National HRM and Its Formative Factors

An important point to consider is that the scope of HRM includes management-employee relationship, leadership style, motivation management, command-and-control systems, and organizational structure. Furthermore, because HRM activities affect all employees in the organization, HRM greatly impacts employees’ productivity and job satisfaction. According to Tayeb (2005), these aspects of HRM are very much susceptible to local socio-cultural influences, thus, HRM is especially significant for MNCs.

HRM takes place within the internal organizational environment and the external national context in which the company operates. Moreover, in terms of the soft HRM model, humans as a resource have emotions, interests, and personal briefs, and perform their best if these are reasonably cared for. If people on the earth have common values, and there is a universalistic one best way of management, tensions between the headquarters and subsidiaries in MNCs would not happen.

In contextual theory, Budhwar and Debrah (2001, 505) showed six contextual factors determining national HRM policies and practice: national culture, institutions, business environment dynamics, industrial sector, firm’s contingent variables, and corporate strategies and policies. Each factor is not simply independent, but they are associated with national cultural attitudes and values.

Although culture is a very vague concept which has aroused controversy among scholars about its precise meaning, the definition of culture by Tayeb (2005, 21) makes it clear, that it is “historically evolved values, attitudes and meaning which are learned and shared by the members of a given community, and which influence their material and non-material way of life.”

“(Culture is) historically evolved
 values, attitudes and meaning
which are learned and shared by
the members of a given community,
and which influence their material
 and non-material way of life.”

The HRM activities involving all employees are based on the decisions which are made by the people. For example, even when a technically sophisticated and well-designed performance appraisal system is implemented, organizational culture, leadership credibility, employee relations, and levels of trust could affect people’s decision-making in the appraisal processes. Tayeb (2005) points out that the behaviors and values that play key roles in decision-making situations are determined by several cultural attitudes: power and authority relationships, coping with uncertainty and risk-taking, interpersonal trust, loyalty and commitment, motivation resources, control and discipline, co-ordination and integration, communication, consultation and participation.