Impact Of Culture On Human Resource Management Management Essay

Impact Of Culture On Human Resource Management Management Essay The global anarchy has witnessed the growing importance of Human Resource Management in both business and public life. The stormy business climate brought in the wake of liberalization, globalization, changing technologies, development in knowledge and advances in information technology is offering managers a complex and challenging situation (Davis, 1995). So researchers are looking into Human Resource Management (HRM) practices on a comparative basis comes across a major question. This question has to do with the extent at which societal culture influences the way firms manage their personnel and the way HRM practices are developed and implemented within firms across various countries in the world. Globalization has shifted the attention of both researchers and practitioners to the way that organizational practices, and especially HRM, are differentiated across various countries as per their cultural context. In the literature one can find several comparative HRM studies concluding , in their majority, that national culture is a conclusive factor in shaping HRM (Heijltjes et al., 1996; Sparrow et al., 1994). In studying about Multi National Companies (MNCs) in 12 countries, Sparrow et al. (1994) found differences in the HRM practices that are perceived to be a source of competitive advantage across the countries. Of all the factors affecting Human Resource Management (HRM) perhaps none is more effective than the national culture and the most popular model for comparison at the level of national culture is that of Hofstede (1980, 1991), which has been the base of numerous research studies in the area of management in general. Hofstede (1980, 1991) argued that American management theories represent their own cultural environment. So, it can be said d that American management cannot be detached from American culture. In the meantime, Laurent (1986:92) viewed that every culture has developed through its own history, some specific and unique insight into the managing of organization and their human resources. Every culture has also developed specific and unique blind spots in the art of managing and organizing (Singh, 2009). Aycan et al (2000) described that due to the increasing demands of the globalized and liberalized business environment, both researchers and practitioners have started paying more attention to the study of culture as an explanatory variable. The researchers have also come to realize that the uncritical adaptation of HRM practices and techniques evolved in the context of Western cultural values may not be effective in other socio-cultural environments. By using Hofstedes framework of national culture, the objective of research is to examine the impact of national culture on HRM practice by applying the Hofstedes (1980) cultural dimensions of collectivism/individualism, power distance, uncertainty avoidance, and femininity/masculinity theory. Background of the study: In the new global economy, HRM has become a vital issue for the effectiveness of organizations. In accordance with the existing studies, the shift to globalization required from corporations to achieve focused performance by all means. This shift emphasized the necessity for businesses to fully utilize their human resources engaging suitable practices and strategies (Schuler and Jackson, 2005). The presence of supportive cultural factors is essential for the efficiency and success of the HRM result. It seems obvious that the ways western organizations cope with HRM practices are different from the ways Middle Eastern organizations with their different cultural and institutional situations cope with these issues (Westerduin, 2010). Because Arabic countries have different values and attitudes than the developed countries, which may determine and shape specific managerial approaches in human resource as cited by cultural research perspective. As Mendonca and Kanungo (1996) determined th at one of most important cultural dimensions, which is different in western and eastern cultures and is exclusively important in shaping their HRM strategies, is the assumption about human resource capability. This restlessness to adopt western HRM tools could results lack of suitable practice in the Arabian context (Binjabi, 2011). Saudi Arabia is the most traditional country in the Arab world; it is also the largest member of the six Gulf Co-operation Council (GCC) states and has the largest known oil reserves in the world estimated at around 25% of the proved reserves (Mellahi, 2006). Taking into account its strategic geo-political position and energy resources, Saudi Arabia is a major player in the stability of the regional and global economy. Saudi Arabia during the era of King Abdullah since 2005 has also introduced numerous laws and policies such as privatization and foreign investment laws to stimulate competition. He also in a smart step to diversify the economy and create more jobs for Saudis in the privet sector and attract the local and foreign investments has launched giant projects with hundreds of billions dollars. To achieve these development goals, Saudi Arabia has a major investment in human resources management in order to raise its average skill level (Mellahi, 2007). Developing the HRM syste m in a very conservative tribal society, there would be as a natural result numerous Saudi cultural impacts on the HRM system (Albugamy, 2010). The present research will reside on HRM practices in the context of Saudi Arabia. Furthermore, the influence of the cultural factors on HRM practices in this country will be examined for its wider implications. Rationale behind choice of setting: Saudi Arabia is chosen as the setting for this study since it is a typical example of a developing economy in Arab with the most conventional and historic cultural environment. According to U.S.-Saudi Arabian Business Council (2008-09), the construction sector in Saudi Arabia is the largest and fastest growing market in the Gulf region. This sector is the most developed, organized, and diverse also in terms of Human Resource Management (HRM) practices in the country. Ongoing construction projects in the Gulf are valued at $1.9 trillion, and one-quarter of the developments are located in Saudi Arabia. The sector has both foreign and local organizations that bring out the different HRM practices employed by various organizations. Identification of the Problem: It is attempted through this research to create a better description of the effect of culture on HRM practices in Saudi Arabia as we know culturally Arab countries are completely different from other countries. At this moment there is some literature available on the research subject, but not much research on this subject conducted until this moment in the context of Arab countries which present an overview of the current status and trends of HRM in Middle East. It could emerge that the knowledge of HRM in Arab culture that these organizations use at this moment is outdated, or that these organization should be aware of the direction in which the differences between HRM in Western countries and HRM in Middle Eastern countries are evolving. Also, there are problems in the image that people in the Western world have of the Arab world. Negative images in the media of the Middle East prevent these people of obtaining a correct view of all aspects of the Arab culture and values. The curre nt research is an attempt to contribute in order to find out the truth. Also by the help of this research compatibility of HRM practices chosen and implemented by organizations would be checked with the respect of the Arab world (in particular, in the Saudi context with a focus on the construction sector). Aim and Objectives: The aim of this study is to examine the effect of Saudi Arabian national culture on the Human Resource Management (HRM) practices within the organizations and how the cultural elements play a key role in that issue. To this end, HRM practices are viewed in terms of Reduction of status distinctions, Employment security, Performance appraisal and Selective hiring whereas National culture is viewed in terms of Power distance, Uncertainty avoidance, Individualism/Collectivism and Feminity/ Masculinity. On the basis of the stated research aim, the following objectives are formulated: O1:- To investigate the relationship between the national culture and HRM practices. O2: To identify the effect of the cultural attributes on HRM practices. Significance of the study: It is expected that the current study will make a considerable novel contribution to the academic research in the field of organizational Human Resource Management (HRM). To be more specific, it will assess the role of cultural determinants in the Saudi Arabian context, which was not given enough attention in the previous studies. The significance of the study is that it will lead to the better explanation of HRM lessons in an international environment. On practical basis, the findings that will be drawn from the current study could serve as a guide in transferring HRM policies within the construction sector of Middle East. It also offers insights into what type of HRM practices are more likely to positively influence the organizational performance. It will also add value by suggesting the need for modified HRM practices to fit the Saudi Arabian as well as the international context. Literature Review Human Resource Management (HRM) and Culture: The impact of national culture on a variety of Human Resource (HR) practices has become one of the most important topics in management research (Chen et al., 2006; Gahan and Abeysekera, 2009). From the perspective of institutional theory (Scott et al., 2003; Westney, 2005) it is suggested that HR practices are affected by differences in national culture and that HR practices will be largely dependent on managers abilities to understand and balance different cultural values and practices (Wang et al., 2008). The contingency or external fit perspective emphasizes the fit between national culture and HR practices, implying that specific HR policies are affected by national culture. According to Alcazar et al. (2008), the theories on Human Resource Management (HRM) have focused on universalistic perspectives for number of years. Researchers have put great efforts in finding a single human resources theory that is applicable in every situation, in every organization, every culture, and every country worldwide, therefore a best practices model. During these expansions it became more and more clear that this universalistic theory was nonà ¢Ã¢â€š ¬Ã‚ existent, and that the solution to the universalistic HRM model should be sought in a contextual, contingent theory which takes into account a wide range of factors that influence the fitness of an HRM model in the given setting. By regarded it, the researchers admitted that a single outline for HRM practices does not exist. The further globalization of businesses meant that the approach HRM takes to her tasks differs from several years ago. HRM departments need to take more factors in consideration than before, inclu ding cultural differences, different labor laws in different countries and different views on labor of the employees (Westerduin, 2010). So research (Sonja and Phillips, 2004) assumes that managers in todays multicultural global business community often encounter cultural differences, which can hinder with management practices in organizations. Leat and El-kot, (2007) have emphasized the effect of national culture, a concept that includes traditions, values, beliefs, attitudes and behavior which influence HRM practices. Laurent (1986) proposed that HRM methods in any country are a reflection of the national culture of that country (Albugamy, 2010). Triandis (1972) and Schein (1992) defined culture in terms of shared ways of thinking, feeling, and reacting; shared socially constructed environments and commonly experienced events including the history, language, and religion of their members (Pellegrini Scandura, 2006). National culture is also defined as the ideas, set of beliefs and norms followed by the people of a certain country; the countrys history, religion and traditions make up for the national culture (Majee d et al., 2010). In comparing cultures of different countries, cross-cultural researchers have focused their attentions on an examination of a set of cultural value dimensions developed by Hofstede. These dimensions are based on a large sample of employees from 40 countries from the large multinational IBM, whom he studied from 1960s, 70s and 80s. According to Gannon Newman, (2002), after investigates, examines, and compares more than 50 countries; he is regarded as the authority in culture differences and how culture differences influence management strategies. He said: in global economic integration of the world, the strategies of all companies in the world are focused on how to meet the largest market to most customers by products and services; while the study of different cultures and values, is the key to success of such strategies (Jing, 2010). Leading value systems of different countries can be ordered along Hofstedes set of cultural value dimensions (Hofstede, 1980; Hofstede Bond, 1988). Peoples Dominant value systems have been crystallized in the institutions these people have built together: their family structures, religious organizations, educational structures, associations, systems of government, work organizations, law and regulations, literature, settlement arrangements, and buildings. All of these reflect common beliefs that derive from the mutual culture. Whereas the value systems affect human thinking, feeling, action, and the behavior of organizations and institutions in predictable ways, the value dimensions reflect basic problems that any society has to cope with but for which solutions differ from country to country (Hofstede, 1983). Current study (Gelfand, 2000) concludes that managers in organizations are recognizing that it is impossible to maintain bias views while doing business across different cultures. Cultural knowledge and a global focus are crucial to survive, and to thrive, within todays business environment. However, the same literature does not give a global focus that is accordant with the global reality of business. Discussion and empirical assessment of culture and HRM practices (Aycan, et al, 2000) has been focused on specific developed countries and developing countries have been given little attention (Nyambegera et al, 2000) which is the gap in the existing academic knowledge. Variables of the study For the purpose of this study the study variables have been grouped into two categories, namely cultural variables that include sub variables as defined by Hofstede, 2001, and organization variables that include HR practices as defined by Gong et al., 2009. Cultural variables: The first category of variables includes the societal culture as defined by Hofstede (2001). Power Distance: Power distance is the degree to which individuals agree that power should be dispersed unequally in the society (Hofstede, 2001). Hofstedes Power Distance Index tells how much one countrys less powerful people accept and respect the unequal power distributed. The inequality of the society is followed by peoples earlier different life experiences such as value and norms. Some cultures present the Power Distance obviously, some present inconspicuously (Jing, 2010). High power distance cultures tend to view inequality as normal or natural. In such cultures, lower-status people are addressed by their first names, while for higher-status people different prefixes are added before their first names (Pellegrini and Scandura, 2006). In low power distance cultures lower-status people are more likely to believe that they should have voice in decision processes (Alves et al., 2006), and will be less motivated if this is withdrawn. Power distance has significant implication for management styles and practices (Emmerik et al., 2008). In low power distance cultures there is a preference for leadership styles that promote flexibility, innovation, job mobility, and general skills, rather than the specialized skills that are preferred in high power distance cultures (Dickson et al., 2003). Power distance plays a role in employees willingness to accept supervisory direction, and on their emphasis on gaining support from those in positions of authority (Taleghani, 2010). People in high power distance cultures accept more guidance from superiors, and this extra attention makes high-status employees more enthusiastic about work. In lower power distance cultures wage differentials between men and women are smaller (Hofstede, 2001). Uncertainty Avoidance: Hofstede (2001) defines uncertainty avoidance denotes to the extent to which individuals feel threatened by and try to avoid vague and uncertain situations. Uncertainty about the future is a basic fact of human life, extreme uncertainty creates unbearable anxiety, and human society has created ways to avoid the uncertainty, for example by the mean of technology, which helps us defend ourselves against uncertainty caused by nature and laws, which help us against the actions of others, religions, which help us accept the uncertainties we cannot protect ourselves against. Different societies have different ways to adapt to uncertainty, how tolerant for the uncertain anxiety a single society has is talking about the Uncertainty Avoidance Index. The high Uncertainty Avoidance society has more worries about the future and anything uncertain, and therefore more ways to defend against those anxieties; and the low Uncertainty Avoidance society has fewer fears about the uncertainties, and therefore such society doesnt care so much about the rules (Jing, 2010). Dikson claims that in societies high on UA, career stability, formal rules and the development of expertise tend to be valued, whereas in low UA cultures, more flexibility in roles and jobs, an emphasis on general rather than specialized skills and more job mobility is more typical. People in uncertainty avoiding cultures are also more expressive, and driven by inner nervous energy. People in uncertainty accepting cultures may be more tolerant of different opinions and relatively unstructured situation s. In the work environment, uncertainty avoidance may lead individuals to try to avoid ambiguous situations and look for precise alternatives. Within such a cultural context, there will be many established formal rules or informal norms controlling the rights and duties of employees (Chang et al., 2007). Individualism/Collectivism: Hofstede (2001) defines individualism against its opposite, collectivism, as the degree to which the society encourages and rewards collective action (Pellegrini Scandura, 2006). The culture inclined to be individualistic is more focused on ones own desires and values, and serves their own interests by relying on individual exertion; the relations between people are regarded less important than oneself. On the other hand, compared with individualism, the culture inclined to be collective is more focused on a combination of strong social organizations, which is divided into inside the group and outside the group. People cared for by members inside the group, and pay back by their loyalty; they love their group like themselves, and they can sacrifice their own likings for the group (Jing, 2010). In collectivist societies, supervisors rely on loyalty of staff, reliability and harmonized group relationship with others while people in individualism culture people enjoy personal particula rs and successes in order to define themselves. The dimension of individualism and collectivism has received the most attention in cross-cultural organizational research (Triandis, 1994). It has been shown to have major implication for the motivational as well as employment practices. For example, in more individualistic societies HR practices tend to differentiate between employees based on their individual performance. These societies also use differentiation in the reward system (Beer and Katz, 2003). At the same time, employees from collectivistic countries prefer reward systems that are non-competitive in nature (Chiang and Birtch, 2005). Employees from more individualistic cultures tend to be more driven by improving themselves and their own positions in life, and are also characterized by feeling comfortable in competitive environments (Probst et al., 1999), whereas employees from more collectivistic countries tend to be more motivated by the success of the group as a whole. More individualistic cultures will tend to emphasize HR practices that stress individual rewards management (e.g. offering individual bonuses and perks, promoting on performance) more than in collectivistic cultures. Masculinity/Femininity: Hofstede (2001) refers to masculinity/femininity, as the distribution of roles between the genders. It is also referred to as assertiveness (House et al., 1999), which emphases on competition, success, aggressive social relationships, and limited emotional involvement with others. His research showed that womens values differ less among societies than mens values; and mens values from one country to another contain a dimension from very assertive and competitive and maximally different from womens values on the one side, to modest and caring and similar to womens values on the other. Hofstede (1998) stated that in high masculine societies, men are supposed to be firm, tough, and focusing on material success; woman are supposed to be more modest, affectionate, and concerned with the quality of life. A man has the obligation to earn money for his family; he should work hard to be successful in society, the harder he works, the more respect he gets from his family and society. Therefore , competition in a masculinity society is very fierce and people pay attention to the work performance very much, they believe life is for work. In high femininity society, both man and woman are supposed to be concerned with the quality of life. A woman has the obligation to take care of the house work, such as cooking, cleaning, and the children, so that her husband can go out and earn money without any worries (Jing, 2010). Research showed that the distribution of gender roles has major implications for HR practices and for career strategies as well as career opportunities of women. Hofstede (2001) described that masculine and feminine cultures create different leader hero types. The heroic manager in masculine cultures is decisive and aggressive. In feminine cultures, the hero is less visible, seeks consensus, and is intuitive and cooperative rather than tough and decisive. At work, in more feminine societies more weight is attached to subjective, intuition-oriented conditions such as care, nurturing and relationships (Alves et al., 2006). At the same time, in more masculine societies people ascribe greater value on monet ary rewards, while in turn more feminine societies place greater importance on non-financial rewards (Chiang and Birtch, 2005). Saudi Arabian culture in Hofstede cultural perspective: Studies of the culture in Saudi Arabia have specified that it is fairly homogenous, like most Middle Eastern nations (Idrees, 2007). Analyzing and comparing Saudi cultural orientations based upon a typology developed by Geert Hofstede show that on the above mentioned cultural dimensions Saudi Arabia presents a unique culture. Saudi Arabias power distance ranking of 80 is revealing of a high level of inequality of power and wealth within the society. This ranking advocates that the population has an expectation and acceptance that leaders will separate themselves from the group and this condition is not essentially undermined upon the population, but rather accepted by the society as their cultural heritage. Idris (2007) indicated the high power distance in Saudi Arabia is evident in the Saudis strong preference for managerial positions due to the belief that labor jobs are dishonorable and considered by many to be a cause of embarrassment. Saudi Arabias high power distance also impacts decision making. Bhuian (1998) described that, generally, Saudi managers make decisions autocratically and paternalistically to subordinates who are considered as having strong dependence needs (Cassell Blake, 2011). Saudi Arabias uncertainty avoidance ranking of 68 shows the societys low level of tolerance for uncertainty. Saudi Arabias ranking suggests that new projects will be carefully analyzed to assure that whatever risk they represent is thoroughly understood and addressed. In order for change to take hold, the idea needs to be perceived as good for the group and be accepted by the group. Due to Saudi Arabias uncertainty avoidance ranking, there is a conception that Saudis prefer government intervention in business practices. Bhuian, 1998 mentioned that within organizations, the ranking is evident in the fact that Saudi managers are generally not tolerant of deviation of the generally inflexible company rules (Cassell Blake, 2011). Saudi Arabias individualism ranking of 38 interprets into a Collectivist society as compared to Individualist culture and is revealed in a close long-term commitment to the member group, that being a family, extended family, or extended relationships. Alanazi and Rodrigues in 2003 also described the Saudi culture as collectivistic with strict  devotion  to the teachings of Islam, which governs the  social behavior  and provides a strong cultural fabric that covers the whole nation. Essentially, business is affected by the collective thinking of the Saudis, which dictates that relationships trump business dealings (Idris, 2007). Saudi Arabia scores 52 on the dimension of masculinity/femininity, thus Saudi Arabia has a more feministic culture. So, in Saudi Arabia people maintain good relationships with each other. Saudi Arabias ranking also impacts hiring and firing practices. Research has found that terminations for poor performance rarely happen because the desire for relationships results in long life employment (Idris, 2007). Historically, the society has been characterized as valuing behavior displaying kindness, selflessness, and generosity; deference to those above in the hierarchy of the family; freedom from reliance on others and mastery over ones emotions; and a willingness to support other family members and accept responsibility for their errors as well (Cassell Blake, 2011). HR Management Practices in Saudi Arabia: HR professionals in Saudi Arabia view HR as a core strategy for improving organizational performance (Ramlall et al., 2012). Pillai et al., (1999) explained management practices in the Islamic world (of which Saudi Arabia is a major part) as influenced by tribal traditions where the manager is expected to act as a father figure. This means favoring the continuity of the family concept over improved organizational effectiveness and competitiveness. Their study showed that this reliance on the  father-figure  relationship means that leaders and managers in the Middle East face difficulties convincing the employees to be part of the solution to management problems. According to Yavas (1997), a prevailing organizational structure in which the manager makes all the decisions repels positive change. According to Bhuian et al., (2001) the people of the kingdom need to be guided and told what to do and actually prefer government involvements in business practices (Idris, 2007).  Beer e t al., (1985) specified, Since, Saudi Arabias collective culture values group work, the pay-for-performance system that recognizes individuals is destabilized when management tries to  moderate  it by writing comforting statements on the appraisal forms to compensate for low salary increases for poor performers. The prevailing culture is  in favor of  life employment, so managers are restrained from  purging  poor performers and substituting them with high performers. Unless the difference in compensation of the high performers and low performers is great, companies risk discouraging the high performers whereas motivating the low performers to remain unproductive (Idris, 2007). Organizational Variables: The second category of variables includes the HRM practices that reflect cultural dimensions in which they were developed. HR practices that are likely to be sensitive to cultural influences are followings (Gong et al., 2009); Employment security: Employment security can be characterized as maintenance-oriented HRM because they defend employees well-being. Employment security may encourage employees to stay in their job. In the literature, employment security usually refers to protection against unfair or unjustified dismissals. According to ILO (1995) employment security means that workers have protection against arbitrary and short notice dismissal from employment, as well as having long-term contracts of employment and having employment relations that avoid casualization. Evidently this definition covers only one category of the labor market wage and salary workers. It is they who are employed by some legal entity, and are at risk of being dismissed by that legal entity, and can have a stable or unstable employment relation with their employer (Dasgupta, 2001). In an era of downsizing and rightsizing, employment security can confer yet another advantage, in that it boosts people to take a longer-term perspective on their jobs and organizational performance. Employment security policies will also lead to more cautious hiring, because the firm knows it cannot simply let people go quickly if it has overestimated its labor demand. Slenderer staffing can actually make the work force more productive, with less people doing extra work. Additionally, employment security maintained over time helps to build trust and belief between people and their employer, which can lead to better spirit in the company (Pfeffer, 1998). Reduction of Status Distinctions: The basic premise of high-performance management systems is that organizations perform at a higher level when they are able to tap the ideas, abilities, skills, and struggle of all of their people. One way in which they do this is by organizing people in work teams, a topic already briefly covered here. But neither individuals nor teams will feel comfortable or stimulated to contribute their minds as well as their physical energy to the organization if it has sent signals that they are not both valuable and valued. In order to help make all organizational members feel important and devoted to improving organizational operations, so, most high-commitment management systems attempt to reduce the status distinctions that separate individuals and groups and cause some to feel less valued. This is accomplished in two ways: symbolically, through the use of language and labels, physical space, and dress, and practically, in the reduction of the organizations degree of wage disparity. Status differences are reduced and a sense of common fate established by limiting the difference in compensation between senior management and other employees. The reduction of status differences inspires open communication, essential in an organization in which learning and adaptation are encouraged. Status differences are reduced and a sense of common fate developed by limiting the difference in compensation between senior management and other employees (Pfeffer, 1998). Conclusively reduced status distinctions include dress, language, of ¬Ã‚ ce arrangements, wage differences and behaviors across levels (Ahmad Schroeder, 2003). Selective hiring: Selective hiring is aimed at developing an organizations talent pool. Organizations serious about gaining profits through pe