SHRM

National values, human resource practices and

organizational performance: A study across 21

countries

Final Report

December 4, 2009

SHRM

Dr. Hilla Peretz

Department of Industrial Engineering and Management

Ort Braude College, Israel

Mailing address: Snunit 5 St., P.O.Box 78, Karmiel 21982,

Israel

Tel: +972-4-8481124; Email: [email protected]

Prof. Yitzhak Fried

Whitman School of Management, Syracuse University

Mailing address: 721 University Avenue

Syracuse University, Syracuse, NY 13244-2450

Tel: 315-443-3639; Email: [email protected]

http://www.syr.edu/#_blank

mailto:[email protected]

mailto:[email protected]

National values, human resource practices and

organizational performance: A study across 21

countries

Background and purpose of the study

In While there is evidence that strategic HR practices

are associated with organizational performance (e.g.,

Bartel, 2004; Huselid, 1995; Sun, Aryee, & Law, 2007;

Wright, Gardner, Moynihan, & Allen, 2005), there is little

research on the contribution of these practices to

performance in different national cultures. Given the

increasingly global competitive environment, this research

issue has become especially important. In this

comprehensive study aimed to close this gap by focusing on

three related research issues, as follows: (a) the

influence of national cultures on the implementation and

characteristics of key HR practices (human resource

planning, staffing, training and career development,

compensation, group-based participation—including

unionization, joint consultative committees, and work

councils, flexible work practices, and communication);

3

(b) the contribution of the degree of fit between

national cultures and the individual HR practices examined

to organizational performance indicators (absenteeism,

turnover, level of productivity, innovation, service

quality, gross revenue and stock market performance); (c)

the influence of national cultures on the configurations

of HR practices , and (d) the effect of the degree of fit

between national values and configurations of HR practices

on the seven organization performance indicators. Here we

focused on configurations of HR practices from three

groups: People Flow (the sum of HR strategy, number of

selection methods, and percentage of employees undergoing

training); Employment Flexible Work Practices (the sum of job

sharing, flextime, work from home, tele-working, and job

compression); Rewards (the sum of availability of stocks,

availability of profit sharing, availability of options).

This study expends on our previous project funded by SHRM,

which focused on one key HR activity (performance

appraisal) in the context of societal culture.

Figure 1 summarizes the variables of the study and

their relationships4

----- Insert Figure 1 about here -----

As we will now discuss the dimensions of national

values (cultures). We will then describe the multiple HR

practices studied in this project, and the effect of the

degree of fit between the national values and these HR

practices (both individually and combined) on the multiple

indicators of organizational performance.

National cultures

Based on Hofstede (1980) and House et al. (2002, 2004),

we will focus on the following five cultural dimensions.

Power distance refers to the degree to which members of a

collective expect power to be distributed equally (House

et al., 2002; 2004). In high power distance societies,

hierarchy is rigidly adhered to and privileges are

distributed unequally. In such societies, higher-level

members are expected to preserve their relative advantage

in status and power. In contrast, low power distance

societies are more concerned with preventing such

inequalities among citizens. Future orientation refers to5

the degree to which individuals in a society engage in

future-oriented behaviors such as planning, investing in

the future, and delaying gratification (House et al.,

2002). Long-term orientation societies place a high value

on persistence in the pursuit of goals. In contrast,

short-term oriented societies place a higher value on

maintaining personal stability and living for the present.

Individualism/collectivism refers to the degree to which

societies value individual rights and opportunities versus

group success and individual loyalty to the group. In

collectivistic societies individuals are expected to

subordinate themselves to the group’s goals and success.

Individualistic societies place high value on personal

freedom, self-expression and individual achievement.

Uncertainty avoidance is defined as the extent to which a

society, organization, or group relies on social norms,

rules, and procedures to alleviate the unpredictability of

future events (House et al., 2002; 2004). Societies low

on uncertainty avoidance tend to value diversity and to be

tolerant of differences in personal beliefs and

activities. Societies high on uncertainty avoidance tend6

to value conformity and to show lower tolerance of people

whose behaviors or beliefs differ from the norm.

National values and the conduct of HR practices

In our first study we investigated how national values

affect PA practices. In the current study we explored how

national values affect other key HR practices indicated

above (i.e., human resource planning, staffing, training

and career development, compensation, employment practices

—including unionization, joint consultative committees,

and work councils—flexible work practices, and

communication). On the basis of the literature, we

discussed some examples of the expected relationships

between the different national values and HR practices

(see e.g., Aycan, 2005).

HR strategic planning

Organizations in future-oriented societies, relative to

past- or present-oriented societies, are more likely to

implement written HR strategies to help pursue their goals

and plans (cf. Lane et al., 1997). Staffing

It is expected that organizations in cultures high in

collectivism or uncertainty avoidance will be more likely7

to rely on internal recruitment than organizations in

cultures high on individualism or low on uncertainty

avoidance. This is because in collectivistic cultures one

can expect greater resentment by the work group toward

external recruits than would be the case in

individualistic cultures. In addition, organizations in

high uncertainty avoidance cultures are likely to be more

concerned with maintaining the status quo by supporting

internal recruitment (e.g., Aycan, 2005; Lee, 1999).

Moreover, organizations in individualistic, or low

uncertainty avoidance societies are likely to be more

inclusive and open to diversity, and thus rely on formal,

structured and more varied methods of recruitment and

selection (e.g., newspaper advertisements, recruitment

agencies, commercial advertisement in the internet) to

hire the most appropriate individuals. In contrast, in

collectivistic cultures or cultures that are high on

uncertainty avoidance, organizations are more likely to

favor the status quo and to be especially concerned about

their “own kind if people,” which lends itself to informal

methods of recruitment (e.g., relying on word of mouth or8

personal recommendations of current employees) (e.g.,

Aycan, 2005).

One important issue in the area of staffing is

preferential programs to hire individuals from

historically disadvantaged groups, including racial

minorities, women, older people and the disabled. It can

be expected that organizations in individualistic

societies that are characterized by a strong belief in

individual rights and equal opportunity will be more

inclined to adopt preferential practices to help recruit

individuals from disadvantaged groups, than will

organizations in collectivistic societies that focus on

the group (rather than the individual) as their reference

point. Similarly, it may be that organizations embedded

in societies low in uncertainty avoidance, which thus

value diversity and tolerance for the different, will be

more inclined to implement preferential treatment programs

to hire more individuals from disadvantaged groups than

will organizations in societies high in uncertainty

avoidance.

9

Another important issue in the area of staffing is

outsourcing. Outsourcing is associated with termination

and reduced size of the workforce. However, in the global

economy it has become increasingly common as a mechanism

to enhance organizational competitiveness. One can argue

that culture may affect the degree to which organizations

are involved in outsourcing. For example, it is likely

that in societies high on nurturing and collectivism,

outsourcing will be less prevalent than in societies high

on individualism.

Training and development

It can be expected that organizations embedded in

cultures high in future orientation will be more likely to

invest in training than will organizations embedded in

cultures low in future orientation. In addition,

organizations embedded in low power-distance societies are

likely to have more employees undergoing training than

will organizations embedded in high power-distance

societies (cf. Aycan, 2005). It can also be expected that

career development will be more prevalent in organizations

10

in low power distance than high power distance societies

(e.g., Claes & Ruiz-Quintanilla, 1998).

Compensation

Concerning compensation, it is expected that in high

power distance cultures organizations are less likely to

implement performance based rewards than in low power

distance cultures. In such a culture, as well as in high

uncertainty avoidance cultures, compensation tends to be

associated more with seniority and good interpersonal

relations with management (e.g., Hui & Luk, 1997; Leung,

1997). Finally, in organizations in collectivistic

societies are more likely to implement group-based

rewards, while organizations in individualistic societies

are more likely to implement individual-based rewards

(e.g., Aycan, 2005).

Flexible working practices

It can be expected that organizations embedded in

future oriented societies as well as organizations in low

power distance societies are more likely to establish

flexible working practices that would maximize employee11

involvement and performance at work. Such practices may

include, for example, flextime, work from home,

teleworking, and compressed work hours during the week.

Group based participation

It can be expected that organizations in collectivistic

societies and low distance power societies are more likely

to have a relatively high percentage of employees

unionized or involved in other forms of group-based

participation such as joint consultative committees and

work councils. In contrast, in individualistic and high

power distance societies these formal group forms are less

likely to occur. This is because the existence of such

formal groups are likely to be perceived as threatening to

managerial authority in high distance power societies, and

similarly are likely to be perceived as challenging the

individual spirit and freedom in individualistic

societies.

Communication

Communication between management and employees can be

accomplished in various ways. Management can deliver

information to employees on key issues verbally, in12

writing, directly (e.g., via e-mail), through the union,

or in groups. Similarly, employees may be able to

communicate directly to their supervisor, to top

management, and/or express their ideas and feelings

through employee representatives, morale surveys, or

suggestion systems. One can expect that organizations

embedded in future oriented societies will tend to

emphasize reciprocal communication between management and

employees as a mechanism to enhance employee motivation

and performance and thereby enhance the organization’s

competitive advantage. Reciprocal communication also fits

the values of collectivistic and low distance power

societies, which suggests that organizations in these

societies are also likely to promote it. In this study we

will systematically examine how the different national

values are related to each of the HR practices discussed

above.

National values, HR Practices and Organizational

Outcomes

Understanding the expected level of fit (consistency)

between national (societal) values and HR practices in13

organizations is important as a basis for understanding

its effect on organizational performance. Overall, we

expect that if organizations adopt HR practices according

to the societal culture they are embedded in, the results

will be increased performance indicators (less turnover

and absenteeism, higher productivity, innovation, service

quality, gross revenue, and stock market performance where

applicable).

However, organizations may at times adopt an HR

practices that vary from the country culture. This could

happen, for example, when a multinational company moves

into a new country, or when a start up is modeled after

organizational practices in another country (e.g., Western

practices adopted by a new company in China; or

collectivistic practices are adopted by a new organization

in the US). It could also happen as an anomaly, for

example, a strong organizational culture emerging

regardless of the country norms. We expect that

organizations that adopt HR practices that deviate from

the dominant societal culture will experience decreases in

these performance indicators. We borrowed from the14

literature of fit that emphasizes the important effect of

compatibility between national (societal) culture and

organizational human resource practices on organizational

performance (see, e.g., Aycan, 2005; Kanungo & Jaeger,

1990; Mendonca and Kanungo, 1994). However, while

empirical studies have shown that national values predict

organizational processes and managerial practices (e.g.,

Communal & Senior 1999; Hofstede & Peterson, 2000), there

is also evidence to suggest that managerial decisions and

operations, including also HR practices, may reflect

strategic goals and interests that deviate at times from

the norms established by the national culture (e.g., House

et al, 2004). Based on the literature of fit, the

argument that follows is that when employees are exposed

to HR activities that do not fit the national culture,

they will tend to respond negatively (Aycan, 2005; Aycan

et al., 2000). When the negative reactions are combined

across all employees, they are expected to contribute to

negative outcomes in the organization, such as high levels

of absenteeism and turnover and lower levels of

productivity and innovation. Moreover, in the aggregate,15

this lack of fit may also adversely affect more macro

results such as gross revenue and stock market

performance. On the other hand, when employees are

exposed to HR activities that fit the national culture,

they will respond positively, which will help produce

positive organizational outcomes (Aycan, 2005). Based on

our discussion above, we provide some examples of

hypotheses on the effect of degree of fit between national

values and HR practices on organizational performance (see

Appendix 1).

National values and configurations of HR practices

Research on high-performance HR practices has supported

the contribution of theoretically-based configurations of

multiple HR practices to organizational performance

related criteria (e.g., Arthur, 1994; Batt, 2002, Guthrie,

2001, Huselid, 1995; Sun, Aryee, & Law, 2007; Delery &

Doty, 1996). However, there is a paucity of research on

the contribution of such configurations of HR practices in

the context of national values. In this study we will

systematically explore how the degree of fit between

national values and theoretically-based configurations of16

HR practices affect the multiple indicators of

organizational performance (cf. Delery & Doty, 1996; Sun

et al., 2007). In addition to the expected effect on the

organizational-based indicators (productivity, innovation,

quality of service, turnover and absenteeism) we also

expect that the analysis of configurations of HR practices

in the context of national values will show a systematic

effect on the financial indicators of gross revenues and

stock market performance, when applicable. Based on

theoretical rationales derived from the literature (e.g,

Delery & Doty, 1996; Sun et al., 2007), we will test the

effect of the degree of fit between national values and

combinations of HR practices within each of the three

categories (people flow, appraisal and rewards, and

employment practices), as well as combinations of HR

practices across these groups. Appendix 2 contains

examples of the hypotheses we plan to test.

Theoretical and practical contributions

In a thorough review of the human resource management

(HRM) literature, Aycan (2005) showed that many theories

have emphasized the organizational and environmental17

determinants of HRM practices, while only a few have

explicitly discussed the socio-cultural context. However,

growing evidence suggests that national cultures

significantly affect the HR practices that organizations

are likely to adopt and emphasize, as well as the

characteristics of these HR practices (see, e.g., Aycan,

2005, Peretz & Rosenblatt, 2006).

Numerous studies have established the impact of

cultural values on managerial behavior and actions.

Within the theoretical framework offered by Hofstede

(1980) and Project GLOBE (e.g., House et al., 1999),

societal values, often described as national values, have

a strong impact on organizations that can override other

organizational (e.g., size, sector) and environmental

(e.g., market) influences, In this study we provides

support for the contingent approach (e.g., Delery and

Doty, 1996, and Rousseau & Fried, 2001), by indicating

that the effect of HR practices on organizational

performance indicators is not universal, but rather it is

contingent on the societal cultures in which the

18

organizations are embedded in, as an important context

(see also, Aycan, 2005; Rogers and Wright, 1998).

From a practical standpoint, the study has important

implications for organizational performance and

competitiveness. Because of increased globalization and

the extensiveness of international business operations,

corporations would likely benefit from research findings

concerning the adaptation of HR programs in different

cultures, and their relative effects on important

organizational outcomes. We conducted systematic analyses

on all theoretically relevant configurations of variables

as predictors of the organizational performance criteria,

which should provide managers a set of very rich and

comprehensive findings. Such information would enable

managers who are responsible for global operations to

determine more accurately and effectively when to

establish HR programs in organizations that are based or

operate in different countries and what characteristics

these programs should have to maximize their contribution

to organizational competitiveness.

19

The study is based on a large sample of organizations

from a variety of countries. Another strength of the

study is the independence of its data sources. The

organizational-level data was obtained from the CRANET

study, but the country-level data on cultural values was

acquired from the GLOBE study (see method section).

Reliance on data from such different sources strengthens

the conclusions of the study.

Method

Study Sample

The study sample consisted of 5,991 organizations from

21 countries: Australia (259), Austria (270), Canada

(464), Denmark (516), Germany (320), Greece (180), Hungary

(59), Ireland (230), Israel (175), Italy (117), Finland

(293), The Netherlands (397), New Zealand (286),

Philippines (56), Portugal (150), Slovenia (161), Sweden

(383), Switzerland (311), Turkey (171), the U.S.A. (560),

and the U.K (633).

Data Sources20

Data for the study were obtained from two independent

sources:

1. The CRANET (Cranfield Network on Comparative Human

Resource Management) 2004 database of international HRM.

The CRANET project was established in 1989 by five

European founder countries, with the purpose of promoting

international comparative research on HRM. To date, 39

countries around the world belong to the project. The

Centre for European Human Resource Management at Cranfield

School of Management (UK) coordinates the project through

the collaboration of universities and business schools in

the participating countries. Data for the project are

collected annually in organizations with 200 employees or

more worldwide. The data collection tool is a

standardized postal questionnaire, addressed to the most

senior HR/personnel specialist in each organization.

Questions focus on the organizational level, and cover

major areas of HRM policies and practices. Questions are

not designed to tap personal opinions, but seek factual

answers (numbers or percentages) or a yes/no response to

factual questions (e.g., Do you use…?). The criteria for21

selecting organizations for the present study were (1)

full and clean data on the focal HR activities, and (2)

participation of the respective country in the GLOBE

project (see below).

2. The GLOBE (Global Leadership and Organizational

Behavior Effectiveness) 2004 database. GLOBE is a multi-

phase multi-method project, in which investigators

spanning the world examine inter-relationships between

societal culture, organizational culture, and

organizational leadership. The GLOBE Project was founded

in 1993; today, scholars from 61 countries, representing

all major regions of the world, are engaged in this long-

term programmatic series of cross-cultural leadership

studies. The meta-goal of the GLOBE research program is

to develop empirically based theory and measurement tools

to describe, understand, and predict the impact of

cultural variables on leadership and organizational

processes and the effectiveness of these processes.

Variables and Measurement

Indices of HR Practices

22

The following 46 measures obtained from the CRANET

database, based on the responses of the most senior

HR/personnel specialist in each organization:

People flow practices:

Planning outcomes

Human resource strategy. The item assesses whether the

organization has either written, unwritten or none

strategy for human resource management.

Stage in which HR manager involves in the design the organization

business strategy (1=not consulted 4= from outset)

Staffing practices

Outsourcing- in the past three years, what percentage of

the workforce was reduced?

Channels of recruitment. The item provides information on

whether employees (for managerial positions, technical or

professional positions, administrative positions, or blue-

collar positions), are recruited internally or externally.

Number of selection methods. This item provides information

on how many of the following selection methods are used to

hire management, professional or technical employees,

administrative employees, and blue collar workers: group23

of interviewers, personal interviews, application forms,

aptitude tests, assessment centers, graphology, and

recommendation letters.

Use of preferential selection (affirmative action). This item provides

information on whether the organization has programs to

help recruit individuals from the following groups: racial

minorities, people older than 50 years of age, disabled

people, women.

Training

Proportion of employees in the entire workforce who are undergoing

training.

Percentage of wage bill spent on training. This item assesses the

percentage spent on training by the organization, in

reference to the entire human resource budget.

Existence of a formal training policy. This item assesses the

presence of a formal written policy of organizational

training.

Employment practices:

Flexible work practices

The item provides information on the percentage of

employees in the organization (not at all, 0-5%, 6-10%,24

11-20%, 21-50%, above 50%) who are involved in the

following practices: job sharing, flextime, work from home,

teleworking, and job compression.

Employment relations practices

(a)Percentage of unionized employees

(b)The existence of joint consultative committees or work councils

Communication

(a)Messages transfer to employees. This item provides

information on the degree to which employees receive

information on key issues in the organization verbally, in

writing, or through electronic mail. The question was

whether receiving information has increased, decreased, or

remained the same over the past three years.

(b)Communication from employees to management. This item

provides information on the degree to which employees’

opportunities to express their opinion to management has

increased, decreased, or remained the same over the past

three years, with respect to the following methods of

communication: directly to top management, through the

direct supervisor, through the union, through regular25

meetings between management and employees, through

updating teams, suggestion box, morale surveys, electronic

communication.

Rewards and Appraisal practices:

Compensation

Compensation packages. (a) The availability of stocks,

profit sharing, or options for: managers, technical

workers, administrative and clerical workers, and blue

collar workers; and (b) whether there is differential

salary on the basis of: group or departmental performance,

individual performance, or organizational performance for

the following groups: managers, technical workers,

administrative and clerical workers, and blue collar

workers.

Performance appraisal

Organizational use of formal individual-based PA system. The item

assesses the presence/absence of a formal individual-based

evaluation system.

26

Evaluated employees. This item provides information on who

is evaluated in the organization (managers, service,

professional, blue-collar employees).

Proportion of evaluated employees. This item provides

information on the relative proportion of employees from

different categories (managers, professional and technical

employees, service, and blue-collar workers) who are part

of the PA system.

Evaluators. This item provides information on the person

or persons who evaluate the employees: supervisors, peers,

subordinates, customers.

Purposes of evaluation: The reported purposes of the PA

system are: future human resource planning, identification

of training and development needs, personal career

development, individual-based, merit compensation, and

work organization.

(see our previous SHRM funded report- 2008)

Cultural Values

Four Cultural values were obtained from the GLOBE

database (House et al, 2004).

27

These data reflected the national values of the

participating countries. The values to be used in the

present study reflect reported practices (“As Is”). These

values tell us about the current perceptions of each

culture (as opposed to feelings about cultural aspirations).

1. Power distance: the degree to which members of a

collective expect power to be equally distributed.

2. Future orientation: the degree to which individuals

engage in future-oriented behaviors such as planning,

investing in the future, and delaying gratification.

3. Individualism/collectivism: The degree to which individuals

are expected to subordinate themselves to the goals of the

group.

5. Uncertainty avoidance: The extent to which a society,

organization, or group relies on social norms, rules, and

procedures to alleviate the unpredictability of future

events.

Scores for the four cultural values ranged between 1

(lowest) to 7 (highest).

Organizational background

28

Data on five organizational background variables were

taken from the CRANET database.

1. Technology level. This measure provides categorical

information on whether the organization is a high tech

(the categories are low, middle, and high tech).

2. Organization Size. This variable indicated the total

number of employees in a given organization.

3. Sector. This item indicates whether the organization

belongs to the public or the private sector.

4. Service. This item provides information on whether the

organization provides services (the categories are health,

education, research, finance, transportation, political,

entertainment and communication) or products (food,

chemical products, textile, machinery, knowledge-based

products).

5. Level of globalization. This item provides information on

whether the organization operates in the global arena (the

categories are European or across the world) or locally

(the categories here are local market, regional, or in the

whole state).

Economic strength29

Gross National Index (GNI) used as a control variable. GNI

comprises the total value of goods and services produced

within a country, together with its income received from

other countries, less payments made to other countries.

For example, if a British-owned company operating in

another country sends some of their incomes (profits) back

to UK, UK’s GNI is enhanced. We will use the Purchasing

Power Parities (PPP) GNI World Bank ranking.

Organizational performance variables

The following seven measures obtained from the CRANET

database

1. Gross revenue. This variable is assessed on a scale from

(1) to (5), where (1) indicates that the gross revenue in

the last three years was significantly above expenses, and

(5) indicates that the gross revenue in the last three

years was so low that it resulted in substantial losses

2. Service quality

3. Level of productivity

4. Stock market performance

5. Rate of innovation

30

These four items (2-5) provide information on whether the

organization is high, medium or low, compared to other

organizations in the same market (for each item

separately)

6. Turnover. This variable indicated the average yearly

turnover percentage.

7. Absenteeism. This variable indicated the average

annually absenteeism (number of days)

Descriptive statistics for key variables are presented

in tables 1 and 2

----- Insert tables 1 and 2 about here -----

Analysis

Analysis was performed in three phases. In phase one,

we examined the effects of national values on HR

practices, above and beyond the organization background

variables and the economic indicator of GNI. In order to

do so, we used multilevel analysis (hierarchical linear

modeling, HLM) to model the structure of the data (Bryk &31

Raudenbush, 1992). Because of range differences of the

variables we converted the scores using standard Z scores.

The level-1 predictor (organizational-level) centered on

its group mean, and the level-2 predictor (national-level)

centered on its grand mean. The relationship between the

predicted variables (Y) and the explanatory variables are

expressed in equation 1.

----- Insert equation 1 about here -----

In phase two, we explored the interactive effects of

societal cultures and HR practices on organizational

performance outcomes. Again, we used multilevel analysis

in which organizational characteristics and GNI are the

covariates, HR practices are level-one predictors and

cultural values ate level-two predictors (hierarchical

linear modeling, HLM) (see equation 2)

----- Insert equation 2 about here -----

32

In phase three and four, we tested for the influence

of national cultures on the configurations of HR

practices (phase three), and then (phase four)

we tested the effect of the degree of fit between national

values and combinations (configurations) of HR practices

within each of three categories (people flow, employment

flexible work practices, and rewards). In order to do so,

we created three new variables:

1.People flow: this variable is the sum of three

variables: HR strategy (0=no 1=yes), number of selection

methods (0= below median (=2.00) 1= above median), and

percentage of employees undergoing training (0= below

median (=30.00) 1= above median). The range of this

variable is 0 to 3 in a linear order.

2.Employment flexible work practices: this variable is the sum

of five variables: job sharing (0=no 1=yes), flextime

(0=no 1=yes), work from home (0=no 1=yes), tele-working

(0=no 1=yes), and job compression (0=no 1=yes). The range

of this variable is 0 to 5 in a linear order.

33

3.Rewards: this variable is the sum of three variables:

availability of stocks (0=no 1=yes), availability of

profit sharing (0=no 1=yes), availability of options (0=no

1=yes). The range of this variable is 0 to 3 in a linear

order.

Descriptive statistic for the three new variables

appears in table 3

----- Insert tables 3 about here -----

Results

Phase one- effects of covariates and national values on

HR practices

To test the unique relationship between the four

societal values and HR measures, we ran a set of

regression analyses. Specifically, in each regression we

first entered the organizational-level variables and GNI),

followed by the societal values. This enabled us to

examine the relationships between the four societal values

and the different HR practices, after controlling for the

organizational-level variables and GNI as covariates. The34

results of the first phase of the analysis are presented

at appendix 1.

-----Insert appendix 1 here-----

Summary of the results:

Relationships among the Organization-level variables

1. Organizational size is positively related to the

existence of HR strategy, HR manager’s involvement in

the design of the organization’s HR strategy,

percentage of the workforce reduced by outsourcing,

managers and clerical external recruitment, number of

selection methods, training outcomes, job sharing, home

based and tele-working flexible working practices,

communication through trade union representative, and

manager stock options sharing. Size is negatively

related to messages’ transfer to employees through

attitude surveys, and affirmative action.

2. Technology level is positively related to HR

manager’s involvement in HR strategy, percentage of the

workforce reduced by outsourcing, managers’ external35

recruitment, number of selection methods used for

professional, clerical, and manual employees, all

flexible working practices, having joint consultative

committee, electronic communication, communication

through workforce meeting, massages transferred

electronically and suggestion box stocks, stocks

sharing, profit sharing, and options for employees, pay

based on individual performance for professionals, pay,

based on company- wide performance for managers and

professionals. Technology level is negatively related

to the existence of affirmative action, and proportions

of employees who are members of a trade union.

3. Private sector (compare to public sector) is

positively related to existence of HR strategy, HR

manager’s involvement in HR strategy, managers external

recruitment, training outcomes, job sharing, compressed

working week, electronic communication, electronic

messages transfer, shared schemes, profit sharing,

stock options offered to employees, pay based on

individual performance, pay based on team performance,

and pay based on company- wide performance. Public36

sector (compared to private sector) is positively

related to percentage of the workforce reduced by

outsourcing, affirmative action, proportion of

employees who are members of a trade union, having

joint consultative committee, and communication through

trade union representative.

4. Product organizations (compared to service

organizations) are positively related to managers

external recruitment, flexible working practices,

communication through trade union representative,

electronic communication, shared schemes, profit

sharing, and stock options offered to employees, pay

to manual employees, based on team performance,

individual pay-based performance to managerial,

professional and clerical employees. , and company pay-

based performance to managerial and professional

employees. Service organizations (compared to product

organizations) are positively related to HR manager’s

involvement in the organization HR strategy, percentage

of the workforce reduced by outsourcing, affirmative

37

action programs, number of training days, and

electronic communication.

5. Level of globalization is positively related to

external recruitment of clerical and manual employees,

percentage of employees receiving training, flexible

working practices, having joint consultative committee,

shared schemes, and stock options offered to employees,

and pay based on team performance to managers. Level of

globalization is negatively related to affirmative

actin programs for racial minorities , communication

through trade union representative, and messages’

transfer through team briefing.

GNI

GNI is positively related to external recruitment of

clerical and manual employees, number of selection

methods, affirmative action programs, percentage of

employees receiving training, job sharing, compressed

working week, having joint consultative committee,

verbally and electronic messages' transfer,

communication through workforce meeting, electronic

communication, shared schemes and stock options38

offered to employees, and managers' pay based on team

performance.

National values (controlling for the organizational-

level variables and GNI)

1.Power distance is negatively related to

managers’ and professionals’ external recruitment,

affirmative action programs associated with

minorities, people older than 50 and women,

percentage of employees receiving training, flex-

time, compressed work weeks, proportion of employees

who are members of a trade union, verbally, written

and electronic messages transfer, communication

through trade union representative, direct to senior

managers, and through team briefing, attitude survey

and online, and shared schemes of managers and

professionals. Future orientation is positively

related to existence of HR strategy, HR manager’s

involvement in HR strategy, percentage of the

workforce reduced by outsourcing, number of selection

methods, affirmative action programs to minorities

and disabled peoples , all training outcomes, job39

sharing, compressed work weeks, having joint

consultative committee, verbally, written and

electronic transfer of messages, communication

through workforce meeting, shared schemes, profit

sharing, stock options for employees, pay- based team

performance, and pay-based company-wide performance.

2.Uncertainty avoidance is positively related to

managers, professionals and clericals' number of

selection methods, proportion of employees who are

members of a trade union, communication through team

briefing, and pay based on team performance for

managers and professionals. Uncertainty avoidance is

negatively related to managers and clerical external

recruitment, minorities, disable people and women'

affirmative action, job sharing, home-based,

compresses work weeks, and communication through

attitude surveys.

3.Collectivism is positively related affirmative

action for older employees (older then 50),

percentage of employees receiving training,

proportion of employees who are members of a trade40

union, having joint consultative committee, messages

transferred, communication through workforce meeting,

communication through team briefing, profit sharing

programs for managers, professionals and clericals,

pay based on team performance for managerial,

professional and clerical employees, and pay based on

company-wide performance for managers and

professionals. Collectivism is negatively related to

managers’ and professionals' external recruitment,

affirmative action programs for minorities, disabled

people and women, job sharing, home-based, tele-

working, compressed work weeks, shared schemes, and

stock options offered to employees, and pay based on

individual performance for professional and clerical

employees. .

Phase two- interactive effects of societal cultures and

HR practices on organizational performance outcomes

In the second phase of the analysis, organizational

performance variables were included. The purpose was to

investigate the combined (joint) effect of national values41

and HR variables on organizational performance. We

conducted a series of multi-level regression analyses

using HLM. HR variables and organizational performance

outcomes were measured at level 1 (organizational level),

and culture values was measured at level 2 (national

level). The results of the first phase of the analysis

presented at appendix 2.



Societal values- main effects on organizational

performance indicators

1. Negative relationship between power distance and

productivity, innovation and stock market performance.

2. Negative relationship between future orientation

and absenteeism and turnover, and positive relationship

between future orientation and service quality,

productivity, innovation, stock market performance and

gross revenue.

42

3. Negative relationship between collectivism and

absenteeism and turnover, and positive relationship

between collectivism and service quality, productivity

and innovation.

4. Negative relationship between uncertainty

avoidance and absenteeism and turnover, and positive

relationship between uncertainty avoidance and service

quality

People flow- planning

Main effects

1. Positive relationship between using written HR

strategy and service quality, productivity, innovation,

stock market performance and gross revenue.

2. Positive relationship between HR manager

involvement in the organization business strategy and

stock market performance. The higher the HR manager

involvement in the organization business strategy from

the outset, the better the stock market performance

Interactions

We found the following interactions:

43

1. Interaction between Collectivism and HR strategy

on turnover. Only in Individualistic countries, the

higher the use of written HR strategy, the lower the

turnover rate.

2. Interaction between Collectivism and HR

manager’s involvement in the organization business

strategy on stock market performance and gross revenue.

The relationship between HR manager’s involvement in

business strategy and stock market performance in

collectivistic countries is stronger (compared to

Individualistic countries). In addition, only in

collectivistic countries we found positive relationship

between HR manager’s involvement in business strategy

and gross revenue.

People flow- outsourcing

Main effects

1. We did not find any relationship between

percentage of the workforce reduced by outsourcing and

organizational outcomes.

Interactions44


1. Interaction between Collectivism and outsourcing

on service quality. In individualistic countries the

relationship is negative while in collectivistic

countries the relationship is positive.

2. Interaction between Collectivism and outsourcing

on gross revenue. Only in individualistic countries we

found positive relationship.

3. Interaction between uncertainty avoidance and

outsourcing on productivity. Only in high uncertainty

avoidance countries we found negative relationship.

People flow- recruitment (external vs. internal)

Main effects

1. Positive relationship between managers’

recruitment and absenteeism, service quality,

productivity, innovation, stock market performance and

gross revenue. The more the organizations rely on

external recruitment of managers, the lower the

organizational outcomes are.

45

2. We did not find main effects of professionals,

clericals and manual recruitment on any organizational

outcomes.

Interactions


1. Interaction between power distance and managers'

recruitment on absenteeism. In low power distance

countries, the relationship between external-based

managers’ recruitment and absenteeism is stronger.

2. Interaction between power distance and managers'

recruitment on innovation. In high power distance

countries, the relationship is stronger (i.e., in high

power distance countries external recruitment of

managers is associated with lower innovation).

3. Interaction between Collectivism and managers'

recruitment on service quality, stock market

performance and gross revenue. In collectivistic

countries the negative relationship between external-

based recruitment of managers and these outcomes is

stronger.

46


managers' recruitment on service quality. In high

uncertainty avoidance countries the negative

relationship between external-based recruitment of

mangers and service quality is stronger.

5. Interaction between future orientation and

professionals' recruitment on absenteeism and gross

revenue. Only in high future orientation countries

external-based recruitment of professionals is

associated with lower the absenteeism and gross revenue

level.


professionals' recruitment on absenteeism. Only in low

uncertainty avoidance countries, external-based

recruitment of professionals is associated with lower

absenteeism.

7. Interaction between power distance and

clericals' recruitment on gross revenue. Only in low

power distance countries, the external-based

recruitment of clericals is associated with lower the

gross revenue.47


clericals' recruitment on service quality and gross

revenue. Only in high future orientation countries,

external-based clericals' recruitment is associated

with lower service quality and gross revenue. In low

future orientation countries, external-based clericals'

recruitment leads to slight increase in gross revenue.


clericals' recruitment on innovation. In high

uncertainty avoidance countries, external-based

clericals' recruitment is associated with an increase

in innovation while in low uncertainty avoidance

countries, external-based clericals' recruitment is

associated with lower innovation


manuals' recruitment on service quality. In high future

orientation countries, external-based manuals'

recruitment is associated with decreased service

quality while in low future orientation countries,

external-based manuals' recruitment is associated with

increased service quality.48


manuals' recruitment on service quality and stock

market performance. In high uncertainty avoidance

countries, external-based manuals' recruitment is

associated with a decrease service quality and stock

market performance while in low uncertainty avoidance

countries, external-based manuals' recruitment is

associated with a slight increase in stock market

performance.

People flow- number of selection methods

Main effects

1. Positive relationship between number of

selection methods for managers and service quality,

productivity and innovation.


selection methods for professionals and service

quality, productivity and innovation.


selection methods for clericals and service quality,


49


selection methods for manuals and service quality and

productivity, and negative relationship between number

of selection methods and turnover.

Interactions

The following interactions were found:

1. Interaction between power distance and number of

selection methods for managers on innovation and stock

market performance. In high power distance countries,

the positive relationship between number of selection

methods and stock market performance is stronger.


number of selection methods for managers on innovation

and gross revenue. In countries high on future

orientation, the relationship between number of

selection methods for managers and innovation is

stronger. In addition, only in high future orientation

countries, we found positive relationship between

number of selection methods for managers and gross

revenue.

50

3. Interaction between collectivism and number of

selection methods for managers on turnover. Only in

individualistic countries we found negative

relationship between number of selection methods for

managers and turnover.


selection methods for professionals on stock market

performance. Only in high power distance countries we

found positive relationship between number of selection

methods for professionals and stock market performance.


selection methods for professionals on turnover and

gross revenue. Only in individualistic countries we

found significant relationship: the higher the number

of selection methods for professionals the lower the

turnover and the higher the gross revenue.


number of selection methods for professionals on

productivity. In high uncertainty avoidance, the


professionals and productivity is stronger.51


selection methods for clericals on absenteeism. Only in

high power distance countries we found negative


clericals and absenteeism.


number of selection methods for clericals on stock

market performance. We found positive relationship

between number of selection methods for clericals and

stock market performance only in high uncertainty

avoidance countries.


selection methods for manuals on stock market

performance. We found positive relationship between

number of selection methods for manuals and stock

market performance only in high power distance

countries.


number of selection methods for manuals on turnover and

stock market performance. Only in low future

orientation countries we found positive relationship52

between number of selection methods for manuals and

stock market performance. In addition, in high future

orientation countries, the negative relationship

between number of selection methods for manuals and

turnover is stronger.


selection methods for manuals on service quality and

productivity. The relationship between number of

selection methods for manuals and service quality and

productivity is stronger in individualistic countries.


selection methods for manuals on innovation, stock

market performance and gross revenue. We found

significant relationship between number of selection

methods and these organizational outcomes only in

individualistic countries.


number of selection methods for manuals on service

quality. The positive relationship between number of

selection methods for manuals and service quality is

stronger in high uncertainty avoidance countries.53

People flow- affirmative action

Main effects

1. Positive relationship between minority

affirmative action and productivity and innovation.

2. Positive relationship between age related

affirmative action and stock market performance.

3. Positive relationship between disability related

affirmative action and stock market performance.

4. Negative relationship between affirmative action

for women and turnover, innovation and stock market

performance. Positive relationship between affirmative

action for women and service quality and productivity.

Interactions



affirmative action for ethnic minorities on service

quality and productivity. Only in high future

orientation countries we found positive relationship

between minority affirmative action and service

quality. In addition, in high future orientation

countries, the relationship between minority54

affirmative action and productivity is stronger than in

low future orientation countries.

2. Interaction between collectivism and affirmative

action for ethnic minorities on stock market

performance and gross revenue. In collectivistic

countries we found negative relationship of minority

affirmative action with stock market performance and

gross revenue. In individualistic countries we found

positive relationship between minority affirmative

action and stock market performance, and no

relationship with gross revenue.


affirmative action for ethnic minorities on service

quality. In high uncertainty avoidance countries the

relationship between minority related affirmative

action and service quality is negative while in low

uncertainty avoidance countries the relationship

between these variables is positive.

4. Interaction between power distance and age

related affirmative action on turnover. In high power

distance countries the relationship between age related55

affirmative action and turnover is positive while in

low power distance countries the relationship between

these variables is negative.

5. Interaction between future orientation and age

related affirmative action on turnover. In low future

orientation countries the relationship between age

related affirmative action and turnover is positive

while in high future orientation countries the

relationship between these variables is negative.

6. Interaction between collectivism and age related

affirmative action on turnover. We found negative

relationship between age related affirmative action

only in individualistic countries.


affirmative action on stock market performance. We

found that in individualistic countries the

relationship between age related affirmative action and

stock market performance is stronger than in

collectivistic countries.


affirmative action on gross revenue. In individualistic56

countries the relationship between age-related

affirmative action and gross revenue is positive while

in collectivistic countries the relationship is

negative.


age related affirmative action on turnover. In low


between age related affirmative action and turnover is

negative while in high uncertainty avoidance countries

the relationship between these variables is positive.

10. Interaction between collectivism and disability

related affirmative action on turnover. We found

negative relationship between disability related

affirmative action and turnover in individualistic

countries and positive relationship between these

variables in collectivistic countries.


disability related affirmative action on absenteeism.

We found positive relationship between disability-

related affirmative action and absenteeism only in low

uncertainty avoidance countries.57


affirmative action for women on service quality. In low

power distance countries the relationship between

affirmative action for women and service quality is

stronger than in high power distance countries.


affirmative action for women on service quality,

productivity and innovation. In high future orientation

countries, the positive relationship of affirmative

action for women and service quality and productivity

is stronger than in countries low on future

orientation. In addition, affirmative action for women

is negatively related to innovation, but this negative

relationship is stronger in low future oriented

countries than in high future oriented countries..

14. Interaction between collectivism and affirmative

action for women on absenteeism and stock market

performance. In individualistic countries the

relationship between affirmative action for women and

absenteeism is negative while in collectivistic

countries the relationship is positive. In addition,58

the relationship between affirmative action for women

and stock market performance is stronger in



affirmative action for women on absenteeism, service

quality and innovation. In low uncertainty avoidance

countries the relationship between affirmative action for

women and absenteeism is positive while in high

uncertainty avoidance countries the relationship between

these variables is negative. Similarly, the negative

relationship between affirmative action for women and

innovation is stronger in high uncertainty avoidance

countries than in low uncertainty countries. Finally, the

positive relationship between women' affirmative action

for women and service quality is stronger in low

uncertainty avoidance countries than high uncertainty

avoidance countries.

People flow- training

Main effects

1. Positive relationships between wage bills spent

on training and service quality and productivity.59

2. Positive relationships between number of

training days and service quality, productivity,

innovation and stock market performance.

3. Positive relationships between percentages of

employees received training and productivity and

innovation.

Interactions


1. Interaction between power distance and wage

bills spent on training on productivity. The

relationship between wage bills spent on training and

productivity is stronger in low power distance

countries.

2. Interaction between future orientation and wage

bills spent on training on service quality and

productivity. The relationship between wage bills spent

on training and between service quality and

productivity is stronger in high future orientation

countries.


wage bills spent on training on absenteeism. Only in60

low uncertainty avoidance countries we found negative

relationship between wage bills spent on training and

absenteeism.


training days on productivity and stock market

performance. The relationship of number of training

days with productivity and stock market performance is

stronger in low power distance countries.


number of training days on productivity, innovation and

stock market performance. The relationship of number of

training days with these three outcome variables is

stronger in high future orientation countries.

6. Interaction between individualism/collectivism

and number of training days on absenteeism. Only in

individualistic countries we found negative

relationship between number of training days and

absenteeism.

7. Interaction between individualism/collectivism

and number of training days on service quality. In

individualistic countries the relationship between61

number of training days and service quality is

stronger.


number of training days on stock market performance. In

low uncertainty avoidance countries the relationship

between training days and market performance is

stronger.


percentage of employees received training on

productivity. In low power distance countries the

relationship between percentages of employees received

training and productivity is stronger.

Employment practices- flexible work practices

Main effects

1. Negative relationship between job sharing and

between absenteeism and turnover.

2. Negative relationship between flexi-time and

between absenteeism and turnover, and positive

relationship between flexi-time and between service

quality.

62

3. Negative relationship between home based and

between absenteeism.

4. Negative relationship between tele-working and

between absenteeism and turnover.

5. Positive relationship between compressed working

week and between stock market performance.

Interactions

1. Interactions between power distance and job

sharing on absenteeism and turnover. In low power

distance countries the relationship between job sharing

and absenteeism is stronger.

2. Interactions between future orientation and job

sharing on absenteeism, turnover, service quality,

innovation and gross revenue. In high future

orientation countries the relationship of job sharing

with absenteeism and turnover is stronger. In addition,

only in high future orientation countries we found

positive relationship between job sharing and service

quality, innovation and gross revenue.

3. Interactions between collectivism and job

sharing on absenteeism, turnover and productivity. In63

individualistic countries the relationship of job

sharing with absenteeism and turnover is stronger. In

addition, only in collectivistic countries we found

positive relationship between job sharing and

productivity.

4. Interactions between uncertainty avoidance and

job sharing on absenteeism and turnover. In low


between job sharing and these two outcomes is stronger.

5. Interactions between power distance and flex-

time on absenteeism, turnover, innovation and stock

market performance. In low power distance countries the

relationship between flex-time and absenteeism and

turnover is stronger. In addition, only in low power

distance countries we found positive relationship

between flex-time and innovation and stock market

performance.

6. Interactions between future orientation and

flex-time on service quality, and stock market

performance. In high future orientation countries the

relationship between flextime and service quality is64


countries we found positive relationship between flex-

time and stock market performance.


flex-time on service quality. In low uncertainty

avoidance countries the relationship between flex-time

and service quality is stronger.


home-based work on service quality, and stock market

performance. Only in high future orientation countries

we found positive relationship between working from

home and service quality and stock market performance.

9. Interactions between power distance and tele-

working on absenteeism, productivity and innovation.

Only in low power distance countries we found positive

relationship between tele-working and these outcomes.


tele-working on productivity. Only in high future

orientation countries we found positive relationship

between tele-working and productivity.

65


tele-working on turnover. In low uncertainty avoidance

countries the relationship between tele-working and

turnover is stronger.

12. Interactions between power distance and

compressed working week on innovation and stock market

performance. In low power distance countries the

relationship between compressed working week and

innovation is positive while in high power distance

countries the relationship between these variables is

negative. In addition, only in low power distance

countries we found positive relationship between

compressed working week and stock market performance.


compressed working week on absenteeism, turnover,

productivity and stock market performance. Only in high

future orientation countries we found negative


absenteeism and turnover, and positive relationship

between compressed working week and productivity. In

addition, the relationship between compressed working66

week and stock market performance is stronger in high

future orientation countries.

14. Interactions between collectivism and compressed

working week on service quality. We found positive


service quality only in individualistic countries.


compressed working week on absenteeism and turnover. We

found negative relationship between compressed working

week and absenteeism only in low uncertainty avoidance

countries.

Employment practices- employee relationship practices

Main effects

1.Positive relationship between proportion of

employees who are members of a trade union and

absenteeism, service quality and innovation. Negative

relationship between proportion of employees who are

members of a trade union and turnover.

2.Negative relationship between having a joint

consultative committee or work council and

absenteeism. Positive relationship between having a67

joint consultative committee or work council and

service quality, productivity and innovation.

Interactions


proportion of employees who are members of a trade

union on absenteeism and productivity. In low power

distance countries the relationship between proportion

of employees who are members of a trade union and

absenteeism is stronger. In addition, only in low power

distance countries we found positive relationship

between proportion of employees who are members of a

trade union and productivity.


proportion of employees who are members of a trade

union on productivity. We found positive relationship

between proportion of employees in trade union and

productivity only in high future orientation countries.

3. Interaction between collectivism and proportion

of employees who are members of a trade union on

productivity and stock market performance. We found

positive relationship between proportion of employees68

in trade union and stock market performance only in


4. Interaction between power distance and joint

consultative committee or works council on


We found positive relationship between having joint

consultative committee or work council and stock market

performance only in low power distance countries. In

addition, the relationship between having joint

consultative committee or work council and productivity

and innovation is stronger in low power distance

countries.

5. Interaction between future orientation and joint

consultative committee or work council on absenteeism,

service quality and productivity. In high future

orientation countries the relationship between joint

consultative committee or work council and these

outcomes is stronger.

6. Interaction between collectivism and joint

consultative committee or work council on productivity,

innovation and stock market performance. We found69

positive relationship between having joint consultative

committee or work council and stock market performance

only in collectivistic countries. In addition, the

relationship between having joint consultative

committee or work council and productivity and

innovation is stronger in collectivistic countries.


joint consultative committee or work council on

productivity. In high uncertainty avoidance countries

the relationship between joint consultative committee

of work council and productivity is stronger.

Employment practices- communication: messages transfer

Main effects

1. Negative relationship between verbal

communication and absenteeism.

2. Negative relationship between electronic

communication and gross revenue.

Interactions

1. Interaction between power distance and verbal

communication on productivity and stock market

70

performance. We found positive relationship only

between in low power distance countries.


verbal communication on gross revenue. We found

positive relationship between verbal communication and

gross revenue only in high future orientation

countries.

3. Interaction between collectivism and verbal

communication on service quality, productivity and

innovation. We found positive relationship between

verbal communication and these outcomes only in



verbal communication on service quality, innovation and

stock market performance. We found positive

relationship between verbal communication and these

outcomes only in high uncertainty avoidance countries.

5. Interaction between power distance and written

communication on innovation. We found positive

relationship between written communication and

innovation only in low power distance countries.71


written communication on turnover. We found negative

relationship between written communication and turnover

only in high future orientation countries.

7. Interaction between collectivism and written

communication on productivity. We found positive

relationship between written communication and

productivity only in collectivistic countries.


electronic communication on productivity and

innovation. We found positive relationship between

electronic communication and communication and

innovation only in low power distance countries.


electronic communication on service quality, innovation

and stock market performance. We found positive

relationship between electronic communication and these

outcomes only in high future orientation countries.

10. Interaction between collectivism and electronic

communication on service quality and productivity. We

found positive relationship between electronic72

communication and service quality and productivity only

in collectivistic countries.

Employment practices- communication of employees to

management

Main effects

1. Negative relationship between communication

through trade union reprehensive and absenteeism and

turnover. Positive relationship between communication

through trade union representative and service quality,


2. Positive relationship between team briefing and


3. Positive relationship between communication

through suggestion schemes and productivity,

innovation, stock market performance and gross revenue.

4. Positive relationship between communication

through attitude survey and stock market performance.

Interactions

1. Interaction between power distance and direct

communication to senior managers on productivity and

innovation. In high power distance countries the73

relationship between direct communication to senior

managers and these outcomes is negative while in low

power distance countries the relationship is positive.


direct communication to senior managers on absenteeism,

turnover, productivity and innovation. The relationship

between direct communication to senior managers and

these outcomes is significant only in high future

orientation countries.


direct communication to senior managers on absenteeism.

We found negative relationship between direct

communication to senior managers and absenteeism only

in high uncertainty avoidance countries.


communication through immediate superior on innovation.

We found positive relationship between communication

through immediate superior and innovation only in low

power distance countries.


communication through immediate superior on74

productivity and innovation. The relationship between

communication through immediate superior and these two

outcomes is positively significant only in high future

orientation countries.


communication through trade union representative on

productivity and innovation. In low power distance

countries the relationship between communication

through trade union representative and productivity and

innovation is stronger.


communication through trade union representative on

service quality, innovation and stock market

performance. In high future orientation countries the

relationship between communication through trade union

representative and service quality and innovation is

stronger. In addition, we found positive relationship

between communication through trade union

representative and stock market performance, but only

in high future orientation countries.

75


communication through workforce meeting on service

quality and productivity. Only in high future

orientation countries the relationship between

communication through workforce meeting and service

quality and productivity is positively significant.

9. Interaction between collectivism and

communication through workforce meeting on

productivity. Only in collectivistic countries the

relationship between communication through workforce

meeting and productivity is positively significant.

10. Interaction between future orientation and team

briefing on service quality. Only in high future

orientation countries the relationship between team

briefing and service quality is positively significant.


communication through suggestion schemes on

productivity. In low power distance countries the

relationship between communication through suggestion

schemes and productivity is stronger.

76


communication through suggestion schemes on service

quality. In high future orientation countries the

relationship between communication through suggestion

schemes and service quality is stronger.

13. Interaction between collectivism and

communication through suggestion schemes on service

quality. In collectivistic countries the relationship

between communication through suggestion schemes and

service quality is stronger.


communication through attitude survey on turnover and

stock market performance. We found negative

relationship between communication through attitude

survey and turnover only in high future orientation

countries. In addition, in high future orientation

countries the relationship between communication

through attitude survey and stock market performance

is stronger.


electronic communication on absenteeism. We found77

negative relationship between electronic communication

and absenteeism only in high uncertainty avoidance

countries.

Appraisal and rewards- compensation

Main effects

1. Negative relationship between shared schemes and

turnover. Positive relationship between shared schemes

and innovation.

2. Negative relationship between profit sharing and

turnover. Positive relationship between profit sharing

and innovation.

3. Negative relationship between stock options and

turnover. Positive relationship between stock options

and innovation.

4. Negative relationship between pay based

team/dept performance and innovation.

5. Negative relationship between pay based

individual performance and absenteeism. Positive

relationship between pay based individual performance

and innovation.

Interactions78

1. Interaction between power distance and shared

schemes on service quality. We found positive

relationship between shared schemes and service quality

only in low power distance countries.


shared schemes on turnover, innovation and gross

revenue. In high future orientation countries the

relationship between shared schemes and turnover and

innovation is stronger. In addition, only in high

future orientation countries we found positive

relationship between shared schemes and gross revenue.


shared schemes on absenteeism. We found negative

relationship between shared schemes and absenteeism

only in low uncertainty avoidance countries.


profit sharing on absenteeism, turnover, productivity,

innovation and stock market performance. In high future

orientation countries the negative relationship between

profit sharing and turnover and the positive

relationship between profit sharing and innovation are79


countries we found positive relationship between profit

sharing and productivity and stock market performance,

and negative relationship between profit sharing and

absenteeism.

5. Interaction between collectivism and profit

sharing on turnover and productivity. In

individualistic countries the relationship between

profit sharing and turnover is stronger. In addition,

we found positive relationship between profit sharing

and productivity only in individualistic countries.


stock options on turnover and productivity, innovation

and stock market performance. In high future

orientation countries the relationship between stock

options and turnover and innovation is stronger. In

addition, only in high future orientation countries we

found positive relationship between stock options and

productivity and stock market performance.


stock options on turnover. In low uncertainty avoidance80

the relationship between stock options and turnover is

stronger.

8. Interaction between power distance and pay based

team/dept performance on absenteeism. We found negative

relationship between pay based team/dept performance

and absenteeism only in low power distance countries.

9. Interaction between future orientation and pay

based team/dept performance on absenteeism, turnover,

service quality, productivity and stock market

performance. We found significant relationship between

pay based team/dept performance on these outcomes only

in high future orientation countries (negative

relationship between absenteeism and turnover, and

positive relationship with service quality,

productivity and stock market performance).

10. Interaction between collectivism and pay based

team/dept performance on service quality, productivity

and innovation. Only in collectivistic countries we

found positive relationship between pay based team/dept

and service quality and productivity, and only in

individualistic countries we found negative81

relationship between pay based team/dept and

innovation.


individual performance on turnover, service quality and

innovation. Only in individualistic countries we found

negative relationship between pay based individual

performance and turnover and positive relationship

between pay based individual performance and service

quality. In addition, the relationship between pay

based individual performance and innovation is stronger

in individualistic countries.

12. Interaction between future orientation and pay

based company-wide performance on absenteeism,


We found significant relationship between pay based

company-wide performance and these outcomes only in

high future orientation countries (negative

relationship with absenteeism, and positive

relationship with productivity, innovation and stock

market performance).

82


company-wide performance on absenteeism and service

quality. We found significant relationship between pay

based company-wide performance and absenteeism and

service quality only in collectivistic countries

(negative relationship with absenteeism, and positive

relationship with service quality).


pay based on company-wide performance on absenteeism.

We found negative relationship between pay based

company-wide performance and absenteeism only in low

uncertainty avoidance countries.

Phases three and four- configurations

First (phase three), we tested the effect of cultural

values on our three HR configuration variables. These are:

People Flow (the sum of HR strategy, number of selection

methods, and percentage of employees undergoing training);

Employment Flexible Work Practices (the sum of job sharing,

flextime, work from home, tele-working, and job

compression); Rewards (the sum of availability of stocks,83

availability of profit sharing, availability of options).

In order to do so we first converted the scores using

standard Z scores. To analyze the data we used multilevel

analysis (hierarchical linear modeling, HLM) to model the

structure of the data (Bryk & Raudenbush, 1992). The

level-1 predictor (organizational-level) centered on its

group mean, and the level-2 predictor (national-level)

centered on its grand mean. The results presented at

appendix 3a.


1. Power distance is negatively related to rewards

and flexible work practices, meaning that the higher the

power distance values in a country (for example Spain

and France), the lower the use of flexible work

practices and offer of rewards (stocks, profit sharing

and options).

2. Future orientation is positively related to

rewards, people flow and flexible work practices,

meaning that the higher the future orientation value in

a country (for example, The Netherlands and84

Switzerland), the higher the use of flexible work

practices, people flow practices (HR strategy, training

and selection system) and offer of rewards.

3. Collectivism is negatively related to rewards

and flexible work practices, meaning that the higher the

collectivistic values in a country (for example Slovenia

and the Philippines), the lower the use of flexible work

practices and rewards.

4. Uncertainty avoidance is positively related to

people flow practices and negatively related to flexible

work practices. The higher the uncertainty avoidance

values in a country (for example Germany and Sweden),

the higher the use of people flow practices, and the

lower the use of flexible work practices.

In the second stage (phase four), organizational

performance variables were included. We conducted a

series of multi-level regression analyses using HLM. HR

configuration variables and organizational performance

outcomes were measured at level 1 (organizational

level), and culture values was measured at level 2

(national level). The focus of these analyses is on the85

interactions between national values and configurations

of HR practices on organizational performance

indicators. The results are presented at appendix 3b.



Main effects

1. Positive relationship between people flow

practices and service quality, productivity, innovation

and gross revenue, meaning the higher the use of people

flow practices, the higher the productivity and

innovation level, and the gross revenue.

2. Negative relationship between flexible work

practices and absenteeism and turnover. Positive

relationship between flexible work practices and stock

market performance. Meaning, higher use of flexible work

practices lead to lower level of absenteeism and

turnover, and higher level of stock market performance

3. Negative relationship between rewards and

between turnover. Positive relationship between rewards

and innovation. Meaning, the higher the rewards level in86

an organization, the lower the turnover rate and higher

the innovation level.

Interactions


1. Interaction between power distance and people

flow practices on absenteeism. We found positive

relationship between people flow practices and

absenteeism only in low power distance countries.

2. Interaction between power distance and people

flow practices on innovation, stock market performance

and gross revenue. Only in low power distance countries,

we found that the higher the use of people flow

practices, the higher the stock market performance. In

addition, we also found that in lower power distance

countries, the relationships between people flow

practices and innovation and gross revenue is stronger

than these relationships in higher power distance

countries.


people flow practices on turnover. We found positive

87

relationship between people flow practices only in high

future orientation countries.


people flow practices on service quality, productivity,

innovation, stock market performance and gross revenue.

Only in high future orientation countries, the higher

the use of people flow practices, the higher the stock

market performance. In addition, in high future

orientation countries, the relationship between people

flow practices and service quality, productivity,

innovation, and stock market performance is stronger.

5. Interaction between Collectivism and people flow

practices on service quality and productivity. In high

collectivistic countries, the relationship between

people flow practices and service quality and

productivity is stronger.

6. Interaction between power distance and flexible

work practices on stock market performance. In lower

power distance countries, the relationship between

flexible work practices and innovation and stock market

performance is stronger. 88

7. Interaction between Individualism/Collectivism

and flexible work practices on absenteeism. In

individualistic countries the relationship between

flexible work practices and absenteeism is stronger.


flexible work practices on service quality. We found

positive relationship between flexible work practices

and service quality only in low uncertainty avoidance

countries.


rewards on turnover, productivity, innovation, and stock

market performance. Only in high future orientation

countries, the more rewords are offered, the higher the

productivity and stock market performance. In addition,

in high future orientation countries, the relationship

between rewards and turnover and innovation is stronger.

10. Interaction between collectivism and rewards on

turnover. In individualistic countries the relationship

between rewards and turnover is stronger.

Conclusions

89

We conducted comprehensive analyses on a large data set

from multiple sources, exploring how societal culture

(national values) affect various key human resource

practices independently and jointly, and the important

effect of level of fit between societal culture and HR

practices on various organizational performance

indicators. We provided evidence that societal culture

affect the degree to which organizations implement these

HR activities. Second, we also supported the notion that

when there is lack of fit between societal values and HR

practices, the consequences on organizational performance

indicators are negative. On the other hand, when there is

a fit between these HR activities and societal culture

organizational performance is expected to improve.

Finally, we indicated that lack of fit between

organizational culture and configurations of HR practices

tend to have adverse effect on organizational performance

indicators.

The findings of the study have important theoretical

and practical contributions. Theoretically, the study

provides support for the contingent approach (e.g., Delery90

and Doty, 1996, and Rousseau & Fried, 2001) which argues

for a contingent impact of HRM practices on organizational

outcomes. Rogers and Wright (1998) suggested that despite

evidence supporting the relationship between HRM practices

and organizational performance, this relationship is not

universal or consistent (e.g. Rogers and Wright, 1998)

In order to fully understand the effect of HR activities

on organizational outcomes, it is necessary to understand

the context in which the organization exists. As our

study indicates, one key contextual variable that can

affect the impact of HR activities is the societal culture

in which the firm is embedded in.

Practically, two major conclusions are emerged: one, in

the global economy organizations should take into account

the characteristics of the societal cultures in which the

organizations are operated in before deciding whether to

implement a particular HR activity and the characteristics

of this activity. Failure to do so is likely to result in

adverse effects on organizational performance. Second,

organizations will benefit more from focusing on the

implementation of configurations of HR practices, rather91

than on HR practices in isolation. Organizations are

expected to perform better if the combinations of HR

activities they install fit the particular societal values

in which the organizations are embedded in.

92

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97

FIGURE 1

Description of the study

98

Cultural values

Power distance,

Collectivism,

Uncertainty

Avoidance, Future

Orientation

Covariates: Organizational

Characteristics (Technology level,

Service, Sector, Size, Global

operation); National Characteristic: GNI

HR Practices

People flowHuman resource

planning Staffing Training and development Appraisal &

RewardsPerformance appraisal

Compensation Employment PracticesEmployment relations

CommunicationFlexible work

practices

Organizational

Performance

Absenteeism

Turnover, Service

Quality, Innovation, Productivit

y, Gross

Revenue,Stock

Market Performance

Equation 1 (Y=HR practices)

Y = β0 + β1(Size) + β2(Tech-level) + β3(Sector) + β4 (Service)

+ β5 (Globalization) + β6 (GNI) + ε

β0 = γ00+ γ01(Culture Value) + U0

The Us are assumed to be normally distributed with Var (Ui) = τ

99

The mix equation is:

Y = γ00+ γ10 (Size) + γ20 (Tech-Level) + γ30 (Sector) + γ40

(Service) + γ50 (Globalization) + γ60 (GNI) + γ01 (Culture

Value) + U0 + U1 (Size) + U2 (Tech-level) + U3(Sector) +

U4(Service) + U5 (Globalization) +U6 (GNI) + ε

Equation 2 (Y=organizational performance outcomes)

Y = β0 + + β1(Size) + β2(Tech-level) + β3(Sector) + β4

(Service) + β5 (Globalization) + β6 (GNI) + β7 (HR practices) +

ε

β0 = γ00+ γ01(Culture Value) + U0

β7= γ70 + γ71(Culture Value) + U1

The mix equation is:

Y = γ00+ γ10 (Size) + γ20 (Tech-Level) + γ30 (Sector) + γ40

(Service) + γ50 (Globalization) + γ60 (GNI) + γ70 (HR

practices) + γ01 (Culture Value) +γ71 (Culture Value* HR

practices) + ε

100

Table 1: Descriptive statistics of several cultural

values, background and outcomes variables

Culture values indices (N=21 countries)M SD

Power distance 5.01 .40Future orientation 4.21 .41Uncertainty

avoidance4.70 .56

collectivism 4.46 .72Organizational characteristics (N=5,991 organizations)

%sector Private

public67.133.9

Level ofglobalization

LocalRegionalNationalEuropeanWorld-wide

13.914.928.511.531.1

Tech level Hi MidLow

20.741.138.2

Size M = 1308.15 SD = 2462.68Performance measures (N=5,991 organizations)Turnover M = 11.04 SD = 17.81Absenteeism M = 8.51 SD = 6.70

%Gross revenue Well

Small profitBreak evenInsufficientLarge losses

39.237.412.08.42.9

Level ofproductivity

HighMediumLow

33.255.511.3

Rate of innovation HighMediumLow

33.746.220.1

Stock market High 33.5

101

performance MediumLow

42.024.6

Service quality HighMediumLow

47.145.57.4

102

Table 2: Descriptive statistics of several key HR

practices

HR Practice Example Measure (N=5,991organizations)

Training Percentage of employees undergoing training

M = 37.92SD = 30.41

Compensation Compensation availability for managers

Stocks: Yes = 1.4% No =38.6%Profit sharing: Yes = 5.9% No =24.4%Options: Yes = 9.5% No = 40.5%

Staffing Preferential treatment

Racial Minorities: Yes = 0.9% No =79.1%People older than 50: Yes = 7.8% No =82.2%Women: Yes = 5.7% No = 64.3%

Performance Appraisal

Proportion of evaluated employees

M = 67.46SD = 19.91

Flexible work Job sharing Yes = 36.6%103

No = 63.4%Employee relation Joint consultative

committees or workcouncils

Yes = 63.9%No = 36.1%

Communication Direct communication to top management over the last 3 years

Increase = 31.1%Decrease = 5.5%Same = 56.9

104

Table 3: Descriptive statistics of configuration HRvariables

HR variables range M (SD) frequencies

People flow 0-3 1.72 (0.80) 0= 6%

1= 32.3%

2= 45.6%

3= 16.0%

Flexible work 0-5 1.69 (1.31) 0= 20.2%

1= 29.6%

2= 23.8%

3= 16.1%

4= 7.5%

5= 2.8%

Rewards 0-3 1.54 (1.32) 0= 33.5%

1= 19.5%

2= 6.6%

3= 40.4%

105

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