American Multinationals MN 7374 International HRM Nik Hammer

Outline What is the role of/how influential are US American MNCs? What are the determining influences that shape international HR practices? US American business system How can we compare business systems? German business system How dominant are US MNCs?

The ‘End of History’?

The US American business system I Firm structure Managerial capitalism (‘separation of ownership from control’); large vertically integrated firms; high centralised managerial discretion and controls of labour; against external influences Work organisation ‘separation of control and execution of production’; deskilling, standardisation Education Weak system of vocational training and education; skill development through mix of formal and informal training; workers are fitted to jobs Labour market Very weak labour market regulation and employment protection; firm-level welfare Industrial relations Unitarist and pluralist approaches; firm-level bargaining, individual negotiation; low trust, adversarial approaches, anti-union campaigns HR strategies Origins of HRM: teamwork; profit sharing and share ownership; performance appraisals,employee rankings, performance-related pay

The US American business system II What incentives does this system create? For managers For workers For organised labour and capital For the state For shareholders

Ease of Doing Business Index (World Bank) A nation's ranking on the index is based on the average of 10 subindices: Starting a business – Procedures, time, cost and minimum capital to open a new business Dealing with construction permits – Procedures, time and cost to build a warehouse Getting electricity – procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse Registering property – Procedures, time and cost to register commercial real estate Getting credit – Strength of legal rights index, depth of credit information index Protecting investors – Indices on the extent of disclosure, extent of director liability and ease of shareholder suits Paying taxes – Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit Trading across borders – Number of documents, cost and time necessary to export and import Enforcing contracts – Procedures, time and cost to enforce a debt contract Resolving insolvency – The time, cost and recovery rate (%) under bankruptcy proceeding https://en.wikipedia.org/wiki/Ease_of_doing_business_index

How much variety is there within capitalism?

‘Varieties of Capitalism’ Highlighting the differences and similarities between different country and region environments Recognising that there is no ‘end of history’ (Fukuyama) and that the world is not tending towards one form of capitalism (US capitalism) Different countries develop different forms of market economy Higher or lower levels of state intervention Not a uniform tendency towards deregulation and minimal state intervention as in the US (and the UK and other countries)

Institutions within societal capitalisms Embedded Inter-linked Economic activities are coordinated across a range of dimensions: Industrial relations Training and education Corporate governance Inter-firm relations Relations with employees Responses in these five areas determine the variety of capitalism

Which ‘varieties’? Liberal market economies Reliance on markets and hierarchies US, UK, Canada, Australia, New Zealand, Ireland, etc. Coordinated market economies Non-market mechanisms as well as market mechanisms Germany, Japan, Korea, etc. BUT Other groupings? e.g. mediterranean countries, emerging economies... Need to pay attention to differences within groups as well as similarities across groups

The German business system I Firm structure Stakeholder model of governance; long-term bank loans and cross-investments; supporting long-term strategies Work organisation Investment in R&D, training, high productivity and innovation > relatively high wages, good working conditions Education Broad based occupational vocational training; dual system (formal class room & on-the-job training); jobs are fitted to workers Labour market Centralised negotiation and encompassing interest representation; social partnership in economic and social policy; relatively strong employment protection legislation Industrial relations Collective self-regulation within framework of law; industry level collective bargaining; dual structure of interest representation (union-sector/industry-CB-strikes <> works council-firm-application of CB-co-determination-cooperation); peace obligation HR strategies Productivity- and quality-based on the basis of minimum wage and working conditions; broad skills allow autonomy as opposed to close supervision; coordinated

The German business system II What incentives does this system create? For managers For workers For organised labour and capital For the state For shareholders

Conclusions ‘Best practice’ vs ‘best fit’ Can we distinguish different effects on HR practices? System Single set of best practices?; widespread diffusion of some specific practices; lean production Society Local embeddedness shapes actual practices Dominance Distinctive US practices related to control dimension of HR practices; Lean production “MNCs configure their HRM practices in response to all three forces rather than to some uniform global best practices or to their national institutional contexts.” (Edwards et al 2013)

Essential reading: Clark I. and T. Claydon (2014) ‘Comparative HRM and responses to global crises’, 531-­568, in Beardwell J. and A. Thompson (eds) Human Resource Management: A Contemporary Approach, 7th edn (London: Pearson Education) Additional reading: McCann L. (2013), ‘Economic and social context: Are there varieties of capitalism What difference does it make to employment relations?’, in Martinez Lucio (ed) International Human Resource Management. An Employment Relations Perspective. London: Sage, 161-­180. Edwards P., R. Sanchez-­Mangas, O. Tregaskis and C. Levesque (2013), ‘Human resource management practices in the multinational company: a test of system, societal, and dominance effects’, ILR Review 66 (3): 588-­617 Almond P., T. Edwards, T. Colling, A. Ferner, P. Gunnigle, M. Müller-­Camen, J. Quintanilla and H. Wächter (2005), ‘Unraveling home and host country effects: An investigation of the HR policies of an American multinational in four European countries, Industrial Relations 44(2): 276-­306.