Research in brief: the importance of developing a “localized” approach to international HRM
International companies may develop global policies for their HR practices – but one of the key challenges is ensuring that practices are adapted to the national culture and legal frameworks. A recent study by professors from IÉSEG and Guanghua School of Management (Peking University) has analyzed how three different HRM practices can impact corporate innovation across different national cultural contexts.
The researchers surveyed more than 300 manufacturing/production companies – across 13 countries/regions including three continents – to study the interaction between the national culture and three different HRM activities with the potential to drive innovation. Namely, cross functional training, financial incentives, and employee participation schemes. They assessed the impact of these practices on the company’s ability to develop new products and services (innovation).
The results highlighted that these practices – designed to improve employees’ motivation, ability, and opportunity to contribute to innovation – can be effective, but only when they fit broadly with the local cultural context.
“We found that these practices have the capacity to either complement or supplement certain cultural elements within countries,” explains Jingjing YAO, one of the authors of the study.
How do practices fit with the local culture?
For example, financial incentives for individual employees can enhance innovation in highly ‘masculine’ cultures (using the definition of the social psychologist Geert Hofstede). These are cultures that tend to have different expectations for men and women and highlight a preference for material rewards for success (examples in the study included Japan and Italy). In countries that are considered to be more ‘feminine’ with more emphasis on quality of life and modesty, such as Sweden and Finland, they found that the implementation of such financial rewards did not affect innovation.
Cross functional trainings are initiatives designed to help employees develop new skills and knowledge notably through interaction with colleagues from different departments and services. The researchers found that this type of training positively affected innovation in cultures that are considered “collectivist” (again using the definition by Hofstede). These are cultures that prioritize the needs of the group above the needs/wishes of an individual and examples included South Korea, China and Brazil.
“In cultures with higher degrees of individualism, however, we found that this type of training actually hindered innovation,” adds Martin STORME. This was the case for countries like the UK and Italy.
Finally, they found that HR activities designed specifically to enable employees to contribute suggestions and ideas (for example through meetings, campaigns, task forces or working groups) were only effective in what are referred to as “high power cultures” (again using the dimension outlined by Hofstede). These are cultures which are traditionally marked by high levels of hierarchy and where employee roles are well defined. Examples included China, Vietnam and Brazil.
In countries with lower levels of hierarchy (for example in Sweden, the UK, Germany & Finland) employees are almost certainly more used to speaking up and putting forward ideas, so this kind of initiative is likely to have little or no added value.
Practical applications for international HR
“Our study has important implications for HR managers in international companies that rely heavily on innovation to survive and grow. When thinking of HR initiatives designed to impact employees’ abilities, motivations or opportunities, they really need to pay attention to the local cultural context,” explains Elise MARESCAUX.
“For example, we have shown this type of cross functional training can be very effective in collectivist cultures where the team comes becomes before the individual. We also highlight that individual financial incentives can be a shrewd strategy in certain countries – but would be a waste of resources in others. Finally in hierarchical cultures, we highlight that it is wise to implement initiatives that give opportunities employees to share and put forward ideas.”
Standardized or localized approach to global HR?
The paper notes that the findings, therefore, “lend more support for a localized approach”, and suggest that HRM practices should be implemented, where possible, in a decentralized manner across multinational subsidiaries, so they can be tailored to fit with the local national culture to foster innovation.
“Certain management practices may be universally effective in multinational companies as the essence of these practices is the task, but HRM practices need to take into account the local culture as the essence of these practices is the people,” the paper highlights.
“Therefore, we would encourage HRM managers implementing such policies to think carefully before taking a one size fits all approach,” adds Jingjing YAO.
“A contingency approach to HRM and firm innovation: The role of national cultures”, Human Resource Management (Volume 62, Issue 5 – September/October 2023) authored by Jingjing Yao, Elise Marescaux (IÉSEG), Li Ma (Guanghua School of Management, Peking University, Beijing, China, and Martin Storme (IÉSEG).