CONVERGENCE AND DIVERGENCE

An issue facing all international firms is the extent to which their HR policies should either ‘converge’ worldwide to be basically the same in each location, or ‘diverge’ to be differentiated in response to local requirements. There is a natural tendency for managerial traditions in the parent company to shape the nature of key decisions, but there are strong arguments for giving as much local autonomy as possible in order to ensure that local requirements are sufficiently taken into account.


As noted by Adler and Ghader (1990), organizations have to follow very different HRM policies and practices according to the relevant stage of international corporate evolution: domestic, international, multinational and global. Harris and Brewster (1999) refer to this as ‘the global/local dilemma’, the issue being the extent to which operating units across the world are to be differentiated and at the same time integrated, controlled and coordinated. They suggest that the alternative strategies are the global approach in which the company’s culture predominates and HRM is centralized and relatively standardized (an ‘ethnocentric’ policy), or the decentralized approach in which HRM responsibility is devolved to subsidiaries. They state that the factors affecting choice are:


● the extent to which there are well-defined local norms;

● the degree to which an operating unit is embedded in the local environment;

● the strength of the flow of resources – finance, information and people – between the parent and the subsidiary;

● the orientation of the parent to control;

● the nature of the industry – the extent to which it is primarily a domestic industry at local level;

● the specific organizational competences including HRM that are critical for achieving competitive advantage in a global environment.


Brewster (2004) believes that convergence may be increasing as a result of the power of the markets, the importance of cost, quality and productivity pressures, the emergence of transaction cost economies and the development of like-minded international cadres. The widespread practice of benchmarking ‘best practice’ may have contributed to convergence.

However, Brewster considers that European firms at least are so locked into their respective national institutional settings that no common model is likely to emerge in the foreseeable future. Since HR systems reflect national institutional contexts and cultures, they do not respond readily to the imperatives of technology or the market. Managers in each country operate within a national institutional context and share a set of cultural assumptions. Neither institutions nor cultures change quickly and rarely in ways that are the same as other countries. As Hofstede (1980) points out, it follows that managers in one country behave in a way that is noticeably different from managers in other countries. 

Brewster (2004) concludes on the basis of his research that there is some convergence in Europe in the general direction of developments (directional convergence) such as the decreasing size of the HR function, increases in training and development and the increasing provision of information about strategy and finances. But there is little evidence of final convergence in the sense of companies becoming more alike in the way in which they manage their human resources.