Economic Interests, Company Values and Local Institutions: Shaping Soft Work Practices in a Multinational's Subsidiaries in Western and Central Eastern Europe**/Wirtschaftliche Interessen, Unternehmenswerte Und Lokale Institutionen: 'Soft Work Practices' in Ost- Und Westeuropäischen Tochtergesellschaften Eines Multinationalen Unternehmens

Verfasser:Kahancová, Marta


Globalisation and intensified transnational competition have led to the introduction of a variety of new work practices and forms of employee relations. Especially in large companies, including multinational companies (MNCs), attention to improved organisational performance is no longer Hmited to the most effective labour cost management, but involves a variety of soft work practices. These aim at motivating employees, fostering creativity and teamwork, rewarding personal initiative, providing social welfare and thus stimulating employee commitment to company interests (Dessler 1999; Dobbin 2005; Bolton/Houlihan 2007; Jacoby 2005; Nolan/O'DonneU 2003; Truss et al. 1997). The specific characteristic of soft work practices is that they are excluded from a formalised employment contract and are often beyond the scope of legal regulation or collective bargaining. Instead, they are formed and continuously recreated in management-worker interaction at the workplace. Recognizing soft practices rests on the premise that managing organizations like communities instead of distant, marketlike relationship vis-à-vis employees yields comparative advantages to companies in their business performance (Pfeffer 2006; Pfeffer /Veiga 1999; Peterson 1993). Soft work practices thus do not directly derive from labour costs, but from company values and social relations between managers and workers at the workplace.

How can we understand similarities and differences between soft work practices in MNC subsidiaries in differing local conditions? Other than reflecting the company's economic interest, a successful implementation of work practices requires attention to workers' interests, and to specific national cultural and organisational aspects in which work practices are applied (Michailova 2002; Maurice/Sorge 2000; Peterson 1993). This is particularly relevant for MNCs, because they simultaneously operate in different host-country conditions. In an attempt to understand how MNCs' soft work practices respond to corporate economic interests and host-country conditions in Western Europe and Central Eastern Europe (CEE), this paper has two aims. First, it documents and compares selected soft work practices (work systems and fringe benefits) in two Western and two CEE subsidiaries of a Dutch MNC. Acknowledging institutional variation in labour laws, industrial relations and working standards across Western Europe and CEE, the paper's second aim is to understand which factors shape the observed similarities and differences in soft work practices. With this focus, the paper responds to the recent literature's call for comparative analyses of work practices resulting from politics within MNCs, i.e. the micro-level relationship between management and employees in a cross-national perspective (Ferner/Quintanilla/SánchezRunde 2006; Geppert/Mayer 2006; Tempel/Wächter/Walgenbach 2006; Scharpf 1997).

In understanding whether work practices across subsidiaries differ or converge, available literature has considered the MNCs instrumental economic interest and the role of host-country institutions as explanatory factors. Next to these factors, I consider the role of MNCs corporate values, or its administrative heritage of doing things in the organization, for understanding soft work practices (Bartlett/Ghoshal 2002). I argue that interaction between the profit interest, moral values and host-country institutions is central in understanding the construction of work practices and their crosssubsidiary similarities and differences. The means of achieving profits are endogenous and informed by company values, responsiveness to workers' interests in different countries and the MNCs ability to benefit from host-country resources. Values shape the MNCs perception of what is rational and how to achieve profits in differing subsidiary conditions. Thus, the MNCs rational behaviour in producing similarities and differences in work practices is contextualized in local socio-institutional conditions, as well as it is informed by company values. Such interaction yields subsidiary work practices that are neither fully standardized across the subsidiaries, nor extensively adapted to local work standards. Instead, the MNCs soft work practices are embedded in, but only selectively adapted to, host-country standards.

The paper is structured as follows. The next section conceptualizes the explored work practices as well as the MNCs economic interests, values and host-country institutions. In the third section I provide empirical evidence on work systems and fringe benefits across four MNC subsidiaries in Belgium, France, Hungary and Poland. The fourth section compares work practices across these subsidiaries and relates them to relevant local standards in each case. The fifth section explains how the MNCs profit interest, values and local institutions interact in understanding cross-subsidiary similarities and differences and the utilization of host-country conditions. The concluding section summarises the overall argument.

Conceptualising work systems and fringe benefits

Soft practices derive from company values, social relations between managers and workers at the workplace, and from implicit aspects of the employment contract (c.f. Marsden 1999). However, empirical studies on employment relations in MNCs predominantly focus on work practices directly related to labour costs, which are part of a formal employment contract, i.e, working time, employment flexibility, and wages (Almond/Ferner 2006; Marginson/Meardi 2006; Meardi/Tóth 2006; Bluhm 2001; Ortiz 1999; Gallic et al. 1998). Such orientation leaves less formalised work practices (I.e. workplace communication, commitment to worker welfare, worker discretion) without a sufficient comparative exploration.

Motivated by this shortcoming, the current paper describes two sets of soft work practices: work systems and fringe benefits of production workers in four subsidiaries of a Dutch industrial MNC across Western Europe and CEE. The aim is to shed light on similarities and differences between the subsidiaries and between subsidiaries and local standards; and to understand how several explanatory factors, i.e. the MNCs' profit interest, corporate values, and the local institutional framework, interact in shaping these practices.

The East-West comparison is justified because of distinct economic and institutional conditions, including employment regulation, trade union roles, working standards and motivation practices (Kohl/Platzer 2004; Danis 2003; Michailova 2003; Meardi 2002; Sagie/Koslowsky 2000; Whitley et al. 1997). In the West, employment relations and work practices are to a great extent entrenched in long-term commitments, consensual work organisation, and institutionalised bargaining (Bluhm 2001; Ferner/Quintanilla 1998). In contrast, with more extensive workplace competition and the use of performance-related pay, CEE presents a less coordinated institutional context for work practices than Western Europe without a strong collective representation of workers' interests (Sagie/Koslowsky 2000; Whidey, et al. 1997). The empirics reveal how the studied MNC has taken advantage of these differences.

The conceptualization of work systems draws on the social structuring of management-workforce interaction at the workplace, embracing distinctive patterns of interconnected characteristics of task organisation and control, workplace relations between social groups, and employment practices and policies (Whitley 1999: 90). Work system attributes adopted from Whitley (1999) directly address micro-level social interaction at the workplace and therefore offer a feasible operationalization for a subsidiary-level case study (see table 1).

The assessment whether the subsidiary scores high or low on particular attributes, listed in the paper's empirical section, derives from a comparative evaluation of subsidiary practices relative to the other subsidiaries as well as the local standards in each host country. Next to participant observation in the CEE subsidiaries, I interviewed subsidiaty and headquarter managers, subsidiary and higher-level trade unions, representatives of the local society and local labour market boards in all host countries. For the sake of comparability, the same interview templates were used across all countries and subsidiaries.

The second set of studied soft work practices includes social welfare provisions, or fringe benefits, for subsidiary production workers. Generous fringe benefits tend to be offered in paternalistic companies that fulfil their economic interests via raising a committed workforce (Pfeffer 2006; Stoop 1992). In contrast, a company aiming at short-term profit maximisation through exploiting workers' skills is reluctant to offer generous benefits (Deery/Iverson 2005; Hyman/Mason 1995). They can therefore be in the long run beneficial for the MNCs profit interest (Deery/Iverson 2005; Heller et al. 1998). In Western Europe, coordinated employment relations secure an extensive institutionaHsation of benefits and thus create external pressures on MNCs to provide them (Meardi 2006; Mailand/Due 2004; Dickmann 2003). In economies with a lower degree of institutionalised employment regulation, including CEE countries, MNCs are driven to provide benefits on a competitive basis. Thus, in such countries fringe benefits depend greatly on market pressures or on MNCs' voluntary decision to provide benefits. In the analysis of fringe benefits, I draw on the same data sources and follow the same methodological principles as in the analysis of work system attributes.

In an attempt to understand why subsidiary work systems and fringe benefits are similar or differ, I consider the interplay of three relevant explanatory factors. The first one is the MNCs instrumental economic interest, operationalized as a strive for immediate profits through international competitiveness and efficiency (Paauwe/Boselie...

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