Competitive Paper Track
ACKNOWLEDGEMENT: I thank Jay Dahya and Naresh Khatri for their help with my data analysis. I also thank the anonymous reviewer of 25th EIBA conference, Chris Brewster and Harish Jain for their constructive comments on an earlier version of this paper.
This paper initially briefs the main developments in the field of human resource management (HRM) and then highlights the need for more cross-national HRM studies. Later on results from two large parallel surveys of matched Indian and British organisations are presented. The main aim of the surveys was to examine a wide range of HRM policies and practices in a cross-national comparative context. The surveys were run in six industries in the manufacturing sector. The study controlled for a number of variables such as size of organisation, product, industry sector and personnel participation. Influence of a number of contingent variables (such as age, size, nature and life cycle stage of the organisation, presence of unions and human resource strategies) on HRM policies and practices is analysed. Statistical analysis suggests pronounced differences in recruitment, compensation, training and development and employee communication practices between India and Britain. The study has opened avenues for further research.
Key Words: Comparative HRM, India, Britain, Determinants of HRM.
The developments of the topic of HRM are now well documented in the literature [see Legge, 1995]. Nevertheless, debate relating to HRM continues today although the focus of the debate has changed overtime. It started by attempting to draw differences between 'Personnel Management' and 'HRM', an attempt to incorporate Industrial Relations into HRM, examining the relationship of HRM strategies, integration of HRM into the business strategies, devolvement of HRM to line managers and then the extent to which HRM as a key means to achieve competitive advantage in organisations. All these developments have taken place over the last two decades or so, as a result of which the nature of Human Resource (HR) function is suggested to have changed from being reactive, prescriptive, and administrative to being proactive, descriptive and executive [Boxall, 1994]. At present, the contribution of HRM to the firm’s performance is being debated in the literature [see Guest, 1997; Schuler and Jackson, 1999].
Along with these developments, the existing literature also highlights a strong need for more cross-national HRM studies. This is mainly due to the ever increasing levels of internationalisation and globalisation of business. Both academics and practitioners are eager to learn how human resources are managed in different parts of the world. With the development of the "global village", it has now become an imperative to know how managers perceive and react to similar pressures related to management of their human resources and what are the main factors and variables which determine HRM policies and practices in different contexts. Such information would be useful for developing relevant HRM policies and practices and to train HRs for different assignments.
Researchers suggest that national HR practices are determined by both "culture-free" (such as age, size, nature of organisation) and "culture-bound" (such as national culture and institutions) factors [Budhwar and Sparrow, 1998; Fisher and Shaw, 1992; Hofstede, 1993; Easterby-Smith et al., 1995]. In wake of all the recent developments in the field of HRM, researchers have recently attempted to study the influence of both 'culture-free' and 'culture-bound' variables on HRM. In this concern studies have been conducted to investigate the influence of a number of contingent variables such as the size of the organisation (based on the number of employees), level of technology adopted, age of organisation, presence of a formal HRM department, type of ownership, the existence of training units in HR department and life cycle stage of organisation on the HRM practices and policies of organisations [e.g. Budhwar and Sparrow, 1997; Cohen and Pfeffer, 1986; Dimick and Murray, 1978; Fisher and Shaw, 1992].
Other writers [such as Brewster, 1995; Budhwar and Sparrow, 1998; Easter-by Smith et al., 1995; Hofstede, 1993; Sparrow and Hiltrop, 1997] have noted that whilst such contingencies exist, more complex culture-bound arguments must be applied to the field of HRM. Management techniques (including HRM) are not universal but are 'socially reconstructed' in each society. The investigation into the influence of both the culture-free and culture-bound variables on HRM in a cross-national context is therefore crucial for the growth and development of the new field of HRM. Investigation into the practical implications of cross-national HRM research has become more demanding ever since different nations of the world, such as China, India, Latin American and East and Central European nations have liberalised their economic policies and have opened gates to foreign investors. Such developments demand more and more research from an international HRM perspective and to move ahead of research conducted within the established blocs of European Union and north America. However, there is a scarcity of research in this area. This is partly due to the fact that the number of methodological issues involved in cross-national research are many and more complex in comparison to national research, and partly due to the absence of a comprehensive framework for conducting such studies [see Brewster et al., 1996; Budhwar, 1999a; Cavusgil and Das, 1997].
Until 1970s it was believed that management theories had a universal applicability. This misconception of the 'convergence hypothesis' has now waned as it has become clear slowly that there is no such thing as a universal management theory [Hofstede, 1993]. To what extent does this apply to the relatively new field of HRM, given that most HRM models have been developed in the Anglo-Saxon world. McGaughey and De Cieri [1999] suggest that organisations are becoming more similar in terms of macro-level variables (convergence), but are maintaining their culturally based dissimilarities in terms of micro-level variables (divergence).
Moreover, the nature of HRM is known to be ‘context specific’ [see Boxall, 1995]. Therefore, the degree and direction of influence of both the culture-bound factors and culture-free variables on HRM varies from region to region and is responsible for the context specific nature of HRM [Locke and Thelen, 1995]. For example, the strong impact of unions and different pressure groups on Indian HRM clearly presents the context responsible for such practices. On the other hand, the influence of competitive pressures marked by downsizing of the work force in the UK also highlights the context specific nature of the British HR function [see Budhwar and Sparrow, 1998]. Similarly, the response of unions to common competitive pressures (such as the introduction of new production technologies, large scale restructuring and pressure to increase work flexibility) varies across different countries. The union membership has declined in countries such as the UK, France or the US, whereas in Australia, Canada and Germany it has remained stable. Such a phenomenon shows that different institutional configurations mediate in different ways the effects of common international pressures [Locke and Thelen, 1995].
In order to evaluate and highlight the context-specific nature of HRM in different national or regional settings we need to delineate the main factors and variables that could determine HRM in such settings. The dilemma regarding what factors to include under broad concepts such as ‘national culture’ or ‘institutions’ needs to be resolved. The issue regarding the selection and choice for certain contingent variables and organisational strategies and policies (from the long available list) as possible determinants of HRM also needs serious attention. A sensible way to tackle this mammoth task is to understand the complex interactions between HRM practices and their determining variables on the basis of empirical data.
An attempt is made in this paper to examine the influence of a selected set of organisational contingencies on the HRM policies and practices in matched Indian and British firms. The influence of national factors (such as national culture, institutions, dynamic business environment and business sector) on HRM policies and practices in a cross-national comparative context has been explained somewhere else [see Budhwar and Sparrow, 1998].
But why compare HRM in India and Britain? As briefed above, presently there is a strong need for more cross-national HRM studies, especially between developed and developing nations. Moreover, personnel specialists both in India and Britain are under severe pressure (though the reasons are different) to manage their HRs within a dynamic and competitive environment. In India, after the recent liberalisation of economic policies, the increased level of competition by the overseas operators has created pressure on the personnel function to prepare and develop a work force capable of competing with overseas operators in terms of skills, efficiency and effectiveness [for more details see Budhwar and Sparrow, 1997; Krishna and Monappa, 1994; Sparrow and Budhwar, 1997; Venkata Ratnam, 1995]. The British personnel function on the other hand is experiencing pressure caused by a long recessionary period, increased level of competition, a move towards harmonisation of conditions across Europe, a need to restructure and train and develop a different set of competencies in their HRs [Legge, 1995; Sisson, 1996]. HRM policies and practices are known to change most under such pressures, so in changing, will they converge or diverge?
It would also be of some interest for the western world to find out what is happening in India regarding HRM, especially MNCs, because they are interested in investing in India or already have subsidiaries there. Britain is the fifth largest investor in India after the US, Japan, Germany and Russia. A comparative study provides more insight into the Indian HRM scenario. India is now an important market to invest in. To develop our hypotheses we now present a brief on the HRM function in India and Britain.
The roots of the Personnel function in Britain can be traced back to mid 19th century when 'social reformers' such as Lord Shaftesbury and Robert Owen sought to legislate provisions for work hours and to ameliorate conditions of work for factory workers such as women and children [Torrington, 1989]. Such a movement resulted in the introduction of 'female welfare officers' and different facilities such as canteens, medical provisions and the provision of sick pay [Legge, 1995]. At the beginning of this century big business owners such as Edward Cadbury started building connections between the 'welfare' of workers and 'efficiency' at the work place [Niven, 1967]. During the two world-wars this connection between welfare and efficiency broadened to include activities aimed at getting a good fit between the worker and his job [Legge, 1995]. This emphasis on welfare and efficiency gave way to a new and wider role for personnel management, including activities such as role specification, recruitment and selection, training, records keeping and dismissals.
After the second world war the emphasis shifted to full employment and union power also increased. The personnel function was required to look after the legal, administrative and negotiating aspects and the employment relationships. Analysing these changing facets of the personnel function, Torrington [1989] summarises the evolution from a ‘Labour Officer’s’ role to ‘consensus negotiator’ and later to ‘organisation man’, emphasising the thrust of the personnel function on the efficiency, bargaining and management of change aspects. In early 1970s, with the development of employment laws, the personnel function took on a 'third party role', where the main task of personnel experts was to interpret the law. As we have seen, it was mainly the growth of competition and the pressing demand to improve the efficiency of HRs, that led the personnel function into the role of 'manpower analyst' in order to achieve the closes fit between the numbers and skills required and those actually resourced. Over the last four decades or so the nature of the personnel function in British industry has undergone a quiet revolution [for more details on British HR function see Legge, 1995].
The origins of the personnel function in India can be traced back to the 1920s with the concern for labour welfare in factories. The Trade Union Act of 1926, gave formal recognition to workers unions, the recommendation of the Royal Commission on Labour which recommended the appointment of labour officers and the Factories Act of 1948 laid down the duties and qualifications of labour welfare officers. All these developments formed the foundations for the Personnel Function in India [Balasubramanian, 1994; 1995] and seem to parallel the initial developments of the British personnel function. Provisions similar to those provided by Cadbury in the UK were provided by JRD Tata (the most prominent industrial figure in India) in India in the early 1920s.
After independence in the 1950s two professional bodies emerged: the Indian Institute of Personnel Management (IIPM) which paralleled the Institute of Personnel Management in the UK) was formed at Calcutta and the National Institute of Labour Management (NILM) at Bombay. During the 1960s the Personnel Function began to expand beyond the welfare aspect with the three areas of Labour Welfare, Industrial Relations and Personnel Administration developing as the constituent roles for the emerging profession [Venkata Ratnam and Shrivastava, 1991]. In the 1970s the thrust of the personnel function shifted towards the need for greater organisational 'efficiency' and by the 1980s professionals began to talk about new concepts such as HRM and Human Resource Development (HRD). Again, we see many parallels to the role and competence of HRM actors in Britain. The two professional bodies of IIPM and NILM were merged in 1980 to form the National Institute of Personnel Management (NIPM) at Bombay. Such a phenomenon took place in 1994 in the UK when the IPM and Institute of Training and Development merged to form Institute of Personnel and Development (IPD). The status of the personnel function in India has therefore changed over the years. However, the influence of social contacts, caste, relationships and politics on Indian HRM policies and practices are still very prominent [for more details see Amba-Rao, 1994; Budhwar and Sparrow, 1997; 1998; Sparrow and Budhwar, 1996; 1997].
The present debate in India directly parallels the one which was dominant in the UK in the 1980s when the Thatcher government liberalised the British economy. The present Indian literature contains arguments about the difference between personnel management and HRM and HRD and the relabelling of job titles from personnel manager to HRD executive. This directly reflects the PM versus HRM argument in the Western literature. Nevertheless, like the Indian personnel specialists, British Personnel specialists are under renewed pressure for a change in their role but the reasons are different (e.g., to manage downsizing, empowerment, to re-train their human resources). What are the impacts of such pressures on the Personnel Function in the two countries? How are Personnel specialists responding to such pressures in their minds at least? It can be concluded that in terms of the perceived role and competence of HRM actors, Indian and British personnel specialists see themselves as being on the same path. But does national culture shape the way they move down this path?
The existing review of literature shows that except for Budhwar and Sparrow’s work [see Budhwar, 1998; Budhwar and Sparrow, 1997; 1998; Sparrow and Budhwar, 1997], there are no direct comparative HRM research between India and Britain. Though few studies do directly compare general management practices and policies between India and Britain. For example, Khan and Atkinson [1987] examined Indian and British managers' attitudes toward social responsibility. They looked at a number of issues related to the concept of social responsibility (such as its relevance, potential gains, effects of legislation on social responsibility, problems involved) and showed significant similarities in the attitudes of Indian and British managers toward them. Tayeb [1987; 1988] examined the organisational structure and management style prevalent in fourteen matched Indian and English firms. She showed a number of differences between Indian and English people in their way of thinking. Tayeb links these differences to the socio-economic conditions and the cultural traits of employees in the two countries.
Broadly speaking India and Britain have administrative and constitutional similarities, which India inherited from the British, but are the HRM practices and policies being adopted in similar organisations the same in both the countries? The literature on Indian HRM certainly shows a strong influence of Anglo-Saxon thought [Akhilesh and Nagaraj, 1990; Venkata Ratnam, 1992]. Yet, Tayeb's [1987] cultural picture of the differences between English and Indian person clearly shows differences in their personality and therefore accordingly real thinking. Tayeb suggests that in cultural terms compared to an English person, an Indian person is fearful of people in power, obedient to superiors, dependent on others, fatalistic, submissive, collectivist, caste conscious, law-abiding and more clan orientated. A possible explanation for such a behaviour can be traced to the long imperialist history of India. From tenth century till 1947 India was ruled by foreigners [Husain, 1992; Thomas and Philip, 1994]. Apart from this, the traditional hierarchical social structure of India has always emphasised respect for superiors, they can be elders, teachers or superiors at work, i.e. the nature of Hinduism evidenced by the caste and social system [Sahay and Walsham, 1997]. Jones [1989] on the basis of interviews with 30 businessman in Calcutta showed a strong influence of the 'British Raj' still existing in Indian organisations. Crabb [1995] compared diversity management in the UK and India and has shown the different types of diversities which have to be managed in the two nations. In the UK, diversity often comes down to race, age or gender, but in India it comes down to class, background, geographical and linguistic origin, caste and religion. These diversities are reflected in patterns of life, styles of living, land tenure systems, occupational pursuits, inheritance and succession rules. Further, hierarchy and inequality which are deeply rooted in India’s traditions and are often found in practice in the form of unequally placed caste and class groups [Jain and Ratnam, 1994]. As a result there is a continued dependence of one set of people or group on another (for example, subordinates on superiors) and they cease to tackle their own problems with local initiatives [Sinha, 1990].
There is a strong influence of social, cultural, economic and political factors on HRM policies and practices in Indian organisations. At times, selection, promotions and transfers in Indian organisations are based on ascribed status and ones’ social and political connections. As a result, there is a strong emphasis on collectivism, which means that family and group attainments take precedence over work outcomes [Kanungo and Mendonca, 1994]. On the same lines, Sharma [1984: 80] reports that staffing in Indian organisations is primarily restricted by familial, communal and political considerations. Motivational tools in Indian organisations are more likely to be social, inter-personal and even spritual. In such conditions the employees’ orientation is towards personalised relationships rather towards performance [Kanungo and Mendonca, 1994: 450]. In contrast, such phenomena are not known to exist overtly in the British organisations.
As mentioned above, the existing dynamic business environment both in the UK and India has placed a number of challenges before the personnel specialists, therefore, it is worth investigating the existing HRM scenario in the two countries from both personnel specialists' and organisations' view point. The influence of contingent variables on HRM policies and practices is analysed from organisation view point. As there are less empirical investigations of this type, therefore it was decided to examine such an influence from top personnel specialists' view point. These are the 'subject matter experts' whose role is changing rapidly and should be able to provide a comprehensive picture of the scene. Though it is acknowledged that speaking to other levels of employees could further enrich the investigation.
Due to the lack of comparative studies between developed and developing countries and because of the absence of established theoretical framework for such cross-national evaluation, it is important to clarify the bases for the suggested analysis. Writers such as Benson [1995], Kochan et al. [1992], Lawler et al. [1995] and Osterman [1992] suggest internal labour market (ILM) as a sensible starting point for analysing HRM in developing countries (most of the research in the field of ILMs has been in highly industrialised nations). Doeringer and Piore [1971] define ILM as ‘an administrative unit, within which the pricing and allocation of labour is governed by a set of administrative rules and procedures’. As a result the internal labour force enjoys certain rights and privileges, which are not available to employees on the external labour market. One major aim behind developing ILMs is to develop long-term employment relationships to bind employees to the organisation so as to reduce turnover. ILMs are known to be determined by external economic conditions, unions, organisational characteristics (such as size, sector, presence of formal HRM department) and transaction cost theory [for details see Pfeffer and Cohen, 1984; Soeters and Schwan, 1990; Turner, 1994].
The literature on internal labour markets [e.g., Benson, 1995; Osterman, 1992; 1994; Soeters and Schwan, 1990] highlights the need for HRM practices to be consistent with a systematic and rationalised employment system. For example, the adoption of formal testing of job applicants, job evaluation, training programmes and performance-related pay are activities associated with highly structured systems [Lawler et al., 1995]. We have plenty of evidence regarding the existence of structured employment systems in the UK [e.g. Gospel, 1992]. However, we have less research evidence in this regard for Indian organisations. In comparison to Thai firms, Indian firms are shown to have relatively more established ILMs [Lawler et al., 1995]. Nevertheless, we have more evidence regarding the provision of limited benefits and the existence of simple rudimentary pay systems in Indian organisations [see Bordia and Blau, 1998; Datt and Sundram, 1999]. Moreover, rules regarding practices such as recruitment, training, promotions and lay-off are adhoc in nature and are subject to easy manipulations of the employers [Venkata Ratnam, 1995]. Based on such information and the existing HRM system (discussed above), one should expect less developed ILMs in Indian organisations.
On the basis of the existing literature (both Indian and British) and the current trends in HRM in the two countries we suggest the following hypotheses:
1. Indian HRM practices will be less rationalised and less structured than those in Britain.
2. There will be significant differences in the nature and level of the influence of contingent variables on same HRM policies and practices in the two countries.
Two parallel questionnaire surveys (one each in the UK and India) in firms having 200 or more employees in six matched industries in the manufacturing sector (food processing, plastics, steel, textiles, pharmaceuticals and footwear) were carried out between October 1994 and April 1995. The respondents were the top personnel specialist (one each) from each firm. We got a response rate of 18% (93 out of 500 questionnaires) in the UK and around 30% (137 out of 450 questionnaires) in India. Questions for the questionnaires were drawn from the existing measures such as those used by Cranfield researchers to study comparative European HRM [see Brewster and Hegewisch, 1994] and other relevant researches [e.g., Amba-Rao, 1994; Baird and Meshoulam, 1988; Dimick and Murray, 1978; Jackson et al., 1989].
The sector distributions for the two samples showed 57% Indian and 47% British organisations belong to Public limited companies. 39% of Indian and 52% of British organisations belong to Private sector. The industry distributions for the two samples is shown in Table 1.
Table 1: Sample Industry Distribution |
||
Industry |
India |
Britain |
Food Processing |
13.9 % |
17.2 % |
Plastics |
15.3 % |
17.2 % |
Steel |
19 % |
16.1 % |
Textiles |
26.3 % |
17.2 % |
Pharmaceuticals |
14.6 % |
21.5 % |
Footwear |
10.9 % |
10.8 % |
An analysis of the demographic features of the sample suggests that this is a random and representative sample of the total population. 46% of the Indian sample and 62% of the British sample are medium sized organisations employing from 200 to 499 staff. 16% of Indian organisations and 14% of British organisations employ from 500 to 999 staff, 31% of Indian organisations and 15% of British organisations employ from 1000 to 4999 staff and 7% of Indian organisations and 8% of British organisations are large organisations with over 5000 employees.
To get a comparative picture of HRM in India and Britain, the influence of a number of independent variables on HRM policies and practices was evaluated. Our analysis includes certain control variables. These are country, ownership of firm (private or public), unionisation, size of organisation (number of employees), type of HR strategy (cost reduction, talent improvement, talent acquisition and effective resource allocation), life cycle stage of organisation (growth and maturity) and age of organisation. The selection of these control variables is based on previous researches [e.g., Cohen and Pfeffer, 1986; Fisher and Shaw, 1992; Lawler et al., 1995]. Privatisation initiated by Mrs Thatcher in the 1980s in Britain has now reached its pinnacle. On the other hand, in India after the liberalisation of economic policies, the privatisation of state enterprises is now becoming a hot topic of debate. Recently, privatisation of number of sectors such as the railways, power, ports, roads, bridges and airport projects has been initiated [for details see Datt and Sundram, 1999]. Further, drastic growth in India propelled by the private investment is likely to alter most HRM patterns [Bordia and Blau, 1998]. The private sector is already attracting greater proportion of new employment. However, the adherence to the provision of different labour legislation in the India private sector is questionable [Venkata Ratnam, 1995]. In general, we would anticipate HRM practices in state owned enterprises to be more structured than in private sector.
The influence of trade unions on HRM in the two countries varies. From the literature it is clear that trade unions are still strong in India as compared to the UK. In India they still significantly influence HRM policies and practices. This is mainly due to the strong political support the Indian unions enjoy and the existence of strong pro-labour laws in India [Budhwar and Sparrow 1998; Sodhi, 1994; Sparrow and Budhwar 1997; Venkata Ratnam 1995]. Whilst in the UK their influence on HRM policies and practices has decreased significantly over the last decade. Presently they are playing a more co-operative role [for details see Heery 1997; Legge 1995]. If the unions are strong and working effectively, then they should lead to a more systematic and rationalised HRM practices (as happens in the developed countries). Does this happens in India?
The variable of size (number of employees) has been shown to affect HRM practices. For example, larger organisations tend to be more rationally structured in regard to their HRM practices [see Jackson et al., 1989]. With the developments in the strategic nature of the HRM function, some researchers [such as Budhwar and Sparrow, 1997; Hiltrop, 1993] have examined the influence of four mentioned HR strategies on HRM practices. Recent research also show the influence of organisational life cycle stage on HRM policies and practices [e.g., Baird and Meshoulam, 1988; Hendry and Pettigrew, 1992; Milliman and Von Glinow, 1992]. Similarly the influence of the age variable on HRM is established in the literature [see Tayeb, 1987].
The main HRM practices examined here fall into the general categories of recruitment practices (7 items), compensation practices (4 items), training and development practices (8 items) and employee communication practices (7 items) The details of these items are shown in Table 2. The recruitment practices were separately examined for both the white and blue collar employees. The remaining three HR practices were examined for all employees in general.
Table 2:
The terms ‘rationalised’ and ‘structured’ HRM practices in the paper are used in a broad sense to denote established and formal ILM practices. For example, an established ILM should adopt performance related pay, performance based promotions, a formal approach to recruitment (advertise vacant or new posts, invite applications, conduct formal interviews), adopt formal career plans and well structured training programmes (i.e. comprehensive, tailor-made, with appropriate facilities, clear time-table, run by appropriate experts, with clear cut implementation strategy).
The data was analysed using the binomial logit regression. Given the ordinal and truncated nature of responses, the conventional regression analysis would have been inappropriate. All the items for the mentioned four HRM practices are dichotomous in nature, i.e. they have only two answers - yes or no. Firms scoring yes for items are given a value 1 and those not are given the value 0. Such a method is earlier used by Budhwar [1999b], Budhwar and Sparrow [1997] and Lawler et al. [1995]. Descriptive statistics for all the independent and dependent variables, broken down by each country are presented in Table 2. For the convenience of readers the pooled scores for both the countries for each of the variables are also provided in the same table.
Each logit regression was run using the following independent variables: 1) a dummy variable scored 1 if the firm was located in India and 0 if it was located in Britain; 2) a dummy variable scored 1 if the firm was a private enterprise and 0 if it was a public enterprise; 3) a dummy variable scored 1 if the firm was unionised and 0 if not; 4) a dummy variable scored 1 if the firm was in the growth life cycle stage and 0 if it was in the maturity life cycle stage; 5) a dummy variable scored 1 if the firm was adopting a cost reduction HR strategy and 0 if not; 6) a dummy variable scored 1 if the firm was adopting a talent improvement HR strategy and 0 if not; 7) a dummy variable scored 1 if the firm was adopting a talent acquisition HR strategy and 0 if not; 8) a dummy variable scored 1 if the firm was adopting a effective resource allocation HR strategy and 0 if not; 9) a dummy variable scored 1 if the firm was incorporated after 1965 and 0 if before it; and 10) the logarithm of the number of employees in the firm. The maximum limit for independent variables is 10 for running logit regressions [Norusis, 1994].
The parameter estimates for all the individual logit equations (one for each of the listed dependent variable in Table 2) are provided in Tables 1 to 5 in the appendix. To facilitate discussion, the significant (at 1 and 5 percent) results are summarised in Table 3. Though there were large number of 10 percent significant results. Presenting these and then discussing them would have made the presentation tedious. Significant independent variables influencing each of the dependent HR practice are identified for both the countries. These parameters are used in evaluating our two hypotheses. Though Table 3 consists only the significant parameters (only at 1 and 5 percent), however, it should be borne in mind that a number of parameters relating to our hypotheses were not always statistically significant nor of the anticipated sign. The various groups of dependent HR practices are now considered in turn.
To examine the recruitment practices in Indian and British organisations, issue regarding how the vacant positions are filled was examined. First we analyse the results for the white collar staff. Indian organisations in the private sector are likely to recruit their management staff from their current employees. It is generally observed that organisations in the Indian private sector recruit their relatives or people with their social contacts on most of the top managerial positions [Bordia and Blau, 1998]. While, British organisations in their growth life cycle stage are more likely to recruit their white collar staff from their current employees. However, these organisations are less likely to strive for a talent acquisition HR strategy. It can be assumed that if a firm has the right type of HRs (and is in the growth mode), therefore it would stick to same employees (i.e. will not go for talent acquisition). Indian organisations in the growth life cycle stage and emphasising on talent acquisition and talent improvement HR strategy are more likely to advertise internally for their white collar staff. In the present day dynamic business environment in India this can act as a useful strategy to retain and motivate ones ‘high fliers’. On the other hand, British firms pursuing a cost reduction HR strategy are more likely to advertise internally to fill in their managerial vacancies. Indian organisations which are established after 1965 and pursuing a talent acquisition HR strategy are more likely to advertise externally to recruit their white collar staff. Whilst British private sector organisations pursuing a talent improvement HR strategy are not likely to advertise externally to get their managerial staff. It seems that these firms are working on the development of their existing human resources, instead on spending more to recruit new employees. The increased emphasis on investor in people (IIP) and national vocational qualifications (NVQs) then seems to be logical [Keep, 1996; Sparrow and Marchington, 1998]. Indian private sector organisations are likely to adopt a word of mouth method to recruit their top level staff. However, they are less likely to take help of recruitment agencies in this regard. As mentioned above, there is a strong reliance in Indian private sector to recruit top level employees based on social contacts and in an informal method, i.e. these positions are never advertised, but are generally created to adjust family members, relatives or friends [Kanungo and Mendonca, 1994; Sparrow and Budhwar, 1996]. Our results also show that Indian firms pursuing a talent acquisition HR strategy are likely to approach recruitment agencies to recruit their managerial staff. May be these firms are in the public sector where it is a legal requirement to advertise new positions and follow a formal method of recruitment [Gonsalves et al., 1995]. Moreover, Indian private sector firms are less likely to recruit their managerial staff as apprentices. Blue collar employees in India are recruited as apprentices not the white collar staff (see Apprenticeship Act 1961).
Moving on to the recruitment of blue collar employees, Indian organisations pursuing talent acquisition, talent improvement and cost reduction HR strategies are more likely to recruit their lower level employees by advertising internally. This not only saves time and finances but also helps to retain the preferred staff. On the other hand, Indian firms emphasising on cost reduction and effective resource allocation HR strategies are less likely to advertise externally to fill in their blue collar jobs. Moreover, Indian private sector and unionised organisations are more likely to adopt a word of mouth method to recruit their lower level employees. Earlier research in the field [e.g., Sharma, 1984; Shenoy, 1981; Sparrow and Budhwar, 1997] has shown the importance of social relationships, caste and religion in the management of human resources in India. Further this is supplemented by the strong influence of trade unions and political parties [Sodhi, 1994; Venkata Ratnam, 1995]. On the other hand, British private sector organisations which pursue an effective resource allocation HR strategy are less likely to adopt such a method. The British literature does not report an overt influence of social relationships or social contacts in the management of human resources. Moreover, British unionised firms are also less likely to take help of recruitment agencies to fill in their blue collar vacancies. Whereas Indian organisations in the growth life cycle stage are likely to recruit their lower level staff as apprentices. The Apprenticeship Act of 1961 states that new lower level of employees should be initially recruited as apprentices [Gonsalves et al., 1995]. Our results indicate that these organisations are less likely to be in the private sector and will not emphasise on an effective resource allocation HR strategy.
Hypothesis one anticipates more reliance on more formal and structured recruitment in the UK than in India. The above results show a mixed support for this. For example, we have relatively more emphasis in India on recruiting staff by advertising internally (white collar) and by adopting a word of mouth method. However, this seems to be happening more in the Indian private sector. On the other hand, British organisations rely less on the word of mouth method of recruitment and prefer to advertise externally. Hypothesis two suggests significant differences in the nature and level of influence of independent variables on recruitment policies and practices in Indian and British organisations. In comparison to Indian, there are relatively less number of determinants of recruitment function in British organisations. Further, there is only one common independent variable (i.e. ownership) which significantly influences the recruitment function in the two countries. Interestingly, the nature of influence of this variable is different in Indian and British organisations (see Table 3). Therefore, we confirm a total support for hypothesis two in this case.
Under this key theme, the different mechanism of compensation adopted in the two countries were examined. It seems that Indian unionised firms are likely to pursue a compensation system based on total work experience. Most public sector organisations in India adhere to this mechanism (this is a requirement of the legislation). Whereas Indian private sector firms pursuing a talent acquisition HR strategy are more likely to adopt skills/competency based approach to compensate their employees. Presently, this trend is emerging in the Indian literature [see Balaji et al., 1998; Venkata Ratnam, 1995]. On the other hand, British private sector organisations are more likely to pursue a mixed approach (comprising of seniority based, performance based and skills based) to compensate their employees. This is in line with the existing trends in the British HRM [see Legge, 1995; Sparrow and Marchington, 1998].
As per hypothesis one we would anticipate a more rationalised and structured compensation system in the UK than in India. Our results show that this is not the case. The emphasis on performance related pay and skills and competency based pay in both the countries reveals the existence of a rational pay system. There seems to be a subtle movement taking place regarding moving away from seniority based pay to performance related in India. However, this seems to be taking place only in the private sector. Life time employment and seniority based pay are still very much relevant in the Indian public sector [Bordia and Blau, 1998; Venkata Ratnam, 1995]. Unlike hypothesis one, we have a total support for hypothesis two regarding the determinants of compensation practices in Indian and British organisations. Interestingly, there are very few independent variables determining compensation practices in the two countries (at 1 and 5 percent significant level). However, there are quite a few at 10 percent significance level (see Table 3 in appendix).
We examined eight different means of training and development in our investigation. Indian unionised firms are more likely to use formal career plans for the purpose of training and development of their employees. Indian firms pursuing a talent acquisition HR strategy are more likely to adopt performance appraisals to train their staff. An earlier research showed [see Budhwar and Sparrow, 1997] a similar emphasis where at least a third of 70% of 137 firms in India were trained in performance appraisal. Indian firms established after 1965 are likely to go for annual career development schemes to train their staff. This is more valid in the Indian public sector organisations which still seriously follow time based promotions and increment system [Bordia and Blau, 1998; Sparrow and Budhwar, 1996]. Indian unionised firms are more likely to set up assessment centres to train their staff. However Indian private firms, pursuing a cost reduction HR strategy are less likely to go for such an approach to train their employees. On the other hand, British firms in their growth life cycle stage are less likely to set up assessment centres to train their employees. Indian firms emphasising on effective resource allocation strategy are more likely to form succession plans to train their employees. British organisations in the growth life cycle stage are also likely to pursue a similar technique. On the other hand, Indian private sector firms are less likely to pursue such a practice to train their staff. British firms pursuing an effective resource allocation HR strategy are less likely to pursue a higher flier scheme to train their managers. However, British private sector firms formed after 1965 and pursuing a talent acquisition HR strategy are likely to adopt such a scheme for their top managers. In contrast, Indian organisations established after 1965 are likely to adopt higher flier schemes for their top managers.
The adoption of formal career plans, annual career development interviews, assessment centres, succession plans and planned job rotation depict the existence of a structured training and development system. To a great extend both the countries seem to be pursuing this. Therefore a partial rejection of hypothesis one. However, we have to be cautious in generalising this to the Indian private sector organisations. Results in Table 3 show a clear support for hypothesis two.
British firms pursuing a talent improvement HR strategy are more likely to communicate to their employees through their immediate superiors. This shows an emphasis on team building in the UK organisations [see Legge, 1995]. On the other hand, Indian firms in the growth life cycle stage are less likely to communicate with their employees through their immediate superiors. They are also not likely to communicate through trade unions or work councils. The hierarchical system is still prevalent in Indian organisations which results mainly in top-down type of communication. Nevertheless, Indian unionised firms are likely to communicate with their employees through unions and work councils. This is mainly due to the presence of strong unions and due to the provisions of the works councils [see Venkata Ratnam, 1995]. Similarly, British unionised firms are likely to adopt the same approach to employee communication. Moreover, Indian firms pursuing a talent improvement HR strategy are more likely to communicate to their employees through regular work meetings. However, Indian firms emphasising a cost reduction HR strategy are less likely to participate in regular work meetings with their employees. On the other hand, British private sector firms formed after 1965 are likely to adopt regular work meeting as a source of employee communication. British private firms are also less likely to communicate with their employees via an attitude survey. But British organisations who are in the growth life cycle stage, formed after 1965 and pursuing an effective resource allocation HR strategy are likely to communicate to their employees through attitude surveys. Similarly, Indian unionised firms are more likely to adopt the attitude survey method to communicate with their employees. On the other hand, Indian organisations pursuing talent improvement and effective resource allocation HR strategies are less likely to adopt no formal methods to employee communication.
Hypothesis one anticipates reliance on employee communication through work councils, suggestion boxes and attitude surveys. Like the training and development variable, our results show that both Indian and British organisations are adopting the mentioned mechanisms to communicate with their employees, however, they also seem to be relying on the informal means of communication as well. Like the above three HRM functions of recruitment, compensation and training and development, our results for employee communication function (see Table 3) strongly supports hypothesis two. The hypotheses testing results are summarised in Table 4.
Table 4: Summary of Hypotheses Testing |
||
HR Practices |
Hypothesis 1 |
Hypothesis 1 |
Recruitment |
Partial Rejection |
Total Support |
Compensation |
Rejection |
Total Support |
Training and Development |
Partial Rejection |
Total Support |
Employee Communication |
Partial Rejection |
Total Support |
The results suggest significant relationship between a number of contingent variables (such as the size, age, nature and life cycle stage of the organisation, HR strategies, business sector and trade union membership) and HRM policies and practices. However, the degree and nature of influence of the mentioned independent variables on the four discussed HRM functions in the two countries is significantly different. We can therefore conclude that though we have similar HRM policies and practices prevalent in the two countries, however, logic behind their existence in the two countries is quiet different. This confirms the context specific nature of HRM.
Apart from the traditional contingent variables of age, size, and ownership of organisation, this study revealed that the nature and type of HR strategy plays a significant role in determining the nature of HRM practices in a particular context. Further research should be conducted to confirm this. The generalisability of results should be limited to the sectors under study as there are many more factors and variables known to influence HRM practices such as the business sector, organisational practices and strategies and a number of national factors such as national culture and institutions [for details see Budhwar, 1999a].
The results of this study are of relevance for both the communities of academicians and practitioners. From a theoretical point of view the results test the influence of a large set of independent variables of HRM policies and practices in the two countries. For professionals the study provides crucial information regarding the context specific nature of HRM which can be used to develop new HR programmes and policies for firms operating in India and Britain. Moreover, it helped to clarify the general notion of HRM in developing countries, i.e. HRM policies and practices in such nations are less rationalised and structured. Our results showed that this is not the case (at least in the Indian context). We also have indication about the existence of unique ILMs in Indian organisations, one based on social relations, political contacts, caste, religion and economic power. Policy makers should consider this seriously. Similar research should be conducted in other developing countries to test this thesis.
Our data do not allow us to strongly evaluate the impact of different HRM practices on organisational performance. However, considering our results, the existing Indian HRM literature and the present dynamic business environment, Indian organisations should seriously pursue more rationalised HRM practices and build strong ILMs (which should emphasise solely on performance and should be less influenced by the mentioned social, economic, religious and political factors). There are some indications regarding such developments (in the form of increased emphasis on training and development, preference to talent during the recruitment and performance related compensation), however, these tend to be more in the private sector. Nevertheless, the time has now come (considering the increased competitive environment due to the recent economic reforms) to speed-up the developments in all sectors.
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