Cultural differences influencing German HR policies in Asia.

• Author: Stehle, Wolfgang

ABSTRACT

Researchers still debate the relevance of using cultural frameworks and socio-economic differences between countries versus focussing on institutional differences when analysing issues affecting the transfer of Human Resource policies between countries. This paper first compares four countries from Europe and Asia on a macroeconomic level as well as on cultural dimensions. It then investigates perceived cultural differences between managers on the transfer of human resource policies by contrasting the perceptions of German headquarters managers with those of their subsidiary managers in Singapore, Thailand and Indonesia. This exploratory study uses qualitative methodology to analyse twenty four in-depth interviews with Human Resource directors and line managers in German electrical, mechanical and chemical companies. The study confirms the importance of perceived cultural differences between managers at headquarters and in the subsidiaries and highlights the presence of misperceptions based on overgeneralisations emanating from the German headquarters as well as local subsidiaries. Convergence is confirmed on a HR policy level with crossvergence taking place on a process level via regional platforms. The growing role of the subsidiary HR director as a cultural translator and regional team player is found to be a key element in the transfer process.

Keywords: Cultural Differences, German Multinational Companies, Asian HR Practices

INTRODUCTION

The first issue to be addressed is that of contextual differences between countries that could affect the transfer of policies or practices from headquarters to subsidiaries and from subsidiaries to parent companies. Although Kostova and Roth (2002) note that as many elements in the institutional environment of a multinational corporation (MNC) such as culture and legal systems are specific to nations, organisational practices do differ. They acknowledge the tension for MNCs between global integration and local adaptation. The analysis on contextual difference will be guided by the theoretical model of Verma, Cochan and Lansbury (1995).

A second discussion point within the relevant literature is the impact of cultural differences and their influence on the perceptions of managers. If human resource management (HRM) policies and practices reflect managers" assumptions about managing people, then the cultural diversity of management conceptions about HRM can be explored (Laurent in Pucik, Tichy and Barnett, 1993). At the time that this study was planned the selected companies still used the Hofstede model to understand the national cultural differences between the countries that they are operating in and this will be used to structure the discussion. A third issue focuses on how perceptions about cultural differences influence human resource policies and practices. It supplements studies on German human resource management abroad (see Dickman 2003). The paper focuses on how do social, economic and especially cultural factors affect the transfer and adaptation of German HR policies in three Asian countries.

CONTEXTUAL DIFFERENCES

The paper explores how HR practices can be influenced by societal differences and reflects data from a larger study. To view contextual differences the conceptual framework of Verma, Kochan and Lansbury (1995) is used to tabulate firstly the country information at a macro economic level and proposes that these factors as well as national cultural differences provide some explanation for the contextual differences in HRM practices between the countries.

CULTURAL DIFFERENCES AND PERCEPTIONS

Comparative research shows that managers from different cultures hold diverse assumptions and value systems about the nature of management and organisation. HRM approaches can be viewed as "cultural artefacts reflecting the basic assumptions and values of national culture in which most organisations are embedded ..." (Laurent 1993, p.180). For Nankervis, Compton and McCarthy (1999, p.644) culture consists of "language, religion, values and attitudes, education, social organisation, technology, politics and law" of a country. Most definitions seem to anchor around values and attitudes being the core of culture (Nankervis, Compton and Baird 2002) and lead to three general assumptions in the context of this study. First, the assumption in this study is that national cultural differences do exist; second, that these differences are associated with a certain number of shared values, and third, that shared value systems influence people's attitudes and behaviour in their working lives (see Harvey and Novacik 2004; Herkenhoff 2000). In this exploratory case study research neither the Hofstede survey nor the GLOBE survey were used, but semi-structured interviews were used to gather data.

From these themes the research issues and sections in this paper about the transfer of three German multinational corporations HRM practices to their Asia Pacific subsidiaries are derived. The first research question of this study is therefore "What are the key societal, cultural and human resource practice differences between the countries Germany, Singapore, Thailand and Indonesia" and the second research question is "How do perceptions about cultural differences influence human resource policies and practices?"

In the first section of the paper, the first research question is addressed by providing country information on a macro economic level to highlight basic contextual differences between Germany, Singapore, Thailand and Indonesia. Furthermore the Verma, Kochan and Lansbury (1995) conceptual framework is selected to focus on not only contextual factors but also to note HRM issues on five dimensions. In the second section of the paper, the Hofstede model of cultural differences between the countries is applied. The third section contains the methodology followed in this study and the fourth section presents the results of the interviews in German companies and their Asian subsidiaries about perceptions of cultural difference and their impact. The final section includes the discussion of results, conclusions as well as limitations of the study.

JUSTIFICATION FOR SELECTING THE COUNTRIES

The contention in this paper is that these issues have not been adequately researched in European firms, specifically German firms and their Asian subsidiaries. Germany is a significant exporting nation and has been ahead of the United States and Japan (Financial Times Deutschland 2003). Because of the smaller domestic market compared to the US, many of the German MNEs have more business and more employees abroad than in Germany (Rugman & Hodgetts 2000). Being successful internationally, not only as an exporter but equally as an employer, is increasingly important to sustain Germany's position in the world economy (Economist 2002). Germany, German MNEs and German behaviour are found to be different or distinct from other countries and their MNEs and behaviour (Pauly & Reich 1997, Rugman & Hodgetts 2000, Brodbeck, Frese & Javidan 2002, Chew & Horwitz 2004, Dickmann 2003).

There are also several reasons for looking at German MNEs specifically in selected Asian countries. First, there is the success of many Asian economies as it is the fastest growing region in the world (Economist 2002) and still under-researched compared to Europe and the US (Chew & Horwitz 2004). Second, the economies of the countries under study are often grouped together as "Asian" and underpinned by "Asian values" on the basis of geographical and cultural proximity. Local customs, institutions, and labour forces do, however, provide for significant differences among the selected countries. Third, in view of the regional range of stages of economic development, the selection of countries also allows exploration of transfer both to advanced Asian economies, namely Singapore, and less-developed ones, namely Thailand and Indonesia.

The decision on selecting the countries was not merely driven by convenience as the three German companies had a range of subsidiaries internationally. There have been substantial analyses and case studies of European and American companies in Japan for more than a decade and the focus in many recent studies have been on companies moving into China or India. It was argued that a focus in this study on selected Asian countries that the German Fortune 500 wish to expand as markets, would contribute more to theory building and as a basis to enhance the knowledge of their human resource directors. It was further decided to select countries that were different from Germany and each other in terms of population size, gross domestic product, income per person, size of workforce and diversity of in the composition of the population (see Table 1). On this basis, subsidiaries in Singapore, Thailand and Indonesia were selected. The selection of companies and subsidiaries are discussed in the methodology section.

COUNTRY INFORMATION AT MACRO ECONOMIC LEVEL

In order to gain insight into the first research question on societal differences between Germany, Singapore, Thailand and Indonesia, a basic macro-economic comparison is noted in Table 1. It needs to be noted that the basis for analysis was the objective data in the World Fact Book and not the perceptions of the study participants.

The analysis confirms that Germany and Singapore are well-developed economies, with GDP figures per head among the highest in the world (World Factbook 2003). Thailand is more developed than Indonesia but not as developed as Singapore or Germany (Rowley and Benson 2002). Indonesia, with its vast population and low GDP per head, is a developing country trying to make use of its cheap labour force (Kamoche 2000)--see table 1.

Singapore is as much a city as a nation, and is not comparable to the area and population of the other three countries in question. Political implications, the EU's role in the case of Germany or...