The relationship between human resources (HR) practices and organisational performance has been widely studied during the 1990s. Ann Bartel (1994), for instance, suggests that training programs contribute to labour productivity in the manufacturing sector. Mark Huselid (1995) evaluated the relationship between “high performance work practices” and organisational performance, and found that innovative practices increase employee commitment. Thus, human resources management (HRM) practices contribute to labour productivity and organizational performance. But does this apply to an international HRM context? In other words, how does successful training in multinational corporations (MNCs) contribute to performance?
It is important to underline that good organisational performance involves not only profitability, but also employee satisfaction. Glenn Llopis (2013), corporate executive and entrepreneur, defends that apart from genuine investment in professional development employees appreciate employers who value their workforce. This employee ‘appreciation’ is reflected by work-life balance programs, pay and benefits system and safe working conditions. A company with good employee relations (ER) treats all employees fairly and consistently, which leads to higher employee satisfaction.
Pay, work-life balance and benefits are often negotiated between companies and trade unions. However, the role of labour unions has reportedly lost its value today. For this reason, the final part of this assignment will discuss whether collective bargaining is effective today and if trade unions are in fact an important factor in international HRM. This constitutes an important answer to the question “how does successful employee relations, from an international HRM perspective, contribute to organizational performance?” The concept of employee voice will be broadly mentioned; as it is as an efficient way to value employees’ opinion and enhance their participation and involvement in organisational decision-making.
The assignment starts with definitions of concepts, such as HRM and international HRM; components of international HRM; HR functions and approaches to their implementation; and strategic HRM. Then, the structure of the essay comprises a discussion of the importance of two functions towards organisational performance and analysis of different case studies.
How does successful international human resources management contribute to organisational performance?
It is believed that the first HR practices in History date back to ancient armies, where soldiers needed good organization and command from their leaders. Today, HR activities, when properly executed and applied, have great value in business. As noted by professor Storey (1992), different interpretations of HRM have created two schools of thought: soft and hard models of management.
The soft model involves employee training, commitment, development and participation, while hard HRM is associated with strategy, and where human resources are used to achieve a company’s goals. From David Storey’s point of view, HRM is “a distinctive approach” to management of the workforce. It seeks positioning the company in a favourable business position “through the strategic deployment of a highly committed and capable workforce”, using of a range of “cultural, structural and personnel techniques” (Storey, 1992, p16). Importantly, the definition implies that the employee is an asset for the organisation. Thus, HR and their effective management allow the organisation to grow and perform successfully.
In different decades, western businesses had specific management issues and main HR activities and concerns. Shari Caudron and Jennifer Laabs developed a timeline of HRM, representing its evolution. According to the authors, during the 20s the primary concern of HR was “employees’ individual differences”, thus main activities included “employee counselling and psychological testing”. In the 50s, main concern was “employee participation”, whereas in the 90s was “workforce changes and shortages”. Therefore, during the 90s HR managers placed greater focus on “planning, employee rights, training, flexible benefits and computerization”. Today, HRM is rather strategic and internationally oriented. Strategic, because people are managed taking into account long-term business goals, and internationally oriented because of the phenomenon of globalization.
According to Brewster et al. (2011), resourcing, performance management, reward management, training and development (T&D), and employee relations (ER) are the five functions of HRM. The key, from a strategic point of view, is executing these functions in a way that long-term goals of the company and employee needs are simultaneously promoted. However, there are a number of approaches regarding the implementation of HR functions. As explained by Brewster and colleagues (2011), they are “best-practice, best-fit and resource-based view”. The strategic direction of a company builds and helps to decide on the most suitable approach to its HR activities.
A notable piece of research on best-practice approach by Patrick Wright and Timothy Gardner shows that organisations can experience financial growth with the implementation of high-performance or progressive HR practices, such as performance-related pay, work-life balance and employee involvement. In other words, this approach sees certain practices as best in order to encourage high performance and commitment. Best-fit, contingency theory or, as defined by Tom Redman and Adrian Wilkinson (2009), “matching model”, enhances the impact of external forces on internal practices. This approach focuses in aligning HR activities with situational factors. And the resource-based view enhances resources that give competitive advantage to the organisation, including people.
In addition to strategy, HRM relates to cultural awareness and internationalisation. HR managers need to be competent to work with international workforce and possess broader knowledge (e.g., international labour legislation). Brewster and colleagues structure international HRM into three components or lenses: cross-cultural management, comparative HRM and international HRM. This particular essay will look at T&D and ER from an international HRM perspective, because case studies involve the way MNCs execute HR practices after deciding to “go global”, and needed to adapt and/or implement new HRM activities.
In today’s work environment, organisations should train and develop their workforce continuously. As suggested by Zheng, Hyland and Soosay in their paper “Training practices of multinational companies in Asia”, training and developing employees gives competitive advantage to companies. It ensures that knowledge, attitudes and skills necessary to achieve organisational objectives are well-known. Investing in training leads to quality workforce and contributes to labour productivity. Also, employees become more confident of their capabilities and worth as professionals; and this leads to increased job satisfaction and greater flexibility during organisational change. T&D is a source of competitive advantage especially today, when economies have greater demands regarding the skills of the workforce.
For example, a sales company might want to train its sales representatives to upsell, so that they can support organisational growth. The company Hormel Foods, as stated in their 2015 corporate responsibility report, provides formal training on policies and procedures concerning human rights and a total of 26 hours of training per employee, related to their level of responsibility and expertise. The organisation defends that their training program supports their “tradition of fostering long-term employment”. Hormel Foods’ high-quality training resulted in several recognitions and awards, such as “best company to sell for” and “best place to work for recent graduates”. The focus on T&D can also be described as a strategic move, because ensures consistent employee performance and complies with corporate social responsibility in the market by providing training on human rights.
Early research has found that companies need training programmes in order to remain internationally competitive. According to John Bishop, participation of newly hired employees in training programs results in “increased productivity” and employees are more flexible and adaptable to change. In 1994, Ann Bartel linked T&D to productivity within the manufacturing industry, and found significant increases in labour productivity after implementation of formal training programs. However, these results are implausible.
Higher levels of productivity could be linked to higher wages, given to more skilled workers, and not a direct effect of developed T&D programs. In any case, if trained employees increase organisational productivity, they may also lead to the internationalisation of the firm. Global presence creates opportunities for learning, development and training of employees on cultural matters.
While the previously analysed papers explained T&D during the 1990s, the present essay explores recent data from MNCs that operate today. T&D sustains companies’ decision to ‘go global’. For example, the Portuguese multinational Amorim Group (cork business) recently held a conference called “HR Challenges within Strategic Internationalisation”. The CEO, Antonio Rodrigues, defended the increased need for an international mind-set. HR professionals need to be culturally aware, and adopt an approach able to respond to the needs of today’s global market.
Rodrigues stated the emergence of being internationally coherent as a business and take into account management of people across borders (Henriques, 2015). Logically, it includes T&D of the workforce. Currently MNCs focus on language training, international management teams’ development and T&D of expatriates. Employee training also enhances innovation, creates organisational learning and increases profitability. Its contribution to organisational performance of MNCs is more than obvious.
Companies aiming to go global also need to learn institutional differences between countries, especially regarding employment relations. From an institutional analysis, ER concerns the relationship between labour (employees) and capital (employers), with involvement from the state (and regulatory bodies). According to Chartered Institute of Personnel and Development (CIPD), ER is a much wider interpretation than industrial relations which involves individual and collective relationships at the workplace. Brewster and colleagues give a broader definition:
“Employee relations concerns matters of overarching employment or collective workforce policy, bargaining, the governance of employment relationship by social actors and arrangements for the distillation and expression of the collective voice of employees.” (Brewster et al, 2011, p95).
Positive employment relations contribute to enhanced labour productivity and job satisfaction. For this reason, employers should pay attention to tools and mechanisms that foster good relations. For example, effective approaches to employee voice include joint consultations, two-way communication and project teams. CIPD’s factsheet states that an informal environment leads to higher employee satisfaction and commitment to their job, than “collective consultation machinery”. A company where every employee feels that his/her voice is heard, and their working and personal needs are cared about, is naturally more productive and less propitious to conflict, as well as more committed to their job.
Table 1. Employee Involvement and Participation, regarding scope and depth. Source: Abdulai and Shafiwu, 2014.
Workers should have some power in a company’s decision making. In order to enhance employee engagement, organisations should enable systems that empower employees’ contribution to decision making. Lack of employees’ participation leads to lack of commitment, job dissatisfaction and negative labour-management relationships. The present assignment will look at representation of employees through trade unions. As it can be observed in table 1, it constitutes a method of indirect employee participation. Employee participation does not imply unity of purpose between workforce and management; oppositely, employee involvement dismisses representation channels such as trade unions, but it is also perceived to be a softer form of participation.
Labour unions negotiate with organisations on workers’ behalf and constitute a representation channel of employees at the industry and institutional levels. The assignment will now look at the specific case of China, which explores the influence of trade unions on employment relations; the case has been considered especially interesting, as the characteristics of the Chinese regime allow observing the three-way relationship labour-capital-state. Importantly, it will define the role of labour unions in the country, including institutional matters and the contribution of trade unions to employment relations (and to organisational performance). It is considered an important area of study, knowing that MNCs have to be aware of the regulatory scope in where they operate overseas.
In 2012, Zhao et al. completed a comparative study of the automobile and banking industries in China. It involved an evaluation of HR practices in five companies, in order to find characteristics of the employment relations within these sectors. The study has found that China’s transition from a closed and planned economy to a socialist market economy brought several challenges to HRM. The main players in the Chinese auto industry were “state-owned enterprises” and “joint ventures with large automotive producers from East Asia, Europe and America”.
All organisations are subordinate to one association – All China Federation of Trade Unions (ACFTU). Originally, it was responsible for workers’ education and major decision-making, as well as determining working conditions, wages and benefits. There was no need for unions to do the bargaining. At the moment, trade unions possess a more independent role, but they still need to promote interests of the state. This leads to the following dilemma, expressed by Ying Zhu and Stephanie Fahey:
“On one hand, unions are expected to represent the workers’ interests; on the other hand, they have to work for the collective welfare of the enterprise, as well as for the general interests of the workers and the state” (Zhu & Fahey, 1999, p. 185).
This led to disputes among researchers regarding the effective protection of workers’ interests in China. It has been found that recent reforms in Chinese HRM resulted in more flexibility in working hours and greater bargaining power for employees. Some researchers on this topic defend that employees perceive managers to be most responsive through direct and non-union voice mechanisms.
Oppositely, a study by Lu, Tao and Wang (2009) found that the involvement of trade unions leave a positive effect on labour productivity. The authors defend that unions contribute to “better employee benefits, increased signing of formal employment contracts, and hence more harmonious employment relations in China’s private enterprises” (Lu, Tao & Wang, 2009, p. 15). The paper has also found that some large MNCs are more receptive to unions in China than in the home-country or in other regions of the world. For example, according to Meyerson (2004), Wal-Mart deviated from its usual anti-union position and announced that it would respect workers’ decision to form a union in China. The same occurred with a number of other MNCs that are receptive to unionization in the country. This trend can be explained by the willingness of other countries to ‘adapt’ to the Chinese HRM or, simply, a ‘public relations’ move (e.g. concerns about brand reputation).
Thus, regarding the case in China, the reach of trade unions remains questionable and open to debate, due to contradictory opinions presented in this essay. From my point of view, labour unions should not be a primary representation of the workforce with the main power of bargaining (especially if we take into account its low influence in Britain). But in China, even with the current competitive and globalized environment, the state will still play a critical role in determining ER systems. In the Chinese automotive industry, state owned enterprises and joint ventures (not private companies) are the most productive, and under the control of ACFTU. Which means companies will automatically have less autonomy in deciding, for instance, on innovative ER practices. However, this does not mean that unionization leads to decreased organizational performance; In other words, low influence of trade unions is not harmful to organisational performance.
Now, from a comparative perspective, the assignment will look at ER in the US. According to a study within the same industries by Hunter and Katz (2012), in the US there is a wide variety of approaches to employment relations, due to the absence of a counterweight to management decisions. Oppositely to China, US as a democratic country does not possess an association of labour unions subordinate to the government. Managers have more freedom to implement innovations in work organization and pay systems. Innovative HR practices can be implemented quickly. But, such reversals are risky in an uncertain environment and can lead to an extensive process of trials and errors. They can also be a reflection of “changes in management priorities, incentives or the identity of the managers themselves” (Hunter and Katz, 2012, p. 1996). Thus, the one-sided approach to employee relations often loses its strategic value.
The assignment has helped me to better understand how human resources management within multinational corporations support their performance. Organisational performance can be measured by the company’s productivity and employee satisfaction. Currently, the main concerns of HR departments include strategy, or mechanisms that give competitive advantage, and international orientation, as a response to globalization and increased competitiveness.
Resourcing, performance management, reward management, training and development (T&D), and employee relations (ER) are the key functions of HRM. As mentioned in the first pages of the assignment, case studies have been analysed from and international HRM perspective. In other words, it analysed the way MNCs run their training and development and the extent to which they are concerned with employment relations after expanding their operations overseas. MNCs included in the discussion were: Hormel Foods, Amorim Group, Wal-Mart China, five companies within the Chinese auto and banking industries and same industries in the US (thus, a comparative study).
Thus, the assignment explored the importance of T&D towards international HRM. The effective application of this practice is essential because this function (a) leads to quality workforce (in terms of skills and knowledge); (b) contributes to labour productivity, job satisfaction and better change management skills; and (c) helps companies to remain internationally competitive, by providing knowledge exclusively on cultural matter (e.g. language training of expatriates, development of international management teams).
In order to support this argument, the assignment mentioned the company Hormel Foods. This organisation gives training on policies and procedures concerning human rights, as a way to support corporate social responsibility. Also, the organisation provides 26 hours of training per employee related to their level of responsibility and expertise, in order to foster long term employment.
The second function explored was employee relations (ER). This function is important because (a) good ER contribute to workforce’s commitment to their job, therefore enhanced job satisfaction and productivity of the firm and (b) employees become more resistant to conflict. The essay presented different forms of employee involvement and participation in organisational decision-making. Specifically, it focused on the role of trade unions. They are a sub-topic of ER, and if we look from an international HRM perspective, labour unions give the opportunity to learn on institutional matters of employee-management relations in different regions. Thus, the assignment concluded with a debate related to the effectiveness of workforce representation channels in China.
It has also explored how workforce unionization contributes to organisational performance. Results were inconclusive, as the case studies showed two different positions; the only similarity consisted of the government’s power, independently of trade unions efforts. However, Chinese auto and banking industries have a strong position in the market, which means that low influence of trade unions is not harmful to organisational performance.
Abdulai, I. and Shafiwu, A. (2014) ‘Participatory Decision Making and Employee Productivity. A Case Study of Community Banks in the Upper East region of Ghana.’ Business and Economics Journal, 5(3), 1-10.
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Bishop, J. (1990) ‘Job Performance, Turnover and Wage Growth.’ Journal of Labor Economics, 8, 363-86.
Brewster, C., Sparrow, P., Vernon, G. and Houldsworth, E. (2011) International Human Resource Management. 3rd edn. London: CIPD.
Caudron, S. and Laabs, J. (1997) 'It's taken 75 years to say’ Workforce (10928332), 76(1), 70.
Chartered Institute of Personnel and Development (2016) Employee relations: an introduction.
Henriques, V. (2015) ' HR Challenges within Strategic Internationalisation.’ InfoRH, 20 March 2015 (in Portuguese).
Hormel Foods (2017) Awards and Recognition.
Hormel Foods (2015) Corporate Responsibility Report.
Hunter, L. and Katz, H. (2012) ‘The impact of globalization on human resource management and employment relations in the US automobile and banking industries.’ The International Journal of Human Resource Management, 23(10), 1983-1998.
Huselid, M. (1995) ‘The impact of human resource management practices on turnover productivity and corporate financial performance.’ Academy of Management Journal, 38(3), 635-872.
Llopis, G. (2013) ‘The 6 Most Important Things Employees Need From Their Leaders to Realize High Potential.’ Forbes, 30 September 2013. Available at:
Lu, Y., Tao, Z. and Wang Y. (2009) ‘Union Effects on Performance and Employment Relations: Evidence from China.’ China Economic Review, 21(1), 202-210.
Meyerson, H. (2004) ‘Wal-Mart Loves Unions (in China).’ Washington Post, 1 December 2004.(Accessed 20 April 2017).
Redman, T. and Wilkinson, A. (2009) Contemporary human resource management: text and cases. 3rd edn. New Jersey: Prentice Hall.
Storey, J. (1992) Developments in the Management of Human Resources. Oxford: Blackwell.
Zhao, S., Zhang, J., Zhao, W. and Poon, T. S. (2012) ‘Changing employment relations in China: a comparative study of the auto and banking industries.’ The International Journal of Human Resource Management, 23(10), 2051-2064.
Zheng, C., Hyland, P. and Soosay, C. (2007) ‘Training practices of multinational companies in Asia.’ Journal of European Industrial Training, 31(6), 472-494.
Zhu, Y. and Fahey, S. (1999) ‘The Impact of Economic Reform on Industrial Labour Relations in China and Vietnam.’ Post-Communist Economies, 11(2) 173–192.
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