Best human resource management practices in Latin America

Citation

Davila, A. and Elvira, M.M. (2007), "Best human resource management practices in Latin America", International Journal of Manpower, Vol. 28 No. 5. https://doi.org/10.1108/ijm.2007.01628eaa.001

Best human resource management practices in Latin America

About the Guest Editors

Anabella Davila (PhD The Pennsylvania State University) is Professor of Organizational Theory and Business History at the Graduate School of Business Administration and Leadership at Tecnologico de Monterrey (Mexico). Her main research interests include: culture and management practices in latin american organizations, social networks, and structure and power in organizations. Her work examines the cultural and social logic that governs Latin American business organizations. Her work has been presented in International Conferences in North America, Europe, and Latin America. She has co-edited two books, has several chapter contributions, and articles in international journals. Since, 1999, she has been a member of the Mexico's National Researchers System.

Marta Elvira (PhD University of California, Berkeley) is Academic Dean at Lexington College. Prior to this position she was an Associate Professor of Organizational Behavior at the University of California, Irvine. Besides, human resource practices and incentives in organizations, her research interest is on social inequality. Her work examines the political and economic processes involved in designing organizational reward structures, and the joint effects of incentive pay and promotion system on employee earnings and performance.

Best human resource management practices in Latin America

Latin America's business environment is in continuous flux and presents multiple challenges to economic development. Two current trends are key to understanding this market. First, economic growth reflects an upward tendency. The Economic Commission for Latin America and the Caribbean (ECLAC) reported a 4.0 percent average rate of growth in the region for the last five years (AmericaEconomia.com, 2005). Though insufficient to solve all the region's financial problems, this growth provides incentives for development, attracting foreign direct investment as well as supporting the local business community. Second, politically the region has betted for democracy. Although some countries have taken a conservative position with respect to economic opening – e.g. Brazil, Mexico, Argentina and Colombia – and still others have established socialist governments that pursue state control of key industries –, e.g. Bolivia, Venezuela and Ecuador, all governments have been elected fairly democratically according to international observers.

These economic and political trends shape business firms' ability to compete globally. Thus, organizational researchers and practitioners have become increasingly interested in learning what constitutes “best” management practices in Latin American firms.

According to ECLAC, the region should now advance through economic integration among countries (AmericaEconomia.com, 2005). The existence of regional commercial blocks has led to changes on how private and state-owned companies integrate operations across borders. Latin American organizations are pursuing a regional international strategy by investing in countries close to their headquarters. These firms use their in-depth knowledge of the region's intricate cultural environment to forge alliances with international partners, obtain access to the latest technology, and increase production with low costs (Robles, 2000). To compete with global firms, Latin American organizations are using what we call a hybrid management model. That is, organizations introduce and adopt modern management practices imported from developed countries, but use traditional cultural approaches in their implementation (Davila and Elvira, 2005).

A number of multinational companies are also successful and as the 2004 America Economia's report of Best Latin American employers shows: MNCs occupied almost all the top 25 places. Similarly, MNCs led the best employers list in Mexico's Expansion. Thus, on the one hand, it seems that there is a great potential for world-wide operations management by local talent. On the other hand, it appears that MNCs have been able to capitalize on social capital to generate a competitive advantage not only for recruiting and retaining employees but also for generating commitment and a harmonious organizational climate. Understanding how firms do so is the theme of this special issue.

Our goal as guest editors is to present research that illuminates how culture and other social institutions affect human resources management (HRM) practices in Latin America. International research privileges culture as a theoretical lens to study HRM. However, besides culture's impact on work values other social factors affect organizational behavior (Rousseau and Schalk, 2000). Culture infuses meaning into the institutions created and developed by societies, which in turn govern organizational practices.

Prior research has laid the groundwork for developing theory, providing an analysis of Latin American HRM regionally and for selected countries, and highlighted the historical, economic, cultural, and institutional environment in which HR practices develop (Elvira and Davila, 2005b)[1]. A key consideration is Latin America's collectivistic culture, where the family and community as well as governments and firms are crucial market institutions. Understanding and solving HR challenges requires using a broad strategic HRM (SHRM) framework that considers the various stakeholders and institutions involved in employment relations, i.e. the social contract (Kochan, 1999). Thus, an underlying objective for this special issue was to develop HRM theories that encompass these institutions.

The studies featured in this special issue explore how successful companies manage human resources in Latin America. Because published research is scarce to date, the articles provide empirical data to advance theoretical models of international HRM. Addressing these questions empirically requires an exploratory research design. Thus, this special issue presents seven in-depth case studies of Latin American firms, examining best practices with an eye to identifying the social contract.

Why publish a special issue on Latin American HRM when special issues seem under increasing academic scrutiny (Conlon et al., 2006; Mowday, 2006; Priem, 2006)? Most special issues are born to enhance breadth and novelty in the research published, creating and disseminating knowledge (Olk and Griffith, 2004). Our edited issue is no exception. A byproduct of this goal is to improve author inclusiveness for Latin American researchers (Conlon et al., 2006). Further, Mowday (2006) suggests that special issues work best when the topic domain is defined broadly, as is the case here. We think this issue will showcase work from a niche research area yet central to international management researchers and thus to readers of the International Journal of Manpower, ultimately increasing knowledge and generating interest among other researchers.

Besides, introducing new research in new areas, we trust readers will find all the studies genuinely interesting, complex, and current, useful for research and instruction as well as for managerial practice application. Each of the articles in this special issue addresses novel questions. They are all grounded in well-established theory, yet further our conceptual knowledge and provide rich data from a large variety of firms operating in different countries and using varied HR practices. The cases studied are representative of key HRM issues in different types of organizations, even if by design they cannot be statistically representative. While failures are also examined, the focus is on learning what works and why, as it relates to cultural models of management and work.

Although the companies studied, the concepts and HR practices observed, and the management domain represent considerable diversity, the conclusions converge in key conceptual themes and implications for management practice. Specifically, the articles point to a hybrid management style, where both global and local practices are idiosyncratically combined to adapt the global practices to the Latin American environment (Davila and Elvira, 2005). In addition, HR plays a role in bridging the interest of multiple stakeholders involved in employment contracts (Schuler and Jackson, 2005). Beyond employment, the social contract in a business environment characterized by economic instability and even violence implies that HR managers end developing skills, knowledge and attitudes different from those typical of routine HR practices in stable environments (Elvira and Davila, 2005b). Along this vein, the articles start exploring themes heretofore little examined in Latin America, such as risk attitudes and corresponding safety practices as well as e-HRM issues.

We bring together a team of international and local researchers interested in deepening the understanding of HRM practices in Latin America. In doing so, we have experienced what Dutton and Duckerick (2006) call relational nature of research that is interesting. By “relational practice, we mean the skilled ways of interrelating that create connections between people” (2006, p. 21). This special issue has facilitated interaction with various research partners at different stages of the project including the origin of some conceptual ideas (Academy of Management presentations), networks of colleagues' bridged by the co-editors and elicited by co-authors, access to data across countries and presentation across continents for publication in an international forum such is the International Journal of Manpower.

Throughout all case studies, we observe that HR indeed plays an increasingly strategic role in successful firms in handling contextual and stakeholder demands for firms operating in Latin America. The first two articles focus on the business environment in Colombia and Chile, and examine firms' relationships with the environment and outside stakeholders to ensure trusting work relationships that benefit employees and permit firms' survival. The next set of articles turns to within-firm analysis of psychological contracts at play in change processes, performance evaluation systems, and innovative practices such as safety and e-HRM across various countries. The special issue closes with an article on Aracruz Cellulose, a complex case that brings research themes together, from the large social stakeholders (such as environmentally conscious Norwegian investors, global NGOs and native Latin American communities), to the internal concern for employees all at play within this firm based in Brazil.

In the first article, Veneta Andonova and Hernando Zuleta study how weak enforceability of property rights affects human resource practices for a firm operating in a hostile business environment. “The effect of legal enforcement on human resources practices: a case study in rural Colombia,” proposes that in fragile environments, private firms are the main force protecting entrepreneurial investments. Firms compensate for what central governments, which tend to be weak in weak institutional settings, cannot provide in terms of stability and guarantee of property rights. Their in-depth study of Hacienda Gavilanes, a Colombian farm, illustrates the effect of ownership and other incentives on the security and enforceability of property rights within a situation of continuous violence and where government enforcement institutions are absent. Specifically, the authors consider the impact of ownership sharing, profit sharing, information sharing, and participation in decision making and psychological ownership, on the business climate. Their detailed account of how human resources practices in this Colombian farm contribute to stabilize the manageable environment for the firm resembles a “natural experiment” setting. Thus, the case provides valuable lessons beyond Latin America for other developing countries with similarly fragile governments and economic environments.

The second article, “Latent premises of labor contracts: paternalism and productivity, two cases from the banking industry in Chile,” focuses on how modern HR practices fit different models of paternalistic management. Paternalism is widespread in Latin America influencing HR policies and management practices. Dario Rodriguez and Rene Rios compare two Chilean banks and conclude that different forms of paternalism exist. These forms relate to different labor contracts which are based on distinct premises about expectations from workers and organizations. Yet the authors find evidence that as long as HRM policies and practices are consistent with the cultural premises underling specific labor contracts, productivity follows. Because paternalism exists in Latin American organizations, acknowledging its impact on employment contracts should help organizations behave more realistically towards the workforce.

In the third article, Betania Tanure and Roberto Gonzalez-Duarte focus on “Managing people in radical change (M&As): the adoption of intrinsically consistent HRM strategies in Brazilian companies.” The authors look at when and how HRM becomes a more active agent and plays a strategic role in mergers and acquisitions (M&As). Their case study follows two separate acquisitions by ABN AMRO. This Dutch bank first acquired one of the largest Brazilian banks and, later, the Brazilian subsidiary of an Italian bank. In both acquisitions, the successful integration of the acquired bank was related to consistency among three factors: the reason behind acquisition; the integration strategy, and the HRM policies adopted. HRM became a strategic partner in change through involvement in both the negotiation period and the integration phase. Further, in both acquisitions HR played a key role preserving the value of the acquired bank, i.e. in the transfer of strategic capabilities and organizational learning. Thus, HR managers in this case took an active and strategic role in M&As by explicitly contributing to the organization's performance. Furthermore, success in the change process was based on the consistency between CEO discourse and change processes. These findings support similar conclusions regarding consistency between leadership values and people management in the first article's Chilean case.

After these three studies on firm-level HR strategies, the next three articles focus on specific HR practices, including performance management, e-HRM, and risk-safety management. In “Psychological contracts and performance management in Mexico” we look at how contextual market changes have required adaptations in job and performance management. We use the conceptual lens of psychological contracts to illuminate how HR practices can contribute to the effectiveness of employment relationship management. Our exploratory research seeks to understand how managers and employees perceive their rights and responsibilities toward employers in the context of performance appraisal. These perceptions depend on the Mexican social contract in which the employment relationship is embedded. The results are based on focus group interviews in three different firms. We find that engagement in performance evaluation and improvement depends on how well the appraisal system imported from other cultures matches workers' understanding of their psychological contract, which is based on cultural expectations. Interestingly, feedback interviews emerge as the social space where managers and subordinates arrange exchanges and commitments by developing emotional engagements. These findings illustrate the interaction between structural and mental models of employment, as individuals struggle to manage imported bureaucratic systems that contradict their cultural work values. At a more macro level, the interviews highlighted the link between a firm's performance management and the country's financial situation: frequently the outcomes of performance evaluation follow the country's economy. Researchers as well as practitioners will benefit from considering performance management in the larger social and market context in which firms operate.

The next article addresses an important though understudied dimension of culture: risk attitudes and their corresponding safety practices in high-risk jobs. In “Risk, safety, and culture in Brazil and Argentina: the case of TransInc Corporation,” Lorena R. Perez-Floriano and Jorge A. Gonzalez explore the behaviors and attitudes related to safety and find important individual, institutional, and cultural differences that relate to risk and safety in organizations. The case describes a multinational company that has successfully implemented a risk management system in South America. Findings suggest that cultural factors shape how people construe the meaning of danger and risk on the job, challenging the assumption that safety-training methods can be applied across borders ignoring cultural differences. Further, the authors challenge the premise that institutional and cultural factors in one urban area can be applied to another urban area even within a specific country. These findings could help HR managers outline steps to adapt training practices, especially in countries as large and diverse as exist in South America.

In the sixth article, Olivas-Lujan, Ramirez and Zapata-Cantu focus on how technology and specifically e-HRM practices can help firms' strategies seeking a competitive advantage. Their case study examines how four of the most internationally competitive Mexican firms are implementing their e-HRM strategy, and considers local idiosyncrasies for each case. Building on the emerging literature on e-HRM, the authors find growing acceptance and adaptation of e-HRM in Mexico, and describe firms' self-selected “best practices” in the use of information and communication HR technologies. Administrative tasks such as approving pay raises, sorting out training, and checking holiday entitlements, can be delegated from HR management to employees themselves – or their supervisors – using technology-mediated processes. The authors do not find much convergence in the application of e-HRM across firms. But they find that the importance of social relationships, respect for authority, and a changing psychological contract shines through the various companies' implementation of e-HRM.

This special issue closes with a case that is still at the center of a controversy evolving as the journal goes to print. In “Aracruz Cellulose: best practices icon but still at risk,” Asbjorn Osland and Joyce Osland study an award-winning company known for best practices in management and sustainability that is nevertheless being challenged by a contentious land dispute with indigenous communities and numerous stakeholders. Guided by literature on sustainability, stakeholder theory, and land tenure difficulties in Latin America, this case uses secondary data sources. Global cultures intersect in a complex situation involving Aracruz Celulose S.A., a Brazilian pulp company founded by a Norwegian, which owns legal title to land claimed by indigenous communities. The firm needs to respond to additional stakeholders with contradictory perspectives: local and international non-governmental organizations, various Brazilian and Norwegian Government entities, the World Bank, and investors. As in the first case presented in this special issue, property rights appear key to sustaining entrepreneurial and business development in Latin America. Aracruz runs the risk of losing land and assets, reputation, and investors. In the end, extensive use of “best HRM practices” by firms such as Aracruz does not guarantee protection from risks related to larger societal dilemmas and the involvement of major interests from global and seemingly unrelated stakeholders. We surmise that firms in other developing countries might face similar situations, and thus could benefit from this stakeholder approach, using political skills to bring parties together to find a viable solution at a society-wide level. A resulting important question for further research is to what extent individual firms are responsible for widespread problems that involve profound social causes such as severe economic inequality.

The conclusions of these articles contribute to understanding “best practice” and stress the need to contextualize HRM research. Specifically, HR management effectiveness appears intimately embedded in the employment relationships and related social contract proper of Latin America. Therefore, social and structural factors such as the financial instability of economies in transition, property rights issues, and labor contract standards, determine the level of trust and resulting effectiveness of HR practices.

Research in this special issue provides empirical evidence that theory and practice addressing HR practices should ponder the profound humanism underlying Latin American social contracts. This person-centered view of HR management faces increasing pressure from the performance-centered view predominant in global companies as reflected in imported practices. The articles that follow present novel, in-depth case studies of how successful Latin American companies address these apparent paradoxes in their HR practices. Given the role of social factors, SHRM could contribute by taking more than a financial stance dealing instead with multiple stakeholders. A narrow understanding of HR focused exclusively on business competitiveness and financial results is of limited effectiveness. HR research and the HR field can embrace a more encompassing perspective working with all the parties involved in the employment relationship and the institutions that govern it. HR would then become a central strategic player not just at the firm level but at the political and social level. Instead, organizational theory focusing on the social contract would help HR by considering social level problems and the employment relationship (Clegg, 2006; Kochan, 1999). In the context of Latin America, it seems that HR cannot succeed in coping with those employment problems by universally applying HR practices within firms; it must work to apply culturally appropriate practices and to reduce the societal challenges faced by organizations.

Anabella Davila and Marta M ElviraGuest Editors

Note1.Though each Latin American country has its idiosyncratic culture, the commonalities in most countries' history lead to a number of culturally shared characteristics. This is quite unique, we think, among the world's regions.