Download Management development and organisational strategy

MANAGEMENT DEVELOPMENT AND ORGANISATIONAL STRATEGY: THE
MISSING LINK?
Françoise Delamare Le Deist
CREER, Ecole Supérieure de Commerce de Toulouse
[email protected]
Alain Klarsfeld,
CREER, Ecole Supérieure de Commerce de Toulouse
[email protected]
Céline Lafoucriere
CREER, Ecole Supérieure de Commerce de Toulouse
[email protected]
Jonathan Winterton
CREER, Ecole Supérieure de Commerce de Toulouse
[email protected]
Abstract
Linking strategy with HRM and management development leads to enhanced
organizational performance. However it can be hypothesized, that organizations do
not respond to such managerial wisdom equally when placed in different cultural
settings. This papers tests and discusses the effect of country on the way managers
perceive the fit between their employer organization’s strategy and its HRM and
MD practices.
Keywords: management development, organisational strategy, cultural differences
Introduction
It is widely held that the key to competitive advantage lies in the capacity within the
organization for developing and maintaining core competences (Barney, 1991; Grant, 1991).
Strategies which recognise core competence as a key organizational resource that can be
exploited to gain competitive advantage are prevalent in the recent literature (Barney, 1995;
Prahalad and Hamel, 1990; Mitrani et al, 1992; Tobin, 1993; Thurbin, 1995; Hussey, 1988;
1996; Campbell and Sommers Luchs 1997). However, the importance of core competence
for competitive advantage was recognised even in the era of classical strategy as ‘distinctive
competence’ (Andrews, 1965) and ‘firm capabilities’ (Ansoff, 1965). Clearly, therefore, the
development of core competence, including managerial competence, is a crucial part of
organisational strategy (OS) irrespective of the particular approach to strategy adopted.
Hussey (1988) concluded that most training and MD is wrongly focused:
What is needed in most companies is a mental shift from the common idea that
training should be for the improvement of the individual because this will benefit the
firm, to the concept that training should be for the benefit of the firm and this will
benefit the individual. (Hussey, 1988: 69).
If management training is to contribute to the attainment of corporate objectives, and is
to be used as a competitive weapon, Hussey (1988: 84-5) argues that the initiative must come
from the chief executive and training needs must be assessed against corporate requirements.
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Moreover, formal training should relate to the corporate need first, with individual needs
being ‘incidental’: ‘this implies that the annual training assessment of individuals, or the
results of the residential assessment centre, have to be related to an understanding of the
company aims, strategy, the business environment, and the desired company culture’
(Hussey, 1988: 190).
Nevertheless, it is clear that in many organizations, such a relationship does not exist
and, given its pivotal importance, this can be seen to be the ‘missing link’ between
development and performance. This paper focuses tries to explain managerial perceptions in
terms of strategy and HRM, as well as strategy and management development (MD), from a
cross-cultural perspective.
Integrating development with strategy
Many authorities share Hussey’s view that MD must be linked with OS. Burgoyne (1988)
proposed a model for integrating the development of the individual and the organization.
Kilcourse (1988) showed how this strategy of developing the individual and the organization
in parallel was successfully adopted in one organisation. Wild (1993) describes a Corporate
Strategy model, designed ‘to integrate the MD activities of an organization with its strategy
in order to provide a framework for the specification of priorities for MD for that
organization’, whilst enhancing the organization’s ‘capability and competitiveness’. Noting
that firms have tended to conduct MD without any clear purpose, Michael (1993) argues that
‘executive training must be linked to organizational strategy, so that executives can manage
the substantial change that is required of them’. Robinson (1994: 368) similarly argues that
organizational development (OD) and MD should be closely integrated, since OD is
concerned with strategic level initiatives to improve OP, and uses the label ‘learning
organization’ to capture this harmonisation of MD with OD strategies (373).
The importance of linking MD with OS has been emphasised where it is used to support
strategic change (Marsh, 1986; Pate and Nielson, 1987) and restructuring (Oram and Wellins,
1995), and where strategic MD is seen as the key to competitive advantage (Shröder, 1989;
McClelland 1994). However, despite the substantial expenditure on MD each year in the
UK, ‘few companies have yet integrated it into their strategic planning process and it is
poorly implemented’ (Miller, 1991). There is some evidence that the situation has improved.
A survey by the Harbridge Consulting Group (1993) found that in the decade 1982-92, the
proportion of UK business organizations in which MD was explicitly linked to corporate
strategy increased from 33 per cent to 54 per cent. Nevertheless, the Taylor Report (IoM,
1994: 47) noted the continued conflict between individualism and corporate goals. The
inherent tension is between the need for organizations to encourage empowerment and
individual responsiveness while simultaneously promoting corporate cohesion and teamwork.
Managers will be required ‘to take responsibility for their own part in corporate success.’
Moreover, while HRD involves both strategic and functional activities, the latter are
often prevalent as a result of the marginalisation of HRM and its dislocation from OS
(Stewart and McGoldrick, 1996: 10). Pont (1995: 27) similarly argues that the HR function
has traditionally had relatively little impact in terms of OS because it is largely preoccupied
with operational matters. Marchington and Wilkinson (1996: 374-5) note the difficulties in
making clear links between HRM and business strategies and doubt the potential for HRM to
have a structured role in strategic decision-making. If the personnel and development
function is represented at board level there is more likelihood that HRD will form an intrinsic
part of OS, yet UK evidence suggests that only 30 per cent of companies employing over
1,000 workers have any HRM function represented at board level (Marchington and
Wilkinson, 1996: 375). There is a danger of HRD specialists having to take on the role of
facilitating strategic decisions taken by senior management without consulting them.
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Tyson (1995: 97-102) cites MD as one of three distinctive areas where personnel and
development professionals can make a key contribution to OS (the other two are employee
relations and OD). Temporal (1990) similarly identifies the role for HR professionals in
ensuring that MD is linked to future business needs. Armstrong (1989: 195-7) argues that the
greatest scope for HRM to have an impact on OS is through strategies which develop the
culture and values of the business. However, MD can only form an effective part of OS if the
strategy is adequately communicated to all managers and resources are available to fund the
necessary training and development (Pont, 1995: 13).
Hussey (1988: 88-9) suggests that training can be used as a tool for implementing
corporate strategy in several ways:
 a very clear understanding can be gained, of both the broad strategy and what it means to
the individual in his or her job;
 commitment can be built, as people discover the reason for the strategy and decide for
themselves that there is sense behind it;
 the implication of implementation can be explored and converted into personal action
plans;
 suitable training can be given so that the appropriate individuals are able to implement
the strategy.
Hussey (1988: 91) provides examples of how MD workshops to develop individual
managers differ from traditional training and offer greater potential for relating MD to
business needs because:
 They are concerned with ‘live’ company problems, identified by a survey and agreed
with the chief executive, instead of lectures and simulated case studies.
 They seek to influence the perception and attitudes of managers and are actionorientated. Implementation of agreed solutions is reviewed during the workshops.
 The emphasis is on improving effectiveness of management teams, rather than individual
managers. There is greater understanding of the jobs of other managers, and
improvement in communications horizontally and vertically.
 They enable managers to determine priorities for achievement of their job objectives, and
they help integrate the efforts of the management team to achieve the business plan
targets.
 The benefit of such an approach, it is claimed, is seen in the improved effectiveness of
the management team in achieving the company’s business objectives. Such an
argument underlies the national standard for development, which is becoming the main
initiative for linking HRD with OS.
Country differences
However much it would seem to be of good management practice to link HRM with strategy,
and in particular MD with OS (a view that is otherwise supported by the findings of Mabey
and Gooderham, 2003), we may expect differences in the strength of that perceived link in
different countries rather than a simple ‘rational’ link with performance. As d’Iribarne
(1989) and Hofstede (1980) have shown, perceptions of management practice, and
management practices themselves, differ widely across countries. Many authors also argue
that there are numerous differences between countries in wide areas of HRM practices such
as potential selection and development (Laurent, 1989), career management perceptions,
(Derr and Laurent, 1986) and perceptions on hiring (Segalla, Sauquet and Turati, 2001) and
terminations (Segalla, Jacobs-Belschak and Müller, 2001). Thus we expect that cultural or at
least country based differences can also have effects on perceptions managers hold with
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respect to the linkage between strategy, on one hand, and HRM and management
development on the other hand. We can thus formulate our first set of hypotheses.
Hypothesis 1a: the country has a significant impact on the perceived link between strategy
and HRM
Hypothesis 1b: the country has a significant impact on the perceived link between strategy
and management development
Taking this analysis further, we seek to explain why countries should differ on
managerial perceptions of the strategy-HRM and the strategy-MD links. Hofstede’s (1980)
model provides measurements for cultural differences in relation to four dimensions: power
distance, uncertainty avoidance, individualism, and masculinity. In particular we can expect
that countries that have been found to display a higher power distance will be countries
where perceptions of links between strategy, on the one hand, HRM and MD on the other
hand will be lower. In such countries, communications between managerial layers will
supposedly be less frequent, more of a top-down style with fewer opportunities for line and
functional managers to express themselves, let alone challenge top managers’ views, and
therefore display less understanding of the overall coherence between strategy and both HRM
and MD. In our survey, according to Hofstede’s model, ‘high’ power distance countries are
the three Latin countries: France, Romania and Spain. We include Romania a priori as a high
power distance country, but acknowledge this is questionable, since Hofstede did not include
Romania (see discussion below). ‘Low’ power distance countries include Anglo-Saxon,
Nordic and Germanic cases: Denmark, Germany, Norway and the UK. Thus we formulate
two further hypotheses:
Hypothesis 2a: in Latin countries, the perceived link between strategy and HRM is lower
than in Anglo-Saxon, Germanic and Nordic countries.
Hypothesis 2b: in Latin countries, the perceived link between strategy and MD is lower than
in Anglo-Saxon, Germanic and Nordic countries.
Methodology
Telephone interviews were conducted with the HRD manager and a line manager in 100
domestically-owned organizations in each one of the seven following countries: Denmark,
France, Germany, Norway, Spain, the United Kingdom and Romania, making a total of 1,400
interviews. This took place within a larger project (Manager Training Database) researching
management training and development systems in Europe, funded by the Leonardo da Vinci
Program of the European Commission. Participating countries were selected to represent the
five typologies of management training and development previously shown to operate in
Europe (Bournois, 1992). They are also evenly distributed in terms of power distance; three
of the seven countries being Latin countries where power distance is ‘high’, and four being
Anglo-saxon, Germanic or Nordic countries that score ‘low’ in power distance : the UK,
Germany, Denmark and Norway.
The sample
A stratified sampling frame was used in order to provide a reasonable representation of
organizations by size and sector in each country. Using local databases, contact was made by
the research team with the HRD manager or equivalent, targeting only host country owned
companies within the private, for-profit sector. Each HRD manager was interviewed and
then asked to identify one line manager in their organization that would be prepared to
participate in the study. This procedure was followed until the quota was filled within each
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country. In this way the research team aimed to collect matched data for 700 organizations,
100 in each country. The achieved valid sample of 896 interviews represents a reasonably
high response rate of 75 per cent. The distribution across the total sample is as follows:
manufacturing 34.3 per cent, transport and distribution 21.3 per cent and the services sector
(including financial and insurance companies as well as legal, business and management
consultancy firms) 44.3 per cent, a proportion approximately found in all countries but
Germany.
The stratified sample comprised four size categories, each representing about 25 per cent
of the sample: 20-99 employees (25 per cent); 100-249 (23.6 per cent); 250-499 (22 per cent);
500 or more (28.3 per cent). Smaller firms were over-represented in Spain and Romania,
while those with 250-499 employees were under-represented in the same countries. In
contrast, organizations employing more than 5,000 were over-represented in Germany. In
terms of turnover, 25 per cent of the 593 organizations that provided this information fell
within each of the following four turnover bands: up to €M9.3; €M9.3-€M34; €M34-€M150;
and over €M150.
The interview schedules were derived from those used in previous UK studies (Mabey
and Thomson, 2000; Thomson et al, 1997; Winterton and Winterton, 1999). However, every
effort was made by the research team to ensure equivalence of all terms, definitions and
meanings in each of the seven country contexts. To this end each country interview schedule
was back translated and amended where necessary. The interviews, which were arranged in
advance, were conducted by telephone and in some cases face to face, and lasted 20-30
minutes for HRD managers and a little less for line managers. Questions were asked about
industrial and management structure, the organization’s HRM strategy and MD policy,
preferred methods and practices for management and career development and mechanisms
for evaluation. Line managers were interviewed about their first-hand experience of training
and development, their views on the policies and practices adopted by their employer
together with an overall assessment of the effectiveness of the training provided for
managers.
Measures: Dependent variables
The perceived link between strategy and HRM was measured by an index averaging
responses (1-5 Likert scale) of both line managers and HR managers to the following items
(Alpha = 0,74) :
 Those responsible for HR play an active role in formulating business strategy (strongly
disagree = 1, strongly agree = 5)
 My organisation links HR management to business strategy (strongly disagree = 1,
strongly agree = 5)
The perceived link between strategy and management development was measured by an
index averaging responses (1-5 Likert scale) of both line managers and HR managers to the
following item (Alpha = 0,48):
 My organisation’s management development policy reflects its business strategy (strongly
disagree = 1, strongly agree = 5)
Measures: Independent variables
Country variable: the country variable is coded from 1000 to 7000 as follows: Denmark =
1000; France = 2000; Germany = 3000; Norway = 4000; Romania = 5000; Spain = 6000;
United Kingdom = 7000.
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Latin country dummy variable: Latin countries (France, Romania, Spain) were dummy coded
1; the other countries (Denmark, Germany, Norway, U.K.) were coded 0.
Analysis
In order to test these hypotheses, we used the analysis of variance protocol where the country
variable is the independent variable and t-tests for independent samples where the Latin
country dummy is the independent variable.
Results
Hypotheses 1a and 1b are accepted, based on the high degree of significance of our variance
analysis statistics. In other words, there are significant differences between countries as
regards perceptions of fit between strategy, HRM and MD. Thus the ‘cultural’ is an appealing
one, seemingly relevant to explain differences in perceptions of fit between strategy on one
hand, HRM and management development on the other hand. The results of our analyses are
shown in Table 1.
Table 1 ANOVA country / perceived links between strategy and HR, strategy and MD
Strategy and HR
Strategy and MD
Inter-group
Intra-group
Inter-group
Intra-group
squares
df
mean
F
sig
85.74
417.32
129.08
452.59
6
694
6
694
14.29
0.60
21.51
0.65
23.76
0.001
32.99
0.001
As regards our interpretation of between country variance, shown in Table 2, the results
appear more mixed: hypothesis 2a has to be rejected. Contrary to our expectations,
perceptions of strategy and HR link thus do not differ significantly between Latin and nonLatin countries. In our sample, the perception of the strategy and HR link is even slightly
higher (though, admittedly, not significantly) in the three Latin countries than in the other
four. However, hypothesis 2b can be accepted: the link between strategy and management
development is perceived to be higher in the UK, Germany and the two Nordic countries
included in the survey (Denmark and Norway) than in the three Latin countries.
Table 2 T-test for means differences between Latin and non-Latin countries
strategy and HR
strategy and MD
Latin dummy
N
mean
t
sig
Non-Latin
Latin
Non-Latin
Latin
401
300
401
300
3.36
3.41
3.58
3.37
-0.77
0.442
2.92
0.004
Though these results may seem to support some of our initial hypotheses, their mixed
character questions the relevance of the distinction between Latin and non-Latin countries as
a predictor of managerial perceptions of fit. Further analyses into country differences were
then conducted in order to explore the relevance of our explanation of perceptions of the
strategy-HRM and the strategy-MD links through the lenses of Hofstede’s model. They
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reveal a country pattern that is hardly consistent with ‘power distance’ explanations of
managerial perceptions: two Latin countries, France and Romania, presumably countries with
high power distance scores in Hofstede’s framework, stand at both extremes of the spectrum
of the perceptions of fit under study, France scoring lowest and Romania highest, as shown in
Table 3.
Table 3 Perceptions of strategy-HRM and strategy-MD links by country
Denmark
France
Germany
Norway
Romania
Spain
UK
Total
strategy and HRM
strategy and MD
3.32
2.70
3.39
3.51
3.92
3.61
3.22
3.38
3.50
2.66
3.48
3.98
4.06
3.39
3.34
3.49
An ANOVA was conducted within both blocks of countries initially considered. Results (see
Table 4) are significant within the Latin block, even more than between Latin and non-Latin
countries. In other words, there are highly significant differences between Latin countries, in
particular between France and the other two. These findings suggest that the ‘power
distance’ explanation of managers’ perceptions of the fit between strategy and both HRM and
MD, has to be rejected or at least discussed further.
Table 4 ANOVA perceived links between strategy and HRM, strategy and MD within
the Latin sub-sample
strategy and HR
strategy and MD
squares
Df
mean
F
sig
Inter-group 80.78
Intra-group 166.31
Inter-group 98.75
Intra-group 177.56
2
297
2
297
40.39
0.56
49.38
0.60
72.12
0.001
82.59
0.001
Discussion
These results are at the same time compatible with ‘country’ explanations, but using the
‘power distance’ dimension coupled with the ‘Latin’ characteristic, appear irrelevant. This
requires comment.
Romania, being a Latin speaking country, was included in a ‘Latin’ sub-sample. This,
of course, may be questionable, since Romanian culture may display strong differences with
the other Latin, more westernised, cultures. In particular, it must be borne in mind that
Hofstede’s work did not include Romania the sample of countries. Therefore, classifying
Romania as ‘Latin’ particularly so far as the ‘power distance’ dimension is concerned, can
only be considered as a reasonable assumption based on work conducted in former Eastern
Europe (Brewster and Hegewisch, 1994), an assumption that has to be specifically studied
further using Hofstede’s methodology and instruments. The same could be said of Spain,
although here, data exist from Hofstede’s investigations, that provide stronger grounds for
classifying Spain as ‘Latin’.
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It can also be noted that, between France and Spain, Hofstede’s study ranked France
ahead of Spain in terms of power distance. So, only looking at those two countries, our
results are compatible with Hofstede’s. The discrepancy with the latter arises when we
include the four ‘Northern European’ countries, typically considered countries with a smaller
power distance than Spain, yet countries where perceptions of strategic fit are lower than in
Spain.
Another issue concerns intervening variables that might account for the observed
differences between countries as regards the perceptions of ‘strategy-HRM’ and ‘strategyMD’ fits. More specifically, these might in fact disguise differences that in reality are
accounted for by to two other important variables: size and sector. Smaller firms might, for
instance, have fewer management layers, so access to top management is easier and more
frequent, which might lead to higher perceptions of fit. For instance, there is a higher
proportion of smaller firms in the sample for Spain and Romania, than in France and
Germany, which could account for the higher perceptions of fit in these two countries. These
rival explanations must however also be rejected: we conducted further tests (bivariate
correlations and ANOVA) in order respectively to explore the effect of number of staff,
turnover, and sector. We also used multiple regressions using staff, turnover and sector as
control variables. All tests converge on the following statement: staff numbers, turnover
figures and sector are either insignificant predictors, or predictors with an effect that in fact
reinforces the ‘country’ explanation. In particular, we found that perceptions of fit are
positively correlated with turnover, where Spanish and especially Romanian firms in our
sample have smaller turnovers on average than firms in other countries, and yet exhibit a
higher score as regards the perceptions of fit under study.
Two other elements seem relevant to explain if not the ranking of each country, at least
the extreme position of Romania as regards the ‘strategic fit’ perceptions of their managers: a
‘start-up economy’ effect on the one hand; a desirability effect on the other hand.
The ‘start-up economy’ argument can be formulated as follows: the Romanian firms
covered by this study belong to the private, for-profit sector, which is very recent in the
economy of this country. The companies able to survive in this sector are, supposedly,
unrepresentative of the Romanian economy taken as a whole, though they may be
representative of what it will be in the future. They may be companies with a short track
record, but with clear strategic options in terms of both generic and substantive strategies,
that have made them successful challengers of their Western competitors, able to survive and
grow despite their lack of experience with market economies.
Another possible explanation is that, because Romania is in the process of requesting
EU membership, respondents may have been tempted to bias their responses in order to make
a favourable impression on the research team, especially if their respective organisations are
to take advantage from EU membership. This hypothesis has to be taken into account given
the fact that the research project from which the above results are drawn is sponsored by the
European Commission, an element made clear to all respondents.
Conclusion
This contribution investigated the link between an organisation’s nationality and the
perceptions of strategy-HRM and strategy-MD fits among HRM and line managers in seven
European countries. Though we could accept our first set of hypotheses, that ‘country
matters’ in order to predict such perceptions, we had to reject the hypothesis that such
perceptions are lower in countries with high power distance in Hofstede’s terms, i.e., Latin
countries, than in non-Latin countries. In actual fact, two Latin countries are found at both
extremes of the spectrum: France (with the lowest levels of perceptions of fit) and Romania
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(with the highest). Another Latin country included in this research, Spain, stands somewhere
in the middle and displays results that are closer to non-Latin countries, than with either
France or Romania. We attempt to explain these results, particularly in order to account for
Romania’s outstanding scores on the perception variables under study. Further research
should be undertaken in order to carefully study whether these observed differences are
stable, are owed to ‘cultural’ traits, or to other intervening variables not included in this
contribution, such as the organisation’s age, or the respondent’s level in the organisation.
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