International Human Resource Management: Japan & US

Introduction

Expansion into international markets causes organizations to export their cultures to foreign business subsidiaries. Organizational culture includes business models such as human resource management practices. For example, multinational corporations deploy their recruitment, training, and development approaches in foreign nations (Ferner & Quintanilla 1998). This strategy suggests that the country of origin has effects on human relations and human resource management practices. The effect is evident in the subsidiaries of foreign organizations’ Multi-National Corporations (MNCs). However, the degree to which MNCs transport their human resources practices remains contentious. Polignano (2006) reckons that although the country of origin has effects on human relations practices for MNCs in foreign nation-based subsidiaries, the host country’s legal frameworks produce a cushioning effect to the internationalization of human resource management.

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Consistent with Polignano’s (2006) position, globalization has encouraged Japan and American-based corporations to exploit international markets by opening subsidiaries in foreign nations. For instance, in Europe, companies such as Toyota, Coca-Cola, McDonald’s, and General Motors among others have operational centers (Elger & Smith 2011). These companies have different theoretical approaches to the management of their human resources. Does the evidence of increasing internationalization of American and Japanese-based organizations suggest the ‘Americanization’ or ‘Japanization’ of HRM practices in the European subsidiaries? This paper responds to this question by considering the host country’s institutional and normative environmental features that influence the diffusion of HRM/employment relations practices. It also addresses the question in the context of the VoP theory, cultural differences between different nations, and other theories and concepts of international HRM practices.

‘Americanization’ or ‘Japanization’ of HRM Practices in the European Subsidiaries

Human resource capital is fundamental to the effective operation of an organization. The HR department within any organization has the objective of handling issues that relate to employees. Functional responsibilities of the HRM include training and development, recruitment and selection, employee conflict resolution, deriving employee motivation and job satisfaction programs, and taking active roles in establishing remuneration programs (Kramar & Syed 2012). It also has the responsibility of ensuring work-life balance. Many human resource management programs are applicable to virtually all organizations to meet the needs of employees in specific working environments. The concept of internationalization of human resource management suggests that HRM programs such as those that ensure work-life balance can be applied effectively in MNCs from different international geographical operational areas. Using the evident Americanization and Japanization of HRM practices in Europe, one might wonder whether the case indicates the internationalization of HRM practices. Can HRM strategies that suit one cultural context fit in another cultural environment?

Suggesting that internationalization of HRM practices may arise from increased invasion of foreign markets by MNCs implies that HRM practices, with the country of origin’s cultural context in mind, can find an application in foreign subsidiaries. This claim prescribes the applicability of convergence theory in human resource management (Polignano 2006). However, other schools of thought are opposed to this paradigm. For instance, the institutionalist theoretical paradigm maintains that institutional environments constitute the main indicator of the traits of an organization. The school of thought finds application in the international comparative theory of management upon considering business systems, the management implications of the societies in the host countries, and the roles of VoP (Varieties of Capitalism) in influencing international human resource management decisions (Hall & Soskice 2001).

Comparative Employment Relations and Varieties of Capitalism

Different nations have dissimilar human resource management practices. Institutionalists hold that societies play a key role in influencing HRM practices. The school of thought has two different paradigms, namely institutionalism and comparative institutionalism (Hall &Soskice 2001). Amid the utilization of different terms such as ‘VoP’ and ‘national business systems’, the comparative theory maintains that regulation at national levels and the availability of structural frameworks that are applicable within nations shape organizations’ leadership and managerial practices. This observation suggests that American and Japanese MNCs that open subsidiaries in the European nations have their human resource management and employees relations influenced by legal and regulatory frameworks that are present in the host country. Therefore, amid bringing their HRM approaches to the European nations, the country-of-origin impacts are mediated by the existing structural and regulatory frameworks that address employee relations. Therefore, MNCs cannot evade localizing their human relations approaches.

Amid the validity of the above assertion, standardization may occur due to benchmarking. Foreign nations may also incorporate standard HRM and employee relations procedures that are applied in another nation if they have proven effective in that other nation, subject to similarities in terms of the environmental variables that prompt the use of the practices (Marginson et al. 2004). Under such circumstances, increased application of Japanese or American human resource managerial techniques in their European-based subsidiaries suggests a high diffusion of the best practices in employee relations management. Opposed to the comparative institutionalism approach in studying internationalization of HRM practices, institutionalism upholds the assertion, ‘organizations’ HRM practices are shaped by coercive, normative, and cognitive pressures exerted by competitors and other social actors’ (Adeleye 2011, p.256). Therefore, organizations will adopt HRM techniques that best suit the micro-environmental factors that influence their operations. This observation implies the need for localization of HRM practices in foreign-based subsidiaries for all Japanese and American-based MNCs.

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Many European nations have a coordinated market economy (CME) model for HRM/ER management. Under the model, the labor sector and structural institutions operate as social partners. In Europe, ER is shaped by intensive collective bargaining that is marked by the provision of national welfare and social wages. High levels of flexibility are also evident akin to the availability of a highly skilled labor force. Requisite work commission represents workers in the boards (Marginson et al. 2004). The concept of employee relations depends on the ability of the council to arrive at a compromised agreement with employers. The European CME model for ER largely depends on social dialogues that are held between the labor council and governmental organizations. It emphasizes the protection of employees. It also respects the need for unionization and strong employees bargaining power. The US/UK approach to ER differs from the CME model that is applicable in many European nations. Low levels of unionization, low levels of employee protection, and strong employer bargaining power characterize the approach.

Although the European CME model finds applications in many European nations, geographical variations in its regulation of ER are inevitable. For example, in the North and Central Bloc, strong unions and high legal regulatory frameworks guide ER while the Eastern region has weak unions and inconsistencies of the role that is played by states to regulate ER practices. Therefore, through comparative employee relations, it is inferable that multinational corporations cannot just use their country-of-origin HRM/ER model to apply it in their European-based subsidiaries without considering consistencies and inconsistencies with the host country’s ER/HRM structural and regulatory frameworks.

The above assertion is significant upon considering that Japan and Europe have different approaches to human resource management. Opposed to the CME models that are applied in Europe as disused before, the Japanese CME model is characterized by a high shielding of the domestic labor market through statutory interventions. Labor is contextualized as comprising a resource as opposed to a cost that has to be minimized for an organization to achieve higher profitability (Elger & Smith 2011). This case suggests that Japan recognizes the need for effective management of employees through requisite HRM programs to minimize wastes. In the Japanese context, labor waste does not just imply a labor force that outweighs the organizational capacity, but also poor employee productivity that is evidenced by the ‘below par’ performance or idle labor.

Japanese and American-based MNCs’ subsidiaries that operate in the European nations are continuously embracing and employing a diverse labor force. There is also an increasing trend for eliminating gender-based bias in employment among the MNCs (Lucas, Lupton & Mathieson 2006). Although this approach relates to ER/HRM approaches in both Japan and the US, it does not imply Americanization or Japanization of the ER/HRM approaches in Europe. Rather, it can be interpreted to mean high adoption levels of the best practices in human resource management. The approach reinforces the applicability of the comparative theory in human relations. Under this theory, organizations adopt and localize HRM strategies in the international arena, subject to the existence of evidence to support their effectiveness in helping to achieve MNCs’ economic agenda on foreign nation-based subsidiaries. To this extent, the internationalization of human resources involves a process of moving the best practices to different nations. Such practices need to suit structural and regulatory frameworks for their acceptance in foreign-based subsidiaries.

Cultural Differences between Countries

Cultural differences between nations influence not only organizational ER/HRM approaches, but also foreign nation-based subsidiaries. In the context of internationalization of American and Japan-based MNCs, Japanization and Americanization can occur after integrating American and Japanese cultures with local cultures that match employees in the European nations. To this extent, integrative cultural theory becomes important in studying cultural differences between countries and their contribution to the internationalization of HRM/ER. The theory is categorized into three paradigms, namely cultural demarcation, cultural union, and cultural hybridization (Linklater 2011). Cultural demarcation sees culture as an element that is not affected by globalization. According to this paradigm, cultural differences still exist in spite of globalization. Consequently, the core culture remains unchanged. This view is associated with Samuel Huntington and his thesis Clash of Civilizations and the Remaking of the World Order. Huntington asserts that different cultural and religious values and identities are the primary sources of conflicts (Linklater 2011). Therefore, human resource management approaches should serve the functional responsibilities of mitigating such conflicts.

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Cultural convergence implies the assimilation and sameness of cultures around the world. This view relates to concepts such as McDonaldization, Americanization, Westernization, and cultural imperialism. The concepts suggest the spreading of global culture and uniformity of customs throughout the world. McDonaldization is the process whereby the principles and characteristics of fast-food restaurants come to dominate more and more areas of social life not only in the United States but also in the rest of the world, including Europe

McDonaldization is fuelled by globalization. It has often resulted in global uniformity, which has consequences of affecting local traditions and habits. According to Ritzer, as quoted by Linklater (2011), there are five dimensions of McDonaldization, which include competence, calculability, inescapability, directing by means of technology, and irrationality of level-headedness. It is likely to continue since economic interests propel it. Similar to the concept of McDonaldization, Japanization and Americanization will require the adaptation of American and Japanese cultures to the European cultures to ensure harmony between the ER/HRM approaches and the emerging culture. Unfortunately, this adaptation has not yet occurred. An alternative cultural dimension that may explain the internationalization of HRM/ER is cultural hybridization. Cultural hybridization refers to the mixture of cultures that create a unique combination that is neither global nor local. This process creates harmony between different cultures so that MNCs experience minimal organizational conflicts that are associated with contradictions of Japanese and American cultures in their subsidiaries in Europe.

International HRM Practices

International human resource practices for the US and Japanese-based multinational corporations in Europe are influenced by different factors. However, the main question relates to the most appropriate human resource management practice that yields optimal benefits that can lead to operations effectiveness. The need to derive an effective international strategy for human resource management accrues from the realization that HRM is critical in driving global competitive advantage (Sisson & Purcell 2010). MNCs focus on HRM strategies that align well with their economic interests. However, subsidiaries’ operations occur in the context of an external business environment that is influenced by nationally applicable HRM systems, technology, and cultural aspects among other issues (Sisson & Purcell 2010). Although an international organization may have the capability and appropriate policy frameworks to regulate and shape its internal environment, it may only have limited or no capability to regulate the external environment.

Management structures for subsidiaries influence the process of internationalization of an organization’s HRM strategies. Indeed, the ability of an organization to have a central control or local autonomy in the HR practices in foreign operational centers depends on the method of internationalization such as franchising, mergers, or formation of joint ventures. Therefore, depending on these aspects, multinational corporations can focus on either divergent or convergent approaches to internationalizing HRM practices. The strategy that works for an organization depends on its policies and sources of competitive advantage.

Evidence from HRM strategies for the US, the UK, and Japanese-based MNCs indicates variations in international human resource strategies. The US-based MNCs’ subsidiaries that operate in Europe tend to resist pressures exerted on them to adopt one HR strategy such as pay policies. MNCs of Japanese ancestry encounter challenges in creating successful HR practices in terms of high commitment to work and high trust in the US or the UK operational areas (Elger & Smith 2011). However, the need for high-performing organizations receives a positive reception in both the UK and the US. For instance, subsidiaries in the US and the UK welcome and embrace lean manufacturing concepts that are associated with Japanese multinational corporations such as the Toyota Company. This situation produces variations while adopting human resource practices by different subsidiaries of MNCs. The issue lies in the acceptance of a strategy as the best practice in the international standard (Hamann & Kelly 2008). Thus, subsidiaries in foreign nations screen the parent company’s practices and then take up the best practices to function as benchmarks for HRM practices. This assertion makes sense upon considering issues that are encountered by MNCs with reference to HRM/ER practices in the European nation-based subsidiaries.

HRM/ER in MNCs

Teamwork, the creation of flexible job structures, high emphasis on quality, performance, training, and job control form the basic tenets of Japanese MNCs’ HRM model. According to Elger and Smith (2011), the MNCs’ headquarters direct subsidiaries to adopt the parent company’s HRM policies. However, in the European context, Tayeb and Thory (2012) insist that MNCs recommend the incorporation of the local color to the model. For example, Ise Wan, a Japanese-based MNC has its HR strategy based on teamwork in both Japan and in its subsidiaries in Scotland. In Scotland, the MNC runs a program tagged ‘team of the month’ (Tayeb & Thory 2012, p.5). Instead of focusing on rewarding employees on the accounts of individual performance, the program evaluates and rewards them based on their contribution and performance in a teamwork environment.

Although Ise Wan’s HRM practices rely on building effective work teams in the country of origin and the host nation (Scotland), variations in the two nations are evident. Tayeb and Theory (2012, p.5) inform, ‘in Scotland, employees start by identifying tasks and objectives.’ Opposed to this approach, all employees in Japan start their daily work. However, they evaluate and review their performance to ensure continuous improvement. This plan suggests variations of HRM practices to meet the host country’s practices in achieving the intended results. The Japanese approach is based on Kaizen’s principles. However, in Scotland, commitment to an objective leads to the attainment of an intended goal.

A different MNC, namely Tosa Wan, Tayeb, and Thory (2012) reveal clear differences in HRM approaches that are deployed in the Scottish subsidiaries and the country of origin, Japan. The subsidiary’s MD in Scotland knows too well the Japanese approaches to HRM such as TQM and high emphasis on QC. Consequently, the subsidiary employs them in the organization, although it negates those that fail to apply in the Scottish context. Tayeb and Thory (2012) reckon that the parent company implements QC controls and checks in Japan. However, such QC controls and checks are hard to implement in Scotland. Instead of flexible work structures, operators in the subsidiary prefer overtimes. Hence, in response to this internal demand, Tosa Wan allows overtimes in Scotland (Tayeb & Thory 2012). A failure to follow this format can translate into reduced performance due to disharmony between approaches in organizational management for human resources in the country of origin and the host country.

For US-based MNCs, the US managerial model has been incredibly adopted in the European subsidiaries. In this context, Sisson and Purcell (2010) assert that management models that are regarded as the best in the industry are adopted by global organizations in different subsidiaries. For example, McDonald’s, a US-based MNC has extensive operations in the European nations. The company expands through franchising and opening of company-owned stores. The individual franchises adopt business models for the parent company, including payment structures.

Minimal unionization features that are associated with American-based multinational corporations are reflected in McDonald’s subsidiaries in Europe. This strategy suggests that Japanese and American-based MNCs export their HRM/ER practices (Adeleye 2011; Björkman, Fey & Park 2007). However, they apply them to the company-owned subsidiaries, despite copying with some variations to ensure localization of the practices to meet the specific micro-environmental differences within different geographical regions in Europe. Lack of uniformity in the application of Japanese or American HRM strategies in different subsidiaries indicates inadequate evidence to suggest ‘Americanization’ or ‘Japanization’ of HRM practices in the European subsidiaries.

Host Country’s Institutional and Normative Environmental Features that influence the Diffusion of HRM/Employment Relations Practices

Organizations establish their HRM practices consistent with acceptable national practices. Therefore, the nationality of an MNC constitutes an important normative factor that determines the diffusion of HRM practices within subsidiaries in foreign nations. Where the country of origin recognizes the adoption of effective human resource management practices, probabilities exist that firms may normalize such practices in their subsidiaries in foreign nations. The aspect of nationality as a normative factor that influences the diffusion of HRM practices varies from one sector of employment to another. For instance, Adeleye (2011, p.257) asserts that Germany’s MNCs may look upon other nations’ HRM practices such as flexible pay structures and incorporate them into their own practices. Nevertheless, such a situation is improbable since Germany has a reputation for possessing diversified high-quality production systems. Institutional factors influence the contribution of nationality normative factors in the diffusion of HRM practices. This process occurs when the parent company has its HRM management approaches embedded within new acceptable practices in the country-of-origin’s institutional conducts.

The host country’s organizational configurations may also influence the diffusion of human resource practices. MNCs’ subsidiaries in a foreign nation may be influenced by the structures and configurations of other organizations that operate in the host country. While the headquarters of an organization may attempt to influence HRM practices in its peripheral elements that operate in foreign nations, such a practice may not diffuse due to the normalization of certain acceptable status quo practices. Polignano (2006) says that if a successful diffusion has to occur, the parent company has to develop strategies for generating organizational change in the host country. While the host country’s employees may resist such a change, the parent country may be unwilling to absorb losses that are associated with low productivity, akin to the low motivation that arises from the reluctance of employees to embrace change. In some situations, institutional factors such as political, technological, economic, and environmental elements within the host country may result in making the diffusion of the MNCs’ HRM practices impossible in the parent country. Indeed, while an organization can alter its internal factors, it may not be possible to alter its external factors that influence the successful diffusion of the country-of-origin’s most effective HRM practices in the host country’s subsidiaries

Conclusion

While many MNCs have attempted to internationalize their HRM/ER practices, they have encountered drawbacks, akin to different institutional and normative factors in the host country. Different nations have different HRM management policies and different mechanisms of handling employee relations issues. Since these factors hinder the diffusion of HRM practices in the country of origin, localization of the practices has been considered by some MNCs the most effective way of achieving their economic interests in the European markets. An organization can only standardize its HRM practices internationally if it can also export 100% of its workforce from the MNCs’ country of origin to mitigate cultural and institutional factors that impede the successful internationalization of its HRM practices. Unfortunately, nations have policies for protecting domestic employment. They put limitations on the percentage of the total workforce that can be recruited from other nations. Consequently, the paper holds that there is insufficient evidence to suggest ‘Americanization’ or ‘Japanization’ of HRM practices in the European subsidiaries.

References

Adeleye, I 2011, ‘Theorizing the Diffusion of International Human Resource Practices: Towards an International Conceptual Approach’, International Journal of Business and Management, vol. 6 no.12, pp. 254-269.

Björkman, I, Fey, F & Park, J 2007, ‘Institutional theory and MNC subsidiary HRM practices: evidence from a three-country study’, Journal of International Business Studies, vol. 38 no. 5, pp. 430-446.

Elger, T & Smith, C 2011, Global Japanization? The transnational transformation of the labor process, Routledge, London.

Ferner, A & Quintanilla, J 1998, ‘Multinationals, national business systems and HRM: the enduring influence of national identity of a process of Anglo-Saxonization’, International Journal of Human Resource Management, vol. 9 no. 4, pp. 710-731.

Hall, A & Soskice, D 2001, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford University Press, New York, NY.

Hamann, K & Kelly, J 2008, Varieties of Capitalism and Industrial Relations, Sage, London.

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Linklater, A 2011, ‘Prudence and Principle in International Society: Reflections on Vincent’s Approach to Human Rights’, International Affairs, vol. 8 no. 7, pp. 1179-1191.

Lucas, R, Lupton, B & Mathieson, H 2006, Human Resource Management in an International Context, CIPD, London.

Marginson, P, Hall, M, Hoffmann, A & Müller, T 2004, ‘The Impact of European Works Councils on Management Decision-making in UK and US-based Multinationals’, British Journal of Industrial Relations, vol. 42 no. 2, pp. 209-33.

Polignano, V 2006, ‘The Diffusion of Employment Practices of US-Based Multinational in Europe: A Case Study of Comparison of The British and Italian-Based Subsidiaries’, British Journal of Industrial Relations, vol. 44 no. 3, pp. 497-518.

Sisson, K & Purcell, J 2010, Management: Caught between Competing Views of the Organization, Wiley, Chichester.

Tayeb, M & and Thory, K 2012, The Internationalization of HRM policies and Practices: The Case of Japanese and French Companies in Scotland, Heriot-Watt University, Heriot.

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