Institutions as constraints and resources: Explaining cross‐national divergence in performance management

• DOI: http://doi.org/10.1111/1748-8583.12214
• Author: Virginia Doellgast,David Marsden
• Published date: 01 April 2019
• Date: 01 April 2019

ORIGINAL ARTICLE

Institutions as constraints and resources:

Explaining cross‐national divergence in

performance management

Virginia Doellgast

1

|David Marsden

2

1

Cornell University, ILR School, Ithaca, New

York, USA

2

Department of Management, London School

of Economics, London, UK

Correspondence

Professor Virginia Doellgast, Cornell

University, ILR School, 364 Ives Faculty Hall,

Ithaca, NY 14853, USA.

Email: vld7@cornell.edu

Funding information

Economic and Social Research Council, Grant/

Award Number: RES‐061‐25‐0444

Abstract

This article compares performance management practices in

call centres from four telecommunications firms in the

United Kingdom, France, Denmark, and Germany. Findings

show that different combinations of institutional con-

straints, such as strong job security protections, and partic-

ipation resources supporting worker voice were influential

in shaping choices among policies to motivate and discipline

workers. Performance management most closely

approached a high‐involvement model where both con-

straints and resources were high, where worker representa-

tives were able both to restrict management's use of

sanctions and to establish procedures that improved the

perceived fairness of incentives. Findings contribute to

debates concerning the role of contextual factors in the

design and effectiveness of HRM.

KEYWORDS

call centres, comparative HRM, performance management,

telecommunications

1|INTRODUCTION

A large body of comparative research has shown that institutions at national and workplace levels can influence firms'

human resource (HR) practices (Doucouliagos, Freeeman, & Laroche, 2017; Katz & Darbishire, 2000; Marsden, 1999;

Maurice, Sellier, & Silvestre, 1986). Researchers disagree, however, on the mechanisms through which they produce

or shape these practices. One argument holds that institutions supporting workplace participation, when combined

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This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2018 The Authors Human Resource Management Journal Published by John Wiley & Sons Ltd

Received: 22 December 2017 Revised: 10 August 2018 Accepted: 14 August 2018

DOI: 10.1111/1748-8583.12214

Hum Resour Manag J. 2019;29:199–216. wileyonlinelibrary.com/journal/hrmj 199

with coordinated vocational training and collective bargaining, can provide critical resources for management to

adopt high‐involvement models relying on worker skills and discretion (Gittell & Bamber, 2010; Hall & Soskice,

2001). Other scholars focus on how institutions such as labour laws and encompassing collective agreements

constrain management choices, discouraging firms from adopting low road HR practices relying on low wages and

job insecurity (Bosch, Mayhew, & Gautié, 2010; Sherer & Leblebici, 2001).

In this article, we develop a framework for analysing the impact that different combinations of institutional

resources and constraints have on the practices firms use to motivate and compensate their workforce, which we

broadly place under the rubric of performance management. We apply this framework to explain variation in models

of performance management adopted in similar call centres, based on a matched comparison of incumbent telecom-

munications firms in Denmark, France, Germany, and the United Kingdom.

We identify two distinct mechanisms through which labour market and collective bargaining institutions shape

performance management. The first is via institutional constraints such as job security protections or contract provi-

sions that restrict the use of certain sanction‐based practices. The second is via participation resources that labour

can use to establish procedures that improve the transparency, design, and perceived fairness of performance manage-

ment. Although each mechanism can help to improve worker control and security, we argue that the overall approach

to performance management will most closely approach a high‐involvement model delivering mutual gains when both

are present. The German case of DeutscheTelekom demonstrated the most favourable outcomes in this regard due to

its strong job security protections, legal participation rights,and partnership structures at multiple levels of the firm. We

argue that this configuration of institutions can make it easier for management to make credible commitments to

workers that they will act in good faith when the latter accept more flexible patterns of performance management.

In the following sections, we first set out a framework for considering the influence of labour market and collec-

tive bargaining institutions on performance management. We then present a summary and analysis of the case study

results. The paper concludes with a discussion of the contribution of our findings to current debates in the strategic

and comparative HR literatures.

2|CONCEPTUAL FRAMEWORK

Performance management is a central component of HRM or employment systems, consisting of the practices and

policies an organisation uses to motivate and discipline its employees. These include goal setting, performance mon-

itoring and feedback practices, coaching, sanctions, and rewards, such as variable pay and upgrading via promotions.

The performance management system that an organisation adopts reflects a series of choices concerning how to

respond to problems of incomplete contracts (Commons, 1924; Gibbons & Henderson, 2012; Stinchcombe, 1986),

imperfect information (Simon, 1976), and the high costs associated with market sanctions, especially for the weaker

party (Crozier, 1963). We view these organisational responses as differing along two dimensions.

The first dimension concerns the direct consequences and rewards attached to performance outcomes. Broadly

speaking, organisations can adopt “incentive‐based”models that reward performance through better pay, promotion,

and investment in skills. Alternatively, they can adopt more narrowly “sanction‐based”practicesthat rely on the threat

of employer exit from the employment relationship via dismissal. Although these are not mutually exclusive (organisa-

tions can combine incentives and sanctions), they are underpinned by different mechanisms for encouraging adherence

to specified standards, with incentives requiring more adaptability of the employmentcontract compared to sanctions.

The second dimension concerns themethod of coordination, whichwe view as the response to the uncertainty or

indeterminacy inherent in the employment relationship. Here, we follow Mintzberg (1979) in distinguishing between

coordination by “standardisation”and coordination by “mutual adjustment.”In the area of performance management,

the formerwould involve an emphasis oncentralised mechanismsfor evaluating performance,including detailed perfor-

mance standardsand intensive monitoring. Mutual adjustment, in contrast, relies on adaptable performance standards

that are governedwith input from theworkforce as new informationarises, and thus tradescontrol for greater flexibility.

200 DOELLGAST AND MARSDEN