Human Resource Management in Estonian Organisations: 0Ormation O0 the Characteristics in the Institutional and Cultural Context
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Estonian Business School HUMAN RESOURCE MANAGEMENT IN ESTONIAN ORGANISATIONS: 0ORMATION O0 THE CHARACTERISTICS IN THE INSTITUTIONAL AND CULTURAL CONTEXT Thesis for the Degree of Doctor of Philosophy by Tõnu Kaarelson Tallinn 2010 1 The Institute of Management, Estonian Business School, Estonia Dissertation is accepted for the defence of the degree of Doctor of Philosophy (Management) by the Ph. D. Curriculum Board of Estonian Business School on April 8, 2009 Supervisor: Professor Ruth Alas, Ph.D., Chair of Management Department, Vice Rector of Research, Estonian Business School, Estonia Opponents: Associate Professor Vilmante Kumpikaite, Kaunas University of Technology, Lithuania Professor Emeritus Raimo Nurmi, Turku School of Economics, Rinland Public Commencement on June 10, 2010, Estonian Business School, Lauteri 3, Tallinn, Estonia Language editor: Riina Koris Copyright: Tõnu Kaarelson, 2010 ISBN 978-9985-9824-5-7 EBS Print, Lauteri 3, Tallinn 2 ACKNOWLEDGEMENTS Many people have contributed to the thesis. Rirst of all I would like to thank Ruth Alas for suggesting the topic of the research, for supervision and support. I would like to thank professor Arno Almann for his invaluable recommendations and great support. The comments provided by professor Tiit Elenurm were thoroughly helpful. My gratitude belongs to co-authors of the articles professor Sinikka Vanhala from Helsinki School of Economics and Business Administration, professor Ivan Svetlik and Andrej Kohont from Ljubljana University as well as professor Katrin Niglas from Tallinn University. I would like to thank all good colleagues in Estonian Business School who have contributed to the completion of the paper, foremost Maris Zernand-Vilson, Riina Koris and Terje Tampere. Research was supported by ETR grant 7537. 3 4 CONTENTS INTRODUCTION ....7 List of papers .. ...7 The relevance of the topic .......8 The objective and research tasks ....9 The originality of the research and its practical merit ......10 Part 1. THE TEORETICAL PART ..13 1.1. Human Capital Theory ...13 1.2. The Resource-Based View of the Rirm ...13 1.3. The Concept of Personnel Management .....15 1.4. Human Resource Management Concepts ..17 1.5. Different approaches in human resource management ....19 1.5.1. The universalistic approach ......19 1.5.2. The contingency approach .......21 1.5.3. The configurational approach .... .......21 1.6. The contextual approach in HRM ...................22 1.6.1. National culture context ...................23 1.6.2. Institutional context .........................24 Part 2. THE EMPIRICAL PART .27 2.1. The propositions for empirical analysis .. .....27 2.1.1. Dependence of the HRM function in organisations on the state institutional system ...........27 2.1.2. Dependence of HRM function in organisations on the societal level cultural practices ........................................................28 2.1.3. The appearance of personnel management as a functional area in management in Estonia ........................ ....................29 2.1.4. Moving from personnel management into the human resource management phase in Estonia .................................................30 2.2. Methodology and methods used in the dissertation .......31 2.2.1. Cranet questionnaire background and methodology ..................31 2.2.2. Sample ..............................................................................32 2.2.3. Validity and reliability of data ...............................................34 2.2.4. Survey on HRM practices in Estonian private sector organisations ......................................................................35 2.2.5. The study on connections between cultural and HRM practices .......36 Part 3. PUBLICATIONS ...........................................................................39 1.Estonia Rrom Personnel Management to Human Resource Management .. ........................................................................41 2.Converging Human Resource Management: A Comparison between Estonian and Rinnish HRM ..........................................................57 5 3.The Development of the Personnel Runction in Transition Countries: The Slovenian and Estonian Experience ..............................................85 4. Trends and developments in human resource management practice in Estonia in the institutional context .. ............................109 5. Human resource management practices in Estonian private enterprises ....129 6. Human resource management in cultural context: empirical study of 11 countries ............................ 149 Part 4. CONCLUSIONS .......169 4.1. Discussion on the research propositions ....169 4.1.1. Proposition 1 .. 169 4.1.2. Proposition 2 .. 170 4.1.3. Proposition 3 .. 172 4.1.4. Proposition 4 .. 174 4.2. Implications for management ...183 4.3. Limitations and suggestions for further research ........185 4.4. The final conclusions ........186 RERERENCES ..189 APPENDICES . .....199 SUMMARY IN ESTONIAN .203 CURRICULUM VITAE 209 6 INTRODUCTION List of papers This dissertation is based on the following original publications, which will be referred to in the text by their respective Roman numerals I. Kaarelson, T., Alas, R. (2002) Estonia - Rrom Personnel Management to Human Resource Management, Human Resource Management, Institute of Labor and Social Studies, Vol. 1A: 25-38 II. Vanhala, S., Kaarelson, T., Alas, R. (2006) Converging Human Resource Management: A Comparison between Estonian and Rinnish HRM, Baltic Journal of Management, Vol. 1(1), 82-101 III. Svetlik, I., Kaarelson, T., Alas, R., Kohont, A. (2007). The Development of the Personnel Runction in Transition Countries: The Slovenian and Estonian Experience, Trames. Journal of the Humanities and Social Sciences, Vol. 11, Issue 1, 35-53 IV. Kaarelson, T. and Alas, R., (2008). Trends and developments in human resource management practice in Estonia in the institutional context, Problems and Perspectives in Management, Vol. 6, Issue 1., 105-113. V. Kaarelson, T. and Alas, R. (2008). Human resource management practices in Estonian private enterprises. Human Resource Management. Institute of Labor and Social Studies, 1(60): 33-49. VI. Alas, R., Kaarelson, T., Niglas, K. (2008). Human resource management in cultural context: empirical study of 11 countries, EBS Review No 24 (1): 50-62 7 The relevance of the topic Human resource management (HRM) is becoming one of the key areas in management and its skilful implementation paves the way for attaining an organisational goals. This has been proven by a number of surveys which have looked into the influence of human resource management practices on organisational performance (Huselid 1995; Becker and Huselid 1998; Boselie et al. 2005). The relevant impact of personnel on the effectiveness of an organisation is best seen when an organisation has developed and implemented suitable human resource policies and systems. Next to these factors, the quality of people management greatly depends on how organisations have developed the function of human resource management and to what extent managers have been prepared to exploit the potential of their staff. Thus, managing the human resource (HR) has become one of the critical success factors in most organisations. Both the existence of proper personnel and the ways how people are managed is the basis for achieving the competitive advantage. While researching management in general and people management in particular, the questions, whether organisations and management practices tend to be similar or whether they contain peculiarities inherent to national, cultural and institutional differences peculiar to different countries and regions, have been asked. Because business activities are increasingly becoming international or global, the issues of applying suitable and effective management practices in international organisations occur. On the other hand, management practices and the development of human resource management in member countries of the European Union are of similar interest. By critically analysing the US sources of human resource management and relying on research practices in organisations in the so called old countries of the European Union, the European human resource management model has emerged (Brewster et al. 2004; Brewster 2007; Morley et al. 2000; Gooderham et al. 2004; Larsen and Mayrhofer 2006). At this point, the importance of context occurs. On the one hand, factors such as economic rationality, internationalisation of business activities, availability of modern technologies, etc make common demands on organisations and management. As a result of this, differences in management practices should decrease and the external context of organisations should be of lesser importance. On the other hand, however, it is claimed that similarities between human resource management practices are restricted by institutional embededness of organisations (Brooks et al. 2005; Tregaskis and Brewster 2006). In terms of contextual factors, national and regional cultural characteristics play an important role. Cultural characteristics that are inherent to different countries and regions have been studied and essential differences brought out (Hofstede 2001; House et al. 2004), but there is not much evidence on relationships between cultural differences and management practices. 8 In Estonian organisations, the topics of people management, initially in the form of personnel management (PM) and later in the form of human resource management, began