Human resource management in an expanding Europe

Human resource management (HRM) is a fairly new concept, first given general currency by the Harvard Business School in the early 1980s. Fifty years ago companies were still debating whether the term 'personnel department' should replace 'employment department' and in the 1920's even the largest companies commonly operated with simply a 'time office' and a separate 'welfare department'. This transformation of people management activities reflects a greater emphasis on individual rather than collective employee relations, an increase in the complexity of the employment process and the growth of an important strategic dimension based on the notion of 'human capital'.

In Europe, there has long been a considerable gap between the Anglo-Saxon and continental approaches to the way enterprises are organised and operated. Companies in the UK and Ireland have a significantly higher proportion of managers relative to other employees than companies in countries such as Germany, and particularly Italy.

This emphasis on management positions has itself been a factor in the development of human resource management within the British Isles. If we look at the proportion of professionally qualified human resource (HR) staff compared to other employees in medium-large companies across Europe, we find the UK has a ratio of just 1:127, while other (EU15) states (except for Ireland and Sweden) have an average ratio of 1:2,790. Although not all members and affiliates of professional personnel/HR bodies will be in management positions, the larger the HR department and the more sophisticated its staff, the more HRM jobs can be expected to exist.

What the above figures suggest is that the ratio of HR/E is even higher in the new member states. However, the evidence from a study of HR management in Poland by Kopec (2001) found a ratio of 1:166. This study indicates that one of the reasons why the HR/E ratio appears to be so high in many new and established EU states is because membership of professional bodies on the European continent is confined to senior HR practitioners. Many HR staff, particularly in eastern Europe, are performing routine administrative functions and do not hold professional HR qualifications.

One other factor that might have explained the apparent paucity of HR professionals in the new EU states is discounted by the figures in the above table. An organisation's justification for operating an HR department is directly related to the number of people it employs. However, the proportion of employees working in companies employing over 250 staff is very similar in both the EU15 and new EU states.

The UK human resource management model

Even though the HRM concept is better developed in the UK than elsewhere in Europe, not all large companies operate with specialist departments or give their head of HR/Personnel a 'Director' title.

Neither do HR/personnel departments provide a wide range of specialist positions. Training is the only role commonly associated with 'director' status, and health and safety is not always considered part of the HR function.

The decline of collective bargaining accounts for the current low incidence of the industrial relations manager, whilst equal opportunities units are generally only found in public sector organisations.

Differences in reporting structures

There are generally two types of HRM reporting structures operating within international companies across Europe. The first type is generally found in US-owned multinationals where global operations are divided into regions and Europe is coupled with Africa and the Middle East (EMEA). The head of HR for the EMEA region is normally located at the company's largest operating site, or at a regional office in Europe.

Typical HR departmental structure: EMEA (US-owned multinational)

If the multinational enterprise is large enough, or the European business is established as a virtually autonomous entity, the regional human resource position may be at a 'Director' or even 'VP' level. In a typical company with a regional workforce of 1,000 staff, the HRM would operate with one specialist professional and an HR assistant working out of the same office, while local personnel managers would cover the principal geographical zones. Where the company has only a small sales or service operation, the routine HR activities will normally be carried out by a general administrator and payroll clerk (or external payroll provider).

EU-owned companies tend to adopt a quite different reporting structure. Outside the UK and Ireland, the structure is frequently influenced by the existence of two-tier boards. Although some 'high tech' companies have adopted the American practice of according HR board-level status in its own right, the majority of large companies incorporate responsibility for HR into a general administrative position, often coupled with the finance function.

Typical German personnel/HR departmental structure (EU-owned company)

The top HR job may be called the 'Personnel Manager' or the more traditional 'Personnel Administration Manager'. Many of the company's training functions could well be controlled by the company's national works council or directly reporting to line management.

Most of today's indigenous private sector enterprises in new EU countries such as Poland, Hungary and the Czech Republic were originally part of a bureaucratic state-run economy. When these companies were privatised, the model generally followed was the German corporate structure with its two-tier boards.

Although the executive boards of Polish companies are more likely to include a director purely responsible for administration than German or Austrian enterprises, it is common practice to retain former departmental titles for functions reporting into the board. Thus, HR may be referred to as the labour department or the staff administration section. Most of the activities in a traditional department are routine and passive in nature, and many recruitment assignments are supervised directly by line managers.

Typical Polish labour/staff administration departmental structure

Future developments

The demands currently made upon HRM in the established EU countries differ considerably from those made upon their counterparts in new member states such as Poland, Hungary and the Czech Republic. In the new EU states, all functions are generally more subject to line management control than in the EU, and this is reflected in the lower level of perceived autonomy amongst employees in eastern Europe. Working practices also contrast significantly, especially in the incidence of shift work.

The number of people with a second job will always be understated in survey data because of the prevalence of moonlighting. Workers in the new EU states value job security and tend to stay in post much longer than workers in Western Europe. They are also prepared to work longer hours and focus on the acquisition of foreign language skills rather than managerial skills. This trend may change once increased economic activity expands opportunities for promotion into managerial jobs.

The HRM concept remains undeveloped in many of the established EU member states such as France and Germany. This is largely due to over-reliance on administrative procedures and company rules, the codetermination powers of works councils, the prevalence of sectoral collective bargaining, and widespread union resistance to workplace innovation. It therefore remains uncertain how far HRM methods will become the norm for managing personnel issues in the new member states.

© FedEE Services Ltd 2008

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