The cultural and institutional features and predominant HR

policies in the USA and UK.

Introduction

In recent decades, as advancements in technology have reduced the cost of

transport and communication, and trade liberalization has opened up
international borders, globalization has resulted in the entire world increasingly
behaving as a single market. This has had significant implications for HR
practices and policies and as such there have been rapid developments in the
concept of International Human Resource Management (IHRM) over the past
decade. The international operations of Multi-national Corporations (MNC´s)
presents a number of challenges to HR functions due to fundamental
differences in cultural values and overarching attitudes to HR practices across
different markets. Harzing et al (2004) suggest human resources to be
‘strategic resource’ and as such their composition drives the development of a
MNC’s international strategy. Therefore, they argue that the challenge for
MNC’s is not finding ´the best IHRM per se but rather finding the best fit for the
firms strategy, structure and HRM approach´(Harzing et al, 2004). It is clear
however that MNC’s need to spend a significant amount of time developing an
effective IHRM policy as the recognition and management of cultural diversity
fosters international cooperation which drives knowledge transfer and a
competitive edge. As such, Scullion et al (2000) believe that effective human
resource management across multinational operations is a critical factor in
determining the success or failure of an international company (Plessis et al,
2008).

Cultural Features of the USA and UK

Hofstede (2001) describes culture as ´the interactive aggregate of common
characteristics that influence a human group´s response to its environment´.
Hall and Hall (1990) noted that 90% of all communication is conveyed ´by
means other than language, in nonverbal messages´ and the essence and
interpretation of these messages are dependant on the level of culture of that
country. He refers to high level and low level communication, with high level
denoting more familiar, informal communication and low level the opposite. In
the USA, for instance it is common to refer to people by their first names
therefore demonstrating an attempt at high level communication, whereas in
the majority of Europe this level of engagement would be termed offensive
(Hall and Hall, 1990). However, in general both the USA and the UK operate
under the premises of a low context culture. As such, information is ´highly
focused, compartmentalized, and controlled, and, therefore, not apt to flow
freely’ (Hall and Hall, 1990). Understanding the difference that this poses on
the day to day operations of the business is important, as interactions between
the two can cause frustration and confusion. Low context cultures are
dependant on scheduled activities, are sensitive to interruptions, demonstrate
a slow flow of information and value punctuality (Hall and Hall, 1990).
Hofstede (2001) determined a host of other factors that influence how HRM is
handled within a country. Power distance ´is a measure of the interpersonal
power or influence between [a Boss] and [a subordinate] as perceived by the
less powerful of the two´(Hofstede, 2001). The USA and the UK demonstrated
a low power distance rating and therefore they demonstrate a higher level of
power equality. Inequality is viewed as a ´necessary evil’ and hierarchies ´an
arrangement of convenience´ and therefore flat organizational structures are
preferred in order to promote interdependence and harmony between all.
Moreover, the UK and the USA have a low level of uncertainty avoidance, a
high degree of individualism and masculinity. The first of these refers to the
extent to which technology, rules and rituals are used to deal with uncertainty
of the unknown. A low scoring means that the USA and the UK have less
structure in place and demonstrate a lower sense of urgency; ´in such
countries not only familiar but also unfamiliar risks are accepted, such as
changing jobs and starting activities for which there are no rules´(Hofstede,
2001). The second, Individualism, refers to the relationship between the
individual and the collectivity that prevails in a given society (Hofstede, 2001).
Americans demonstrate a high degree of individualism, as do most Western
economies including the UK. As such, there is less reliance on organizations for
emotional support and organisations demonstrate less responsibility for its
employees (Hofstede, 2001). The final element refers to gender
characteristics that influence the emotional and social response to different
aspects of business. The US and UK business environment is predominantly
masculine and therefore value is derived from advancement, earnings, training
and up-to-dateness (Hofstede, 2001).

Institutional Features of the USA and UK

Both the UK and US very heavily feature neo-liberal tendencies within the
institutional characteristics of society and enterprise. Neo-liberalism´s roots
were founded upon Adam Smith´s publication of ´The Wealth of Nations´ and
were later adapted by Economist Milton Friedman (Lecture notes 2 and 3: The
Cultural and Institutional Environment). Neo-liberalism refers to the
liberalization of the economy such that market forces, or ´the invisible hand´,
determines the most efficient allocation and pricing of resources. This laissez
faire approach to the management of the economy encourages reduced
government spending, limited subsidies, privatization, deregulation and trade
liberalization (Investopedia, n.d). Much of this freedom can therefore be
witnessed within the regulatory and institutional frameworks that determine
employee bargaining power and flexibility within the workplace. Liberal
collectivism is a major feature within the UK which deals with both ´principles
(of ideology, philosophy, orientation) and processes (forms and directions of
transformations)´(Clarke, 2004). Central to this is the concept of free collective
bargaining which was termed as voluntarism, which has been characterized as
´industrial self-government´ (Leat, 2001). Therefore, the terms and conditions
of employment are traditionally determined by collective bargaining rather
than through state regulation, however in recent years there has been a higher
degree of control which has extended from minimum wage levels, hours of
work and holiday entitlements. There has also been a shift in focus from the
collective to the relationship between the employee and management and
elements such as performance measurement and skills development have
been implemented into HR policies. This was seen as a shift from liberal
collectivism to market individualism which was pioneered by Margeret Thatcher
in the 1980s. In the same sense that public intervention is seen as a source of
inefficiency, so to are trade unions, which are ´perceived as monopoly
suppliers of labour, and are therefore sources of imperfection in the labour
market´(Leat, 2001). Similar industrial relations exist in the US where trade
unions are perceived as unnecessary due to the predominantly unitary
perspective. Unitarism is a concept which states that employee and employer
exist harmoniously and that all levels of staff work together towards the same
objectives, and therefore there is an emphasis on the role of the manager. In
recent years, there has been a focus on fairness and competitiveness as a
means of changing the culture in employment relations. This is reflected in the
growth of employment rights in terms of discrimination law, maternity and
paternity rights and equal pay across genders. However, Dickens and Hall
(2006) claim that the extent to which this impacts fairness is contingent on the
extent to which it supports business interests (Dickens, 2009). The role of the
state directly and indirectly influences the relationship between employer and
employee. Employment regulations within US and the UK are some of the most
liberal in the world due to the belief that enabling a fully flexible workforce
enables companies to be more competitive. Whilst the employment relations
are highly influenced by government legislation, companies also recognize the
importance of the psychological contract which determines the level of trust
between employer and employee. Therefore a company wishing to develop a
level of loyalty between itself and its employees would go above and beyond
its statutory obligations.

Predominant HR Policies in the USA and UK

HR policies enable consistent management of employees that foster the
development of the relationship between the employer and employee and
protect companies against legal claims. A company´s HR policies are shaped
by the company´s strategy, organizational culture, cultural values of the
market and the institutional structure of the economy it operates. The low
context culture that exists influences the communication strategy of the HR
function, and as such the ´the mass of information must be made explicit´
(Hofstede, 2001). Communication is strategic and does not flow freely across
the organization and this is therefore aided by HR´s implementation of formal
communicative procedures and systems. Moreover, the preference for
deadlines and scheduled events and activities influences managerial behavior
and the day to day operative processes. A low context culture also influences
performance management as employees prefer completing one activity at a
time. Therefore there is an emphasis on developing a structured development
path which rewards results rather than the hours put in to the task. The
predominant masculine culture also impacts performance management,
particularly with regards to pay and reward. As opposed to femininity whereby
living area and employment security are important, advancement and earnings
are important within a masculine environment. Moreover, ego-boosting, wealth
and recognition are more important than quality of contacts and the
environment (Hofstede, 2001). Therefore, career development is
predominantly based on promotion and pay-scale advancements with company
wide announcements of such in order to satisfy the ´ego-boost’ criteria. The
low power distance level impacts the organisational structure that is
implemented by HR and as such companies tend to operate flat hierarchical
systems in order to encourage harmony and the consultative interaction
between employee and employer. This is supported by the institutional
doctrine of unitarism which is present across the UK and US. The low level of
uncertainty avoidance combined with the relaxed labour regulation policies
presents particular challenges to HR functions as it encourages a high rate of
labour turnover. Therefore, HR functions in the UK work particularly hard to
develop loyalty by making managers accountable and therefore including
employee turnover within management appraisals. In addition to this,
company benefits above and beyond what is statutory by law, such as flexible
working hours and times, consultative processes with regards to appraisals,
attitude surveys and grievance procedures, and fairness in the distribution of
rewards.

Conclusion
The cultural and institutional landscape of the US and the UK has
determined the overarching principles of HR policies and practices within these
countries. Non-verbal communication, time orientation, individualism, power
distance and the degree of masculinity determines how employees will respond
both to each-other and to workplace situations. Moreover, the institutional
framework has a significant impact on the relationship between the employer
and the employee. Therefore, the understanding of these two aspects has
enabled companies to determine how to shape HR policies and practices in
order to influence employee behavior and promote cooperation and efficiency
in the workplace.

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