Strategic imperatives, power and subsidiary performance: the transfer of human resource management practices in multinational companies operating in Poland's post‐socialist banking industry

• Date: 01 July 2019
• DOI: http://doi.org/10.1111/irj.12263
• Published date: 01 July 2019
• Author: Ilona Hunek,John Geary

Strategic imperatives, power and subsidiary

performance: the transfer of human

resource management practices in

multinational companies operating in

Poland’s post-socialist banking industry

John Geary and Ilona Hunek

ABSTRACT

We examine the extent to which institutional influences account for the transfer of

performance management systems in two foreign-owned banks, one German the

other Irish, in Poland. While we find they were important, more important were the

joint effects arising from the subsidiaries’times-of-acquisition, their pre-acquisition

economic health, the international experience of the MNCs’management, headquar-

ters-generated strategic imperatives and the political dynamics that ensued between

corporate and local management.

1 INTRODUCTION

In the international literature, a variety of interacting effects are identified as account-

ing for the transfer of MNCs’employment and HRM practices. These include parent-

country and host-country institutional influences, the extent and nature of an MNC’s

international expansion and integration, dominance effects arising from host econo-

mies’dependence on inward investment and the shape and tenor of power relations

between actors within and beyond the MNC (Edwards, 2011; Ferner et al., 2012;

Becker-Ritterspach et al., 2016; Geary and Aguzzoli,2016). A great deal of this research

has been conducted in mature, relatively stable market economies, albeit there is a

growing literature on emerging economies (e.g. Sayım (2010), Gamble (2010), Ngoc

and Rowley (2011)).We examine whether such an explanatorymodel is sufficient to ex-

plain MNCs’practices operating in a context of significant institutional transition and

flux. Our study is of two foreign-owned retail banks from Germany and Ireland with

operations in Poland shortly after its transition from a socialist to a market economy.

Our choice of the banking sector is deliberate. Much of our understanding of the

practices of MNCs in Central Eastern Europe (CEE), and in Poland in particular,

is derived from studies of manufacturing firms (Meardi et al., 2009; Kahancova,

2010). We know little of service industries or of banking, with some notable excep-

tions (Meardi et al., 2013). Banking is a critically important sector in a transition

❒John Geary, University College Dublin, Dublin, Ireland and Ilona Hunek, Kozminski University,

Warsaw, Poland. Correspondence should be addressed to: Professor John Geary, University College

Dublin, Dublin, Ireland; email: john.geary@ucd.ie

Industrial Relations Journal 50:4, 362–378

ISSN 0019-8692

© 2019 Brian Towers (BRITOW) and John Wiley & Sons Ltd

economy. In Poland, banking underwent a radical overhaul driven primarily by a

large inflow of foreign direct investment (Hryckiewicz and Kowalewski, 2008; Meardi

et al., 2013). By 2005, the share of all financial companies and banks owned by

foreign-owned MNCs reached almost 80 per cent (Contrepois et al., 2011). The sector

was subject to considerable government oversight, which in turn influenced MNCs’

possible modes of entry and timing of entry (Hryckiewicz and Kowalewski, 2008).

The acquisition of a large state-owned bank, which was widely seen as the most at-

tractive option for MNCs, as it provided instant access to an existing branch network,

was only possible between 1998 and 1999.

We examine two retail banks rooted in different national business systems (NBSs),

one coordinated (Germany), the other liberal (Ireland), to analyse whether their par-

ent countries’institutional influences led them to pursue different HRM policies. We

also look at the possible influence of size, both of the case banks themselves and of

their home countries. The Irish bank is small and comes from a small open economy.

The German bank is a large, iconic company originating from a large dominant

neighbouring country. We anticipated that size matters in the sense that sectoral dom-

inance and economic hegemony have been identified as important factors in enabling

corporate management to lay claim to the superior efficacy of their home-country

practices (Smith and Meiksins, 1995).

We examine the MNCs’pay and performance management systems (PPMS). The

transfer of common PPMS can be viewed as a specific instance of HQ-subsidiary re-

lations (Ferner et al., 2012). Many MNCs, particularly in the financial services sector,

regard PPMS as central to their employment systems and generally adopt a highly

centralised approach (Regini et al., 1999). Thus, they are central to how MNCs man-

age across national boundaries. The management of PPMS within MNCs is also con-

ducted at the intersection of home-country and host-country contexts and, as such,

provides a privileged setting for examining the collision and relative influence of

parent-country effects and local isomorphic pressures. Finally, PPMS are often iden-

tified as a fulcrum within HRM in that they bear close links with other areas of HRM

practice notably employee voice, appraisal, training and development and union rep-

resentation (Geary and Aguzzoli, 2016).

We adopt an actor-centred perspective together with a context-sensitive mode of

explanation. That is, we seek to understand how circumstances of flux and fluidity

are perceived by, and influence the power resources and postures of, actors within

and beyond the MNC. Like Edwards and Belanger (2009), we conceive of the institu-

tional context as a contested terrain in which different actors seek to identify and

exploit the institutional space of the host context, deploying a variety of power

capabilities as they do so.

2 A CONSIDERATION OF BUSINESS STRATEGY, INSTITUTIONAL AND

POLITICAL INFLUENCES

The motivation to transfer standardised management practices across the subsidiaries

of an MNC is significantly shaped by its strategy and structure (Edwards, 2011).

Firms that pursue synergistic linkages and whose operations and services are repli-

cated across countries—as they are in retail banking—are more likely to develop a

‘global’HRM model. The transfer of such standardised ‘best practices’is also driven

by strategic business imperatives (Taylor et al., 1996). Best practices are deemed best

by their association with leading companies originating in hegemonic NBSs (Smith

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Strategic imperatives, power and subsidiary performance

© 2019 Brian Towers (BRITOW) and John Wiley & Sons Ltd