Preparing For 1992? Business-Led Versus Strategic Human Resource Management

P R E P A R I N G F O R 1 9 9 2 ?

H U M A N R E S O U R C E M A N A G E M E N T B U S I N E S S - L E D V E R S U S S T R A T E G I C

Stephen Wood and Riccardo Peccei London School of Economics and Political Science

INTRODUCTION

1992 has become a major element in the latest rallying cries for personnel management to become more proactive and integrated into the overall organization. There is a concern, first, that the Single European Market (hereafter SEM) should be approached strategically and, second, that planning for it should extend to human resources and industrial relations. The tone of much of the general and journalistic discussion of 1992 has been a fear that managements are failing to take sufficient action to prepare for the SEM. Some trade unions are also expressing concern about this lack of preparation, and particularly a feeling that what plans are being made do not incorporate an industrial relations element (see, for example, Barry, 1990). Such fears reinforce a more fundamental and longstanding concern about the lack of competitiveness of British industry, especiaIIy of manufacturing. The tendency amongst commentators on 1992 is to imply that not enough is being done, and that the approach to 1992 is a reflection of the past weaknesses of British management, including their possible insular orientation.

Nevertheless, there is recognition that some firms are preparing, and some have been treating Europe as a single market for some years. For example, the IPM/IDS (1988) study specifically on personnel management issues opens by acknowledging that 'In the main, the strategic planning for 1992 is taking place in those companies which already have a substantial presence in Europe'. The question raised by this, then, is: should a concern for 1992 extend beyond those firms who have, or are shortly planning to have, a presence in Europe? The assumption in the rallying cries about 1992 is that they should, if only because it may herald even more intensive competition in the British market.

For personnel specialists the issues extend, as we have said, beyond simply the extent of planning to whether such planning incorporates human resources. This may be seen as an extension of the more general argument that many commentators on human resource management have been making, namely the need for it to be incorporated into the overall planning and practices of the organization. In so far as firms are not extending planning for 1992 to personnel issues, their managements are providing an example of precisely what proponents of human resource management are reacting against, namely piecemeal, tradi- tion-bound personnel management (Storey, 1989). Accordingly, planning for the SEM might be treated as a useful test case to assess whether the cry for more integrated human resource management is having any effect, and if there is any substance to the often assumed trends towards more business-orientated and proactive personnel departments.

With such issues in mind, we conducted a study of firms focusing on their preparations for 1992.' Firstly, we were concerned with their planning for 1992, and whether it extended to the human resource issues; and, secondly, with the factors which are likely to affect the extent of personnel planning for the SEM and, in particular, with whether this planning is likely to be more sophisticated if personnel departments are integrated into the business. The study then had two main objectives: (1) to monitor how far and in what ways firms are preparing personnel and organizational

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PREPARING FOR 1992? BUSINESSLED VERSUS STRATEGIC HUMAN RESOURCE MANAGEMENT

strategies and plans for the SEM, and (2) to account for observed variations in the extent to which firms are preparing for 1992 on the personnel side, thereby contributing to the debate about human resource management.

The study was thus designed on the basis that 1992 is of interest in itself but that, at the same time, it also provides a useful site for researching some of the issues concerning human resource management, through a test case. If managements are truly integrating their strategies and extending their strategic planning to personnel issues, then it should apply to their planning for 1992.

The research itself consisted of two main parts. A survey of companies of varying sizes designed to assess the extent of firms’ preparations for 1992, and a more detailed set of industry case studies designed to explore in greater depth some of the issues surrounding the SEM.

In this article we shall first report the results of the survey study and then, in the second part, the material from the industry case studies. We conclude by discussing the implications of the survey and of the case studies for both the specific issue of 1992, and some more general questions concerning human resource management.

THE SURVEY OF PREPARATION FOR 1992

A postal questionnaire was sent to a sample of 500 companies (randomly selected from AP Information Services, The Personnel Manager‘s Yearbook 1989, which contains a list of 4,532 personnel departments, claiming to cover practically all the large companies and organizations in the UK with more than 300 employees (p. 103)). Completed questionnaires were obtained from 171 organizations, a response rate of 34.2 per cent. Prior to designing the questionnaire, we interviewed seven people we identified as potential experts in 1992, such as the author of the joint IPM-IDS publication on 1992 (IPM/IDS, 19881, and a number of academics. From these we identified certain key human resource issues resulting from the SEM. Firstly, increased competition in both product and labour markets was seen by nearly all the ‘experts’ to put a premium on planning, and to require better technical training, more management development, and knowledge of EC languages. Secondly, the increased mobility of skilled personnel was accorded considerable significance. Related to this was a felt need to increase recruitment from outside Britain and make pay and benefits competitive with European standards, in order to face up to what was anticipated to be an increasingly competitive labour market for skilled labour. The ‘social dimension’ of 1992, whilst seen as an issue, was not accorded the same significance as developments in product and labour markets. It was acknowledged that the harmonization of employment rights and pensions and benefits within the EC could become an issue, but no expert gave these a five- star rating.

The postal questionnaire was designed in the light of the ’experts” views, particularly focusing on recruitment, training and development, the monitoring of pay and conditions across the EC and plans to meet EC draft employment proposals, and the extent of planning for 1992. The general questions, not specifically related to 1992, included such standard questions as the size of the company and the extent of a European presence in the firm‘s operations. These were supplemented by questions on the extent of integration of the personnel function with the rest of the business, and on recent changes in the personnel policies of the company.

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STEPHEN WOOD AND RICCARDO PECCEI LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE

The sample of firms who responded to the questionnaire covered the whole spectrum of industry, including organizations operating both in the manufacturing and service sectors. Over 91 per cent were private limited companies and 72 per cent were UK owned. Table 1 shows a breakdown of the firms in the sample in terms of a number of other key variables, including their size, the degree of integration of personnel into their organization, the extent of their presence in Europe, their perceptions of 1992, and the extent of their planning for the SEM. As can be seen from the table, 19 per cent of the firms in the sample had 500 or less employees; a further 30 per cent fell between the range 501 and 1,000; 22 per cent fell between 1,001 and 2,000; a further 27 per cent had between 2,000 and 10,000 employees, leaving just two per cent with over 10,000.2

The extent of integration of personnel was measured by asking respondents, on a five point (strongly agree to strongly disagree) scale, whether (a) manpower and personnel issues were closely integrated into the company’s business planning, and (b) personnel or human resource specialists in the company made a major contribution, at Board level, to the strategic planning process. The first item refers to the extent to which a company’s personnel policies are integrated with its business strategy. It provides a measure of what may be said to be the level of strategic integration of a firm’s personnel policies. In contrast, the second variable refers to theextent to which the personnel department is integrated into the organization at a strategic level and is a measure of the degree of institutional integration of the personnel function within the company. As such, these items measure two distinct aspects or dimensions of personnel integration, aspects which often are not distinguished sufficiently clearly in the debate on human resource management (see, for example, Miller (1987) and Legge (1989)). Judging by the responses on these two items a majority of firms in our sample had reasonably high levels of both strategic and institutional integration between their personnel and the main business. Thus, nearly 80 per cent of the respondents either agreed or agreed strongly with the statement that in their companies manpower and personnel issues were closely integrated into the business planning, whilst 62 per cent either agreed or strongly agreed that the personnel department made a major contribution, at Board level, to the strategic planning process.

As might be expected, the responses on these two items are positively correlated (r = 0.64; significance level < 0.001), indicating that the two dimensions of personnel integration are interrelated. At the same time, though, the intercorrelation between these two variables is far from perfect, suggesting that high levels of institutional integration may sometimes co- exist with low levels of strategic integration and vice versa, as Table 1 shows3.

Of the sample, just over 50 per cent had employees in one or more EC countries; a further 19 per cent had strong linkages with EC countries such as joint ventures with European firms, as well as selling in them; only 6 per cent only sold to EC countries, whilst the final 24 per cent currently had no presence in the EC. Of the last group, 62 per cent planned to go into Europe in one form or other in the foreseeable future.

Perceptions of and Planning for 1992

A majority of firms (56 per cent) saw the SEM as giving their organization an opportunity to expand its business, while as many as 73 per cent felt the SEM would result in more aggressive competition in UK markets. Combining these two variables into an overall

65

PREPARING FOR 1992? BUSINESS-LED VERSUS STRATEGIC HUMAN RESOURCE MANAGEMENT

TABLE 1 Distribution of Sample Firms in Terms of Size, European Presence, Perceptions of 2992, Personnel Integration and Planning for 1992

Size (Number of Employees) (Valid N = 171)

< 500 employees = 19% 501 - 1,000 = 30%

1,001 - 2,000 = 22% 2,001 - 10,000 = 27% > 10,000 = 2%

Strategic and Institutional Integration - of Personnel (Valid N = 169)

1. 2. 3. 4.

European Presence (Valid N = 165)

1. Not present in EC 2. Only sell in EC 3. 4. Have employees in EC

Perceived Business Implications of 1992 (Valid N = 171 )

1.

2.

3.

4.

Perceived Manpower Implications of 1992 (Valid N = 171)

Low strategic and institutional integration Low strategic but high institutional integration High strategic but low institutional inteGration High strategic and institutional integration

Sell and have linkages in EC

Indifferent or unsure (do not see 1992 either as threat or opportunity) See 1992 only as a threat (will result in more aggressive competition in UK) See 1992 only as an op ortunity (gives firm opportunity to expanc?business in EC) See 1992 both as a threat and as an opportunity

1.

2.

Indifferent or unsure (1992 not seen to have important man ower implications) Think 1992 wilfhave important manpower implications for company

Business Planning for 1992 (Valid N = 156)

1.

2. 3.

(Percentages in the table are calculated on number of valid cases.)

Have no business plan for 1992 (no general or s ecific business plan) gave general but not specific business plan for 1992 Have specific business plan for 1992

= 17% = 4% = 21% = 58%

= 24% = 6% = 19% = 51%

= 36%

= 14%

= 3% = 47%

= 51%

= 49%

= 14% = 60% = 2690

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measure of firms’ perception of the business implications of 1992 shows that 37 per cent of respondents were either unsure of the effects of the SEM or felt that 1992 would have no significant implications for their company, 14 per cent saw the SEM essentially as a threat, 3 per cent saw it as an opportunity, and the rest (47 per cent) saw it both as a threat and as an opportunity (see Table 1 ). Similarly, almost half (49 per cent) of the respondents assessed that the Market would have important manpower implications for the company, whilst the other 51 per cent either felt it would not, or did not know one way or the other (see Table 1).

As can be seen from Table 1,41 organizations, representing 26 per cent of the sample, said they had a specific plan for 1992, while as many as 60 per cent said that whilst they were not planning specifically for the SEM their company incorporated the implications of 1992 into the general business plan. The remaining 14 per cent had no plans at all for 1992. In this context it is important to note that the extent of planning for 1992 is related to firms’ perceptions of the SEM. Thus, firms which are either indifferent or unsure about the business implications of the SEM are significantly less likely to be doing any planning for 1992 than companies which view theSEM either as a potential threat or an opportunity. The direction of causality between these two variables is unclear, however. On the basis of the survey, in fact, it is not possible to determine whether firms which are engaging in more detailed and extensive planning for the SEM are doing so because they are more aware than other companies of the potential threats and opportunities posed by 1992, or whether their greater awareness of the business implications of the SEM is itself a function or consequence of their more detailed strategic planning.

Turning now more specifically to manpower and personnel issues, there was a fairly broad set of answers to the general open-ended question we asked at the end of the questionnaire, ’What do you consider will be the single most important issue concerning your personnel function in the Single European Market?’ (see Table 2). Sixty-seven per cent of firms responded to this question, and where respondents identified more than one issue we included them in our analysis. Most of the responses can be categorized into labour market, legal, training and management development. Labour market issues were most prominent: over half of the responses fell in this category. Twenty-one firms were concerned about the competition for professionals, graduates and skilled labour; whilst a further ten specifically singled out the acquisition and retention of skilled employees as the most important issue resulting from the SEM. A further eighteen firms mentioned labour mobility in general, eight salary and benefit differentials, and five answered with a blanket term ’recruitment’.

The next most significant area of concern was skills, training and management development, as eighteen firms mentioned the need for a higher standard of management and/or staff skills and training. Language proficiency was only singled out by five respondents. Equally unimportant were the Social Charter, and the Fifth and Vredling Directives.

Personnel Policies and Practices for Europe

In order to assess the extent to which firms had a European dimension to their personnel activities, respondents were asked a series of more structured questions about a range of specific policies and practices relating to Europe. The results are summarized in Tables 3 and 4.

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TABLE 2 'What do you consider will be the single most important issue concerning your personnel function in the Single European Market?' Frequency of responses.

1.

2.

3.

4.

5.

6.

7.

Labour Market Issues

Competition for ProfessionaIs/Graduates and Skilled Workers Labour Mobili Acquisition an Retention of Skilled Employees Salary and Benefit Differentials

E:gL::Zperations Recruitment Other

2 of Treatment of Staff across

21 18 18 8

5 5 3

Total 78

Skills, Training and Management Development

Staff Trainin and Development Higher Staniard of Management Skills Language Proficiency

11 7 5

Legal - and Other 'EC' Issues

New Employment Law Legal Issues Establishment of Worker Participation and Consultation S stem Ado ting EC &solutions Heaih and Safety Regulations New Pension Le islation Implications of &cia1 Charter Fifth Directive/Vredling Directive

Product Market

To be Aware of the Market Market Competition Product Other

Total 23

Total 21

2 1 2

Total 5

Industrial Relations

Avoidance of Strikes

Others

No Impact

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TABLE 3 Personnel Practices Linked to Europe by Types of Firm

All Firmswith Firmswho Firmswith Firmswith Firms nopresence onl Sell Linka e EC

in EC in JC with JfC Employees but no Emplo ees

(N=165) (N=40) (N=10) (N=317 (N=84) 1. Actively recruiting

ersonnel in other E C countries 9 0 0 10 13 2. Have a policy of

recruitin UK

Clan ua e other tiansnglish 21

3. Personnel Department has researched/& researchin the comparabitty of relevant professional/vocational qualifications from other EC countries 19 0

4. Career development for our personnel currently included postin s into EC countries otter than the UK 26 0

5. Personnel function monitors ay and benefit ofgred to professional and mana erial staff in

6. Personnel function makes sure that pay and benefits of professional and managerial staff are comparable with those offered in other EC countries 9 3

7. Training and development rogrammes

( j y d e d f o r : a) uropean language

(b)sales and marketing

ersonne 9 with an E 3 30 19 29

other %C countries 28 5

skills; 30 10

in EC; 26 0

11

0

10

0

30

30

23

10

23

10

26

26

27

48

43

13

40

37

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TABLE 3 (continued) All Firmswith Firmswho Firms nopresence onl Sell

in EC in JC

(c) business implications

(d)European

of the Single European Market; 29 13 50

Community Law 9 0 10 8. The personnel

function is planning to raise expertise levels in order to compete more successfully in the Sin le European Mar a et:

(a) mana’gerial employees 55 28 50

(b)en . eers 19 0 10 18 3 20

5 20 (d) secretarial and clerical 19 Figures in table are rounded percentages.

(c) tec Y nicians

Firms with Firms with

%?fE Employees but no Employees

EC

29 33

7 14

65 64 26 27 19 24 29 23

TABLE 4 Firms Planning to Develop New Policies to Meet the Requirements of EC Employmenf Proposal on Various Dimensions by Type of Firm

All Firms with Firms which Firms with Firms with Firms no Presence Only Sell Linka e EC

in EC in EC with f C Employees

(N=165) EC Health and Safety Regulations 22(33) EC Company Statute 8(13) Equal retirement rights for women and men 37(29)

Equal terms and conditions for full-time and part-time employees 36(22) New burden of proof on employers in sex discrimination cases 14(13) Draft Fifth Directive l(8) Draft Vredling Directive 2(7)

but no Employees

(N=10) (N=31) (N=84)

20(30) 45(6) 35(26) lO(20) 310) 20(11)

Figures in table are rounded percentages.Figures in brackets refer to percentage who claim their policies already met the requirements.

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As can be seen from Table 3, the recruitment policies (item 1) did not, in general, appear to have much of a European dimension. Only 9 per cent said they already actively recruited personnel from other EC countries for their UK operations, and only a further 13 per cent said they planned to start this practice within the next three years. Slightly more firms (21 per cent) said they now have a policy of recruiting UK personnel with skills in EC languages other than English (item 2) , whilst a further 21 per cent said they planned to in the next three years. As might be expected, however, practices in this area varied significantly by type of firm, with organizations which are already operating in EC countries tending to have a stronger European dimension to their policies than companies which are operating only in the UK. A similar pattern is evident also in relation to a number of the other personnel practices reported in Table 3.

Firms appeared to be doing slightly more about training and development: just over a quarter (26 per cent) reported that career development for their personnel currently can include postings in EC countries other than the UK (item 4), and a further 11 per cent claimed it would in the next three years. As many as 55 per cent of companies planned to raise the expertise levels of their managers, specifically in order to compete more successfully in the SEM (item 8). Interestingly, the figure was considerably lower for the other groups of employees we enquired about: technicians 18 per cent, and engineers, secretarial and clerical staff 19 per cent.

Figures in brackets refer to percentage who claim their policies already met the requirementsthe other groups of employees we enquired about: technicians 18 per cent, and engineers, secretarial and clerical staff 19 per cent. Respondents were given a more general question about whether they gave or were planning to give training and development programmes in a number of Europe-related areas, e.g. European language skills and European Community Laws (item 7). The results show that there is in particular some concern about language skills and the business implications of the SEM, as nearly 30 per cent of firms are already incorporating or are planning to incorporate these elements into their training and development activities. Slightly less interest is so far being accorded to sales and marketing, and even less to common practices in the EC.

As yet there seems no great concern about pay relativities (and commonality of other conditions) across Europe. Only 9 per cent said they ensure that their UK pay and benefits for professional and managerial staff are comparable to those offered in other countries (item 6). Yet a somewhat higher figure (28 per cent) reported monitoring the pay and benefits of professional and managerial staff in other EC countries (item 5).

Likely adaptations to meet EC draft directives were not especially widespread, as Table 4 shows. The three elements which appeared to be given the highest priority were equal retirement rights for men and women, provisions on health and safety, and equal terms and conditions for part-timers. Approximately half of the firms either had made or were planning to make changes to meet these requirements. It was, however, also in these areas that the highest number of firms claimed that their policies already met the requirements. It could be inferred from the results that neither the draft Fifth Company Directive nor the Vredling Directive is of much concern to the companies we researched. Also significant, in the light of the way the major British trade unions appear to be using, or are planning to use, the Social Charter in their campaigning and bargaining, there was no correlation between

71


whether a firm was unionized and its degree of concern about the draft directives. In order to get some indication of firms’ overall preparedness for the SEM, we aggregated

the answers to the various questions in Tables 3 and 4 aimed at assessing developments in personnel management specifically related to Europe, into an overall index of personnel preparedness for 1992. The ‘preparedness’ index was constructed by aggregating the scores on the 21 items listed in Tables 3 and 4 and on three additional items not shown in the tables; i.e. whether firms provided training in EC political institutions and commercial practices, and whether they provided, or were planning to provide, special relocation benefits for employees who moved between EC countries. Firms which already had a policy in place in relation to a given item were assigned a score of ‘2’ on that item; those which did not have a policy in place but said they were planning to develop one were given a score of ’1’; and those which neither had a policy, nor were planning to develop one, were assigned a score of ‘0’. The scores on the 24 items were then added to give an overall index of preparedness for 1992 ranging from zero to 48 - the higher the score the higher the preparedness. The results confirm the present relative lack of preparedness, at least as measured by OUT research instrument. The top score, achieved by only one firm, was 31, while seven firms recorded a score of 0. The mean for the sample as a whole was 11, whereas the mode was as low as 8. Whilst the range was high, there was some clustering as 40 per cent of firms were in the range 7 - 15. Nevertheless there was sufficient spread to attempt to assess what might determine the degree of preparedness. W h y are Some Firms More Prepared than Others? There are a large number of variables which are likely to affect the degree of preparedness of companies. The main variables which were examined as part of the research are shown in the model presented in Figure 1. Our basic hypothesis is that the degree of preparedness depends on two main factors: (a) companies’ desire and/or felt need to have a European dimension to their personnel policies, and (b) their organizational capacity to prepare and plan for 1992 on the personnel front. In turn, the willingness or need to prepare for 1992 can be expected to vary depending on a number of more specific factors, including the nature of companies’ current involvement in Europe and their perceptions of the business and manpower implications of the SEM. We would expect firms which are already operating in the EC, or which have extensive business linkages with other European countries, to have a stronger need to have a European dimension to their personnel policies than companies which do not operate in the EC, and consequently to exhibit a higher degree of preparedness on the personnel front. Similarly, we would expect managements who believe that the SEM will have important business and manpower implications for their company to put more effort into preparing for 1992 than managements who are indifferent or unsure about the possible effects of the SEM.

The degree of preparedness is, as we have said, also likely to vary depending on the firm’s capacity to develop and put into place new personnel policies and practices for 1992. In turn, this capacity is likely to be affected by a number of factors, including whether the company has a specific business plan for 1992, the Ievel of strategic and institutionai integration of personnel into the business, the firm’s history of innovation in personnel practices, and the extent to which the personnel department has been a major initiator on such innovation^.^ More specifically, we would expect firms which have a specific business

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plan for 1992, reflecting a greater capacity and concern for more detailed strategic planning in relation to the SEM, to have made more extensive preparations for 1992 also on the personnel front. Similarly, firms which have a higher degree of strategic and institutional integration of personnel, and which have a stronger track record of innovation in the personnel and manpower area, might also be expected to score higher on our index of preparedness.

In addition to the above variables, there are also a number of other background structural and institutional factors which might be expected to affect the degree of preparedness of companies, such as their size, type of ownership (UK- or foreign-owned), the type of industry in which they operate, and whether or not they recognize trade unions. The former two variables are included in the general model of preparedness presented in Figure 1, while the latter two are excluded from the model since, from preliminary (bivariate) analyses, they were found not to be significantly related to preparedness.

The model in Figure 1 was tested against the data by means of an analysis of variance using the various factors identified in the model as independent variables and the preparedness index as the dependent variable. The main results of this analysis are summarized, in simplified form, in Figure 2. (The full results of the analysis of variance are presented in the Appendix.) The results show that the independent variables, taken together, account for 55 per cent of the variance in preparedness, thereby lending strong overall support to our model. Of the variables in the model, however, only three were found to have a significant impact on the degree of preparedness: the extent of ‘Europeanization’ of firms, the extent of companies’ business planning for 1992, and the level of strategic integration of personnel in the organization (see Figure 2). Of the remaining variables, neither type of ownership nor company size was found to be important in accounting for variations between firms in terms of their preparedness. On the whole, UK-owned firms do not appear to be any less prepared for 1992 than foreign-owned ones. The same is true in the case of smaller firms when compared with larger companies. Similarly, the extent to which the firm has been highly innovative in its personnel practices, or the extent to which the personnel department has been a major initiator in such innovations does not, on the whole, appear to have a significant effect on the degree of preparedness. As predicted, though, there is a tendency for firms with a stronger track record of innovation in personnel management to have more of a European dimension to their personnel practices. Preparedness was also found to be linked to respondents’ perceptions of 1992, with managements who saw 1992 as having important business and manpower implications for their company tending to be generally more active in their preparations for 1992 than managements who were either indifferent or unsure about the effects of the Single Market on their organization. Judging from our data, however, the relationship between perceptions of 1992 and preparedness is not very marked (see analysis of variance table in the Appendix).

By far the most significant factor accounting for theextent to which a firm is prepared for 1992 is the current nature of its involvement in Europe. As predicted, those companies which have the strongest linkages with EC countries, including having employees there, are much more likely to have a greater European dimension to their personnel practices than firms at the opposite extreme, i.e. those which do not even sell their products in the EC. In other words, our data indicate that having a presence in Europe is decisive, suggesting that

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FIGURE 1 General Model of Preparedness for 1992

Need for Prevaredness

- European Presence - Business Im lications of SEM - Manpower kplications of SEM

Capacitv for Preparedness

- Business Planning for 1992 - Strategic Inte ration of Personnel - Institutional ktegration of Personnel - Innovativeness in Personnel - Personnel Initiative

'

Other Background Factors

- Firm Size - Type of Ownership

FIGURE 2 Summary of Analysis of Variance Results: Factors Significantly Associated with Preparedness for 1992

Independent Variables Characteristics of Hiph - Prepared Firms

European Presence Already operate/have employees in EC (significance level = 0.000

Strategic Integration of Personnel Have high level of strate ic integration (significance level = 0.02F Have specific business lan for 1992 k? Business Planning for 1992 (significance level = 0.0 )

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it is necessity, above all, that drives preparedness. That is, it is firms which are already operating in the EC and which are, therefore, most likely to need to have a European dimension to their human resource policies, which exhibit by far the highest degree of preparedness for 1992 on the personnel side.

At the same time, though, our data show that the degree of preparedness also tends to vary significantly depending on the extent to which human resource policies are incorporated into the overall strategic planning process of the organization, and on the extent to which the company‘s business planning is geared specifically to 1992. Thus, as predicted, firms which have a high level of strategic integration of personnel and which have a specific business plan for 1992 tend to score significantly higher on our index of preparedness than companies which are not specifically planning for the SEM and in which the development of human resource policies is not closely integrated into the organization’s overall business strategy (see Figure 2). In this context, it is also important to note that there is no significant relationship between preparedness and the degree of institutional integration of personnel into the organization. In other words, our data suggest that the extent of integration of personnel can indeed make a difference to the developments firms are making in the light of 1992, but that it is the level of strategic rather than of institutional integration which is important in this respect. This is not to say, however, that high levels of strategic integration invariably lead to or are associated with high levels of preparedness for 1992. This is likely to be the case only in companies which, on the business side, are specifically planning for 1992. Companies with no specific or even general business plan for the SEM are unlikely to exhibit a high level of personnel preparedness for 1992, even if their strategic planning normally extends to personnel issues, as the SEM essentially lies outside the scope of the organization’s strategic interest and orientation. Irrespective of their level of strategic integration, therefore, firms which have no business plan for 1992 can be expected to exhibit a substantially lower degree of preparedness than firms which have both a specific plan for 1992 and a high level of strategic integration.

In order to test this hypothesis, we first combined the two variables in question (i.e. strategic integration and business planning for 1992) into an overall measure of ’company orientation’ and then looked at the relationship between this new variable and our index of preparedness. The results of this analysis are presented in Table 5, showing four main types of companies, depending on the extent of their strategic integration and planning for 1992, and their mean score on the preparedness index.

The results strongly support our initial hypothesis. Purely UK-oriented companies (type A) have the lowest degree of preparedness. At the opposite extreme are type D companies which have a much stronger European orientation coupIed with a high level of strategic integration of personnel. In line with our hypothesis, these strategically integrated companies with a strong European orientation exhibit by far the highest level of personnel preparedness for 1992. Between these two extremes are what might be described as commercially-driven companies with a European orientation (type B). These are firms with a medium to high European orientation but a low level of strategic integration of personnel. They are companies with a primarily commercial and business orientation to Europe whose strategic planning for the SEM does not necessarily extend to human resource issues. Despite their interest in Europe, therefore, type B companies tend to exhibit a generally low

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TABLE 5 Mean Preparedness Score by Type of Company Orientation

Companv Orientation Mean Preparedness Score

A. Companies with no business plan for 1992 and with either high or low levels of strategic integration (N = 20) Com anies with either a general or specific business plan For 1992 but with a low level of strategic integration (N = 27) Companies with on1 a general business plan for 1992

Companies with a specific business $n for 1992 and with a high level of strategic integration (N = 33)

B.

C.

D. but with a high leve r‘ of strategic inte ation (N = 67)

Mean Preparedness Score for sample = 11.22 Difference between group mean scores significant at < 0.001 level

5.00

9.22

11 -57

15.94

level of preparedness on the personnel side. Finally, type C companies have a moderately strong European orientation coupled with a more systematic and strategic approach to the management of human resources and, consequently, tend to exhibit a higher level of preparedness than type B companies but a lower level than type D firms.

In summary, the overall picture which emerges from the survey is one of a relatively low level of overt preparation for 1992 on the personnel side. At the same time, our data suggest that the level of preparedness of companies is primarily a function of their degree of Europeanization, with firms which are already operating and conducting business in the EC tending to have a much stronger European dimension to their personnel policies and practices. Our data, however, also point to important links between preparedness and both the level of strategic integration of personnel and the companies’ overall orientation to Europe, as reflected in the extent of their business planning for 1992.

Although useful in helping us to identlfy and isolate some of the key factors which tend to affect the level of preparedness of companies, what the survey cannot necessarily do is help us locate 1992 within companies’ overall strategic concerns, as a basis for understand- ing the rationale behind their policies and actions in relation to the SEM. To do this, we need to look at the material from the more in-depth case studies. It is to the industry case studies, therefore, that we now turn.

INDUSTRY STUDIES

In addition to the survey we also conducted a further more in-depth study of two industries, namely furniture and insurance. These were selected in advance of the survey. They were picked because we wanted to include one example from manufacturing and one from the service sector, and because the relative lack of geographical fragmentation in furniture and insurance eased access problems.

The study consisted of face-to-face interviews with either senior representatives of the personnel department or where none existed with the senior manager most responsible for personnel work and/or European matters. In the furniture industry, of the 20 firms covered

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only one had a senior personnel executive, and hence the interviews were in the main with commercial managers, including Managing Directors, Export Sales Managers or General Sales Managers. In the insurance industry, 12 firms were studied, and in all cases a senior representative of the personnel function at the Group level was interviewed. In six cases these interviews were supplemented by an interview with the company’s European specialist.

The furniture industry firms were selected to cover a range of large, medium and small firms, including some niche players and both domestic and office furniture. The insurance companies were the household names ranging in size from 1,900 employees to 30,000. The interviews were semi-structured, lasted on average between 1’/2 and 2 hours, and were conducted in spring (March and May) 1989, i.e. when the survey was despatched.

In each industry one of the firms studied in the interview programme was also one of those drawn in the sample for the survey. We were thusable through these cases to compare the results directly. In both cases there was no discrepancy between the results gained from the two methods, including both the factual questions, such as employment levels, and more judgemental questions, for example, about the integration of personnel management with the wider business. Whilst the two elements of our study produced compatible, and not conflicting, results, we were able to get from the interviews a clearer idea of the underlying rationale for the kind of responses firms were making to 1992, including in many cases the ‘non-responses‘.

Furniture Cases

What the interview in particular was able to do was locate, in a much clearer way than the questionnaire, the SEM within the overall company‘s development and concerns. For example, in the furniture firm we included in both the survey and the interview study, our respondent reported that the company had no specific plan for 1992, but that its business plan incorporated its implications. Currently the firm only exported 2 per cent of its production, it had 3 per cent of the total UK market, and 20 per cent of the ‘upper’ segment in which it primarily competed. Initially, the manager stressed the constraints on exporting, the costs of transport and that UK designs are very different from those in Europe, because of differences in tastes, room sizes and the proportion of income spent on furniture (the British spend less). But he also went on to note the increasing import penetration, particularly at the bottom end of the market; significantly, though, the main threats were from the Far East and, to a lesser extent, Scandinavia, and not so much from the EC countries. But this had not as yet impacted on their firm because it was more in the quality market. The principal reason ultimately for not having expanded exports was that, despite expansion of capacity, they could fill capacity just through meeting domestic demand.

Considerable change in personnel practices and experimentation had commenced from the mid 1980s onwards,including, for example, revisions in payment systems, the introduction of profit sharing, quality circles and suggestion schemes, and the enhancing of direct communication methods. The firm was going through a programme of setting mission statements, clearer objectives, linking management remuneration more to performance, attempting to ’professionalize the management’ and ‘achieve excellence in everything’, as the personnel manager, very much echoing Peters and Waterman‘s words, put it. AGroup

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Commercial Director had been appointed at Board level the year before and one of his first tasks was to analyse and report on the competition within Europe. His appointment was not, though, specifically because of the SEM, or even inspired by it, and it would have happened anyway, as the firm was aiming for growth in the next five years. Although the interviewee reported that the company intended to take 'full advantage of 1992', the implication was that the firm was not targeting changes specifically to meet this, but rather that they were subsumed under a more general heading of adapting to become less production-orientated and more market-orientated. As such, 1992 was 'just another market force'. Moreover, the interviewee placed more emphasis on defending the UK market than any proactive initiative towards Europe. The first priority was to 'aim for excellence and efficiency' in order to defend the home market, 'to bolt the back door' as he put it. The aim was to get the company in a position where they had nothing to fear, and then if they wanted to expand, their 'excellence at home' would help them go into Europe. It was possible this might be achieved through buying a European firm. The only immediate effect of these plans and possibilities was that there had been some discussion of the language needs of management, and the extent to which language training should begin at the Board level.

The company also did not seem to feel any compulsion to plan new policies in the light of the EC draft employment proposals, with the exception of the Health and Safety regulations. Yet the respondent reported that the company was planning to raise the expertise levels of management (N.B. not others), and that management expertise was, in his view, the single most important issue concerning the SEM. It was not envisaged that any increased pan-European mobility of labour following 1992 would significantly affect the firm, and part of the reason for this was that it already was facing labour shortages in its major plant.

The company, whilst one of the largest and most sophisticated (e.g. as measured by numbers of graduates within management and employment of modern accounting and personnel methods), was typical on a number of dimensions of the other firms in the furniture industry. First, none employed personnel in Europe, or had subsidiaries or strong linkages in Europe, and hence they would all have scored low on our Europeanization measure. Second, none was really planning any changes in organizational structure, recruitment and training policies or other personnel practices specifically to meet 1992. Even in the area of management development, where considerable fresh initiatives had been, or were being, made in over half the firms with more than 100 employees, 1992 was not accorded a key role. Both the form and content of management development were reported to be largely unaffected by the prospect of the SEM.

The company was also typical of the furniture industry in that the majority of firms' current business plans did not include 1992 as a specific and major issue. Only four firms had such specific plans. When discussing this, however, it is important to take account of the planning horizons of the firms. Only six (less than one-third) could be classified as long- term planners, defined by whether they had a planning cycle of three years or more and a long-term strategic plan. Nine (just under a half) had planning cycles of between one and three years and were what might be called medium-term planners. The remaining five (one- quarter) had a very limited planning cycle, the extent of planning ranging from day-to-day to up to one year ahead. Unless the limited planners were to use the SEM as a major catalyst

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to change the organization of their planning and overall orientation, we would not expect them to have plans for 1992. And indeed this was the case. As one interviewee put it, ‘we respond to the order book and ‘we confront issues as they arise‘. Although all such ‘limited planners’ did have a vague concept of their business, the tendency when asked about their objective was to earmark survival, with few firms specifying it more precisely.

The results of the investigation into the furniture industry are then compatible with the survey, as none of the firms was sufficiently ’Europeanized’ to have a high degree of Europeanization in their personnel practices. The material from the company cases suggested that there were a variety of reasons why firms without an already strong presence in Europe were not significantly adapting their personnel policies or practices in the light of the SEM. They include the uncertainty surrounding and lack of knowledge of the SEM; the lack of anticipated capacity for expansion and managements’ satisfaction with their pros- pects in Britain, as well as the prioritization of consolidation within the British market, and the subsumption of personnel changes which might meet any demand of 1992 within a broader concept of attempting to make the organization more responsive to the market and capable of ’excellence’.

Insurance Cases

Twelve insurance firms were included in the interview part of the study. The interviews were conducted with senior representatives of personnel departments at the corporate level. In many respects the picture that emerges from the insurance cases is similar to that gained from the survey, as well as from the furniture study: the extent of overt preparation on the personnel front was small, and the amount of this was related to the extent to which firms were planning fresh business ventures in Europe. The average size of the firms, the development of the personnel function, and extent of involvement in Europe were, however, all considerably greater in the insurance than the furniture industry.

The insurance case provides, then, a good contrast to the furniture industry to help show why preparation specifically for 1992 may be relatively slight, even in companies which are more ‘Europeanized’, in the sense that we have been using the term. All the companies bar one were involved in Europe, and in most cases this involvement had been evolving from Britain’s entry into the Common Market. As one manager put it, ‘the company has been in Europe for about 20 years, so 1992 is not seen as a big issue because we are already there’; or as another senior personnel manager of a company with an ever growing network of branches in Europe, acting as local distribution centres and legally bound to the British mother company, said:

This development of business across Europe was an evolutionary process of agencies growing into branches or separate companies with large degrees of autonomy and their own boards of directors.

The SEM was thus perceived by the majority of firms within the context of their own increasing Europeanization. As one manager put it, ’such a market has been envisaged within the insurance industry ever since Britain went into the EEC,‘ although ’1992’, as such, ’might create opportunities for firms to trade in countries where British firms are currently unable to easily trade’ (e.g. France, Germany and Italy). Indeed, several of our interviewees explicitly mentioned that all the regulations were not likely to be in place until 1995, and one

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said he did not anticipate harmonized markets until the year 2000. As one manager noted, As things currently stand there is little or no hope of a real SEM being in place by the end of 1992. There are fundamental differences in terms of fiscal policy, law, tax (I could go on and on) between the UK and the rest of Europe.

More generally, there appeared to be considerable uncertainty surrounding the precise development of the SEM. Several managers referred to the uncertainty about the timing of developments, and in so doing stressed that 1992 was not a date but a process. As one manager said,

1992 is a concept and not a date, if and when 1992 happens it certainly won’t be in 1992.

Or as another put it, ‘1992 in itself is not crucial, it is a transitional period ... a date in a continuous process of change although it is recognized that 1992 cannot be ignored’. Others expressed doubts or uncertainties about the extent of integration there could ever be throughout Europe, for example, ’the cultural and legal differences within each European country mean that in the near future there will still be twelve separate markets in the European Community’.

All the companies had looked at the issue of 1992 in some depth. Two had considered it as early as 1985, whilst most of the sample started this process between 1987 and 1988. One firm actually mentioned this in its annual report:

We have set up a small but highly qualified research team whose main task will be to identify the opportunities which will be open to us for expansion into Europe once we have freedom of financial services through the EC.

Various methods had been used to assess developments, including special committees or working parties to report on how the company should respond to 1992; making one person responsible for assessing 1992; relying on the European division to assess developments; or, as in two cases when the companies were subsidiaries, relying on the holding company‘s top management’s 1992 planning. No firm appeared as a consequence of such developments to have elevated 1992 to a major issue in its own right.

At one extreme was the company that in 1988 charged a Board member with responsibil- ity for an investigation into 1992, and following this, as its personnel manager told us, ’a strategic decision was made to do nothing‘. At the other extreme was the company which already saw itself as European, and was keenly promoting this image to both its own personnel and customers. Less extreme, but nevertheless approaching this position, were the companies where the management did perceive 1992 as having an important bearing on their futures, and envisaged acquiring a company or companies as the fastest and easiest access to European markets. In one of these such acquisitions were viewed as part of a long- term strategy for becoming a European company, whilst in the other they were seen in more defensive terms, ‘to get in fast before they get you’, as the interviewee put it.

A more intermediate and less extreme position, and one not dissimilar to several other firms in the sample, was that of the manager who earlier we reported as describing 1992 as a concept, and who told us:

Although the company is looking at the issues surrounding 1992 it is nothing special in the sense that other issues are more important at the moment. It is just another external issue to contend with. ... It is not part of the strategic planning process and it probably will never be.

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Nevertheless, it should be added the firm was, again in the personnel manager’s words, ’interested in any openings that may arise in Europe in the future but it is waiting for them to materialize’. The company had already expanded into Spain and had become a wholly- owned subsidiary of a French firm in 1987. In one firm, the respondent described his management’s reaction to 1992 as hostile and critical because it saw the SEM as representing more bureaucracy and also because it might mean top management having to spend all its time fending off hostile mergers.

The possibility of take-overs and mergers with European companies was of particular concern to some managers. For one manager the key question surrounding 1992 was ‘who owns whom in 1992’. Some companies were actively looking for a possible firm to acquire; and indeed one such company having set up a working party on 1992 of ten people, had to reduce its number to help handle the secrecy problem as its main focus had become the acquisition question. Another manager described his company as extremely vulnerable to a merger as it had a low capitalization. One firm noted that there was a paradox for them, because by entering Europe through an acquisition it might make them more vulnerable to being taken over. Another manager of a company he described as a cautious, long-term orientated business commented thus on the merger situation:

X is a long-term, stable and secure business with little incentive to get involved in the drama and excitement of City politics.

Whilst all firms had plans to increase the international dimension of their business, for several, at least 50 per cent, this was not confined to Europe, as the USA and the Far East also figured strongly in their plans, or were already important to their businesses. In at least two cases, the markets and the company’s developments in those countries were deemed more important to the future of the business than were those in Europe, particularly as the markets there were seen to be growing at a faster rate than was anticipated for those in Europe. Moreover, the fear of direct competition from European companies was rather weak, and managers appeared to fear more competition from either Japanese firms or from other financial institutions, notably banks.

There was, however, some recognition that the SEM would increase competition within the UK. This is borne out by the survey where 100 per cent of the insurance firms in the sample (six in all) claimed that the SEM would result in more aggressive competition in their UK markets. Nevertheless, this appeared from our interviews not to be something which was generating too much concern.

Several of the interviewees actually said their firm had nothing to fear from increased competition, some adding that the market in the UK was unattractive to new entrants as it was static and saturated. This, plus the uncertainty surrounding the evolution of the SEM and the inability to predict future mergers or acquisitions, meant that 1992 was not being treated as a major issue in its own right. Again, this is reflected in our survey results, where once more there was an absolute uniformity of responses, as all six insurance firms covered reported not having a specific plan for 1992, though all also claimed to have incorporated its implications into their overall business plan.

In the survey there was less homogeneity on the perceptions of whether the SEM would have important manpower or personnel implications. Only three of the respondents said it

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would, whilst of the remainder, two said it definitely would not and the other was uncertain as to its consequences. In no firm in the interview study was there any explicit planning for human resources in the light of 1992. Any action or planning being undertaken on the SEM largely reflected business needs. No independent initiatives specifically targeted at Euro- pean developments were being pursued by the personnel departments.

There was little being done in anticipation of the Social Charter or perceived language problems, though several firms claimed to monitor the Charter through press coverage of it, subscriptions to relevant publications and attendance at conferences ‘in order to anticipate ways in which corporate personnel policy may be affected’, as one senior personnel analyst put it. Two firms in the interview study had taken on a few more language students in their graduate intake in 1988; but this did not reflect any changed selection criteria or explicit concern to increase the language capability of management in the light of 1992. Only one firm had significant numbers of staff undertaking individual language tuition, significantly they were from a wide range of areas - Marketing, Legal, Real Estate and Insurance. Only one company reported any anxiety about an increasing competitive labour market and having to match the pay and conditions of their European counterparts. As in the survey, where only one firm claimed to monitor the terms and benefits offered to managerial and professional staff in EC countries, there appeared to be little formal assessment of European personnel practices.

There was then a lack of specific concern within personnel departments with the SEM. Apart from reflecting the uncertainty surrounding the SEM and relative significance being accorded to 1992 as a date, this also reflects certain features of personnel management within the sampled companies.

First, personnel issues were perceived to be very much downstream and treated as ’third order’ within the strategic process, to use Purcell’s (1989) terminology. As one manager said, ‘as ever we view HRM issues as critical but they by necessity must take second place to marketing and business decisions’. Given perceived continuation of internal barriers beyond 1992, he thought it was ’entirely logical’, in fact, for the business-led personnel functions to take but tentative steps in preparation for 1992. ‘The business and marketing decisions have to be resolved first.’ As another manager said, ’we would not be involved until something happened at a higher level‘.

Second, the personnel functions in the firms studied appeared fairly reactive. This did not mean that they never initiated new developments, but rather that these developments were themselves largely in response to identifiable problems of the business which visibly needed tackling. Significantly, though, in both the survey and the cases, in over 50 per cent of the firms who had introduced customer/client service training the initiative had come from outside the personnel function.

Third, the personnel function appeared to have a low status relative to other functions. Without any prompting and in answering questions not specifically on this matter several managers, for example, referred to the lack of status of personnel and to the fact that there was no personnel specialist on the Board. Also, while labour costs are a very high proportion of total costs, personnel management did not have any representation in the overall budgeting co-ordination committee, nor were they represented in the firms interviewed in any of the committees or working parties specifically set up to examine 1992. In firms where

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personnel management seemed to be a relatively important function there were exceptional circumstances. In one case, the unions were strong and this, as the respondent put it, gave the personnel function its importance 'because line managers are not allowed to deal with unions, instead line managers have to seek advice from personnel'. In another case, an extremely decentralized company, personnel were one of the few centralized activities with virtually all personnel issues originating there, all managerial appointments being made at the centre, and standards for such matters as recruitment and training programmes being set centrally.

Enhancing the status and role of the personnel function was, indeed, a major concern in some companies. For example, in one case the number of personnel specialists at the corporate level was being increased, and a more long-term proactive approach was being fostered with manpower planning being attempted for the first time. In such cases, these and other issues were seen as far more pressing than 1992. Of particular importance was the perceived need for more flexibility, for management development and for broadening the skills base and orientation of staff at all levels. For example, one company reported how they had initiated a customer-care programme, using video presentations and team exer- cises, aimed at building a total quality control approach and improving staff awareness of 'service' and quality problems.

Also significant was the demographic problem. At least one firm had already experi- enced labour market pressures in the late 1980s, and reacted to them in a variety of ways, including relocating some head office functions to areas of high unemployment, increasing substitution of labour by technology, investigating the possibilities of home working and doing more sophisticated market research on salaries. Several managers explicitly argued that demographic and labour market problems were far more of a potential worry to them than 1992, and that a number of new initiatives were either underway or being considered in the light of them. Recruitment, training and working hours policies were also all being reviewed in over half the companies. In part, what lay behind these and other changes was the latest stage in the development of information te~hnology.~ Again, to use Purcell's (1989) terms, personnel was adapting to 'second-order' strategy development.

All managers perceived that the changes their companies were making in response to factors other than the SEM could help in any developments consequent upon it. They were treating 1992 as one part of the environment to which they were adapting, and were conceptualizing the problem facing their companies in fairly general terms, namely to make the organization more flexible to cope with a rapidly changing environment. As one manager put it,

1992 is one change among many that will affect us in the 1990s. Fundamental change will occur, particularly in terms of decentralizing businesses, and also achieving central strategic direction. We are involved in restructuring the business so 1992 is not a central factor. Integrating new acquisitions is of more immediate concern.

Even those firms for whom 1992 appeared to have some significance were not, as we have said, planning personnel initiatives on any widespread scale in the light of this. The managers in such organizations perceived that their businesses would remain decentralized at the operational level, and local personnel would dominate the recruitment in European operations. Indeed, this was similar to current UK practice where those compa-

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nies which were divisionalized treated each division as a separate business, as in the case, for example, of one of the firms we interviewed which was part of a large conglomerate which had acquired both it and another business in the 1970s and deliberately continued to treat each separately.

Attention to European personnel matters was then primarily focused on the development of managers, some of whom would, it was thought, have to be more international. If there are implications of the SEM for personnel management, the assumption appears to be that these only apply to a small minority of employees, those either in or destined to be in senior managerial and/or specialist positions.

There was, in the insurance companies studied, little or no anticipation of any significant increase in cross-national mobility and training of management within Europe. Currently in one firm such mobility was largely confined to managers being sent to developing countries, or the Middle East. Only one company, even among those for whom Europe was increasingly important, anticipated some European managers; and it had already held strategic European management conferences to discuss common issues. Also, the holding company of one of our respondent‘s companies had appointed an overseas human resource manager. In this company Management Development was seen as the key area for further development, and it was anticipated that the new appointee would identify potential individuals to work in the European context. Finally, another company had begun to support financially and recruit students from a European business school in Oxford, as well as allow managers to get involved in its examining and governance.

Some concern was expressed (albeit by only two companies) that their top ‘star’ managers had marketable skills and that they might be ripe for poaching by rival European firms in the run-in to 1992. Another manager, one we reported earlier as seeing the SEM largely as an illusion, seemed less concerned because ’probably only three or four individuals in this company would have any European marketable value’. Whilst another manager, perhaps giving a more general assessment, emphasized that mobility and poaching would be largely confined to top management:

Training is limited by specialisms, there is little generalistic MOA-type management which might be poached ... there is little poachable management potential in the British insurance sector outside top management.

The same manager, having noted that international movement of managers in his company was rare, also suggested that it will, in fact, become less common as autonomous business units become more independent and European holdings are expected to operate more as separate profit centres.

CONCLUSION

In practice, then, the results of our study show that (a) for many companies 1992 is not, as yet, a critical issue, and (b) there may be good reasons from the point of view of the company for this to be the case. Many of the issues identified in the personnel guides for 1992 and by our ‘experts’ were not key issues identified by our respondents. In both the survey and interview study, for example, there appeared no immediate concern about having to adjust pay and conditions to make them comparable with those in Europe. Even in unionized firms, there was little or no concern about most of the issues of the Social Charter. The two

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areas, health and safety and equal terms and conditions for part-timers, which firms had made or were planning to make changes in to meet new EC requirements, were significantly also those where the highest number of firms claimed that they already had policies in place. There seems little fear, therefore, of having to follow standardized practices, with the prospect of European-wide standardization of terms and conditions appearing remote.

In so far as the SEM is significant to companies, the likelihood of increased product and labour market pressures is far more important to personnel managers than the Social Charter or any pan-European legislation. It would appear that managements which are most active are those which already are taking steps to overcome problems generated from within the UK. For example, firms may be developing practices to overcome skill shortages and improve management development, regardless of Europe. Fifty-five per cent of the companies in our survey, however, planned to raise the expertise levels of their managers specifically in order to compete more successfully in the SEM, and labour market issues were the single most important issue posed by the SEM for over half of our respondents.

On the business side, though, only 24 per cent of the surveyed firms had a specific business plan for 1992, and an additional 60 per cent claimed to have incorporated the implications of the SEM into their general business plan. Of course, as the insurance cases illustrate, for some 1992 may be a concern at the strategic business level even though it is not so prominent in human resource terms. Thus, unlike most of the furniture firms we studied who tended to be oriented almost exclusively to the UK market, many of the insurance companies showed a moderate to high level of interest in Europe and in 1992. However, they also tended to exhibit a relatively low level of strategic integration of personnel into their business planning. In other words, these firms tend to correspond to what in the survey study we described as commercially driven European-oriented organizations (see type B companies in Table 5) . Our analysis suggests that in companies of this type, which account for 18 per cent of the firms in our sample, human resource policies, including policies relating to 1992, tend to be business-led, in the sense of being linked to developments in products, markets and locations and of taking their cue from the commercial needs of the organization. Although business-driven, personnel in these commercially oriented companies tends very much to be a downstream activity with human resource issues tending, on the whole, to be treated as ’third order’ within the strategic process.

Although business-led, this type of approach to personnel issues should be distinguished from what proponents of human resource management would argue is a more proactive, strategic approach to the management of human resources. This more strategic type of approach is also business-driven. In this case, however, personnel is not treated as a downstream activity. On the contrary, human resource issues are closely integrated into the strategic planning process so that personnel policies are, from the very beginning, designed to support and enhance the company’s business and competitive strategy, and form an integral part of the organization’s overall strategic response to its environment. Within this category, it may then be important to distinguish between companies which, on the business side, engage in detailed and systematic long-term planning, and those which have a shorter planning horizon and whose strategic planning process is less detailed and elaborate. In terms of our data, this distinction broadly corresponds to the one we made in the survey between companies which have a high level of strategic integration of personnel

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and which, on the business side, are also specifically planning for 1992, and those which have a high level of strategic integration but only have a general plan for 1992. The former only make up a minority of the firms in our sample (22 per cent) but, as expected, were found to have the highest level of preparedness for 1992, while the latter, although more numerous (46 per cent of the sample), tend to be generally less well prepared on the personnel side.

More generally, our study suggests that there is a need to separate the ‘business-led’ issue from that of the strategic management of human resources. At the same time, it also suggests that, when looking at the way in which organizations deal with human resource issues, the conventional distinction between traditional, piecemeal personnel management on the one hand, and strategic, proactive human resource management on the other, is too restrictive and, therefore, is of limited empirical and analytical value. This simple dichot- omy tends to ignore important dimensions of the problem and, consequently, needs to be replaced by a more detailed and differentiated conceptualization and analysis of the way in which organizations approach the management of human resources.

With respect to the more specific issue of 1992, the overall conclusion is that it is necessity above all else that is leading some firms to add a European dimension to their personnel practices. Thus, it is firms already operating in Europe which are the ones most active in developing policies aimed at the SEM, but of these it is the ones which have specific business plans for 1992 and a high level of strategic, although not necessarily of institutional, integration of personnel, that are doing the most.

The implication of our study is that personnel policies are indeed, for the most part, business-led, although more often than not they are developed downstream from corporate strategy and are treated as ’third order’ within the strategic planning process. Firms which have extended their operations in Europe, and which are developing specific strategies to compete more effectively in the SEM, are explicitly, albeit a little slowly, adding the needed European dimension to their manpower practices. The extent of personnel preparedness for 1992, seemingly still low on some counts, is then apparently a rational incremental response to an evolving situation, reflecting the extent of Europeanization of firms and the relative importance which they assign to Europe in their overall business and competitive strategy.

Seen from a wider business and human resource management perspective, however, the general lack of preparedness for 1992 appears less positive, reflecting what would seem to be a mixture of complacency and insularity in firms’ attitudes towards Europe and to the SEM. Above all, this outlook is reflected in the tendency for a majority of companies to continue to concentrate primarily on their UK markets while, at best, expressing only a moderate interest in Europe. From a commercial and business point of view, such an approach, it could be argued, is potentially short-sighted, particularly since it often appears to be based on a limited knowledge of the possible implications of the SEM and of what potential European competitors are planning in relation to 1992. Thus, whilst what we have described on the human resource side may be rational in terms of the firms’ current commercial concerns and business priorities, it may be short-sighted and reflect a lack of strategic thinking in relation to Europe and 1992.

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NOTES

1. This research was supported by a grant from the Nuffield Foundation, to whom we express our appreciation. We are very grateful for help with the design and execution of the data collection from a number of the 1988-9 personnel management stream of the LSE’s MSc. (Industrial Relations and Personnel Management). In particular M. Farrell, K. Phillipson, J. Orbell for help with the survey; H. Deal, G. Laird, S. Langham, R. Levine who helped with the furniture survey and, finally, I. Kirkpatrick, J. Gallagher and C. Reynolds who helped with the insurance survey. Finally, we would like to thank David Guest, Keith Sisson and an anonymous reviewer for valuable comments on an earlier draft of the paper.

10,000 people, was lower than for smaller companies. Consequently the results of the present analysis should be treated as indicative only since our sample tends to be biased towards smaller companies.

3. At one extreme are type 1 firms which exhibit a low level of both strategic and institutional integration of personnel. These firms, which account for 17per cent of the sample, tend to be ones with relatively small or poorly developed personnel functions which are not formally represented at Board level and where human resource issues tend to be ap proached on a more ad hoc basis by senior management rather than being closely integrated into the overall strategy of the company. At the opposite extreme are what might be thought of as prototypical human resource management companies (type 4) which have high levels of both strategic and institutional integration. These are firms which tend to have well established and possibly quite influential personnel functions with direct representation at Board level. In thesecompanies human resource issues tend to be approached in a more planned and systematic fashion at the top of the organization leading to closer coordination and integration between the firm’s personnel policies and its overall business strategy. Type 4 companies account for 58 per cent of the firms in our sample. Between these two extremes are a number of companies (21 per cent) which exhibit high levels of strategic integration but low levels of institutional integra tion (type 3). These tend, on the whole, to be smaller firms which, like type 1 companies, have relatively small or poorly developed personnel functions, but where senior management tend to take an active interest and lead in the development of human resource policies, thereby ensuring a closer integration of personnel issues into the company’s overall busi ness planning. Finally, the sample also includes a small proportion (4 per cent) of firms which have a high level of institutional but a low level of strategic integration (type 2). These tend to be larger and possibly quite bureaucratic organizations, which have well developed but a t the same time relatively weak or isolated personnel departments. A1 though personnel in these companies is formally represented at Board level, its influence over strategic decision-making may tend to be limited and the organization’s overall approach to human resources tends to remain fragmented and to lack a clear strategic direction. More generally, the results suggest that high levels of institutional integration tend to facilitate but do not necessarily ensure high levels of strategic integration of personnel policy. At the same time they also indicate that strategic integration may exist in the absence of institutional integration, thereby suggesting that, in the personnel and

2 . The response rate among larger firms, and particularly those employing more than

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human resource area, institutional integration is neither a necessary nor a sufficient con dition for the achievement of strategic integration.

4. Respondents were asked whether over the past three years their company had (a) intro duced any substantial policy changes in 16 separate areas related to the management of human resources, ranging from changes in recruitment practices to the introduction of new areas of labour subcontracting, and (b) whether the changes had been initiated by the personnel function. The answers on these 16 items were then combined to form (a) an overall index of the company’s innovativeness in the area of personnel management, and (b) a personnel department ‘initiative’ index designed to measure the extent to which innovation in the company was primarily initiated by the department. (Range on both indices = 0 to 16.)

problems of recruitment and also increasing the power and forcefulness of the relevant trade union, thus creating industrial relations problems.

5. In at least one case, for example, skill shortages in data processing were presenting

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mation Services.

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APPENDIX

Analysis of Variance: Factors Associated with Preparedness for I992

Independent Variables Sum of Squares _F Significance -

European Presence 1299 17.1 .ooo Strategic Integration of Personnel 139 5.5 .02

Business Planning for 1992 149 2.9 .05

Manpower Implications of SEM 88 3.5 NS

Business Implications of SEM 140 2.8 NS

Size 18 0.7 NS

Innovativeness in Personnel 17 0.7 NS

Ownership 9 0.3 NS

Personnel Initiative 2 0.1 NS

Institutional Integration of Personnel 1 0.1 NS

Multiple R2 = 0.55; sig. = 0.000

NS = Not statistically significant (> .05 level)

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Preparing For 1992? Business-Led Versus Strategic Human Resource Management

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