Posted by: nsrupidara | February 3, 2010

HR Actors and the Configuration of HR System within Multinational Context

Actors amid Pressures: HR Actors and the Configuration of HR System within Multinational Context
Abstract (Draft)

Neil Semuel Rupidara and Peter McGraw, Macquarie University, Sydney

Human resource system have been argued as having greater impacts on firm performance and a source of competitive advantage than the collection of separated individual HR practices (Kepes and Delery 2006; Lepak et al 2006). This argument has been supported significantly by a number empirical works (e.g. Arthur 1994; McDuffie 1995). It therefore leads to a wide acceptance of such a perspective in the everyday management of human capital and human resource processes, mainly in modern and advanced companies.

Despite widespread acceptance that effective HR can add to a firm’s competitiveness, a system view of HR is actually far from a unified understanding. Researchers in this area have been criticized as lacking of agreement and consistency regarding their understandings about HR systems. As Lepak et al (2006) point out, this issue still remains despite it being highlighted by authors like Becker and Gerhart (1996) and Youndt et al. (1996) ten years ago. The authors thus argue that further work therefore need to be done in order to develop clearer understanding about HRM system and how they really work toward greater firm performance.

A number of studies have tried to develop our understanding about HR system (e.g. Lepak et al 2006; Arthur and Boyles 2007). First, these works have tried to propose a more overarching definition of the concept. They also elaborate the elements of HR system and re-categorize the HR practices as the most operational elements into broader policy columns that serve certain objectives. Other works have contributed in establishing the measurement of the two fit criteria of HR systems and their collective contribution on a number of firm performance criteria (e.g. Kepes and Delery 2007). Although these works still acknowledge that differences in viewing HR systems is obviously exist, — which will be discussed further in the full paper–, we have at least been provided with a clearer understanding of HR system.

However, the literature tends to contribute less on the issue of how the system are actually developed as an integrated configuration. As Paauwe (2004) states, “little attention is given to the way in which HRM practices and policies are shaped and on factors affecting that process. On the other hand, a good understanding about the process of constructing HR system is as important as other issues in HR system context since HRM is about processes. Therefore, further understanding and development about the process of designing HR system is needed. It is this issue that this paper pays attention to theoretically and thereby expects to contribute to the knowledge of the overall process of strategic HRM implementation.

The importance of understanding the process to configure integrated HR system is obvious in the context of multinational companies. The multinational context has been argued to contain conflicting pressures (e.g. Bartlett and Ghoshal). Within such a context, multinational firms face multitude pressures from different contextual, contingency, and strategic environment. It therefore implies complicated roles for all managers given under such complexity, including in the management of human resources and jobs and the development of system that take care of them.

The academic literature in this issue portrays various possibilities of how HR system could be developed in the context of multinational companies. These include the transfer of HR systems from the headquarters and adaptations to local context or a compromise approach which includes elements of both. Another possibility is to mimic global best practices (Harzing and Pudelko 2007). However, those possibilities discussed in literature have not come up with actual description of what really happen in the process of constructing HR system. Literature tends to portray the possibilities separately. However, the literature tends to assume that all processes and decisions have been completed as is and rarely acknowledged how HR actors in the field are actually dealing with the tensions and making choices, before implementing the chosen model and revising it across time. Therefore, the paper argues that an in-depth investigation and analysis of the actual processes of building HR system as an integrated whole is necessary.

In theorizing the process of configuring HR system, the resource-based view of the firm (RBV) has provided a strong argumentation on how HRM could contribute significant value to firms (e.g. Wright, McMahan and McWilliams). Taking the configurational mode of theorizing (Delery and Doty 1996), HR systems have been argued to need to be aligned with each other and also congruent with firm contextual factors such as business strategy. Furthermore, the HR system of a firm also has to be unique or rare in order to contribute significant value that leads to competitive advantage. Therefore, from this perspective building HR system is a complicated rational process of selecting the suitable system that fit to such criteria.

However, researchers have also pointed out with the increasing spread of HR practices across firm and geographical boundaries, it shows that HR systems are far from unique across firms, although one may admit that differences are also exist. Transfer or copy of managerial practices, including HR practices is a business world phenomenon. This shows that the decision making of constructing HR systems is not always as rational as it is expected, with regard to the strategic or rational choice approach such as RBV. It instead needs to be complement by other perspective to better explain the phenomena. Therefore researchers have, for example, increasingly paid attention to the use of institutional analysis in this regard (Oliver 1999; Paauwe 2004; Farndale and Paauwe; 2005; Bjorkman 2006).

Institutional analysis in general argues that institutions provide constraints to choices and actions of individuals and organizations. Actors therefore attempt to conform to institutional pressures to attain legitimacy and maintain survival. Moreover, new institutional theory argues that firms within the same organizational field or institutional context will be more alike each other, a phenomenon which is called isomorphism. Three institutional mechanisms have been identified as causing the isomorphism, namely coercive, mimetic and normative (DiMaggio and Powell 1988). This line of argument is therefore very important to take into account the influence of institutional context within the process of constructing HR systems, aside the argument of rational choice.

Taking both perspectives into account means that actors in the field are placed under conflicting pressures of their own interests or rational thinking and institutional ideas, including norms and regulative framework. This means that depicting the process to configure HR systems needs to be approached by close observations to the daily actual activities of the actors and how their ideas are conceptualized and transferred. This would include the relationships between actors in the field, which may become channels of idea transfer. In that notion, an actor perspective is also needed in analyzing the process.

This paper will elaborate the three perspectives that have been argued as having significant roles in the process of HR systems configuration. The mixed frameworks will in turn guide an empirical work which will be later conducted but not be part of the current paper. Therefore this paper is a theory paper that discusses the different perspective taken to come up with a conceptual model.

This abstract was sent to the 10th International Human Resource Management Conference, held in Santa Fe, New Mexico, USA, in 21-24 June 2009, by New Mexico State University (Prof. Phil Benson, Conference Chair). The full paper (with adjusted title) was presented by Neil on 23 June 2009. Please visit: http://business.nmsu.edu/~mgt/ihrmc/index.html

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