In order to learn more about the world, I have become interested in the study of what affects absolutely everyone throughout their adult lives: work. This article is meant to serve as a primer, to briefly introduce the key concepts and basic theories that are most commonly used to conceptualize what we know about work, employment, and management. I have attempted to explain and simplify fundamental models, frameworks, and theories, and these should be helpful when considering the broad topic of international business.
Before we jump into employment, we should talk about capitalism. Defining capitalism is challenging, but I will define it as follows: The economic system in which the means of production and exchange of wealth is owned and maintained by private individuals/corporations (as opposed to state-owned means of wealth).
There are many different varieties of capitalism, but it is important to talk about the two main – or “ideal” – ones. I also mention about what this means for employment after describing how they differ.
Liberal market economies (LMEs) such as the US, UK, Canada, Australia and New Zealand are characterized by competitive market arrangements, competitive inter-firm relations, and deregulations. LMEs are generally concerned with short-term capital and public financial information such as the stock market, and their responsibility is to the shareholders.
- For employment, this means workers get formal education for general skills from high school and universities, they work full-time and may change jobs many times in their careers. Wage bargaining is done at the firm level, which is difficult because unionization is low, and wage distribution is unequal.
- This makes for an environment where managers have more power and therefore make the important business decisions without much employee participation.
Coordinate market economies (CMEs) such as Germany, Japan, and Scandinavia are characterized by non-market relationships, strategic and collaborative interaction among firms, and niche production (as opposed to director product competition in LMEs), and their responsibility is to a wide variety of stakeholders.
- For employment, this means workers learn industry-specific skills from apprenticeships (e.g., Germany and Austria), and work shorter hours, but they tend not to change jobs much in their careers. Trade unionization is comparatively high, so wage bargaining is done at the industry, sectoral, or national level, making wage distribution more equal.
- This makes managers in CMEs more likely to cooperate with employees for important business decisions.
Now we are ready for comparing employment relations.
Comparative Employment Relations
Comparative Employment/Industrial/Labour Relations (often abbreviated as CER or CIR) is a very recent field, developed as a more international offshoot of ER/IR, which began as a field around 100 years ago. CER began only around 30 years ago, when textbooks were beginning to get published with the word “Comparative” in the title. Though some critics question its true interdisciplinarity, CER generally involves economics, psychology, sociology, law, labour studies, personnel management, and political science. Therefore, these perspectives serve to make sense of the potentially confusing mess of information.
“Institutionalists” believe that institutions are what make employment relations differ between societies. (Note: Institutions are essentially anything organized and important in our lives, such as education, hospitals, law, marriage, police forces, mass media, etc.)
Neo-liberalism: A doctrine that emphasizes deregulation – a “freedom to manage,” without state intervention. This may entail privatization of public enterprises, control of organized labour, tax cuts, government downsizing, and expanding international markets. Proponents do not like state-owned industry and trade unions whose responsibility it is to represent and benefit workers. This view has caused controversy for producing “winners” and “losers” nationally and globally.
Neo-corporatism: This view emphasizes partnerships between labour unions (organizations who represent employees), employers’ associations (organizations who represent employers), and the state. This entails decision-making through consensus, government intervening in order to moderate market forces (so people can be protected), high taxes, and involvement of the “stakeholder.” This is especially prominent in Coordinated Market Economies (CMEs) such as Germany, the Netherlands, and Scandinavia.
- In discussions of neo-corporatism, you may hear the word “tripartism,” which is the economic policy that entails cooperation, negotiation, consultation, and compromise between labour, business, and the state.
Marxism: You’ll never get through a decent discussion of society or business without talking about Carl Marx. This view suggests that the state is biased in favour of the upper class, and that the lower classes do not have nearly an equal level of power in society. As you can imagine, Marx was not a fan of neo-liberalism.
Universalists say that common models of economic or social organization can be applied to all contexts. Here are five sub-types (you’ll notice some overlap with other schools of thought) of universalists, accompanied by a brief verbalized perspective on business.
- Economists: “The free market makes the best outcomes.”
- Marxists: “Globalization is making the struggles of capital and workers a worldwide issue.”
- Contingency theorists: “Organizations are certainly similar, but we should alter our management approach based on the specific characteristics of the organization.”
- Lean Production proponents: “We should eliminate waste and not overwork; and then we’ll see what really adds value.”
- Best Practice proponents: “Why bother with anything other than the ‘one best way’ of doing things?”
Delery and Doty (1996) argue that when it comes to Strategic Human Resource Management, there are really three perspectives we should be concerned with:
- Universalistic (best practices) – Some HR practices are better than others, so the best practices should be used.
- Contingency (best fit) – HR policies must be consistent with other aspects of the organization, namely the organization’s strategy.
- Configurational – HR policies should fit horizontally and vertically. Horizontal fit is the consistency of HR practices within the firm; vertical fit is the alignment of HR with the organization’s strategy.
In fact, one of the most common debates among management theories is about about “best practices” vs. “best fit,” which will be the subject of a later article.
Culturalists see culture as the main explanation for observed differences between societies. Anyone who has ever taken a cultural anthropology or sociology course knows that culture is not an easy word to define, but Hodgetts and Luthans (2003) defined culture with six traits, arguing that cultures are: 1) learned (not biological), 2) shared (no such thing as a one-person culture), 3) transgenerational (you can’t wake up one day and have a new culture), 4) symbolic (they’re based on using one thing to represent another), 5) patterned (a change in one part of its structure will change another), and 6) adaptive (cultures evolve over time).
Low and High Context
One example of how differences can be seen via culture was described by Hall & Hall (1990), who developed models of high- and low-context cultures.
- Low context cultures include North America, Scandinavia, West Germany, and Switzerland. They are characterized by emphasizing time management and punctuality, and a clear distinction between work and home life. High context cultures include Japan, Latin America, the Middle East, Africa, and Southern Europe.
- Whereas low context cultures focus more on what you say, high context cultures focus more on how you say what you say, which means body language is considered much more important than for their low-context counterparts. In Japan, for example, productive meetings might occur despite the lack of overt communication of a subject two parties want to discuss. In other words, high context cultures also pay attention to the things that are not being said.
As you can imagine, these cultural differences make for challenging meetings when it comes to international business. The language barrier is only one small issue; the non-verbal differences are another other matter entirely.
Hoftsede’s IBM Surveys
A very influential study was conducted by Geert Hofstede, who called culture the “software of the mind” (2001). He took data obtained through two surveys conducted (in 1968 and 1972) on 116,000 IBM employees in over 60 countries.
He devised four dimensions (then added a fifth in 1987, and a sixth in 2010) that could be compared among all cultures, and suggested what this would mean for management.
- Power Distance – Acceptance of a hierarchy or unequal power structure. (North America and Northern Europe have low power distance; but many countries in Latin America, Asia, Africa, and Southern Europe are content with hierarchy and paternalism)
- Uncertainty Avoidance – Acceptance of ambiguity and risk. (US, UK, and Sweden are examples of low uncertainty avoidance; whereas Germany, France, Japan, Italy, Latin America, and Mediterranean have high uncertainty avoidance, opting for more bureaucratic rules and regulations.)
- Individualism vs. Collectivism – Being concerned with your own vs. the group’s well-being. Hofstede suggested that as countries economically advance, they become more individualistic. US, Canada, UK, Australia, and New Zealand tend to be individualistic, and Eurasia, Latin America and developing countries tend to be more collectivistic.
- Masculine vs. Feminine – Bring on the stereotypes… “Masculine” values were rated by things like high earnings and a challenging career, whereas “feminine” values were considered personal relationships, nurturing and sharing, and consensus orientation. Japan, Austria and Latin countries were considered masculine, whereas Scandinavian countries and the Netherlands were considered more feminine.
- Long-term vs. Short-term Orientation (added in 1987) – Eastern nations are more long-term, strategic thinkers, emphasizing perseverance; Western nations are more short-term thinkers, more concerned with the present, putting pressures on people to demonstrate immediate achievements.
- Indulgence (vs. Restraint) (added in 2010) – Nations such as USA, UK, and Australia, have high indulgence, referring to the freedom it allows people with which to feel gratification and enjoy life and have fun. Nations such as China, Romania, and Russia rate low on indulgence, which means they suppress gratification by regulating it with strict social norms. Italy and Arab countries also rank quite low.
It should be mentioned, however, that Hofstede’s research was not without criticism. Academics have scrutinized the study for its scientific merit, such as by arguing that limiting the participants to IBM employees may make the study ungeneralizable to the rest of the population. As for the concepts of culture, critics note that this theory treats culture as though it does not evolve over time, and does not take into account sub-cultures or multiculturalism that may skew results (e.g., thanks to immigration); not to mention the fact that cultures don’t all simply fit within our well-defined national borders. Lastly, critics state that the study is out of date, since many of the values and attitudes of the participants may have changed over the years (especially with the advent of the internet and increase globalization efforts), and concepts like “masculine” and “feminine” are merely stereotypical nonsense (feminism was not so prominent when he devised this theory).
Trompenaars’s Manager Studies
After having several years of conducting surveys on professionals in many different countries around the world, Dutch organizational theoriest Fons Trompenaars teamed up with British management philosopher to create another large-scale study among managers. Trompenaars and Hampden-Turner (1997) took Hofstede’s approach and created their own set of cultural dimensions, focusing more on humans’ interpretations of the world. Their study was conducted in the early 1990’s, involving surveys of over 15,000 managers in 298 countries. They devised a theory of seven cultural dimensions, which I have given examples of and explanations for below:
- Universalism vs. Particularism – How much we apply universal principles/rules to social situations, or if we alter our approach based on the specific context. US, UK, and Australia ranked high on universalism; China, Latin and developing countires ranked high on particularism. This sounds like it may support Hall & Hall’s high and low context distinctions (1990).
- Individualism vs. Communitarianism – This is the same as Hoftede’s individualistic vs. collectivistic differentiation, but this study had a wider range of countries, and a more modern sample, contradicting some of Hoftede’s conclusions. For example, Mexico (as well as the Czech Republic) moved towards individualism with greater market liberalism; but Japan is still one of the most collectivistic countries in the world.
- Achievement vs. Ascription – The difference between being congratulated for what you have done or for who you are. For example, a Mitsubishi employee in Japan is seen as high-status by virtue of affiliation with a prominent company. In the USA or the UK, it would be a task within such a company that would warrant praise.
- Neutral vs. Affective – To what extent you express emotions. For example, Mexicans are highly affective/emotional, whereas Japan is considered more “neutral” (i.e., not overtly emotional).
- Specificity vs. Diffuseness – Specificity just means that we consider our work and our private lives separate (i.e., not adding colleagues onto your facebook), which is common in Western countries. Diffuseness refers to integrating your work and private life to have the “whole person” involved in the business, and this is more common in Eastern countries.
- Sequential vs. Synchronic – Perceptions and orientations (i.e., past, present, or future) of time.
- Inner vs. Outer Directedness – This refers to how much control a group has over themselves, or if there are external factors (or luck) that influence the group.
These are just some of the many cultural perspectives that explain in what ways we differ across the world. They are by no means the only ones, but they are some of the most important and influential ones, despite their limitations.
Approaches to Industrial Relations
When we consider industrial relations (i.e., the relationship between employers, employees, the state, and trade unions) there are four major approaches to use. With each perspective is another way to interpret things like conflicts in the workplace, so they are all useful.
The Unitary Perspective
The unitary approach recognizes every work organization as a harmonious whole that exists for a common purpose. Collective bargaining (and trade unions in general) are considered to be unnecessary and anti-social, serving only to cause conflict between the two non-competing, cooperative parties.
For employees, this means there should be flexibility in the workplace, they should have a say in important business decisions, and any unionization should be for the purpose of enabling better communication between them and management. For employers, the business strategy should be well understood by the workers, HR policies and reward systems should should unify and motivate workers and increase loyalty. Conflicts are thought to be caused from a lack of information.
The Pluralist Perspective
The pluralist perspective sees conflicts as normal, inevitable, and not even necessarily a bad thing. Managing employees is less about control and more about persuasion and coordination, so trade union membership is actually encouraged by management. As long as they have trained employees who can deal with conflicts and create resolutions, the company can thrive. When necessary, it would be best to use independent third-parties for arbitration.
The Radical Perspective
Often called the Marxian/Marxist approach or the conflict model, this perspective views the employment relationship as a class system, and that conflicts will always occur under this system. Namely, there is an imbalance of power between the employer (capital) and the employee (labour), and they both fight for more bargaining power. Marxist theories have appeared throughout this article, so by now you should be familiar with this pessimistic view.
The Systems Approach
The systems approach views workers as part of a system within a larger system. There are three key components we need to understand the relationship between employer and employee in this approach: The environment, interaction, and the output (rules). The “environment” is the set of legal, economic, social, political, technological, etc. forces that influence these subsystems. The “interaction” refers to the communication between various departmental functions, such as procurement, production, sales, marketing, HR, etc. The “output” is the set of rules that the industrial relations actors (i.e., employees, employers, unions, and the state) need to preserve a good employment relationship. These rules include the contractual conditions of employment (called substantive rules), and procedural rules which are to determine how those first rules are made and interpreted.
If you are studying human resource management or international business, some of these theories and models will undoubtedly surface. It is important to familiarize yourself with such perspectives in order to understand what we already know about employment and industrial relations. Without overwhelming you, I hope you have found these frameworks useful. In later posts I may delve deeper into employment topics from these very perspectives.