Competition and change: mapping the Indian HRM recipe against world-wide patterns. (human resource management)

Comparative human resource management (HRM) analyses differences in people management techniques and strategies across different cultural and national circumstances. Although studies have compared HRM policies and practices amongst developed nations there are relatively few cross-national analyses of developing economies, which is an oversight given the pace and geographical spread of globalization. Moreover, we lack both a theoretical and empirical framework for positioning individual countries against each other. International managers are faced with the need to understand a broad territory. Can we bring some simplicity to this massively complex topic? When we compare HRM policies and practices at the organizational level can cross-national differences be measured and mapped?

The need for some comparative frameworks is pressing. To understand comparative HRM issues alone, international managers must learn about factors that govern the nature and operation of both internal and external labor markets. Therefore, in addition to developing knowledge of cross-national and cross-cultural differences in generic organizational functions such as employee resourcing, work systems, rewards and employee relations, managers also have to understand important societal systems, structures, processes and policies and the fingerprint they leave on national HRM practice (Begin, 1992; Earley & Singh, 1995). The reasons are, of course, obvious. National HRM systems evolve primarily from the industrialization process, so academics argue that managers have to understand the complex set of historical processes through which HRM in any particular country has developed. Such understanding provides the necessary insights into the unique organizational performance criteria that are engendered by national business systems and the resultant pattern of HRM policies and preferences. The factors that lead to distinctive national and local HRM solutions have typically been examined and explained to managers from four frames of reference (Sparrow & Hiltrop, 1997):

1. Evolution of the business system and the structure of labor markets;

2. The institutional influence on the employment relationship;

3. The competence and role of HRM decision-makers; and

4. The influence of national culture on policy preferences.

The theoretical argument suggests that international HRM managers will have to become very sophisticated. It runs broadly as follows (Smith & Meiksins, 1995). Each of the above perspectives forms part of the context that must be understood by managers if they are to correctly interpret the mindset and actions of local employees. Direct links between each set of factors and the HRM policies and practices have been demonstrated. However, two additional complexities are added. First, we are told that we cannot understand the character of these national patterns of HRM unless we also understand the social systems that shape them. Therefore academic analyses highlight the complex set of interactions between HRM practices and factors such as the role of the market, employment relationship, economic mode of production and labor process, historical and cultural traditions. Second, we are warned to avoid the tendency to ignore the impact of social and organizational action when we analyse national differences. The best way to understand social systems is to see how they arise out of the activities of organizations. There are a range of strategic pressures, which though not eradicating national distinctiveness, are at least making national patterns of HRM more receptive to change. Therefore international HRM managers must also assess the propensity for change. Consideration has to be given to the processes of "convergence" such as the impact of foreign direct investment, work and production system emulation, and the influence of cadres of like-minded international managers.

So can empirical analysis of international HRM practices simplify the picture? An attempt at measuring international differences and similarities in HRM was made by Sparrow, Schuler, and Jackson (1994) on the basis of data for twelve countries surveyed in late 1991 as part of the IBM/Towers Perrin Word-wide Survey. This study builds on this perspective by adding data from a thirteenth country - India. It creates an empirical framework against which each country may be measured and mapped, and then interprets the position of India by reference to the range of comparative HRM factors outlined above. It is argued that the empirical framework based on the world-wide data provides a useful management tool for educating managers about international management and for highlighting the likely perceptual differences between managers of one country and another.

The Indian Context for HRM

The need to avoid generalising western assumptions about HRM becomes clear when considering a country like India. India's economy, with total GDP of around $272 billion, is less than a third as big as Britain's but slightly larger than that of Switzerland or Taiwan. Per capita income is 109 times higher in Japan, 74 times higher in Germany and 52 times higher in the U.K.. Chronic unemployment and underemployment exist hand in hand with maldistribution of wealth and assets and India is the least competitive of 41 countries barring South Africa for the availability and quality of its human resources.

India represents a fascinating country to position cross-nationally because it has a distinctive national culture, a western institutional inheritance but an economic, legal and political strategy aimed increasingly towards South and East Asia. Moreover, India's route to industrialization followed neither the Japanese export-led model, the entrepreneurial Chinese family business unit model of South East Asia, nor China's socialist model (Kuruvilla, 1996). Industrialization was dominated by centralised government five year economic plans intended to strengthen the country's military base, reduce reliance on foreign manufacturers and raise per capita income. The strategy relied on import substitution in heavy industries, indigenisation of defence production, and high tariffs and government orders to protect state-owned enterprises (SOEs). The economy is still strongly influenced by the SOEs and a web of nearly 250 public sector undertakings. These employ 19 million people in banks, financial institutions and government departments such as the railways and postal services and strive to achieve a socialistic pattern of society and national economic development.

Upon Independence in 1947 India was among the two most industrialised nations of Asia. However, its subsequent economic performance was poor in comparison with other developing countries in South East Asia and it slipped from the 10th to 20th largest industrial power from 1955-75. By the beginning of the 1990s the economy experienced decelerating industrial production, high inflation, increasing external and government debt with a high ratio of borrowing to GDP, and foreign exchange reserves sufficient to cover only three weeks of imports. Cultural instability, a desire to become a regional power in South Asia and economic necessity stimulated policies of trade liberalization and export-led growth. India is attempting to replicate the economic development of South East Asia. However, the process of liberalization begun in 1991 has heralded sudden competition for indigenous firms with international firms, unbridled imports, incentives to export, a switch from labor intensive to capital intensive methods of production and an incentive to remove surplus labor and generate new sustainable employment (Ahluwalia, 1994; Das, 1996; Tyagi, 1994).

A Unique Cultural Backdrop

An analysis of the cultural backdrop to HRM in India reveals the immense challenge faced by some of the organizations involved in this study (which include the Steel Authority of India, Bata Shoe Company, Delhi Cloth Mills, Modern Food Industries (India) Ltd., and Bhiwani Textile Mills) if they wish to emulate western or eastern patterns of HRM. Societal norms and cultural influences determine HRM policies and …