Human Resource Management in Denmark

Employee RelationsEmerald Article: Human Resource Management in DenmarkFrans Bévort, John Storm Pedersen, Jon Sundbo

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To cite this document: Frans Bévort, John Storm Pedersen, Jon Sundbo, 1992"Human Resource Management in Denmark", Employee Relations, Vol. 14 Iss: 4 pp. 6 - 20

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Employee Relations 14,4

6

Human Resource Management in Denmark

Frans Bévort, John Storm Pedersen and Jon Sundbo University of Roskilde, Denmark

Introduction The main theme of this article concerns the new wave or new paradigm of HRM which is about to emerge within HRM in Denmark. The causes that drive these profound changes are:

• a greater emphasis on service and on quality in production; • the diffusion of new information technology; • the absence of the expected increase in productivity from the introduction

of new technology in the mid 1980s; and • new patterns of class co-operation at the level of the firm, replacing

negotiations between unions and employers' organizations at national level. Some elements of the new paradigm observed in Denmark are, of course, also observed internationally. However, it must be stressed that this new Danish HRM paradigm has some specific national characteristics, an analysis of which has to take into account, for example:

• The particular historical Danish form of employer-employee relationship, based on co-operation and negotiation.

• That small- and medium-sized enterprises (SMEs) are the core of Danish industry, which has caused a very weak development of scientific management/Taylorism and mass production/Fordism in the country.

• A special Danish version of the Scandinavian model of the economy is in existence.

• Working conditions have been improved by legal and public administrative systems.

The state of traditional HRM in Denmark, and some new experiments reflecting the new paradigm of HRM in the country, are described first, followed by the historical reasons why Fordism and Taylorism have relatively been so weakly developed in Denmark and why the situation there may very well generate a new paradigm of HRM. The historical background is then used as the starting-point for the presentation of a theoretical model and a conceptualization of the new paradigm of HRM. The challenges to HRM specialists in the 1990s, drawing on a research project on HRM trends in large Danish companies concludes the discussion.

Employee Relations, Vol. 14 No. 4, 1992, pp. 6-20. © MCB University Press 0142-5455

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The Current State of Danish HRM Traditional HRM: Personnel Functions and Specialists Personnel and HRM practices in Danish companies are characterized by a relatively low level of professionalism. This fact has been pointed out by several recent studies. Jørgensen et al.[1] undertook a large study of employment relations in Danish companies, sponsored by the Ministry of Work. One result which is very typical, was that in 1989 only 5 per cent of companies with up to 19 employees had a personnel department. What is more important is that only 46 per cent of companies with more than 200 employees have a personnel department[2, p. 61].

Asking whether companies made written personnel plans did not provide a more "professional" image of HRM practices in Danish companies. Twelve per cent of small companies and 53 per cent of large companies said they made personnel plans in writing[2, p. 62]. The general conclusion was:

. . .the degree of professionalism and institutionalization of personnel planning is low. When only approximately 10 per cent have a personnel department and only approximately 20 per cent make use of written personnel plans, both professionalized and formalized HRM and HR planning is the exception in Danish enterprises[l, p. 306].

In another recent report[3], based on questionnaire returns from 732 Danish enterprises with more than 100 employees, a possible explanation of this state of affairs is given:

Danish line managers are drawn into personnel matters and have that responsibility much more frequently than their European colleagues.. .When this is the case the role of the HRM specialist becomes one of stimulation and co-ordination. The data point to the fact that Danish personnel departments are comparatively small, although they employ a relatively high number of specialists[3, p. 4].

These results imply that the degree of institutionalization and professionalism of Danish HRM is not impressive. But is this the same as concluding that Danish HRM is lagging behind and only poorly developed? The presence of formalized personnel departments or personnel planning in enterprises may not be the most appropriate way to measure the state of a country's HRM. Some interesting experiments in Danish companies show this clearly, and point to the emergence of a new trend of HRM in the 1990s.

Recent Experiments within Danish HRM A number of recent experiments in Denmark are causing much debate in the early 1990s.

At the forefront of Danish HRM, the introduction of autonomous work groups in the Post Office will eventually reduce the postal delivery service's payroll by some 2,000 jobs. By leaving the planning of work to the operators, and letting the work group fill vacancies during illness, this remarkable cost saving was achieved in co-operation with a traditionally very radical union, thus disproving the axiom that services cannot be rationalized.

In another case, Oticon, a well-known manufacturer of hearing aids, decided to break up the departmental structure in the administration and research and


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development departments. In co-operation with Hewlett-Packard, they created what has been picturesquely termed the "spaghetti organization". The idea is that nobody has their own desk or fixed physical position in the organization. Bosses and managers compete to attract the best employees to specific tasks, and projects are circulated to all employees in the organization. When the project group is formed, they set up a temporary organization within the larger organization.

A regional bank, Nordjyllands Sparekasse, attempted to assess the performance of the firm as viewed by the relevant stakeholders in the local area, including employees. By implementing a system of "ethical accounting", the bank tried to develop a common basis of values and norms on which an enhanced dialogue and co-operation within the enterprise, as well as with relevant outside actors, could be built[4,5].

These experiments are, if not typical of what is going on in Danish enterprises, then symptomatic of the HRM concerns of managers and shop stewards when they are asked what they expect from the future[5].

Another, and maybe more substantial, glimpse into the future of Danish HRM can be distilled from the results of the so-called K2000 (Competence 2000) project. The purpose of this project was to examine what judgements managers and employees themselves make, concerning their needs for further training and education, seen in the context of the enterprises' strategic aims. The K2000 project was sponsored and run by some of the largest Danish services enterprises: DSB (railways), SAS (Scandinavian Air Transport, Danish section), DR (public broadcasting), ISS (International Service Systems — international cleaning and security services, etc.) and Great Nordic (production and operation of telecommunications equipment, and now also an investment company) along with a number of business and vocational schools. It received substantial financial support from the Danish Ministry of Education.

One very interesting finding was that the skills and qualifications most in demand in the further training of employees were the so-called "soft" qualifications. The needs disclosed by the investigation focused on qualifications such as people management skills, communication and information skills, strategic personnel management, organizational development and project-oriented work in management, as opposed to "hard" technical skills such as statistics, accounting and computing. Surprisingly, this applied even to the most technically-oriented departments and corporations, such as aircraft and locomotive maintenance in SAS and DSB. Furthermore, the report showed that there is a great demand for further training in order to make employees more flexible — for instance by increasing their ability to work across traditional skill demarcation lines — though this is also relevant for job enrichment in the view of the employees [6].

The demand for further training, reflected in the K2000 project and the HRM experiments in Danish companies, shows a growing awareness of the necessity to utilize human resources much more efficiently than at present. Again, this reflects a necessary response to a major problem which confronted many Danish companies in the 1980s, when increased investment did not result in signficant

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rises in productivity. A group of scholars from Alborg University analysed this problem and came to the following main conclusion:

It is in the fracture between technology as "hardware" and the human resources as "software" that enterprises find the great prospects for growth and the opportunities to augment their competitive advantage. At the same time, this is also the point where the greatest trouble is encountered when enterprises introduce new technologies[7, p. 44].

And in Denmark a major problem is that human potential is not utilized and developed to the necessary extent in the Danish system of production (emphasis added)[7, p. 135].

The quest of modern HRM strategies seems to be to: • handle the complexities of promising new technologies; • secure a level of commitment and loyalty from the workforce; and • utilize the potential of lower rank employees.

The successful management of these three areas of interest could make HR investments extremely profitable.

The basic challenge of Danish HRM, in the 1990s, will be to create a form of techno-human efficiency as a response to the techno-economic inefficiency of the 1980s. A tentative answer to this challenge will be given in the concluding part of this article. First, some characteristics of Danish HRM will be discussed to locate the analysis of the future of HRM in Denmark in its historical background.

The Historical Development of HRM in Denmark Denmark became an industrialized country, mainly relying on industrial manufacturing, only in the post Second World War period. Scientific management/Taylorism and mass production/Fordism did not therefore arrive, to any significant extent, before the 1950s and 1960s respectively. When eventually it did arrive, its progress was unlike that in the USA or UK. Traditional mass production had only a short heyday in Denmark during the late 1950s and 1960s. After that period, many industrial mass consumer goods manufacturers were eliminated by the competition from abroad, which benefited from economies of scale and, usually, lower wages. In addition, with union membership including more than 80 per cent of the workforce, the labour market was characterized by an equal balance of power. The strategic aims of trade unions and employers' associations were to create a labour market based on high salaries and good physical working conditions etc., in exchange for highly efficient production. This was achieved through a closely linked institutional system of co-operation and negotiation. For instance, piecework and time and motion studies were introduced in the 1950s at the demand of the trade unions, not vice versa[8]. A result of the class compromise in Denmark, in the 1950s and 1960s, was the creation of a well organized labour market with a low level of conflict.

Furthermore, the predominantly Social Democrat governments paid allegiance to the general concept of the welfare state. Both the labour market and industry became elements in the creation of a model of a mixed economy in Denmark, within the framework of the so-called Scandinavian model.


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In Denmark, as in Scandinavia generally, several attempts were made to generate class co-operation, reflecting the special Danish-Scandinavian socioeconomic and political conditions. For example, in each workplace, works committees and safety groups were established. The democratization of work was a major focus of attention[9]. It was discussed as a phenomenon, entirely separate from motivational techniques, since the goal was that the employees should have a voice in management and should have more decision power over work conditions.

At the national level of debate, these ideas and activities were combined with the proposal of "economic democracy" at the level of company, to be achieved by the creation of funds owned by all wage earners, to be used to buy shares in Danish firms. "Economic democracy" has, however, not been successful at the national level, because of massive resistance from employers and some scepticism from the employees themselves.

Another important theme was the improvement of working conditions. The development of this theme was more successful, and it came to be regarded as a national political task. Several investigations were made[10] and a radical law on working conditions was passed in 1975. The enforcement of the law on working conditions was carried out by the civil service, the employees and their unions and the business corporations as three equal actors. The psychological conditions of work (which may be a part of HRM) were intended to be included in the law but the recession of the 1970s stopped further legal improvements in work conditions.

Seen in HRM perspective, the post-war period in Denmark had several important implications. It is evident that the lack of big mass-production companies in Denmark created a situation where a large self-conscious profession of HRM or personnel specialists never developed. Although the HRM trends and movements were much discussed, they did not become as important in Denmark as in many other countries. In fact, HRM was never really diffentiated from general management to the same extent as it was in larger industrial economies, partly as a result of the relatively small size of Danish companies.

Nevertheless, influences from abroad meant that HRM specialists and managers gradually achieved a broader role in enterprises, as managers in general became slightly more aware of the importance of the management of human resources.

In general, the post-war period in Denmark can be characterized as a period with a very high level of systematic institutional co-operation and a low level of conflict, this being the basis of the Danish version of the Scandinavian model of production. Many observers have characterized the Danish economy as an example of a negotiated economy[ll, 12] or welfare corporatism[13, 14], to a large extent because of the existence of a high degree of self-regulation of the labour market carried out by employers and trade unions. As a consequence, the business climate has been very stable for decades compared to other European countries. In this context, practising HRM managers have had a very important role because they handle these negotiations on behalf of the enterprises. Furthermore, the great number of SMEs in Denmark have, by tradition, developed

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and sustained the occupational training system in a joint effort with the trade unions. This system produces workers with a high level of polyvalency or multiskilling[15]. Therefore, it has frequently been argued that Danish industry could be the perfect setting for industrial models such as flexible specialization[8, 16], based on the notion of functional flexibility in the workforce. Such workers create functional flexibility because their wide skill base allows management to employ them in a range of different task areas.

In addition, the Danish version of the Scandinavian model of production has become a social model, which covers many "overhead costs" for the SMEs, through welfare state activities financed mainly by taxation on incomes. The SMEs are, even if indirectly, heavily subsidized by the state and the tax payers. All programmes for basic education and most programmes for further training, education and research are run by the state or local authorities. This is also the case for health care, hospitals, social security programmes, pension schemes, expenditure on environmental problems, etc. In effect, the state delivers much of the input to the SMEs, free of charge, and pays many costs created by the existence of the SMEs. This perspective explains why a fairly prosperous nation like Denmark can utilize, and go on surviving, with SMEs as the industrial base[l].

This model has, however, developed some rather illogical institutions over time. For example, there are fewer legal complications in dismissing an employee in Denmark, than in any other European country as a result of Danish employment legislation and the comprehensive unemployment benefit system[7]. In Denmark, it is generally very cheap for a company to recruit employees with the necessary skills and, conversely, to get rid of those employees whose skills are obsolete, or for any other reason.

But the country's tradition of humanity and local negotiations has ensured that the workforce is not generally used in such a numerically flexible fashion. Only in a few instances are human resources used in this old-fashioned way, rather there is a need for the sophisticated utilization of human resources in the 1990s as discussed earlier. However, currently this crucial problem seems to be reflected in changes in the Scandinavian model. Brulin[13] states that the focus of corporatism in Sweden has moved from the level of tripartite negotiations, including employers' organizations, unions and the government, to a kind of managerial corporatism at the level of the enterprise. In Denmark, the same trend is confirmed by research of Bévort et al.[5] and Storm Pedersen[12]. A wide range of issues, concerning the employment contract and employment relations, is currently moving downwards from the level of national representative organizations in the labour market in such a way as to use the human resources more efficiently[12]. This is having a major impact on HRM activities. In practice, Danish HRM is currently moving from the traditional tasks of the personnel function (administration, record keeping, mediation, recruitment, etc.[17] and motivational social engineering) to an approach more dominated by a general concern for the development and education of employees. This, in turn, demands new kinds of co-operation and dialogue between employees and managers, both of which are seen as central HRM concerns


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in the future. In fact, the employment contract is developing from a narrow "wage for work" economic contract to a much wider framework of mutual reciprocity between the employee and the organization. This new phenomenon within Danish HRM can be conceptualized as multidimensional barter. This will be discussed at greater length in the following part of the article.

A New Paradigm of Rational Management As previously discussed the traditions in Denmark have been negotiation, involvement of employees in certain management areas, and a public welfare system to assist HRM at the level of the firm. Furthermore, the management culture has mostly been pragmatic and problem solving. These traditions are now being challenged by a new paradigm of HRM in Denmark, which is emerging in the 1990s.

Among others, Carlota Perez[18] asserts that a new techno-economic paradigm is emerging. A new economic rationality or "best practice'' necessitates new social and institutional ways of organizing enterprises. New production technologies, and new demands from consumers for goods and services, are changing the emphasis of production, from one of low-priced mass consumption goods manufactured in long production runs to the flexible manufacturing of variedly-priced goods for highly segmented markets in shorter production runs.

A catchword for such market development is "service", in the sense that the competitive edge of goods and services alike is seen as being determined by the level of "service content" in the product in terms of speed of delivery, documentation, quality, design aesthetics, etc. Enterprises will either have to expand, through the provision of service as secondary activities supporting industrially-manufactured standard goods, or they will have to focus on services proper. An example of the first trend is the development of peripheral services in transport service systems that traditionally have focused on the core service — the transport of people. The transport service is supplemented with hotel bookings, car rental, clerical assistance to business travellers, etc. An example of the second trend is the expansion in financial services regarding personal services, computerized banking, individualized insurance packages for individuals, families, firms or other specialized segments.

The necessity of interpreting and satisfying the constantly changing demand of customers has made flexibility, quality and customizing the decisive parameters of competitive advantage in services [12]. Even traditional industrial goods are frequently viewed in this perspective [5, 12].

This development is reinforced, and to some extent caused, by the diffusion of information technology (IT) and its applications in virtually all areas of business — industrial robots, machine and process management controlled by computer-aided techniques (e.g. CAD-CAM), etc. The introduction of IT provides the flexibility that is needed to differentiate the service aspects of products almost indefinitely. The flexible properties of production systems meet the demands of service markets in three ways:

(1) they have the ability to change from one product line to another rapidly and cheaply;

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Causes behind changes in HRM practices

Information technology

Organizational effects leading to a new paradigm of HRM

1. Individual level — A new structure of knowledge

2. Interaction level IT and changes in product demand; service

— A new distribution of authority

3. System level The need to incorporate strategic knowledge and make the employees responsible or autonomous in their own work

Source: [24]

— A new system of motivation

Table I. Theoretical Causes and Effects Changing HRM

(2) they can handle many lines of production simultaneously, i.e. they enhance the ability to differentiate the enterprise's mix of products on the same set of machines; and

(3) they are able to increase the level of "consumptive complexity" in terms of product features which are attractive to customers[8, 12, 19].

All this adds up to a new techno-economic paradigm for economic rationality at the level of the company which, in turn, has several important consequences for the internal organization of work and hence, HRM practices[12, 16, 18, 20-22]. This close link between a new paradigm in the economy and the related changes in work practices was also predicted in the extensive work of the socio-technical school[23].

Production technology is no longer posing the most important restrictions on corporate ability to respond to the demands of service markets or markets in general. The ability and skill with which employees handle the new technology is more important. Because of the character of the markets and the technology, it is impossible to "programme" the activities of an enterprise and the behaviour of the employees efficiently by the traditional "top down" command system. Seen in this perspective, both HRM and work organization are being challenged at three levels (as shown in Table I).

Individual Level: From Action-centred to Intellective Skills One of the most profound effects of IT on the labour process or work organization is the skills needed to operate computer-aided production, surveillance, design, etc. These aspects of production demand from the worker a new kind of learning and knowledge. Zuboff[21] has termed the difference in the skills required in


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a non-IT context and the skills required by IT as the difference between action-centred skills and intellective skills. Action-centred skills are largely implicit and primarily learned by doing and seeing/hearing/feeling what other operators do. Such skills are context-dependent, non-communicative and personal. By comparison, the intellective skills that the IT workplace will favour are based on explicit, abstract knowledge learned through linguistic communication; these skills are universal context-wise and are operationalized by inferences from other knowledge, inductively or deductively [21, p. 61; 24].

The point is that the intellective skills that workers need in the IT workplace can only function efficiently if they get access to comprehensive information about the production processes, not just that fraction which is related to a specific task that sufficed before.

Seen from an HRM point of view, therefore, two options exist. Following Zuboff[20], the choice is between an informating strategy or an automating strategy. An informating strategy aims at enhancing the problem-solving capacity peculiar to man while the automating strategy seeks to eliminate the reliance on manpower altogether.

In the Danish context, and particularly for SMEs, a strategy of total automation seems rather exotic because of the prohibitive cost of even less ambitious technological strategies such as FMS (Flexible Manufacturing Systems) and CIM (Computer Integrated Manufacturing) [8].

For our purposes, the important aspect is that the present divide between employees who have access to formal knowledge about the business and employees who possess the concrete insights used to "make the wheels turn" will narrow if an informating strategy succeeds[24]. This will, in turn, challenge the hierarchical distribution of knowledge in the organization.

The Interaction Level: A New Distribution of Authority If employees are required to use their newly-acquired knowledge to make the necessary decisions, they must be given the necessary discretion. Furthermore, to work out in practice [21], the introduction of intellective skills relies on some degree of joint decision making between workers and managers, as well as horizontal communication between operators. Operators therefore need more interpersonal and communicative skills to work efficiently.

Concepts such as quality circles, just-in-time management, and service management all put a strong emphasis on the independent judgement of the individual worker and his/her work group. The purpose of these techniques is to reap the benefits of a more dedicated, co-operative and responsible attitude to work among employees [24]. Employees will need to have the authority to make decentralized decisions, as well as the interpersonal skills needed to do this efficiently in collaboration with colleagues and supervisors. Thus the current difference in the knowledge and interpersonal skills demanded from supervisors, managers and those demanded from operators will diminish.

The question is whether employees, in general, will want to commit themselves to developing and using skills that demand a higher degree of personal involvement and which will irreversibly disturb "the way things are" from the shopfloor perspective? Or, in other words, how is it possible to motivate

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employees to invest themselves and expend the effort necessary in an organization geared to IT and service?

The System Level: A New System of Motivation Alan Fox[25] described organizations in terms of discretion and trust. He asserted that vertical (top down and vice versa) low trust and low discretion, and vertical high trust and high discretion, are structurally bound together by the nature of the relationship between the different actors in organizations of modern industrial capitalism. Functionaries and managers of most enterprises enjoy high trust from their bosses and are counted on to perform their function without necessarily being monitored. Consequently, they have a high level of discretion to do their job in the way they see fit. On the other hand, hourly workers, according to the Taylorist ideal, should be kept under strict supervision to ensure that they do what they are told to the letter of the contract. Management and workers display little trust in each other, so both parties want to keep the contract as formal and transparent as possible.

Fox[25] draws on the work of Blau[26] to develop these two corresponding forms of exchange relationships — i.e. social exchange and economic exchange — to describe the employment relationships of different groups in organizations. Economic exchange is the modem, explicit, time-specific and limited relationship known from other economic contracts. Social exchange is characterized by unspecified, diffuse and lasting obligations, and an implicit trust rooted in reciprocity[25, 26]. The question then, is, can a significant proportion of employees enter into a relationship with their enterprise which is similar to the above-mentioned social exchange?

On the one hand, the demand for such a development is intrinsic in the modern workplace; the specificity of the economic contract is counter-productive because of the high rates of change and turbulence in most modern organizations [21]. Specificity of contract is highly rational in a stable environment but under current ever-changing production conditions, management will have to rely on still more limited rationality[27]. In practice, environments do change and workers will have to adapt accordingly, on a continuous basis. Rigid contract structures and hostile negotiations will not make adaptation easier.

On the other hand, considering the intellective and interpersonal skills which enterprises demand from employees in order to succeed within the framework of new techno-economic paradigm, the enterprise will rely much more on the personal attitude, loyalty and commitment of employees at all levels. Thus, the •enterprise will want to weld ties of trust, which are as strong as possible, with a much larger group of employees than was formerly seen as being necessary[24]. Employees may support these changes if they get guarantees (or a credible promise) of something more than merely wages in return: a reasonable degree of job security; training to secure their value on the labour market; professional challenge; and personal development, etc.[5]. In short, while the Taylorist motivational system could attain its objectives through a one-dimensional economic contract, a new paradigm of HRM will need to be based on multidimensional barter[5] bearing many similarities to the social exchange


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described above. The term ' 'barter is used to designate the non-monetary elements in the new kind of employment relationship.

The challenge for HRM specialists and functions is to facilitate the development of middle management as a dialogue partner, to help in developing the "self-programming employee", to stage the necessary dialogue, and to contribute to the development of multidimensional barter. In the next section some practical consequences of this more theoretical discussion for Danish HRM are described.

Elements of a New HRM Strategy A group of Danish enterprises, namely the Danish State Railways, the Post Office, East Asiatic Company, Great Nordic and Scandinavian Airline System, were looking for answers and advice, reflecting some of the themes discussed in this article and stemming from their everyday experiences. The problems were stated by the companies themselves as follows: "We are facing a new paradigm regarding the utilization of people as labour power or partners in order to achieve the goals of the enterprise". They wished to have an analysis of the probable effects on the enterprise of such an emerging paradigm shift. Our research method in this project was to develop a range of themes in collaboration with the directors and personnel managers of the enterprises. These themes were examined to confirm or disprove the view that a new paradigm of cooperation is emerging in public as well as private enterprises. These themes were grounded in a range of literature studies that sought to distil a number of historical trends in corporate concepts of production, organization and co-operation.

A series of 47 interviews in Danish enterprises was carried out in the companies mentioned, as well as others such as LEGO, Bang & Olufsen and Danfoss. All levels of employees — rank and file, managers, directors and shop stewards — were interviewed. Finally, a questionnaire was sent to the largest enterprises in Denmark, in which both the manager responsible for the personnel function and a representative of the employees were asked to respond; 57 managers and 49 representatives submitted their answers.

One of the most important results of the research was that these companies are seemingly being forced to develop a new concept of co-operation based on conditions similar to those discussed in this article. We are living in an era in which corporations are being obliged to base their business activities on service concepts and "informated" production processes[5, chs 1 and 2; 24]. Enterprises are therefore placed in a situation where the rational approach to management includes the following four elements: the management of the company puts down a business and production context plan at the strategic level; after which the employees interpret and implement these concepts in the production context in everyday working life (conceptualized as the self-programming employee); supported by a continuous dialogue with the middle management of the company; which results in a multidimensional barter as a framework of co-operation between the company and the employee. The outcome of the successful implementation of such a process will rely on how the following challenges are managed by Danish HRM.

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The Self-programming Employee Employees will have to be "self-programming", i.e. self-responsible — taking over to a still greater extent the control and management of their own work, in collaboration with colleagues. The required qualifications and traits are active participation and self-initiation of activities. These traits, developed and nurtured by Danish social institutions, will be sought and utilized to create a more rational production process. The investigation shows that employees are willing to back such a model of co-operation if job enrichment, self-actualization, various fringe benefits, and more permanent benefits, such as supplements to public education, employment guarantees, and retirement pay schemes, are offered[5].

In relation to this development of a new HRM paradigm, a new "human resource profile" will emerge. The core group of employees will be well-educated and flexible, based on the skilled worker's skills and professional attitude and the well-educated white-collar worker's individualistic working style and acceptance of the ever-changing content of work.

The Dialogue Companies will have to organize small networks that are loosely coupled through various management and organizational principles. Communication must pass through dialogue and networks as opposed to "top down" hierarchies. In this way, important elements of democracy and participation are introduced and refined in enterprises.

Our research shows that this can happen by dialogue between the first line or middle management and employees regarding the daily routine of work organization. This dialogue forces managers to guarantee that the necessary information is available to workers in order to handle production, sales, etc. in a decentralized form in the enterprise. As a result, the goals of the enterprise can be achieved efficiently, and the necessary faith in the model of co-operation is created among employees.

The dialogue has two essential functions in the modern industrial enterprise. On the one hand, it is a way of communicating information which is an important element of organizing. Dialogue, at its best, is an efficient way to generate and maintain flows of information in the firm. Employees are (so to speak) culturally "programmed" to use dialogue as the form of communication as a consequence of their prior experience of the Scandinavian model, where democracy, and human rights, etc. play a very important role. On the other hand, such dialogue creates the foundation of consensus regarding a mutually acceptable exchange between management and employees. It is necessary to develop such a contract of co-operation, in the shape of multidimensional exchange relationships, between the company's management and its employees.

A New Role for Middle Management: The Second Moment of Truth The "people manager" role of middle management will take on a central importance in operationalizing the new paradigm of HRM. Carlzon[28] and Normann[29] described the meeting of employee and customer as "the moment of truth" in the service enterprise. In the new paradigm of HRM envisaged


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here, the meeting of the employee with the immediate superior is "the second moment of truth", in the sense that dialogue and multidimensional barter both depend on the behaviour of this level of management. It is the reciprocal behaviour at this interface that guarantees that the multidimensional exchange is implemented in practice. The middle manager is also the direct medium through which the dialogue between the employee and the general management of the enterprise is transmitted. This role has been labelled the "dialogue-partner" of the individual employee[5]. But the middle manager will not just bureaucratically pass on orders and directions from management. The middle manager, as "people manager", will help the self-programming employee to interpret the overall strategy of the enterprise and will try to provide the necessary information, technology and training etc. which employees need to do their job.

It is very important that the middle manager, as "people manager", is supported by general management and by the HRM staff. The middle or first-line manager acts all too often as scapegoat for organizational inefficiency, and is badly trained and educated for the job he/she is asked to do. In addition, the middle manager's task-is often drawn up too ambitiously and includes contradictory goals[5; 30, p. 60]. For instance the middle managers are expected to implement the strategy, act as change agents in their own department and are yet held responsible for the overall productivity of the enterprise. They are also frequently required to be technical experts and psychologically sophisticated people managers at the same time. Thus, top management will have to decide what kind of first-line manager it wants and take its share of the responsibility. A great challenge to Danish HRM in the 1990s is to recruit, train and support a breed of "people managers" at the first-line level who can provide a successful "second moment of truth" in the enterprise[3, 5, 12].

Multidimensional Barter The new rationality of management must be based on a new model of cooperation between the enterprise and the employee. The employee gets education/training, a high level of participation and personal opportunities for self-actualization, retirement benefits, health insurance, etc. In return he/she agrees to endow the work with a more proactive and responsible attitude in order to reach the company's goals. The efficient utilization of human potential in the enterprise is achieved and thus, all resources are in this way based on a complex set of internal exchange relationships between the employee and the enterprise.

In this new brand of exchange relationship, wages will mean still less in motivating the employee compared to social welfare arrangements and opportunities to develop professional and interpersonal skills. Evidence points to the fact that most employees will comply with, and even identify with, the goals of the enterprise if these personal assets are included in the exchange between company and employee[5]. Other observers have analysed the same phenomenon in terms of a commitment model[30] and welfare corporatism[14],

HRM in Denmark

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the latter taking its point of departure in the so-called "commitment gap" between Japan and the USA. The socio-technical school referred to the phenomenon as the psychological contract between employee and enterprise, in their long quest to show how new work designs could be motivated[23, pp. 29-30; 31]. In our view however, the concept of multidimensional barter adds to the understanding of what direction the HRM paradigm shift will take in Denmark and elsewhere.

Conclusion There has never been a strong tradition of formalized HRM in Denmark but instead, a great inclination exists for locally and more informally-based HRM and co-operation between employees and management. This has in the past been related to strong traditions favouring centralized negotiations between unions and employers' associations, and politics dominated by the welfare state ideal. The "social capital" created by this latter phenomenon is apparently being exploited today in the current trends of Danish HRM, discussed in this article, at the level of the firm. These developments could result in a new powerful formula for Danish HRM, based on "high-trust relations" between employees and management and co-operation, rather than expert HRM implemented from the top down. What we have termed: a new techno-human paradigm of HRM based on a multidimensional barter between employee and enterprise on the micro-level. On the other hand, the traditional Scandinavian corporatist model seems to be withering away on the macro-level. This could disrupt the intricate system of social services and indirect subsidies which are vital to Danish SMEs and in turn, adversely affect the historical basis of the new wave of Danish HRM.

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forsvundne produklivitet, Dansk jurist-og økonom forbunds forlag, København, 1990. 8. Hull Kristensen, P., Teknologiske projekter og organisatoriske processer, Forlaget

Samfunds0konomi og Planlaegning, Roskilde University Centre, Roskilde, 1986. 9. Agersnap, F. and Fivelsdal, E., Demokrati i Organisationer, Nyt Nordisk Forlag, København,

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1974; Arbejdsmiljøgruppen, Arbejdsmiljø, Report No. 3, Teknisk forlog, Københaun.


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11. Hernes, G., Forhandlingsøkonomi og blandingsadministrasjon, Universitetsforlaget, Oslo, 1978.

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20. Zuboff, S., "Technologies that Informate: Implications for Human Resource Management in the Computerized Industrial Workplace,", in Walton, R.E. and Lawrence, P.R (Eds), HRM, Trends and Challenges, Harvard Business School, Boston, MA, 1985.

21. Zuboff, S., In the Age of the Smart Machine: The Future of Work and Power, Heinemann Professional Publishers, London, 1988.

22. Madsen, P.T., "Mysteriet om den forsvundne produktivitet", Samfundsøkonomen, Vol. 5, København, 1991.

23. Trist, E., "The Evolution of the Sociotechnical System", Issues in the Quality of Working Life, series of occasional papers, no. 2, Ontario Quality of Working Life Centre, Ontario Ministry of Labour, June 1982.

24. Bévort, F., "Omstillingproblemer og forandringer i danske virksomheders arbejds-organisering", MA thesis, Institute of Economics and Planning, Roskilde University Centre, Roskilde, 1991.

25. Fox, A., Beyond Contract: Work, Power and Trust Relations, Faber and Faber, London, 1974. 26. Blau, P., Exchange and Power in Social Life, John Wiley & Sons, New York, NY, 1964. 27. March, J.G. and Simon, H.A., Organizations, John Wiley & Sons, New York, NY, 1958. 28. Carlzon, J., Moments of Truth, Harper & Row, New York, NY, 1987. 29. Normann, R., Service Management, John Wiley, Chichester, 1991. 30. Walton, R.E. and Lawrence, P.R. (Eds), HRM, Trends and Challenges, Harvard Business

School, Boston, MA, 1985. 31. Emery, F.E., and Thorsrud, E., Democracy at Work, Martinus Nijhoff, Leiden, 1976.

Further Reading Baker, M.J., Marketing Strategy and Management, Macmillan, London, 1982. Freeman, C., The Economics of Industrial Innovation, 2nd ed., Frances Pinter, London, 1982. Rose, M., Industrial Behaviour, 2nd ed., Penguin Business, London, 1988. Sabel, C.F., Work and Politics, Cambridge University Press, Cambridge, MA, 1982.

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