SHRM Foundation Research National values, human resource practices and organizational performance: A study across 21 countries Funded: November 2008 Completed: December 2009 Yitzhak Fried, Ph.D., Whitman School of Management, Syracuse University Hilla Peretz, Ph.D., Dept. of Industrial Engineering and Management, Ort Braude College, Israel Executive Summary While there is evidence that strategic HR practices are associated with organizational performance, it is still unknown how these practices contribute to organizational performance in different national cultures. For example, are the same HR practices effective across countries with different values? Which HR practices are most consistent with different cultural values? Given the increasingly competitive global business environment, these questions are especially important today. Hilla Peretz and Yitzhak Fried examined the influence of national culture on the implementation and characteristics of key HR practices. Further, the study explored the effect of the degree of fit between national culture and the HR practices on organizational performance. KEY FINDINGS AND IMPLICATIONS FOR PRACTICE The authors examined four cultural dimensions on which countries may vary: power distance, future orientation, individualism/collectivism, and uncertainty avoidance. They found that HR practices do vary by the national culture the organization is in. Further, organizations that use HR practices consistent with the country's cultural values are more effective. Below is a list of HR practices that are consistent with high and low levels of each cultural dimension examined. Power distance is the degree to which members of a collective expect power to be distributed equally. In high power distance societies, hierarchy is rigidly upheld. For instance, India and South Korea are high on power distance, while Israel and Denmark are low on power distance. ● HR practices that are consistent with high power distance cultures: internal recruitment of managers; the use of multiple selection methods to hire professionals. ● HR practices that are consistent with low power distance cultures: Flexible work practices such as teleworking, flextime, and compressed work weeks; racially-based affirmative action programs; the use of joint consultative committees or work councils. Future orientation is the degree to which individuals engage in future-oriented behaviors such as planning, investing in the future, and delaying gratification. For instance, Thailand and Italy tend to look toward the future, while Russia and Denmark score low on this cultural dimension. ● HR practices that are consistent with high future orientation cultures: use of multiple employee selection methods; HR strategy planning; outsourcing; flexible work practices such as job sharing, home-based work, and compressed work weeks. ● HR practices that are consistent with low future orientation cultures: external recruitment of employees. Individualism/collectivism is the degree to which individuals are expected to subordinate themselves to the goals of the group. Japan and much of Latin America tend to have collectivist cultures, while the United States is an individualistic culture. ● HR practices that are consistent with individualistic cultures: flexible work practices such as job sharing, home-based work, and compressed work weeks; external recruitment of managers and professionals. ● HR practices that are consistent with collectivist cultures: commitment to employee training; pay systems based on team or departmental performance; use of consultative committees or work councils. Uncertainty avoidance is the extent to which a society relies on social norms, rules, and procedures to alleviate the unpredictability of future events. Societies high in uncertainty avoidance are more likely to develop strict rules and norms. Singapore, China, and Germany are all high on uncertainly avoidance, while Greece, Russia, and Venezuela are low in uncertainty avoidance. ● HR practices that are consistent with high uncertainty avoidance cultures: multiple selection methods to hire managerial, professional, and clerical employees. ● HR practices that are consistent with low uncertainty avoidance cultures: flexible work practices such as job sharing, home-based work, and compressed work weeks. Bottom Line: ● Societal (national) values are associated with the tendency of organizations to implement different HR practices. ● Organizational performance is higher when there is a good fit between national culture and HR practices. ● Organizations should understand the cultural values in which the organization operates to ensure the HR practices are appropriate and effective. The results of this research are based on data from 5,991 organizations (each having at least 200 employees) from 21 countries. The researchers examined HR practices and how the fit between those practices and national values affected organizational effectiveness. Gross revenue, service quality, level of productivity, stock market performance, rate of innovation, turnover, and absenteeism were used as indicators of performance. Read the Full Report View the full list of SHRM Foundation funded research.