of the EU.

The literature review supports the duality put forward by Brewster that, on the one hand, there are distinct differences in the way HRM is viewed in the different European countries and, on the other hand, there are clusters of similarities and a European identity that makes HRM specific to the region. This has led to attempts at developing a European HRM model. The development of such a European HRM model is attractive to facilitate the understanding of the complex legal, cultural, and structural factors that determine the practice of HR in Europe. The search for a European model is even more attractive when one considers the growing structural, political, and legislative unification trends of the EU and the importance of European countries as business partners for countries worldwide. In addition, a number of recent societal changes (such as the recession of the early 1990s, the relatively high level of structural unemployment, the fall of the Berlin Wall, and the break up of the Soviet Union) have affected Europe and the practice of HRM. Europe, like other countries and continents, cannot ignore the people management pressures resulting from globalization and increased international competition. For Europe this is coupled with the burden of its protective legislation and the aging of its demographic structure. All these factors make the search for similarities and differences in European HRM a worthwhile endeavor that can facilitate international business ventures with European or multinational companies located in the EU.

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CONCEPTUAL FRAMEWORK Unfortunately, much of the current research on European HRM has an ethnocentric bias, dominated by British, French, and/or German views and practices with the exception of a few researchers, who have Unfortunately, used more polycentric or comparative approaches, and the labor relamuch of the current research tions literature, which has always emphasized the importance of national institutional differences. The models on European HRM on European have generally not taken into account the paradigms of European HRM has an countries other than the big three (United Kingdom, France, and ethnocentric Germany). There seems to be an inherent bias that nothing worthbias . . . while happens in HRM in the remaining 12 EU countries. Literature reviews on European HRM have mainly focused on English publications (sometimes German and French publications are reported as well). As a matter of fact, most of the references cited in the literature review of this article are Anglo-Saxon as well. The Anglo-Saxon bias in the literature review is due to the fact that most academic HR journals that are published in the various European countries in the local country languages are unavailable in libraries outside of their countries and are not readily accessible through electronic periodical database searches. A systematic review of the HR literature in the other eight languages of the EU (Danish, Finnish, Flemish/Dutch, Greek, Italian, Spanish, Swedish, and Portuguese) is missing, unavailable, in a language not understandable for most readers, or simply assumed to be non-existent. In addition, most data collection for Europe-wide HR research projects was either done in English or using instruments translated (and back-translated) from English. Sparrow & Hiltrop (1994) noted that differences between societies can be explained by cultural factors (a form of cultural reductionism) and must be modified to consider the interaction between the cultural norms, legal institutions, and underlying economic factors. Therefore differences in HRM(s) would most likely be the result of the interconnection between the culture and structure of a particular society. Such a particularistic view of HRM fits the sociology of knowledge frame of reference suggesting that knowledge and practice develop in a broader context (i.e., the cultural and structural elements of a society). The context of this research assumes that there are three macrocomponents that influence HR development in Europe: the international institutional context of the EU, the national cultures, and the national structure of each country. Discovering the path of European HRM(s) and their similarities and differences can only be done meaningfully by viewing its practice from a multi734

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cultural and multilingual perspective and taking into account the broader societal context in which professional HRM practices emerge.

METHODOLOGY “An international comparison of HR management is no easy undertaking” (Gaugler, 1988). The research viewpoint utilized in the Euro-HRM project is that cross-cultural and international research cannot be reduced to empirical comparisons of data from different countries without attempting to understand the broader context. A similar assertion was made by Boxall (1995), who argued that credible explanations in comparative HRM cannot be built on simplistic methods and statistical databases but must be connected to the socioeconomic outcomes. Cross-cultural research must be multilingual and undertaken with cultural savvy, and it should also utilize a variety of methods (quantitative and qualitative) and data (primary and secondary). In addition, each method of data collection must be scrutinized for ethnocentrism. The Euro-HRM project was based on the “Monterey model,” a heuristic model used in the training of global professionals at the Monterey Institute of International Studies. The Monterey model requires the integration of professional competency in a discipline (in this instance HR), language skills (the various languages of the EU countries), and cross-cultural knowledge/savvy (the various cultures of EU countries).

Cross-cultural research must be multilingual and undertaken with cultural savvy . . .

Data on the current status of Euro-HRM were obtained by conducting a naturalistic inquiry in each country and a review of selected local country articles and/or theses written on the development of HR in a particular country. A total of 50 leading European HR experts were interviewed in 14 different countries of the EU. These leading HR practitioners, academics, consultants, heads of HR professional organizations, and influencers in each country were considered privileged because they were in an exceptional professional position to witness the development of HRM in their respective countries. Selection criteria for being considered a key witness included HR prominence in their country, recommendations by the head of the country’s HR professional organizations, and referrals from other prominent HR experts. Although many of the countries have a wider set of “HR experts” than could possibly be included in this research, the interviewees were among the leading “HR experts” who had been in a position to witness and be part

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of the development of HR as professionals in their respective countries. Among the 50 HR experts from the 14 different countries who participated in the interviews, 21 were senior HR professionals (directors and vice presidents of HR), 11 leading HR professors, nine consultants, and nine influencers (staff of professional Concerns with this methodology HR associations, HR journalists). were two-fold: Would a selection of different people being interviewed and the use of different field workers following this open enquiry method produce different results and place the findings of the study in question?

Eleven fieldworkers were selected from two graduate schools of the Monterey Institute of International Studies (Fisher Graduate School of International Business and Graduate School of International Policy Studies) to conduct the field interviews. Selection criteria to be considered as a fieldworker included nativelike language proficiency, knowledge of the culture of the country, and at least one graduate-level course in the following three subjects: human resource management, international organizational behavior, or cross-cultural management. Fieldworkers completed training sessions focusing on the scope of the Euro-HRM research, the interview protocol, data collection techniques and the use of the data templates to report the data. Almost all fieldwork was done during the last two weeks of May 2000. When fieldworkers were on assignment in the various European countries, they stayed in touch with each other and the principal investigator through an online e-group. This enabled them to jointly problem-solve fieldwork issues that arose during the data collection period. All interviews were conducted in the language of the country and almost all interviews were done face-to-face on location. Interviews were audiotaped in the original language and transcribed and translated into controlled English. Each in-depth interview, based on an interview protocol, lasted approximately two hours. A few interviews were conducted over the telephone because the interviewee was not available at the time of the summer fieldwork. HR experts also supplied fieldworkers with local HR documentation and additional support material. Fieldworkers prepared a summary of their fieldwork in English and were involved in follow-up discussions with the principal investigator to ensure accurate interpretation of the responses to the questions. Concerns with this methodology were two-fold: Would a selection of different people being interviewed and the use of different field workers following this open enquiry method produce different results and place the findings of the study in question? While acknowledging that the methodology could reduce the validity of the findings, a number of factors were taken into consideration to safe-

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Table 1. List of HR Experts Interviewed for the Euro-HRM Research Country

HR Expert Interviewed

Austria*

Peter Gusmits, H. Neumann International Management Consultants Susanne Herles, Konzerns Service und Beratung GMHB Rudolf Krenn, Wiener Stadthalle Betriebs-und Verantstaltungs GMBH Wolfgang Mayrhofer, Wirtschaftsuniversität Wien Belgium Daniel Bastin, SmithKline Beecham Luc De Decker, HRMagazine Willy Musschoot, Management Consulting François Pichault, University of Liège Marc Van Aken, Glaverbel Daniël Vloeberghs, University of Antwerp Denmark Ann-Charlotte Hasselager, Ledernes Hovedorganisation Henrik Holt Larsen, Copenhagen Business School Peter Moller, Novo Norsisk A/S France Nadia Alard, Eligia Sylvie Cresson, Gras Savoy Jean Fombonne, Author of doctoral thesis on HRM in France Sophie Luneau, Gaumont Jean-Louis Mutte, Anderson Consulting Germany Dieter Claus, Schwarzkoph & Henkel Hans Böhm, DGFP Michael E. Domsch, Universität Bundeswehr Hamburg Marcus Heidbrink, Kienbaum Management Consultants GMHB Werner Opgenoorth, Beiersdorf AG Greece Gavrillidis, Hellenic Fabrics, S.A. Dimitris Hatjopetrou, Forum Management Consultants Stella Ksitoriti-Kufida, University of Macedonia Dimitris Vrontos, Greek Personnel Management Association Ireland Peter Mulholland, Allied Irish Bank Italy Ruggero Cesarea, IRSO Sandro Ciani, Parma Giovanni Costa, University of Padua Luigi Di Marco, Milano Luxembourg Bernadette Froment, Luxguard Netherlands Mechteld Nije, Deloitte and Touche Portugal Pedro Croce Rivera, CIMPOR Rui Mora, Practitioner Carlos Moura, APGTRH Maria-Joao Safara, Consultant Spain Roberto Carballo, Universidad Complense de Madrid Alberto Fernandez Caveda, Madrid Ricardo Esteban, Griker & Associates Carmen Gomez de Ureta Merino, DNA Consultores Antonio Gonzales Suarez Bustamante, Dragados Gonzalo de Lucas Ruiz, Aedipe Alberto Fuster de Carulla, Aedipe Sweden Marie Hallander Larsson, Scandic Hotels Lennart Ryden, Pharmacia & Upjohn United Kingdom Chris Brewster, Cranfield School of Management Lesley James, Tesco Judy Whittaker, CIPD *Affiliation is at the time of research (Summer 2000).

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guard for this bias with regard to interviewers and interviewees. No single individual would be able to amass the cultural and linguistic savvy to conduct the comprehensive study in nine different languages and 14 different countries. In-depth preparation, fieldwork communication, and post- fieldwork debriefing were intensive. Fieldworkers practiced interviewing skills and gained familiarity with the pre-established standardized research protocols before going on location. The issue of whether the interviewees were selected appropriately and whether different interviewees would have produced different results can only be ascertained at face validity. For the smaller countries (excluding the United Kingdom, Germany, and France), there is no doubt that the interviewees were the leading HR experts in their country. For France, Germany, and the United Kingdom, due to the availability of a wider range of experts, the decision might have been more subjective.

FINDINGS The in-depth interviews with HR experts sought to analyze the following broad issues: (1) Are there important issues an outsider should know about HRM in particular European countries? (2) Is there a European HR model or are HRM models country-specific? (3) What is the impact of the European Union on HR? and (4) What similarities and differences can be discerned in Euro-HRM? HR country experts had no trouble indicating what specific matters outsiders should be aware of regarding HR practice . . .

Important issues an outsider should know about HRM in the EU countries

HR country experts had no trouble indicating what specific matters outsiders should be aware of regarding HR practice in their country or when setting up an HR practice. While answers were different from country to country most responses focused on, in order of importance, local labor laws, unique national cultures and subcultures, labor relations, social institutions that are specific to the country, consultation with social partners, and the need for localization of HR practices. In spite of different examples given in different European countries, there was general agreement among HR experts that these factors defined consistently the unique nature of HRM in their country and for Europe as a whole. Laws. HR experts indicated that it is paramount to know the intri-

cacies of the country’s laws that govern employment and labor relations. As a result of complicated labor legislation and regulations in most EU countries, the early background of HR professionals tended to be technical and law-related. Respondents strongly recom738

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mended the need for using “local” experts to ensure compliance with country laws and regulations and their implementation. That labor laws differ from country to country is nothing new. What is interesting is their uniqueness in spite of EU directives and the trend toward harmonization of labor and employment laws. As laws are a . . . the EU, as a reflection of the culture and the result of the institutionalization of political and values, norms, and codes of conduct, the EU, as a political and eco- economic union, nomic union, has not yet managed to tackle the harmonization of has not yet local labor laws. managed to tackle the harmonization of national culture (and subcultures) is embedded in value dimensions local labor laws.

Culture. Each country has its unique culture and language. The

that govern individual and social behavior and affect the corporate culture of companies. In spite of increased travel, the multilingual skills of the workforce in many European countries, and structural opportunity for labor mobility within the EU, European workers tend to have relatively low labor mobility and hold on to their country’s cultural roots. The cultural impact on management and HR is well-documented in the management literature. Two Dutchmen inspired most of the debate (Hofstede, 1980, 1991; Trompenaars, 1993). HR experts emphasized that importing HR practices that are counter to the culture of the country or imposing standardized practices without localization are seen as counterproductive and imperialistic. Several examples of the lack of cultural savvy by U.S. companies came up over and over again; such as the use of 360-degree evaluation as a means of performance appraisal, U.S.-style diversity management (with a race and gender focus), implementation of non-smoking policies in the workplace, office layouts in cubicles, and the introduction of casual dress days. U.S. companies are imposing uniform standards in their European operations on relatively trivial issues (such as smoking, office layouts, and dress code), but these issues have strong cultural implications for Europeans. In fact, there are only limited attempts to transfer more important essential elements of a successful U.S. business culture (for example, the focus on entrepreneurship and innovation) to their European subsidiaries. Similarly, local HR practitioners in European subsidiaries of American companies are often forced to focus on national and provincial factors, because the legal and cultural issues are so different from U.S. practice, and they are not always given the opportunity to participate in strategic issues at the Pan-European or global corporate levels. Subcultures. Within countries, there are different subcultures that affect

HR. They are based on differential economic development, urban versus rurally located companies, linguistic differences, and company size. Thunderbird International Business Review • November–December 2003

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The most interesting example of subcultures in Europe can be seen in Belgium where HR in Wallonia (French-speaking) is very different from HR in Flanders (Flemish-speaking). HR in Belgium developed along drastically different lines in spite of common Belgian labor legislation and tax systems. The professionalization of Flemish HR is considerably . . . in spite of more advanced than HR in Wallonia, mainly as a result of the differenthe same tial economic and social development of the country. In addition, the Belgian legal HR frame of reference is very different in both Belgian subcultures. In context, HR Wallonia, the HR model is based on syndicalistic and collectivistic practices and notions, while in Flanders people management tends to be based more reward systems on entrepreneurship and individualistic concerns. Hence, in spite of the follow different same Belgian legal context, HR practices and reward systems follow difpaths based on ferent paths based on the linguistic and regional subcultures (Claus, the linguistic and Vloeberghs, & Pichault, 2002). regional subcultures

Labor relations. As a result of globalization and privatization, the power

of trade unions is considered to be decreasing overall in Europe. Spain, however, is bucking the trend as union membership has actually grown significantly. While labor relations are still very important in defining HR practices, labor unions in the EU are in the process of reinventing themselves. Labor unions have strong political and national allegiances. Due to strong cultural, historical, and local solidarity, labor relations are being defined on a country-by-country basis rather than at the European level. In general, labor relations in Europe tend to be cooperative rather than adversarial as compared to the United States. Labor unions in the EU remain legitimate partners in the consultative process between employers, employees, and the government. Labor unions in the various EU countries have worked very hard to affect labor legislation. They have been successful in promoting laws for the protection of the workers in their respective countries as well as at the EU level. By the same token, their success has given rise to a specialized HR expertise within companies to deal with compliance with these laws. As a result, unions may have created a professional HR force functioning as a spokesperson for management rather than for employees. Institutions. Each country has developed a set of institutions that reflects

their tradition and that influences the way HR is practiced. The nature of these institutions also differs from country to country. Of particular interest in the EU is the development of strong and well-evolved social security systems (based either on the German Bismarck model or the British Beveridge model). While the entitlement of a vast array of employee benefits is guaranteed under these systems, there is an abundance of discussion as to the economic viability of providing these gen740

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erous benefits to an aging population in view of global competitiveness. However, the idea of a social safety net is deeply engrained in European society and strongly supported by the social policy of the EU. Other important institutions and structural differences that affect HR in the EU are education, political systems, religion, demography, family, and various social and administrative/regulatory organizations. Consultation. In general in Europe, there are formal consultation pro-

cesses in place that allow greater involvement of employees and trade unions in the company’s decision-making processes. These consultation practices are institutionalized in the important EU directive on work councils. HR in Europe is very often more consultative toward management rather than controlling. As a result, HR is often more reactive, paternalistic, and administrative rather than top-strategic.

Importing HR practices from abroad without localization has little chance of successful implementation.

Need for localization. Importing HR practices from abroad without

localization (to the culture, laws, or language of the country) has little chance of successful implementation. European HR practitioners are reluctant to adopt foreign models of HR for practical as well as ideological reasons. The European reaction of “malicious compliance” comes to mind, when global companies are imposing “foreign” HR practices without adapting them to local cultural norms. In spite of this reluctance, global companies seem to be adopting more and more standardized initiatives. In summary, HR experts recommend paying attention to local labor laws, the local cultures and subcultures, the importance of labor relations, specific institutions shaped by the country’s history, the importance of consultation, and the need for localization of HR practices. These factors constitute the major differences when “European” HRM is contrasted with HR in the United States. Does Euro-HRM Exist?

Although the idea of a European HRM model had been suggested in the literature review, the HR experts interviewed for this study almost unanimously agree that there is no European HRM model but that there are multiple ones operating in different countries and within countries. When probed, respondents most often reasoned that a lack of a Euro-HRM model was due to the broadness of cultural differences among countries. European societies are an amalgamation of countries founded on different social, cultural, religious, and ethnic solidarities. While there is no European model yet, HR experts indicated that, especially in large multinational companies, the strategic

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Are we heading toward a European model?

global HR model is gaining influence as a corporate cross-border HRM model. Respondents agreed that if there is a European HRM model, it is really a “global company” HRM model of multinational companies operating in the EU. This global HRM model is heavily influenced by the best practices of the large European and American multinationals. The U.S. HRM model is also promoted through university education, best-selling management publications (often translated into the different European languages) and leading U.S. HRM experts who are frequent speakers at European HRM professional conferences. The role of multinational companies is especially felt in smaller countries such as Belgium, Luxembourg, the Netherlands, Greece, and Portugal where many local companies in recent years have become subsidiaries of larger U.S., French, or German international companies. While professional HR functions, processes, and competencies might be more or less similar around the world, Euro-HRM practices still consist of a multitude of different methods in which these functions are implemented. These differences are based on nation, company, and industry characteristics. Although the Social Programme of the EU has provided a number of directives in the area of employment, training, and development funding to reduce structural unemployment, its impact on HR is minimal as of yet and has not led to the harmonization of national employment and social legislation. Are we heading toward a European model? There is no doubt that with increased communication and the integration of information technology in HR services, HR tools will become more similar across Europe. Especially in the areas of leadership, HR scorecards, competency management, and knowledge management there have been great developments in harmonizing the tools that aid managers and enable them to reinforce this European trend. HR experts indicated that blue-collar workers in the various European companies tend to respond more to local patterns while managers adopt global management practices faster. They anticipate that, unlike in the management arena, there will not be a lot of change for the blue-collar sector in the next decade. The management function is becoming more standardized across Europe as a result of teamwork and interactions with colleagues from abroad in other parts of global companies. Similar tools and models are already being utilized across borders within the same company. Globalization, technology, and economic cycles might be far more effective in developing a “global brand” of HR, although cultural differences will remain strong, and legal as well as cultural localization of HRM practices is necessary for operating in the EU countries.

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HR experts predicted that for large companies operating across borders, the local management models might be replaced by a global model that shows great similarity with the European and U.S. models of the multinational companies. For senior management positions, this trend is already underway in Europe. The corporate global HRM model seems to be outpacing the EU in the area of harmonization of HR practices.

For countries that had not yet met these The Impact of the EU on HR standards, the Respondents perceive the impact of the EU on HR to be minimal at the EU directives had local/national levels. This does not lessen the significance of HRM in a positive effect the EU. The implications for HR of belonging to the EU are mainly on HR.

related to the free movement of labor resulting in the ability of employees to cross borders for employment opportunities. While borders are disappearing, allowing for the free movement of people, there has been relatively little noticeable change in cross-border migration of workers mainly due to cultural factors. With regard to labor legislation, the EU has mainly kept in place the local labor laws of the individual 15 member countries. There is a legal and regulatory employment framework in the EU through its directives. As of yet, there are only a number of EU directives that relate to employment, and there is no real harmonization of HR legislation or equalization of social and tax systems. EU directives related to employment can be found in a number of areas such as health and safety, vocational education and training, gender equality, employee involvement and participation, and unemployment. Many EU countries were already performing at a higher standard than the EU directives required. For countries that had not yet met these standards, the EU directives had a positive effect on HR. For example, in Greece, improvements in health and safety were obtained through the EU’s financial support incentives for safety and health training programs provided by the European Social Fund. Prior to their entrance into the EU, countries like Greece were often not included in many labor statistics and employment studies. This had a positive impact on Greece and helped to increase its national presence and pride.

The EU’s most important impact on HR relates to the economic and political consequences of creating an economic and political union. The EU had repercussions for companies and indirectly for HR. The impact of the EU is also felt by more established members (such as the United Kingdom), as a result of the recent entrance to the EU of countries like Portugal, Spain, Greece, and Austria, which caused the labor market to open up for competition with the availability of cheaper labor. The newer EU members were also affected by the implementation of the EU directives (i.e., updating their employment laws) and/or upgrading their standards to levels set by the EU directives. Thunderbird International Business Review • November–December 2003

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As one respondent said, “An HR manager does not really spend time reading EU directives.”

They, in turn, often benefited by receiving financial aid from the European Social Fund for training and development. Overall, the impact of the EU was perhaps felt most through deregulation of the public services and the development of social policy in the area of employment. To remain competitive, a more competitive and customer-oriented business model and, consequently, a more appropriate people management model were needed. However, according to the HR experts, the impact of globalization and the growing internationalization of companies were perceived to be much greater on the development of the value-added HR model than the creation of a Single European Market. The EU impact is not just through directives on working time or equal opportunity. It is much more about the opening up of markets and the introduction of foreign competition. The true impact on HR of the Single European Market can be seen in sectorial adjustments, increasing firm size and concentration, and the development of European firms (Hendry, 1994). The HR impact is felt much more on maintaining productivity, restraining labor costs, and increasing quality standards due to competition. In addition, the largest European companies (in terms of number of employees) tend to be public service companies such as utilities, railroads, and postal services. The EU has put a lot of pressure on the public sector to privatize. These indirect effects through the economic and performance changes brought about by the EU have been much more significant for HR than the European Union’s Social Charter, social programs, and employment-related directives. As one respondent said, “An HR manager does not really spend time reading EU directives.” In summary, despite the development of the EU, there is no European model of HR. While there may be a common context in European HR that distinguishes it from U.S. HR, the lack of harmonization of labor legislation and the cultural diversity result in country-specific HR practices. The EU’s greatest impact on HR lies in deregulation, privatization, and the resulting increase in competition. The impact of the global company model seems to be more important in the standardization of HR practices than that of the EU.

SIMILARITIES AND DIFFERENCES IN EURO-HRM According to the respondents, there are fewer similarities in HRM in the EU than there are differences. This, again, points to the absence of a genuine Euro-HRM model. 744

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Similarities in Euro-HRM

Although countries differ in how they go about HR services, HRM functions can be considered to be universal. While there is no European HRM model, respondents admit that there are characteristics that make it distinct from HR in other continents. Similarities in European HRM are the importance of consultation, the emergence of flexible work patterns, the role of work and the employer in the life of employees, and the use of the Euro as a common currency. Consultative approach. European HRM is more consultative in its

approach than U.S. HRM and requires a collaboration between different stakeholders as social partners (management, employees, unions, and governments). This collaborative model is institutionalized in the EU directive on consultation.

Although countries differ in how they go about HR services, HRM functions can be considered to be universal.

Temporary work and flexible work patterns. A recent development in

the EU countries is the growth of flexible work structures and temporary work patterns. The emphasis on temporary work structures has developed as a response to reduce structural unemployment (especially youth unemployment) and has led to a greater emphasis on competencies and polyvalence. In addition, the focus on work-life balance calls for more flexible work patterns. Role of work and the employer. There is a different mentality in the EU countries regarding the role of work and the employer. Employees consider social benefits as entitlements and work-life balance as an acquired right. The employer is responsible for the employee and has to, in a sense, “take care of” and “care for” the employee. Although the importance of a social safety net is acknowledged throughout Europe, social policies and social security benefits are significantly different from country to country. Benefits packages have core elements that are similar across the EU but they vary based on local laws, entitlements, and traditions. The use of the euro. The use of the euro as a common currency is

more than just a symbol of European unification. While compensation and tax systems are far from harmonized in the EU, the Euro provides greater transparency for employees in compensation, benefit matters, and purchasing power. Differences in Euro-HRM

HR professionals must deal with very different realities based on the context of the country and the businesses in which they operate. Thunderbird International Business Review • November–December 2003

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Factors that create differences in HRM in different European countries are both nation- and company-based.

Factors that create differences in HRM in different European countries are both nation- and company-based. National differences in HRM are mainly based on the extent to which there is hierarchy in the society, the different cultures and mental models, strong labor and social legislation incorporated in vastly different national laws, regulations, and different tax systems. Company factors relate especially to the size of the companies, public versus private sector, and multinational versus local companies. Finally, some regional differences are clustered around the northern/southern and eastern/western European axes. National factors. National factors creating divergences in Euro-HRM

are: (1) hierarchy; (2) cultures and mental models; (3) societal structure; and (4) languages. First, hierarchy and power distance in the society are especially relevant in creating differences in work and management practices. As illustrated by Hofstede’s (1980) research, each nation is different in the function of its cultural characteristics. The United Kingdom, the Netherlands, and the Scandinavian countries have a rather dim view of hierarchy and are more equality-based, while France, Germany, Greece, and Portugal are more status-based, thereby making it difficult to build a flat organizational structure. Second, the different cultures and mental models, such as collective/syndicalism versus individual/developmental models, impact the competencies needed to be an effective HR manager. The HR manager working in the individual/developmental model has a hard time operating in the collective/syndicalism model because it requires working in collective management, building relations with trade unions, having knowledge of the labor laws and union practices, and possessing strong negotiation skills and political intuition. In contrast, in the individual/developmental environment, the HR manager must possess personal skills and human relationship skills (such as sensitivity, curiosity, and attention to individual expectations) and a willingness to engage in dialogue. The practice of HR is also embedded in various social models that are operating in Europe. This study identified the existence of an Austrian social peace model (where harmony is sought between the various stakeholders), a Dutch social justice model (that accepts the interventionist role of the government to provide social protection in employment), a Belgian social compromise model (requiring give-and-take among the representatives of different political, linguistic, and religious factions in decision making), a Swedish/Danish social equality model (based on the Janteloven concept of “Thou shalt not be better than anyone else”), a German co-determination model (with employee involvement and

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participation in the company), a Luxembourgeois consensus model (with tripartite representation of labor, management, and government), an Italian ideological model (emphasizing protection and solidarity based on Christian and Marxist values), and a French centralized administration model (a more authoritarian, legalistic, and administrative approach). These social models have considerable impact on how the management-employee relationship is construed and the skills the HR professional needs required to operate within the appropriate country model. Third, a structural component affecting HR is the strong labor and social legislation incorporated with vastly different national laws and regulations. In addition, each country has very different individual and corporate tax systems affecting the total compensation and reward systems that can be offered to attract, retain, and motivate employees. Fourth, languages play a major role in creating differences in European HRM. In some European countries, people are proficient in multiple languages. In other countries (such as France, Austria, and the United Kingdom), people have more limited linguistic capabilities. Smaller countries often have a cultural reference point (e.g., Germany for Austria and Luxembourg; France for French-speaking people from Wallonia and Luxembourg). In European countries with smaller populations, where the native language is not a world language (e.g., Denmark, Luxembourg, Belgium, Netherlands, and Greece), people often learn several other languages through their formal education. Multilingual HR professionals (often from smaller countries) have an advantage over people with a dominant country language (such as English, French, and German). They are in a position to tap into another cultural reference base. HR professionals from smaller countries have the capacity to integrate the knowledge (HR and management) they acquire into their own practices and adapt it as needed. In most cases, for HR the reference language is English and the reference country is the United States. Therefore, inspiration comes mainly from the United States and less from other EU countries.

. . . each country has very different individual and corporate tax systems affecting the total compensation and reward systems that can be offered to attract, retain, and motivate employees.

Company factors. Company factors creating divergences of Euro-

HRM are: (1) size of companies; (2) public versus private sector; and (3) multinational versus local companies. The first company factor creating divergence in HRM is the size of European companies. The majority of companies in EU are small or medium-sized. The number of employees working for the largest Thunderbird International Business Review • November–December 2003

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5,000 employers in Europe range from as low as 1,960 employees to over 1 million. Only 41 European companies have more than 100,000 employees and only 888 companies have more than 10,000 employees. The large employers in the different European countries Smaller firms do tend to be in the public rather than the private sector. Another factor that influences HRM is that although some companies might have a not have the small number of employees at the local country level, they belong to critical mass a large global or multinational company. European integration of and cannot HRM is possible for large companies, but the small and mediuminvest in HRM sized enterprises still have the one HR administrator that is allocated and HR to the controlling/accounting department. Smaller firms do not have development in the critical mass and cannot invest in HRM and HR development in the same the same manner as large and multinational corporations. However manner as large these companies can, because of their small size, often avoid countryand multinational specific regulations and the imposition of the EU directives (such as corporations. having a work council if they have a certain number of employees). Within a particular country, there is not one model of HR but there are large-company, small-company and start-up/new company models. In the large company, HR is well established with modern systems. In small companies (often family-owned), there is an owner/leader model based on mutual trust relations. In start-up companies, there is a global new economy model with limited hierarchy and a focus on entrepreneurship and rewards. The second company factor creating HRM divergence relates to whether companies are in the public or private sector. Up to the mid1980s, in most EU countries, there was strong governmental influence in the area of HR through government-owned businesses, state subsidies, and the support of the local economy. Public sector companies were controlled by the state and labor relations were the basis that influenced HRM. The public system was effectively connected with monopolies (telecommunications, electric and gas power utilities, railways, and postal service). Lack of customer orientation was a trademark of these companies. This resulted in noncompetitive business sectors, bailouts of failed businesses by the state, and an emphasis on the unionized public employee model of lifelong employment, extensive social benefits, and compensation based on seniority. The political nature of the business in many European countries was so deeply rooted in the society that it was taken for granted. With the entrance into the EU, privatization of public companies became the norm. Compared to the United States, the EU still has a much larger proportion of public to private sector employment. The industrial sector also produces variations in HR practices between and within countries. 748

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The third company factor creating HRM divergence is related to multinational versus local companies. Multinational companies have a global model that is the closest to becoming an accepted “universal” model. The corporate culture of these European and American global companies is based on attracting and retaining the best Companies that employees, building customer relations, developing employees, and work Europecreating a winning corporate culture of empowerment and accountwide have ability. Companies that work Europe-wide have pushed for European pushed for or even global integration so that the HR tools and instruments at European or least fit with each other. A good example is the European expatriaeven global tion compensation for EU workers. Global companies have a tenintegration so dency to abandon the expatriate and special compensation packages that the HR tools for their European expatriate employees and espouse a European and instruments integration standard. Foreign firms with subsidiaries in EU countries at least fit with use the firm’s global model and adapt it to the constraints of the local each other. country (mainly legislative, tax, and social requirements). Multinationals can have a differential impact on local HR depending on the degree of integration of the HR organization: They can bring in more competitive value-added HR systems and practices and transfer knowledge to local HR components (as was the case in Belgium, Spain, and Greece). Or, they can limit the ability of the local HR professional to adapt corporate policy to the complexity of the country’s legal constraints (as was often the case in Luxembourg). A new HR model is evolving, and it is based on the forma mentis of the global company with an emphasis on practices such as strategic visioning, development and execution of the people strategy, HR administrative capabilities, emphasis on customer service in meeting employee expectations, competency development, and change management. Regional differences. With regard to HRM, Europe is divided into

north-south and east-west regional differences. Awareness of the importance of people management is much more pronounced in the northern than in the southern countries. But, there is an increased awareness in the south of the importance of HR professionalization. Although certain countries (Greece, Italy, Portugal, Spain, Austria, and Luxembourg) are considered behind in HR, they are all quickly catching up with the more advanced HR countries. Several of these countries (especially those who recently entered the EU) are receiving assistance from the European Social Fund for HR development and for bringing their standards in line with the EU directives. The Cranfield studies (Hegewisch & Brewster, 1993) have identified differences in HR practices between the European countries on a variety of dimensions (from devolvement of HR services to line

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management to performance appraisals). Some north-south generalizations are, that the level of participation and co-determination increases form southern to northern countries and that the hierarchy flattens from south to north. In the long run, the north-south difCommon trends ferences are expected to decrease with greater HR interaction and the proliferation of global company models. Common trends and simiand similarities larities should become more important in HR in the future in spite should become more important of the current legal, cultural, and tax divergences. Although the integration of the new Eastern German Länder into unified Germany was in HR in the a German-specific issue requiring a German way of responding, it future in spite of opened Europe’s frame of reference to the East. The integration and the current legal, entering of new markets in eastern Europe called for a more cultural, and tax European or global HRM model. Certain EU countries, such as divergences. Germany, Austria, and Greece are becoming focal points for the Central and Eastern European neighboring countries. With the eventual entrance of many of these countries to the EU, their HR reference might become more Euro-centric rather than national. The north-south regional groupings suggested in the literature have been borne out by this study with culture being the main differentiator. In addition, an east-west axis is emerging as a result of the increased interest of “Western” European companies in “Eastern and Central” European markets. The main east-west differentiator is the country’s level of economic and business development. However, the recent proliferation of HR professional associations in the Czech Republic, Hungary, Latvia, Poland, Slovakia, and Slovenia (with memberships ranging from 55 in Latvia to 960 HR practitioners in Slovenia) is another testimony to the growing business and HRM development in these countries.

CONCLUSIONS This study focused on similarities and differences in HRM in the countries of the EU and the impact of the EU on HR practice. In general, similarities in Euro-HRM lie in greater employee consultation with different stakeholders, the role of work and leisure in people’s lives, the development of different work patterns, and the introduction of the Euro as a common currency in the majority of EU countries. Although the role of unions is changing, they remain an integral partner (with the government) in the Euro-HRM scene. Creating differences in European HRM are national, company, and regional factors. National factors include societal hierarchy, different cultures and mental models, societal structure, and language. Company factors include size of companies, public versus private, and 750

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multinational versus local companies. Regional factors differentiate along north-south and east-west axes. A major obstacle to Europeanization is the lack of harmonization of labor and tax laws. The EU had relatively little impact on HRM in terms of harmonization of labor and tax laws but had a major impact by opening up marA major kets to foreign competition and privatizing public sector companies. obstacle to The unintended impact of the EU on HR is the need for competitive Europeanization labor in terms of cost and competencies. In spite of the market is the lack of demand for intellectual capital and the pressures for competitiveness, harmonization of the EU reinforces the social model of employment. That model is labor and tax deeply engrained in European societies and variations can be found laws. in different countries. HR does not exist as a uniform practice in the EU. Instead, the way standard HR services are delivered represents a collage of different practices. There are no differences in the basic HR functions (such as recruiting, selection, compensation, benefits, training, labor relations, employee relations, etc.) in Europe, but the context in which HR services are delivered is vastly different from country to country. Variations in HR practices are mainly due to the different employment/labor laws and the national cultures and the organizational context of the company. As a result, in the EU countries HR can be many different things on a continuum from personnel administration to very strategic HR and people management. Macro forces that shaped the development of HR in the past and present require that HR adapts its practice to the legal, economic, political, social, structural, cultural, ideological, and technological context of the country. It is difficult to gauge the development of HR because professionalization characteristics (such as body of knowledge, licensing, ethics, and professional organization) are value-laden Anglo-Saxon notions. Multifaceted indicators must be used to ascertain whether HR is more or less developed in a country. They should include structural variables (such as size of company, economic sector, privatization, and legislation) as well as cultural indicators impacting management. A clear tendency is that HR in the EU is moving away from personnel administration to strategic HR, and might move from national to European and global HR as a result of the impact of global companies. The HR dominance of the larger European countries and companies headquartered in these countries (such as France, Germany, and the United Kingdom) is evident. However, due to their own nationalistic tendencies and ethnocentrism, they might not be the HR trendsetters in Europe. The U.S. HRM reference point is very important and American companies (by being large global compaThunderbird International Business Review • November–December 2003

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nies) are large employers of EU citizens through their European subsidiaries. Furthermore, small European countries often have an HR advantage over the big European three by being more open to foreign influences and flexible in implementing and integrating new HR practices. This study has found highly developed HR bodies of As a result of globalization, the knowledge and advanced HR practices in small countries like the “global company Netherlands and Belgium. Because of their global mindset, foreign language capabilities, lack of notoriety on the global HR scene, and HR model” contact with multinational firms, HR professionals in these countries clearly were in position to absorb, synthesize, and integrate outside HR overshadows the influences in their own country practices. Companies in smaller development of countries are, however, more vulnerable when it comes to HR a Euro-HRM because their companies are both smaller and family-owned (with litmodel. tle or no HR function) or have been swallowed up by foreign companies and lost their HR autonomy. As a result of globalization, the “global company HR model” clearly overshadows the development of a Euro-HRM model. This model is based on “labor competitiveness” and the need for value-added HR. It also pushes for the development of standardized HR practices within a company across borders and worldwide HR shared services. The standardized HR model does localize to comply with country legislation but largely ignores the necessary cultural adaptation. While the desire for standardized HR practices is attractive for global economies of scale and scope, they cannot eradicate or ignore the strong identification of people to their cultural and national roots. Due to the strong legal, cultural, and institutional differences from country to country, there are dangers for a company that operates throughout Europe in managing HR in different regions. If HR is to add value to the company, failing to take into account the impact of culture as well as structure on people management will not result in positive well-being and productivity for the employee. HR in Europe is positioned more as a link between the well-being of individuals and the competitiveness of the company. Balancing both requirements is a major component of HR’s strategic role in Europe. Globalization has a much further reaching consequence on the HR profession than probably any other external force since the end of the industrial revolution. It has engendered a series of mergers and acquisitions between European and U.S. companies and pushed for the privatization of public companies, free trade, and greater competitiveness. Combined with technological and communication capabilities, companies need teams to function across borders and cultures 752

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and work together to achieve global objectives. All these factors have focused executive attention on the value of the workers’ knowledge and competencies, accountability, and productivity as well as the need to understand the local culture and structure in which people operate. While cultural diversity remains strong, the influence of larger multinational companies may lead to more regional integration in the practice of HRM. It is interesting to note that while U.S. HR professionals may not have specific knowledge of HR in the various EU countries, Europeans do not have a clear understanding themselves of HR in their neighboring countries. The reference for HR in many European countries is the United States. For multinational and global companies there are solid HR networks within companies that allow for knowledge-sharing of HR best practices. There are also well-established academic ties through research cooperation and teaching programs. As the context of HR throughout Europe is being subjected to structural and business changes, looking for similarities and differences may be too simplistic a way to grasp the many factors that create the context of HR in the different countries. European HRM lives more comfortably in a polycentric mode than U.S. HRM that seeks universality and standardization. Differences based on cultural and structural factors are accepted as a way of life in Europe despite the overarching infrastructure of the EU. What might be lost by the economies by organizing a “global” HR function of a company operating in different EU countries could be gained in creativity, innovation, problem solving, and productivity of the culturally diverse Europeans. As U.S. HR has generally espoused diversity of people in employment practices and internalized its benefits, global companies should consider adopting diversity of HR practices within their European operations with the same resolve.

It is interesting to note that while U.S. HR professionals may not have specific knowledge of HR in the various EU countries, Europeans do not have a clear understanding themselves of HR in their neighboring countries.

ACKNOWLEDGMENTS The author is grateful for the comments, insights, and suggestions provided by her colleagues through the journal’s peer review process. The Euro-HRM research project was supported through a grant from the SHRM Foundation and made possible through the participation of the following fieldworkers: Andrew Berdy, Rebecca Busich, Diane Castro, Carsten Eldrup, Robert Hector, Laurent Kounouho, Natanya Myers, Dounia Nouini, Morena Petrich, Lisa Sandblom, Jeroen Van Hijfte, and Astrid Ziebart. Their support is gratefully acknowledged.

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