Rapidly Developing Economies and HRM Policies

Subject: Employee Management
Pages: 11
Words: 2996
Reading time:
13 min
Study level: PhD

Abstract

The context in which human resource management (HRM) policies and practices are developed and implemented is usually important to determine their content and character. From this point, the context of rapidly developing economies also has its particular effects on the development of HRM policies and practices. In addition, it is possible to speak about the correlation between the growth of the public and private sectors in rapidly developing economies and retention practices. This literature review aims to summarise the recent research in the field of HRM in the rapidly developing economies. The economic factors associated with the active progress of certain nations can influence the choice of the HRM practices that can have an effect on the employees’ perceptions and attitudes, leading to the intentions to stay or leave the organisation. The context of the rapidly developing economies makes managers propose the HRM practices that are most effective to retain the employees and decrease the turnover rates in the situation when it is necessary to increase the profitability and the competitive advantage of the organisation. This factor is important for public sector organisations because they compete with semi-private organisations in the context of rapidly developing countries.

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Introduction

The active economic growth of nations known as rapidly developing ones is associated with the significant changes in their labour markets. As a result, the previously used human resource management (HRM) policies and practices become inappropriate to address the new needs of these nations. Additionally, the governments in rapidly developing countries become focused on adapting their HRM policies to the global trends to compete in the market (Chuang 2013; Tzafrir, Baruch & Meshoulam 2007). From this point, the implications of the rapidly developing economies for the HRM policies and associated HRM practices are significant, and it is also possible to speak about the implications for the employees’ perceptions, attitudes, turnover intentions, and the factor of retention. The purpose of this literature review is to summarise the researchers’ views on the correlation between rapidly developing economies, HRM policies, implemented HRM practices, and the employees’ intentions.

The Labour Market and Business Environment in Rapidly Developing Economies

Rapidly developing economies are characterised by such features and trends in their labour market as the impact of the increased globalisation; the spread of the outsourcing; the competitiveness in terms of wages and conditions for employees; the availability of the labour options for employees; and the lack of the skilled workforce (Afiouni, Ruel & Schuler 2014; Vance et al. 2013). According to Moideenkutty, Al-Lamki, and Murthy (2011), Weber (2011), and Horwitz (2012), the employers in these countries are also supported and encouraged by foreign direct investment, and they become focused on increasing the educational and professional requirements. However, in spite of the positive changes in the economic sphere and labour markets, the turnover rates are still high in the rapidly developing economies because these nations only start their path toward the development of the effective HRM model to follow and compete globally (Tzafrir, Baruch & Meshoulam 2007; Weber 2011). The problem still exists in the area of women’s employment and the effective recruitment of expatriates and nationals, and the HRM policies are often focused on resolving this problem (Tzafrir, Baruch & Meshoulam 2007; Moideenkutty, Al-Lamki & Murthy 2011; Weber 2011).

In the Middle Eastern region, the situation in the labour market is influenced by the consequences of the Arab Spring. Afiouni, Ruel, and Schuler (2014) state that it is possible to speak about the long-term unemployment in the countries, but the governments still focus on enhancing the economic development and rehabilitating the strategies according to the principles of the rapidly developing context. As a result, it is possible to observe the tendency when the HRM policies in the public sector, as well as the selected strategies for organisational development, become closer to the principles and strategies used in the private sector (Gkorezis & Petridou 2012; Weber 2011). The HRM in the rapidly developing economies of the Middle Eastern region suffers from the tension most significantly because such factors as the reference to the expatriate workforce, the references to the religious principles, the references to the specific laws and norms have the important impact on the implementation of the HRM policies in these countries and the choice of HRM practices (Connell & Burgess 2013, p. 4167). On the one hand, the organisations in the rapidly developing economies try to develop according to the global models. On the other hand, as it is noted by Afiouni, Ruel, and Schuler (2014), the business environment in these countries is specific and actively changing, creating competition between the public and private sectors.

Implications for the Design of the HRM Policies

The economic and business environments change significantly in the rapidly developing countries, and HRM policies and practices are selected to increase the organisations’ competitiveness. In this context, there is a high risk of shifting the employees’ interest to the private and semi-private sectors that often become dominating in these economies (Afiouni, Ruel & Schuler 2014; Gkorezis & Petridou 2012; Tzafrir, Baruch & Meshoulam 2007). Therefore, the HRM policies for the public sector receive the features of the HRM policies for the private sectors in order to achieve the success and guarantee the high level of the employees’ involvement, as it is in the Israeli organisations (Tzafrir, Baruch & Meshoulam 2007). The HRM policies for the public sector can be characterised by the focus on the employees’ satisfaction and motivation with references to the improved approaches to performance management, rewards, and training in contrast to the previous focus on regulating the recruitment and appraisal procedures.

As a result, it is possible to state that HRM policies adopted in different rapidly developing contexts reflect diverse SHRM perspectives because the managers are inclined to choose the perspective that is most relevant for the concrete economy. Thus, the context of the rapidly developing economies makes authorities choose the configurational or the universalistic perspectives most often (Al-Husan, Brennan & James 2009; Tzafrir, Baruch & Meshoulam 2007). The reason is that they orient to the HR managers in actively developing organisations, who are inclined to implement the bundles of effective practices to achieve the higher results in the most efficient manner or who are inclined to focus on the best practice that is proved to be effective globally (Al-Husan, Brennan & James 2009; Weber 2011). These SHRM perspectives are most efficient for transferring the HRM visions and practices globally. From this point, modern HRM policies in rapidly developing countries are based on the models that proved to be effective while being applied in the developed countries or the Western contexts (Al-Husan, Brennan & James 2009; Horwitz 2011).

While discussing the HRM policies as the official responses to the global tendencies and contexts of the rapidly developing economies, it is important to state that the governments choose different patterns to achieve the high results. According to Connell and Burgess (2013), in the UAE, the Emirates’ governments work to improve the HRM policy to make it oriented to supporting the expatriates’ rights and interests in contrast to the HRM policies adopted in other rapidly developing countries; therefore, the level of retention in the UAE companies can increase. The Turkish and Korean firms choose to reject the authoritarian HRM practices that were followed previously and refer to the Western patterns in HRM policies (Mellahi et al. 2013; Vance et al. 2013). Focusing on the context of Taiwan, Chuang (2013) notes that the Taiwanese firms as any other organisations in the rapidly developing countries faced a challenge of increasing their competitive advantage and improving the practices in the employees’ retention. In addition, they faced “challenges in changing workforce demographics and related skill gaps” (Chuang 2013, p. 230). As a result, the Taiwanese government focused on improving the HRM policies to support the talents management and attraction of the skilled employees in firms. Okpara and Wynn (2008) claim that in Nigeria, the HRM policies are oriented to respond to the extended privatisation and to guarantee the increase in the firms’ profits. In China, the situation is different because the government remains to be the powerful agent to influence the HRM policies and provide support to the public sector (Cooke 2014). Therefore, the authorities in the rapidly developing countries analyse the economic development and the market trends and develop HRM policies effective to address the observed changes.

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Implications for the HRM Practices

Having the limited resources in terms of the skilled workforce, the HR managers in the rapidly developing economies need to propose the practices and options that are developed to increase the level of the employees’ satisfaction to predict the positive attitudes and behaviors and prevent the turnover (Den Hartog et al. 2013). Currently, the HR managers are influenced by the context of the rapidly developing economies in terms of focusing on the adoption of the recent trends in the management and market. The flows of investments in these countries make businesses more competitive. As a consequence, HR managers choose the most effective practices to retain employees who received the opportunity to choose the employer. The most challenging situation is in the public sector organisations where the proposed HRM practices are often of the lower quality or less beneficial for employees (Tzafrir, Baruch & Meshoulam 2007; Zheng, O’Neill & Morrison 2009).

In order to respond to the changes in the business environment, managers refer to the proposed HRM policies and choose the HRM practices that can contribute to increasing the profits and retention in organisations. HR managers choose the practices that can reinforce each other while being implemented as bundles, and this approach is effective in any context (Sanders, Dorenbosch & De Reuver 2008, p. 414). Choi and Lee (2013) state that HR managers in such rapidly developing economies as Korea, Singapore, China, and Russia became concentrated on the development of HRM practices that can enhance the performance to increase the overall competitiveness. However, according to the researchers, these practices need to be commitment-based in order to improve the performance and the employees’ attitudes to their work (Choi & Lee 2013). Under new conditions, HR managers are oriented to investing in the training to increase the potential of their workers in the situation when the overall education level of the employees is comparably low. According to Chuang (2013), the HRM managers in Taiwan focused on implementing of such effective HRM practice as the training and development of employees in order to address the changes in the economic context and the labour market. The main focus is on the support of the Taiwanese government in promoting the training in firms.

Moideenkutty, Al-Lamki, and Murthy (2011, p. 240) point at the other extreme when managers choose not to invest in the HRM practices and not to retain the expatriates, as it is in the case of some rapidly developing countries in the Gulf region because the costs of such turnover are rather low. Still, in the majority of cases, managers orient to improving the followed practices according to the global trends. Thus, improvements in the recruitment, performance management, appraisal, training, development, and promotion practices are chosen by managers in such countries as Greece, Russia, and India (Gkorezis & Petridou 2012; Gurkov, Zelenova & Saidov 2012; Rao 2010). From this point, it is possible to state that the context of rapidly developing economies has the double impact on the HRM practices that need to be focused on improving the employees’ performance to gain profits and on the employees’ retention to prevent turnover costs and retain talents.

Effects of Changes in Rapidly Developing Economies on the Employees’ Perceptions and Attitudes and Turnover Intentions

In the context of the rapidly developing economy, employees usually choose to stay with organisations as long as possible if the received psychological and monetary benefits are comparably high. Juhdi, Pa’wan, and Hansaram (2013) note that in this case, the impact of the feeling of stability is also important, and employees are inclined to choose organisations that are ready to invest in their professional development. As a result, the factors of the psychological, financial, and professional benefits seem to influence the employees’ turnover intentions in the context of the rapidly developing countries. Reiche (2009) studied the issue of the staff turnover in Singapore, and they found that modern organisations operating in the public and private sectors of developing countries are characterised by the building of the specific organisational climate that is created by HR managers in order to address the employees’ needs and expectations while increasing the level of commitment and work performance. As a result, it is possible to expect the decreased rates of turnover in private firms, as well as in the public sector organisations.

However, the lack of the training and career development options for employees can significantly decrease their commitment, and the turnover intentions can be associated with the lack of the opportunities for the personal and professional development in the concrete organisation. Li, Frenkel, and Sanders (2011), who studied the development of organisations in the context of the Chinese business environment, found that employees need to feel successful to demonstrate the commitment to the organisation and have the intention to stay with it. As a result, the HRM practices should be focused on training, development, and promotion to respond to the employees’ needs. In addition, Al-Husan, Brennan, and James (2009) note that there is the relationship between HRM practices associated with increasing the compensation levels and the psychological state or attitudes of workers as a result of new trends in the employment market.

Rapidly Developing Economies and Retention

The important feature of the HRM in rapidly developing economies is the focus on talent management and retention. The talent management typical of the Western patterns is adopted in many modern rapidly developing countries because this practice allows minimising costs associated with the retention (Chuang 2013). It is important for the companies in the public and privates sectors of the rapidly developing economies to remain profitable, and the managers choose to retain the skilled and talented workers to preserve the competitive advantage (Tzafrir, Baruch & Meshoulam 2007). In Chinese organisations, modern managers see employee retention as a result of the effective implementation of such HRM practices as training and career promotion (Li, Frenkel & Sanders 2011). The potential of rapidly developing economies allows the huge investments in these practices in comparison to the periods when managers could not afford the retention of the employees with the help of the increased monetary rewards and benefits (Zhu, Zhang & Shen 2012).

Following Ghosh et al. (2013), the costs of employee turnover in such rapidly developing countries as India are often high, and the proposed HRM practices intend to create a stable workforce with a focus on the retention. According to Juhdi, Pa’wan, and Hansaram (2013, p. 3006), in Malaysia, the focus is on the monetary reward that is “the motivating factor not just for lower-level employees; even those at the higher levels are also equally motivated by money”. Therefore, a range of HRM practices in rapidly developing economies is grounded on this factor. In their article, Ghosh et al. (2013) also note that the creation of the competitive compensation package and the provision of a range of additional benefits for employees remains to be the primary practice used by HR managers in rapidly developing countries to increase the employees’ retention. From this point, managers choose to develop effective performance appraisal and reward practices to provide employees with competitive salaries to promote their retention.

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Measuring the Impact of Rapidly Developing Economies on HRM

To understand how the rapidly developing economies or changes in the economic environments can influence the HRM in organisations, it is important to refer to the effective measures. Having focused on the researches by Conway and Monks (2008) and Snape and Redman (2010), it is possible to notice the attempts of investigators to measure the impact of changing economies with references to the financial support that companies provide to their employees and the investment into promotion and training programs. The questionnaires used in studies by Gkorezis and Petridou (2012) and Den Hartog et al. (2013) also have the items that are intended to measure the level of the employees’ satisfaction with the received bonuses, compensation, and other rewards. The discussion of the utilised performance appraisal is also associated with the role of these assessments to determine the bonuses (Al-Husan et al. 2009; Moideenkutty et al. 2011). The reason to focus on these monetary benefits, non-monetary rewards, and the overall financial background of the training and development programs in organisations while measuring the impact of rapidly developing economies on HRM is in the fact that the possibilities of organisations to provide competitive compensation and rewards are based on the economic situation in the country. In its turn, the presence or absence of comparable rewards or effective training influences the employees’ decisions to stay with or leave the organisation to find more financially advantageous conditions.

Conclusion

The review of the researches on HRM in rapidly developing economies demonstrates that HR managers in the public and private sectors in these countries are focused on meeting the new standards and requirements associated with the changed economic conditions. In response to the changes in the business environment and markets, the governments try to improve the HRM policies according to the patterns used in the developed countries. In their turn, HR managers try to implement the HRM practices in the most efficient manner in order to overcome such challenges as the high level of turnover, the differences in the compensation in private and public sectors, and the higher opportunities for the career development within the private and semi-private sectors. The used HRM practices often reflect the models used in the advanced economies, but they are adapted to the concrete contexts. As a result, while responding to the factors determining the development of these countries, the managers propose the HRM practices that can also increase the retention rates and improve the employees’ perceptions and attitudes.

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