Management Models in Latin America: Stakeholder Theory and CSR from a New Humanism Perspective

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1 Management Models in Latin America: Stakeholder Theory and CSR from a New Humanism Perspective Marta M. Elvira, IESE Business School (Spain) Anabella Davila, EGADE Business School Tecnologico de Monterrey, Campus Monterrey (Mexico) ProDoc Program -- December 2011

2 Agenda Context: A bit on prior research regarding Management in Latin America Theoretical Frameworks to understand HRM Toward a Stakeholder Analysis of HRM and Leadership in Latin America Stakeholder Management & New Humanism

3 In the beginning Books (w/ Anabella Davila co-editor) Managing Human Resources in Latin America: An Agenda for International Leaders Best Human Resource Management Practices in Latin America. Routledge, Inc. Oxford & New York. In print, 2008

4 Latin America A bit on Business Context Strategic role in the global market, including so-called emergent economies: Prosperity period Critical for US and EU companies Conflict between MNCs and local governments Missing mediation and negotiation procedures Translatinas: Internationalization of local companies What can we learn about management in competitive companies in this dificult environment?

5 Searching for a Latin American Management Model? Limited existing research (except cross-cultural) Identified network on local researchers Main assumptions: LA management model developed through a unique historical process shaping economic, political, and societal structure. LA organizations are institutionally embedded in their historical tradition even though globalization forces have deeply changed the region and affected its population. LA organizations are characterized by a hybrid management model.

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8 Early Focus on Two Dimensions Power Distance Extent to which members of an organization expect and accept that power is distributed unequally Individualism Hi PD: greater comfort with power differences (order of inequality exists) Extent to which people expect that individuals are supposed to care for themselves and be emotionally independent of groups. Low I: There is a WE in society that gives us comfort and security.

9 Key Themes in L.A. Organizations Respect for Authority Benevolent Paternalism: Leadership style where a supervisor has the personal obligation to protect his/her subordinates and, often, safeguard the personal needs of workers and their families. Conflict and Confrontation: Criticisms that could be considered offensive to the superior as well as to other colleagues avoided (considered denigration). Social Distance: Value for hierarchy and symbols of social differentiation. Egalitarian Sense: Behaviors and symbols that reduce power distance.

10 Key Thems in Organizations (ctd.) Social Relationships Personal Contact: Interactions and communications face to face with a high emotional content. Group Loyalty: Loyalty to the in-group, within the overall community.

11 Table 1.1 Human Resource Practices according to Work Values in Latin America. Respect for Authority Benevolent Paternalism Conflict and Confrontation Social Distance Egalitarian Sense Staffing and Promotion Hiring a worker s family members or close friends People that contribute to a good labor climate Glass ceiling based on physical appareance and social contacts Training and Development Modern practices are rejected or modified Social mobility Rewards and Recognitions Family protection and welfare Rejection of performance appraisals Symbols of status for top executives Work Systems Communication Labor Relationships Could be interpreted as exploitation systems for workers Shared responsibility with team members Difficulty in authority delegation Reduces power distance Vertical and hierarchical communication Avoid confrontation of ideas and actions Centralization of information Concern for employee s work and personal problems Immediate rejection of any kind of abuse Courtesy and political treatment Social Relationships Personal Contact Nuclear and primary groups (in-group) Starting participation practices and responses in MNCs Rejection of individual recognition Face to face relationships Emotional ties Personal commitment and friendship Group Loyalty Organizational Sense of Managerial Concern for Davila, A & Elvira, M. In Culture and Human Resource Management in Latin America. Chapter 1, Managing Human Resources in Latin America: An Agenda for International Leaders (2005). M. Elvira & A. Davila (Eds). Oxford, NY: Routledge.

12 Contextual & Social Contract SHRM Brewster (1999) contextual paradigm: Societies, governments, culture, labor markets and other institutions affect SHRM practices, besides firms HRM implementation in LA differs depending on people and circumstances Kochan (1999): institutions that underlie social contracts are contextually key for HRM. Shifts analysis from organization to employment relations Shifts HR role from organizational HR policy to social policy related to workers/labor.

13 What s the Social Contract? Mutual expectations and obligations that employees, employers, and members of society in general hold for work and employment relationships (Kochan, 1999, p. 201). Implications: mutual dependency: employers employees; societies - employers - employees. HRM s role is bridge among various stakeholders expectations Affects psychological contracts (Rousseau, 1995) which rely on individual views of employment relationships

14 A Social Network Enriched Approach Informal mechanisms provide for workers relational needs that lubricate functioning of formal bureaucracies Social reinforcement: loyalty. Vertically Integrated social network affect staffing promotions, etc. Horizontal social networks scarcely studied yet should help understand the importance of family and personal relationships for business (conviviality?)

15 What are the elements of a new social contract and whose responsibility is it to establish these new arrangements? (Chilton and Orlando, 1996 p. 24) Place employee at the center of employment relationship. Include the environmental and contextual elements surrounding an organization. Managerial professional as proactive liaison among local, state and national agents including firms.

16 Initial Conclusion Firms cannot succeed in coping with employment problems by universally applying HR practices within firms; it should apply regionally appropriate practices. But still unclear: Is there then a Best approach to managing LA? This question guided next steps in our research.

17 Continuing the study Mgmt in Articles (with A. Davila) Latin America Psychological Contracts and Performance Management in México. International Journal of Manpower, 2007 Book Chapters (besides those in our books) Performance Management Systems in México. In A. Varma, P.S. Budhwar, and A. DeNisi (Eds.). Global Performance Management HRM Model in Latin America. In C. Brewster and W. Mayrhofer (Eds.). Handbook of Research in Comparative Human Resource Management. Edward Elgar Publishing. 2012

18 Further Research Motivation Opportunity to strengthen a collaborative research network Present and understand best HRM practices used by both MNCs in the region and by outstanding local firms Highlight the growth and importance of management concepts that emerge from case study analysis in LA

19 So, can we speak of HRM Best Practices in Latin America? The debate: whether exemplary or best practices can transfer successfully across national borders Cultural factors as boundary conditions for effective transfer: limited explanatory power of why modern management theories do not work in different regions hybridism: outcome vs. process

20 Hybrid Model of Management? HR influenced by foreign practices in the United States or Europe, including: practices that contribute to labor equity -- such as, for example, systems for hiring and evaluating performance by competency and extent of advanced training; styles of corporate leadership that are more consensus oriented, and practices oriented toward a strategy of social responsibility focused on the major themes of global problems -- for example, environmental protection. Identification of salient and silent stakeholders

21 Field strategy... In a nutshell Gaining access by approaching companies ranked as Best by various organizations, though rankings are questionable (biased selection of firms, by design): Usually proud of their recognition and willing to cooperate Building relationships with their executives as a way of both gaining access and understanding the research setting.

22 Grupo San Nicolás (El Salvador Leguizamon, Ickis & Ogliastri, 2009) Hacienda Gavilanes, Indupalma, Hocol y Cerromatoso (Colombia- Andonova Gutierrez & Avella,2009; Jimenez &Davila, 2009) Aracruz Celulose (Brazil- Osland & Osland, 2009), Conflictive environment, violence Problem: interaction with and integration in the local and regional community Local and national institutions do not protect property rights or do not provide protection and security: political and labor conflicts Innovative practices to improve competitiveness and contribute simultaneously to secure a more peaceful environment: Cooperatives Commitment to employees amid civil war and earthquake

23 Organizations as Social Institutions: in the social contract Some strengths: a serious and effective commitment to the individual and his or her job; a willingness to provide social benefits to employees via the company, substituting( or complementing) government support; a transformation of companies into centers for community strengthening; and a willingness to support community growth. Some weak points / opportunities: developing HR policies reflecting the economic deregulation of the region; creating alliances with educational and technological institutions for the training of personnel; cooperating with governmental institutions to deal with turbulent conditions; increasing corporate investment in HR-related information technology. Elvira, The State of Human Resources in Latin America.

24 Typical management theories bypass social realities and the historical development of regional contexts, from the reality of many Latin America s business organizations. Cultural hybridism (process) Combining context and structural conditions for successful practices Recognize the local incorporation of universal practices and include specific practices, creating a hybrid model that works Stakeholder management "Best Companies" include multiple stakeholders in their practices New humanism Encompassing social and psychological contracts Centered on the person as part of the community balances the individual and economic perspectives of organizations.

25 Hybrid management styles HR in LA welcomes foreign influence and covers mainly three aspects: Practices that contribute to equity in the workplace: selection and hiring systems, performance evaluation with competencybased models, and high-caliber training. Leadership styles: riskier for senior management; more democratic within the company Adoption corporate social responsibility (CSR) strategies focused on the major global issues such as environmental conservation

26 Stakeholder Management Stakeholder theory: impact of HRM systems on an organization s multiple stakeholders stakeholders might be specific to particular societies How effective HRM systems meet diverse stakeholders demands in Latin America: employees, unions, other community members

27 Stakeholder Theory Stakeholder theory: describes organizations and the various interests of internal or external corporate constituencies alternative to the traditional input-output model (Donaldson & Preston, 1995) or to the shareholder model (Kaler, 2009) focuses on connections between an organization and salient individuals or groups of stakeholders (Clarkson, 1995) interprets the purpose of a corporation regarding its moral obligations (Donaldson & Preston, 1995; Freeman, 1984): CSR

28 Two Key Issues 1. Who key stakeholders are, and 2. How organizations interact with them An additional concern 3. The role of a stake s actual content or claim over the firm.

29 1- Who the stakeholders are A stakeholder in an organization is any group or individual who can affect or is affected by the achievement of the organization s objectives (Freeman, 1984, p. 46).

30 Stakeholder salient attributes: power, legitimacy or urgency (Mitchell, Agle & Wood, 1997) influencing firm executives values, perceptions, and actions (Agle, Mitchell & Sonnenfeld, 1999) Stakeholder classifications: managerial perspective ---- those that might influence the organization legal perspective ---- contractual requirements (Fassin, 2009)

31 2- How organizations interact with stakeholders Hierarchical relationship Organizations play the central role Stakeholders could also play a central role building alliances with other stakeholders (Fransen & Kolk, 2007) Network structure (Rowley, 1997) Contributing principle (Kaler, 2009)

32 International View of Stakeholder Theory Contextual paradigm (Brewster, 1999) Social contract (Kochan, 1999) Lack resources to represent their interests (Tavis, 1994) HRM in Latin America works best when including practices that benefit these stakeholders (Elvira and Davila, 2005)

33 In Latin America Silent stakeholders: May lack legitimate claim, power or urgent needs (Osland &Osland, 2009) Often emerge during economic /political crises What both stakeholders and organizations care about in Latin America (Andonova & Zuleta, 2009) Property rights Ownership-related privileges Interact on a social contract infused by trust (or lack of it)

34 HRM Policies Investment in employees salary and benefits levels as well as education, training, and development Efforts to operate within a cooperative labor-relations framework Community-centered CSR practices

35 Investment in Employees HR practices that are centered around individuals: Unilever Mexico & Zanzini Móveis (Brazil) Investing in employee education through training and development, assuring satisfaction and quality of life through compensation according to employees purchasing power, and expanding the boundaries of this satisfaction through salaries that cover employees family basic food needs

36 Cooperative Labor Relations FEMSA and bottling partners in Colombia: respect the rights of employees maintain relationships with multiple unions collective bargaining agreements covering wages, benefits and working conditions provide emergency cell phones, transportation to and from work, secure housing, and other measures to protect employees

37 Stakeholder Analysis of Employees HRM in Latin America primary stakeholders Salient but also silent stakeholders that are unique to the region s context The relationship organizationstakeholder is based on: trust and respect for the social contract horizontal character of social inclusion

38 Current status Incorporating views on leadership (from sustainable perspective). From heroic focus toward community and stakholder relationships. Article conditionally accepted for the Journal of World Business. Trying to work out the specifics of the new humanism

39 The question is how future historians will judge our generation s success in coping with the most critical employment problems of our time. Kochan (1999). Beyond myopia: Human resources and the changing social contract.

40 Thank you! Reactions? Questions? Conversation?

41 Aracruz Celulose (Brazil), Grupo San Nicolás (El Salvador, Centro America) Hacienda Gavilanes, Indupalma, Hocol y Cerromatoso (Colombia) Conflictive environment, violence Problem: interaction with and integration in the local and regional community HR theory lacks mechanisms for social, political and economic environment present in Latin America: Economic and political instability The corporation as a social institution The value of each individual within society Local and national institutions do not protect property rights or do not provide protection and security: political and labor conflicts Innovative practices to improve competitiveness and contribute simultaneously to secure a more peaceful environment: Cooperative organizations Commitment to employees amid civil war and earthquake

42 ACHIEVING CORPORATE SOCIAL RESPONSIBILITY THROUGH HRM : THE CASE OF LATIN AMERICA Prof. Marta M. Elvira, IESE Business School, Universidad De Navarra (Spain) Prof. Anabella Dávila, Tecnológico De Monterrey-Campus Monterrey (México)

43 Esquema Entorno Económico en América Latina Empresas mejores en América Latina: Casos ejemplares Sus prácticas en la dirección del talento Marcos explicativos Lecciones para el rol de las empresas en el desarrollo sostenible

44 Entorno Económico en América Latina Rol estratégico para la inversión extranjera en mercado global: CEPAL 2006: Tendencia ascendente pero la proporción de FDI global baja Ciclo de bonanza : Crecimiento 1.9% en 2009 Conflicto entre multinacionales y gobiernos locales Faltan procedimientos de mediación y negociación Translatinas: Internacionalización de empresas locales Qué aprendemos de la gestión de talento y RSC en empresas competitivas en este ámbito difícil?

45 Best Companies en América Latina Nos ayudan a entender: Estrategias de RRHH en entornos complejos Multinacionales que gestionan con éxito el talento El papel de RRHH en la estrategia de negocios La relación entre las prácticas de recursos humanos, RSC, y el desarrollo del país

46 Aracruz Celulose (Brazil), Grupo San Nicolás (El Salvador, Centro America) Hacienda Gavilanes, Indupalma, Hocol y Cerromatoso (Colombia) Entorno conflictivo, de violencia Instituciones locales y nacionales no protegen los derechos de propiedad o no proveen protección y seguridad: conflictos de empleo y políticos Problema: interacción e integración en la comunidad local y regional. Las teorías de recursos humanos carecen de factores sociales, políticos y económicos presentes en el entorno de America Latina: Inestabilidad económica y política La empresa como institución social El valor de cada individuo dentro de la sociedad Prácticas innovadoras para mejorar la competitividad y contribuir simultáneamente a un entorno más pacifico: Organización cooperativa Compromiso con los empleados a pesar de guerra civil y terremoto

47 Modelo de management híbrido RRHH en LA recibe influencia del extranjero y abarca sobre todo tres aspectos: Prácticas que contribuyen a la equidad laboral: v.g. sistemas de contratación y evaluación de desempeño por competencias, así como entrenamiento de alto calibre. Estilos de liderazgo más arriesgados en la alta dirección y democráticos dentro de la empresa. Adopción de prácticas orientadas a una estrategia de responsabilidad social enfocada a los grandes temas de los problemas mundiales, como por ejemplo, conservación del medio ambiente. Sin embargo, las MNCs en América Latina se perciben como arraigadas en la región por conveniencia económica más que por compromiso para el desarrollo.

48 Telefónica (España) Novo Nordisk (Dinamarca) Telefónica: Profesionalización de RRHH en empresa nacional transformada en multinacional Selección de ejecutivos : Centralización inicial con programa de expatriados tradicional Evolución hacia internacionalizar los equipos directivos, impulsando el desarrollo de talento local Finalmente, localizó las operaciones internacionales de la empresa Universidad corporativa para generar ventaja competitiva Novo Nordisk: Incorporación de prácticas derivadas de una cultura danesa en México Éxito basado en fomentar primero una cultura con valores de apertura y participación, antes de introducir prácticas danesas

49 Successfully establishing access for research in Latin American Iberian countries Marta M. Elvira IESE Business School (Spain) Anabella Dávila Tec de Monterrey (Mexico) PDW Notes from the Field Academy of Management Meetings Montreal, 2010

50 Research Site Mexican, global IT consulting company Leader in the nearshore outsourcing services: In 2006, ranked second-largest IT consulting firm in Latin America, & largest in Mexico Specializes in nearshore outsourcing, value-added consulting, and emerging technologies It offers systems integration, custom applications developments, IT consulting, software deployment & support solutions Headquartered in Miami (FL), firm has operations in the US, Europe, Latin America, Africa, and the Middle East with more than 3,000 employees Largest operations site is Northern Mexico (>900 employees) our research site

51 Performance Appraisal Process Phase 1 Phase 2 Phase 3 Superior appraises subordinate: objectives/behaviors Online Plenary Session: Divisional Directors/ Managers/Project Leaders/HR Appraisal Ranking Superior informs subordinate evaluations results and gives feedback Subordinate reviews his/her appraisal HR processes info and proposes rewards/ recognition Subordinate accepts and confirms HR information has been received.

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