Corporate Reputations and Management Practices

I'm taking part in a forum on Corporate Reputations and Management Practices as part of an initiative organized by Macquarie University where I'm based for a brief period.  As part of my presentation, I'll refer to another recent session in Edinburgh in which I participated on the impact of new human rights developments arising from the Ruggie Report.  This report and indeed much of the discussion was relatively new to me but is likely to have major implications for multinational corporations and is already the subject of business school research.
You can find out a little more about it from the following Warwick University website, which has the details of the Edinburgh conference and the 'Edinburgh Declaration'.  For those of you interested in corporate responsibility and for those of you managing in multinationals this is essential reading.  

http://www.business-humanrights.org/Documents/NHRIsConference2010. 

Corporate Reputation by Ronald J. Burke, Graeme Martin and Cary L. Cooper

We have a new book on Corporate Reputations coming out early next year on corporate reputations, which you may wish to consider for your library. 
Contents: 
Part I Importance of Corporate Reputation: Corporate reputations: development, maintenance, change and repair, Ronald J. Burke; The meaning and measurement of corporate reputation, Gary Davies; Measuring the impact of corporate reputation on stakeholder behavior, Manfred Schwaiger, Sascha Raithel, Richard Rinkenburger and Matthias Schloderer. 
Part II Developing a Corporate Reputation: Reputation and corporate social responsibility: a global view, Philip H. Mirvis; Organizational identity, corporate social performance and corporate reputation: their roles in creating organizational attractiveness, Kristin B. Backhaus. 
Part III Managing a Corporate Reputation: Employer branding, the psychological contract and the delicate art of expectation management and keeping promises, Kerry Grigg; managing corporate reputations, strategic human resource management (SHRM) and negative capabilities, Graeme Martin, Paul Gollan and Kerry Grigg; From applause to notoriety: organizational reputation and corporate governance, Charles McMillan; The role of the CEO and leadership branding – credibility not celebrity, Julie Hodges; The role of the news media in corporate reputation management, Craig E. Carroll; The impact of Web 2.0 and Enterprise 2.0 on corporate reputation: benefits, problems and prospects, Martin Reddington and Helen Francis; Re-creating reputation through authentic interaction: using social media to connect with individual stakeholders, C.V. Harquail. 
Part IV Reputation Recovery: Corporate governance and corporate reputation: a disaster story, Thomas Clarke; Corporate rebranding, Dale Miller and Bill Merrilees; Repairing damages to reputations: a relational and behavioral perspective, Moonweon Rhee and Robin J. Hadwick;

New Assumptions about Strategic HRM?

I attended the Strategic Management Society annual Conference in Rome where I went to find out about what strategy academics have to say about HRM as a source of value creation.  And I’m pleased that I went if only to confirm what I’ve said in other blogs about the search for new business paradigms. Like many of the other management scholars, strategy academics have fallen out of love with business and with some of their most treasured assumptions about shareholder value.  This was evidenced by two new special interest groups that have formed in the Strategic Management Society on human capital and on stakeholder theory.

The opening plenary session given by some of the most prominent strategy academics  - Jay Barney, Russ Coff, Ed Freeman and … - raised lots of questions and some answers on the topic of ‘where strategic thinking in business needs to go’.  Jay Barney, the man most associated with what has become one of the most discussed ideas among management academics – the resource-based view of strategy (RBV) – outlined some of the assumptions/ predictions it has made with respect to human capital.   One of the most important is that firm-specific, as distinct from general (or transferable), human capital is a potentially great source of competitive advantage because it can be valuable, rare and inimitable.  This is why firms seek to engage employees to secure their identification and willingness to ‘go the extra mile’.   It also explains why firms are much more eager to train employee in the routines, processes, and ways of ‘doing things around  here’ and much less eager to give them a more general education, such as an MBA, which  they can use for their own advantage and for the advantage of other firms.  This last point, however, highlights a problem for the RBV: rational employees recognise that they do not benefit as much as firms from investing in their own firm-specific human because of what is called asymmetric power relations.  Basically, this refers to the lack of power and knowledge of individuals in relation to firms.  Thus, we are left with a distribution problem:  after all costs are paid, who should benefit from residual profits and how should this residual amount be shared?

The traditional answer, which has underpinned strategic management theory and corporate governance since the 1980s, is the normative theory of shareholder value.   Employees are paid a wage for their investment in general human capital in the firm and may gain in some of share ownership if they in invest in firm-specific human capital, but the shareholders have sole ownership rights and thus the only legitimate claim on residual profits.  Firms in the 1990s did try to limit their investment in firm-specific human capital by retrenching into employment contracts that were largely transactional rather than relational – the so called ‘employability contract’.  This, more or less stated that firms were unable or unwilling to guarantee the old style contract based on job security and firm-specific careers, but were willing to help employees develop skills (general human capital) that they could use to make them more employable in the future in return for their temporary demonstration of high commitment.  However, such psychological contracts have not proven successful, especially in attracting and engaging knowledge workers and senior managers, who often have high levels of general human capital and are capable of bargaining away much of the residual profits that would normally accrue to shareholders.  This is best exemplified by the case of premier league professional footballers and many CEOs and other star employees (who are both unique and capable of adding high value).

Russ Coff suggested the answer lay in developing a different theory of strategic management, one that is based on stakeholder theory rather than shareholder value.  This was hardly revolutionary stuff, but was positioned as such by these eminent strategy academics.  It was left to Ed Freeman, who has a new book coming out on stakeholder theory, to put the argument for a different view of what might count as useful theorising about strategy and where it may need to go.  His time seems to have come, especially given the weakening position of the US in the global economy.

I’m still stunned, however, over how large the gulf is between assumptions made by American scholars and those made by their (particularly continental) European counterparts.  However, we should be grateful for small mercies.

A Final Blog from the AOM: New Developments in Strategic Human Resource Management

I’m about to begin writing a new book exploring the links between HRM and business strategy, a conjunction of ideas which has been at the core of my work for the last few decades. So, I was pleasantly surprised to see that the AOM conference had some core tracks on this subject, the main participants of which have organized an interest group - rather unfortunately in my view - labelled ‘strategic human capital' (are we really interested in human capital or even human resources, or should we be more interested in resourceful humans?). The first conference stream dedicated to research in this field is due to take place at the Strategic Management Society annual conference in Rome in September and fields an impressive array of American scholars, including Dave Lepak, Pat Wright and Russ Coff.

During the AOM conference there were some excellent papers mapping out the field and addressing the question of what it means to be strategic in HRM. Shad Morris used this session as an opportunity to explore how organizations manage their star performers and attempt to expropriate value from them to create firm specific human capital - a very tricky problem because stars often have an inbuilt incentive and the power to expropriate value from the companies with which they deign to work to build their own general human capital. Another paper by Dana Minbaeva from the Copenhagen Business School HR team explored the bridge between the macro-micro divide. This may sound like academic jargon but is an extremely important issue for practitioners to understand.  It is not enough to have a set of so called best HR practices in place to ensure desirable individual and group attitudes and behaviour; we also need understand how these practices are implemented, the signals they send out and how these signals are perceived by individuals in particular contexts. This signalling theory approach, of which we have written about in a new book chapter, was demonstrated in another paper entitled ‘ Why are job seekers attracted to socially responsible companies? Testing underlying mechanisms’ by David Jones and colleagues from the University of Vermont. One of the insights generated by this paper is that it is not CSR in itself that attracts potential employees, but the inferences that such people make from the signalling cues of such policies. In this paper, environmental oriented CSR policies did not have as big an impact on the attractiveness of an organizational to potential employees as those policies focusing on being community-oriented i.e. signals from the corporate citizenship elements of the CSR policy were picked up by potential applicants as ‘they treat the local community well, so they must treat employees well’ and 'if they treat there employees well, I will apply to this organization'.

The third and fourth papers, however, provided even better insights into how we can conceive strategic human resource management.  A presentation by Lisa Hisae Nishii outlined a process theory of SHRM. The main contribution of process theory lies in explaining how the success of HRM is very much down to the implementation of policies, especially in meeting the valued expectations of employees, i.e. meeting psychological contract expectations. We provided a similar explanation in 2001 in a paper entitled ‘Transforming multinational enterprises: towards a process model of strategic human resource management change’ in the International Journal of Human Resource Management, but it will take someone of the stature of Pat Wright to get this idea into practice. The final and probably best paper was presented by Robert Kaše from Ljubljana. His was an attempt to map out the relationship between HRM and organizational outcomes using a social network perspective. Robert’s ideas would be the most difficult to put into practice because they highlighted the complex and multiple relationships inside and outside of organizations which have to be understood before we can predict with any certainty the impact of HRM policies. However, to get an accurate picture of HRM in organizations, such complex understandings are needed. One of the few examples I have seen of this kind of social network mapping is IBM’s attempt to capture the informal communications patterns which only become evident through tracking online social network communications. Such an activity is only made possible because the company has access to the IP addresses of all users of the company’s social networking software and can trace their communications. The patterns that emerged showed the importance of ‘mavens’ and ‘connectors’ who were critical to knowledge creation and sharing in the organization, so allowing IBM to create organizational structures which built on the bottom-up informal organization structures rather than on the top down formal structures.

If  anyone is interested in these papers, which are unlikely to be published for a year or two, the authors may be willing to share their work with you if you email them.  Most can be found using a Google search.

However, no matter how many times I attend the AOM conference – I’ve been going for a dozen or so years – I’m always amazed by the differences between business and management and HR on this side of the pond from what goes on in the USA. One example that rammed this point home to me this year was the statement by one of the leaders of the new strategic human capital interest group that I began this post with. He proposed a ‘revolutionary’ idea that US scholars and practitioners took the shareholder value perspective as given, arguing that this assumption needed to be questioned for the field to move on. Quelle surprise! I felt obliged to point out to the largely US audience that shareholder value was not a given outside of the USA, especially in some parts of Europe and Asia, and that we had recently written a 'not so revolutionary' paper on four configurations relating different corporate governance assumptions (shareholder value, stewardship theory, stakeholder theory and context-bound theory) to different sets of ethical and strategic assumptions, and through these to particular strategic HR policies. I also felt obliged that this notion was not even revolutionary among scholars in the USA. In a manner reminiscent of the love affair with Japanese management in the 1980s and 1990s, Peter Cappelli from the Wharton School and his Indian colleagues have just produced a piece of research in the Academy of Management Perspectives extolling the virtues of an Indian approach to management and what US firms can learn from them. The single most important feature they found of corporate governance among Indian companies was the ‘determination to balance the interests of the firm’s diverse stakeholders’. Being a representative of shareholders came only fourth on a list of priorities for business leaders. First was acting as a guardian for the mission driven strategy, which embodied social as well as economic goals, second was as guardians of the firm’s culture, and third was as acting as guide or teacher for employees.

Making Academics More Relevant: Useful Research

Perhaps the most important session I've attended at the AOM conference featured six of its  'biggest hitters', including past presidents and genuine world class researchers who have made a significant impact on practice and published in top tier journals.  Their messages deserved a larger audience and I'm sure they will get it in the near future through their new book, 'Useful Research: Advancing Theory and Practice', edited by Susan Mohrman and Ed Lawler. 

The title of the book invoiced its key message and also the impassioned pleas by the presenters for academics to focus on doing more useful research which has an impact on practice (as well as theory) and for the top tier journals to reflect use value to practice in their review processes and acceptance rates.  On this last point, some revealing statistics were laid out.  For example, in the Academy of Management Journal, probably the top of the top tier, only 16% of articles were based on qualitative case study research - the kind of research closest to practice and most likely to influence practitioners.  Apparently, however, this rates as a significant  improvement on the 6% that made it a few years ago!

All six presenters grounded their talks in the notion of academic knowledge chain or system, a development of the Mode 1 and Mode 2 distinction of a few years ago.  Upstream activities included Pure Research in the traditional disciplines of business and management, e.g. economics, sociology, psychology, philosophy etc., which provide the theory for the Traditional Organizational and Management Research that appear in the so-called top tier journals.  Downstream activities include the development of intermediate bridging knowledge, which is really a form of 'knowledge for sale' to practice - very much the province of consultants, professional bodies such as the CIPD, and the writers of textbooks - and Practice-oriented Knowledge Products including talks and keynotes to practitioners, teaching through executive education, blogging, writing in practitioner journals, newspapers, TV and radio, etc.  The main message of the presenters was that business schools should require at least some of their (senior) academics to operate in these critical downstream activities as well as the upstream ones.  By engaging in 'engaged research' with practitioners - not just on them - academics benefit from grounding their upstream work in relevant problems and can make a significant impact on policy and practice.  By doing so they lay claim to be genuine intellectuals in the traditional sense of that term.

All presenters were also highly critical of the current systems in elite university business schools whic rewards only publication in a limited range of highly self-referential top tier journals.  As Andy Van de Ven, the doyen of engaged research has demonstrated,  these journals have almost zero impact on practice and often little impact on science (some 60% of articles published in top tier management journals are never cited by other academics!).

Yet despite their arguments and positions of influence - not to mention the constant soul searching by the Academy over the last twenty years to make itself more relevant - we seem to be no further forward.  The research assessment exercise in this country (the REF) with its near exclusive focus on publishing in top tier journals and the requirements for tenure in the USA have led to a 'trained incapacity' among the academic community which has made the divide even greater over the last twenty years.  This divide has resulted in practitioners regarding most of  us as 'skilled incompetents' at best and only good for teaching MBA courses and undergraduates (the main finding of some research I conducted with a colleague a few years ago on the views of the Scottish business community of the Scottish business schools). 

Will books such as this one and the constant exhortation of senior academics in business schools that featured in this session change the system?  I doubt it: what gets measured gets managed, and the new research evaluation framework for the British universities shows no real desire to measure impact, despite its ambitions to be more impactful.  Maybe the new (much reduced) funding regime will though?

Just How Important is National Culture in Explaining the Effectiveness and Transfer of HR Practices in Multinationals?

The second of these two quick posts reflects on some excellent work in the Handbook of Research on Comparative Human Research Management edited by Chris Brewster and Wolfgang Mayerhofer and to be published by Edward Elgar in April 2011.  Those HR readers who are involved in managing in multinationals should read this book if you are concerned about the global-local problems. and developing employer brands. 

The chapter by Barry Gerhart looks like being a standout in this respect.  We've been trained as scholars and practitioners to emphasise national cultural differences as a constraint on transferring practices across cultures, in part because of the influence of work by Hosftede, Trompenaars and others on dimensions of national culture.  These ideas have been at the core of teaching on international management courses, as most MBA students would know.  Barry has spent a number of years re-examining the evidence produced by Hofstede in particular and reflecting on the messages this work has sent out.  He does not deny that national cultural differences exist, but argues (1) that you cannot equate culture with nation states and (2) that it is not national dimensions of culture that are the major constraints in transferring practices but organizational cultures, or industry cultures.  According to Gerhart, Hofstede used poor standards of proof and over-interpreted the importance of national cultural variables to the point that they seem to play less and less importance in constraining the ability of corporate HR departments to develop corporate identities and employer brands.  Instead he proposed that those firms which buck the shibboleths associated with transferring invidualist HR practices such as performance related pay, performance appraisal, etc, will actually gain a competitive advantage over those firms which follow the received wisdom in this field.

Healthcare HR at the AOM

One of two quick posts on excellent workshops at the AOM, both of which have important lessons for readers of this blog.

The first is about the influence of context and the disconnections between managers and employees over the effectiveness of HR practices.  Jaap Paauwe introduced a session that featured Louise Fitzgerald from Manchester Business School, Corine Boon from Amsterdam University and David Guest from Kings College.  Louise's work raised the importance of receptive contexts for change in that most complex of industries.  Her research over the past number of years has shown that transferring 'best practice' from the commercial sector to healthcare and even within the the healthcare sector itself is fraught with problems, e.g. lean service delivery and HR best practices.  Context matters a great deal, and if ever we needed lessons on this two of the most important dimensions of receptive contexts were (1) the relationships between managers and clinicians and the relationships among clinicians themselves, and (2) the extent of distributed leadership and willingness of clinicians to engage in leadership.  However, she also pointed out the impact of senior leadership actions on shaping such contexts, which is a lesson that most recent research has shown.  You need both transformational and distributed leadership to make things work.

The second point on the impact of HR practices on change was made by Corine Boon and re-inforced by David Guest's research in healthcare.  It is not the fact that HR practices exist but the signals they send and how they are perceived by employees that is important in predicting performance.  The correlation between managers reporting that they had such practices in place and the views of employees on their effectiveness was very low (0.25).  David Guest argued that there was a general lack of a strategic perspective on HR among his healthcare organizational sample, and a 'huge gap between what was intended and what actually happened' in HR.  He further proposed that the adoption of so called best HR practice was linked to low performance, a finding that is not without parallel in the private sector.  If everyone is doing the same thing, where is the advantage in that?

So beware of poorly researched case studies reporting only managers' views on the existence of best practices and beware of the airport books promulgating these views.  You have to understand the context in which these practices are adopted, how these practices are implemented, they signals they send and how effective they are perceived to be by staff.  Simple but powerful lessons.