The Role of Strategic Groups in Understanding Strategic Human Resource Management
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com/0048-3486. htm The role of strategic groups in understanding strategic human resource management Judie M. Gannon Oxford School of Hospitality Management, Faculty of Business, Oxford Brookes University, Oxford, UK The role of strategic groups 513 Liz Doherty Business School, Shef? eld Hallam University, Shef? eld, UK, and Angela Roper School of Hospitality & Tourism Management, University of Surrey, Guildford, UK Abstract
Purpose – This article aims to explore how understanding the challenges faced by companies’ attempts to create competitive advantage through their human resources and HRM practices can be enhanced by insights into the concept of strategic groups within industries. Based within the international hotel industry, this study identi? es how strategic groups emerge in the analysis of HRM practices and approaches. It sheds light on the value of strategic groups as a way of readdressing the focus on ? rm and industry level analyses.
Design/methodology/approach – Senior human resource executives and their teams across eight international hotel companies (IHCs) were interviewed in corporate and regional headquarters, with observations and the collection of company documentation complementing the interviews. Findings – The ? ndings demonstrate that strategic groups emerge from analysis of the HRM practices and strategies used to develop hotel general managers (HGMs) as strategic human resources in the international hotel industry. The value of understanding industry structures and dynamics and intermediary levels of analysis are apparent where speci? industries place occupational constraints on their managerial resources and limit the range of strategies and expansion modes companies can adopt. Research limitations/implications – This study indicates that further research on strategic groups will enhance the theoretical understanding of strategic human resource management and speci? cally the forces that act to constrain the achievement of competitive advantage through human resources. A limitation of this study is the dependence on the human resource divisions’ perspectives on realising international expansion ambitions in the hotel industry.
Practical implications – This study has implications for companies’ engagement with their executives’ perceptions of opportunities and threats, and suggests companies will struggle to achieve competitive advantage where such perceptions are consistent with their competitors. Originality/value – Developments in strategic human resource management have relied on the conceptual and theoretical developments in strategic management, however, an understanding of the impact of strategic groups and their shaping of SHRM has not been previously explored.
Keywords Strategic groups, Strategic human resources, Strategic human resource management, International human resource management, Hotel and catering industry, International business Paper type Research paper The authors would like to express their thanks to the organisations who participated in the research and the reviewers and Editors who provided insightful and excellent feedback on early drafts. Personnel Review Vol. 41 No. 4, 2012 pp.
513-546 q Emerald Group Publishing Limited 0048-3486 DOI 10. 1108/00483481211229401 PR 41,4 14 Introduction Most developments in strategic human resource management (SHRM) and international human resource management (IHRM) have drawn heavily on the strategic management literature (Becker and Huselid, 2006; Schuler and Jackson, 2007). Some of the earliest models associated with SHRM (such as Fombrun et al. , 1984; Beer et al. , 1984; Hendry and Pettigrew, 1986 and Guest’s (1989) model) provide insights into how leading HRM thinkers have approached the strategic dimensions of HRM.
Such insights have focused on the links or ? between strategy and HRM, environmental analyses as the basis for strategic management informing (and in some cases informed by) HRM, and borrowing concepts and theories with their origins in the strategic management literature, such as organisational and product life cycles, and competitive strategies (Schuler and Jackson, 1987; Sanz-Valle et al. , 1999; Miles and Snow, 1984). Despite the advances made in both areas there has been minimal consideration of the ways that strategic groups, not only industries and ? rms, in? ence HRM strategies and practices in the pursuit of competitive advantage (Boxall, 2003). Strategic group research identi? es how groups of ? rms engage in similar strategies in order to compete effectively within industries and shape industry structure and competition. Panagiotou (2006 p.
440) de? nes strategic groups as: [. . . ] those groups of ? rms within an industry, which are characterised by similarities in their structure and competitive beliefs as well as their tendency to follow similar strategies along key strategic dimensions in a speci? operating environment. The performance differences between strategic groups are the focus for much of this research, but mobility between groups and the structural dimensions of industries have also received attention (Ferguson et al.
, 2000; Leask and Parker, 2006; Porter, 1980; Reger and Huff, 1993). As such strategic group research has developed as a central research theme in strategic management. One of the most notable aspects of strategic groups research is that it highlights and reinforces the importance of particular industry contexts.
This is an important consideration for the development of SHRM research as there is now growing recognition of the value of industry and sector speci? c SHRM research where the nuances and structural dimensions of industries are emphasized (Boselie et al. , 2009; Paauwe, 2008; Paauwe and Boselie, 2008; Tyson and Parry, 2008).
The aim of this study is to explore how the strategic group concept can inform SHRM approaches. Speci? cally it sets out to identify how strategic groups can help us understand why companies struggle to achieve sustainable competitive advantage.
This aim is achieved by initially investigating the strategic group literature and evaluating where it adds insight and value to the SHRM approaches literature. Thereafter the ? ndings from an in-depth empirical study of the HRM practices and strategies deployed across a global industry are used to highlight the role of strategic groups in constraining companies’ capacities to differentiate their SHRM approaches and practices. Accordingly this article also satis? s the demand for more sector led SHRM research (Paauwe, 2008; Paauwe and Boselie, 2008; Tyson and Parry, 2008). This article unfolds as follows.
Initially an evaluation of the strategic group literature is provided followed by an analysis of the contemporary debates in SHRM (Boxall and Purcell, 2000, 2003, 2008; Boselie et al. , 2002, 2003). The limitations of the SHRM literature are re? ected on in light of the strategic group literature and the potential contribution this ? eld towards a more nuanced understanding of SIHRM approaches and practices.
The research design for the study is subsequently outlined alongside an overview of the context of the research, the global hotel sector. The qualitative data analysis is then considered with the HRM practices and approaches which are found to be common across the whole industry, similar across particular strategic groups and distinctive to speci? c companies explored sequentially.
The implications of these various layers of HRM practices and strategies, and speci? cally the strategic group dimension, are then discussed in relation to the extant research. Of speci? c note is the way such ? dings reinforce the challenges companies face when pursuing competitive advantage through human resources and how the national, industry and strategic group pressures for assimilation limit opportunities to develop idiosyncratic and integrated HRM interventions and strategic human resources. Literature review: building bridges between strategic groups and SHRM approaches Strategic groups The strategic group concept emerged within strategic management as an attempt to better understand the competitive backdrop and demands faced by companies operating in an industry (McGee et al. 1995; Porter, 1980; Short et al. , 2007).
Strategic management analysis has typically taken place at the level of the ? rm and the industry, and has omitted the interface of ? rm and industry competitor behaviour. Originating from the broader ? eld of industrial organization economics in the 1970s, strategic groups were identi? ed as clusters of companies within industries (Porter, 1980). Such divisions arise because industries are not collections of heterogeneous companies but subsets of ? ms separated by mobility barriers limiting movement between groups (Ferguson et al. , 2000; McGee et al. , 1995). Strategic group research has facilitated a better understanding of how group structure can shape rivalry and ultimately performance, as well as group identities and reputations.
It has also illustrated how strategic group reputations serve to reinforce mobility barriers to other industry competitors (Dranove et al. , 1998; Ferguson et al. , 2000; Leask and Parker, 2006; Peteraf and Shanley, 1997).
The analysis of the business environment as an objective reality, achieved classically through cluster or factor analysis of company data (Reger and Huff, 1993), drives most investigations in this area. However, Panagiotou (2006, p.
441) summarises the problems of this prescriptive approach as leading to: [. . . ] a preoccupation by managers that strategic management is all about prescribing strategies for positioning a business in a particular industry structure, having ? rst carried out a thorough economic analysis based on the implicit notion that industry structures are relatively stable and easily identi? ble. The role of strategic groups 515 More recently a cognitive approach to strategic group research has emerged based on the argument that managers’ simpli? cation of their complex competitive environments and perceptions of similarities and differences among their rivals will shape strategic decision-making (Panagiotou, 2006, 2007; Reger and Huff, 1993).
Such managerial insights into competitive groupings offer clearer conceptions of the way decision-makers perceive their own organisations and their rivals and therefore how these determine and implement strategies.
These arguments suggest that strategists’ PR 41,4 516 understand (and approach) their competitive environments in similar ways, and are related to the ideas of institutional assimilation and isomorphism (DiMaggio and Powell, 1983; Powell and DiMaggio, 1991). Therefore, the capacity of ? rms to pursue distinctive practices for competitive advantage may be limited by constraints, such as organisational inertia and forms of isomorphism (Reger and Huff, 1993; Boon et al. , 2009). Strategic groups are then another important aspect of the structural dimensions which foster this organisational sluggishness.
These are critical insights where the pursuit of competitive advantage through human resources, HRM practices and strategies has gained substantial support in recent years (Becker and Huselid, 2006; Boxall, 2003). However, this quest for distinctive or idiosyncratic HRM practices and strategies to attain competitive advantage needs to be resolved against the pressures to conform and achieve social legitimacy within sectors. The next section evaluates the contemporary SHRM approaches and highlights where the strategic group literature contributes to their enhanced understanding.
The strategic HRM approaches Three main SHRM approaches have emerged as the keystone for understanding and achieving sustained corporate success through human resources (Purcell, 1999, 2001; Boxall and Purcell, 2003, 2008). While the opportunities for simultaneously enacting these approaches are now well-rehearsed it is useful to revisit them brie? y as part of developing the theoretical connection with the strategic group literature.
The best practice SHRM approach encourages companies to adopt sophisticated or “high performance” practices across their human resources in order to achieve competitive advantage (Pfeffer, 1998; Huselid, 1995).
Considerable criticism of the best practice SHRM approach occurs in relation to what actually represents “sophisticated” HRM practices and the empirical basis on which these practices are suggested (Marchington and Grugulis, 2000; Boxall and Purcell, 2003, 2008). Furthermore, the conventional best practice SHRM approach suggests that these superior HRM practices should be adopted regardless of different industrial and national boundaries (Marchington and Grugulis, 2000; Boxall and Purcell, 2003, 2008).
Recent evaluations of the “best practice” SHRM approach have emerged recognising that within industries there may be certain HRM practices and approaches which are obligatory (Boxall and Purcell, 2003, 2008). The “table stake” concept suggests there are established (HRM) practices adopted by all businesses in an industry which serve to legitimise their position in that industry.
This concept has thus been recognised as an adaptation of the “best practice” SHRM approach (Boon et al. , 2009; Bjorkman, 2006; Boxall and Purcell, 2003; Paauwe and Boselie, 2003).
The “table stake” version of best practice SHRM approach is based on the institutional assimilation literature where organisations struggle to distinguish themselves from their industry associates while simultaneously achieving legitimacy (institutional ? t) in their sector (DiMaggio and Powell, 1983; Powell and DiMaggio, 1991; Oliver, 1997). Isomorphism is the process which constrains organisations’ attempts to differentiate themselves within the same institutional context (DiMaggio and Powell, 1983).
Isomorphism emerges in two broad variations; competitive isomorphism where market pressures and performance targets are emphasised and institutional isomorphism where institutional factors associated with socio-cultural, technological and economic parameters are highlighted. The adoption of best practice SHRM approach across an international setting has also been roundly critiqued (Brewster, 1999, 2006; Sparrow et al.
, 2004) due to the ingrained national institutional and cultural conventions, which are seen to regulate the value of various high performance HRM practices in other countries (Brewster, 1991, 2006; Sorge, 2004).
However, this does not mean that across a country all industries have the same HRM practices. Much of the IHRM literature could be seen as disproportionately focused on the parent and host country cultures and systems in light of the evidence on SHRM approaches and practices in hospitals, local government and hotels (Boselie et al. , 2002, 2003). Such studies indicate that institutional and competitive isomorphisms differ across industry contexts creating distinct table stake HRM practices in different industries within the same country (Boon et al. , 2009; DiMaggio and Powell, 1983).
Furthermore, such evidence recognizes that national institutional dimensions may have less of an impact than competitive institutional dimensions on some industries and their resulting people management practices. This level of industry interplay on the best practice approach is valuable but in light of the strategic group insights it is clear that companies do not compete directly with every other company in their industry. Instead they are likely to have particularly close rivals whose practices, products, managers, innovations and initiatives will be of speci? interest to them (Panagiotou, 2006; Peteraf and Shanley, 1997). As such there may be another layer of consistency and similarity in HRM practices due to the close rivalry of strategic groups, in addition to those identi? ed by the “table stake” version of the best practice SHRM approach across an industry. The “best-? t” SHRM approach suggests a ? rm’s market position and strategies drive and shape its HRM policies and practices. Within the “best ? t” SHRM approach a range of theories have emerged from those that more simplistically link speci? strategy choices to HRM practices and policies (Delery and Doty, 1996; Miles and Snow, 1984; Schuler and Jackson, 1987) to more complex models (Fombrun et al.
, 1984; Hendry and Pettigrew, 1986) which envision a range of corporate characteristics (strategies, positions, portfolio characteristics) determining people management practices. Within the IHRM area, much of the research has also focused on the in? uential nature of national differences as well as strategic models (Perlmutter, 1969; Bartlett and Ghoshal, 1989, 2000; Edwards et al. , 1996).
For example: the models of international orientation (Perlmutter, 1969; Heenan and Perlmutter, 1979); product life-cycle phases (Adler and Ghadar, 1990); and international responsiveness versus integration (Bartlett and Ghoshal, 1989, 2000; Edwards et al. , 1996) are all based on strategic choice arguments derived from the strategic management ? eld. The main thrust of the strategic dimension to IHRM has revolved around the question of whether HRM practices are determined by corporate or business strategies and customised or standardised across national boundaries with many authors providing detailed analyses of the contingency of speci? factors (Boselie et al.
, 2002, 2003; Coller and Marginson, 1998; Easterby-Smith et al. , 1995; Ferner, 1994, 1997; Ferner and Quintanilla, 1998; Hannon et al. , 1995; Newman and Nollen, 1996; Rosenzweig and Nohria, 1994; Rosenzweig, 2006; Thompson et al. , 1998). The weaknesses of the “best ? t” SHRM approach are its distorted attention on the external context as determining strategies and practices based on market positioning, cultural and institutional factors; and its inability to secure competitive advantage where several companies within the same sector pursue similar strategies and market
The role of strategic groups 517 PR 41,4 518 positions (Boxall and Purcell, 2003, 2008; Kamoche, 2001; Wright and Snell, 1998).
Such criticisms are similar to those voiced by contemporary strategic management researchers on the objective and prescriptive versions of strategic management being the primary in? uence on strategic thinking and decision-making at the expense of managers’ and executives perceptions of positions and rivalries (Reger and Huff, 1993).
Indeed Panagiotou’s (2006, 2007) research on executives’ perceptions, as opposed to the economic analysis of the competitive terrains, competitor strategies and industry dynamics shaping strategic groups, highlights that executives whose ? rms belong to the same strategic groups react to events and market factors in similar ways. This suggests, that not only are companies constrained by the suggested strategies and market positions they develop, but that there are limitations to the options they can take to distinguish themselves because of the added level of similarity strategic groups create.
Finally, the resource based view (RBV) SHRM approach has been proffered as an alternative to the best practice and best-? t approaches due its internal focus based on creating competitive advantage through the leverage of valuable, rare, inimitable, non-substitutable and rent achieving (human) resources (Morris et al. , 2006; Wright et al.
, 1994, 2004). The empirical research supporting the RBV SHRM approach (Boxall and Steeneveld, 1999; Leonard-Barton, 1995; Marchington et al. , 2003) clearly highlights that human resources can ful? l the criteria of resources which deliver competitive advantage.
The most valuable human resources are those identi? ed as the “strategic human resources” or “rainmakers” who ful? l the RBV criteria of adding exponential supplementary value to companies. By developing HRM practices, which are idiosyncratic and interdependent, the RBV approach argues that companies can capitalise on their proprietary knowledge and transfer it creatively and effectively across its workforce. Several authors (Bonache and Fernandez, 1999; Harvey et al.
, 1999, 2000; Taylor et al. , 1996) have adopted this approach and identi? d that capitalising on internal resources to achieve competitive advantage is quite different from the best-? t SHRM approach because it surmounts the external views of the best-? t approach. This view is neatly outlined in the frustrations of Cappelli and Singh (1992 in Wright et al. , 2004 p. 11): [.
. . ] many within strategy have implicitly assumed that it is easier to rearrange complementary assets/resources given a choice of strategy than it is to rearrange strategy given a set of assets/resources, even though the empirical research seems to imply the opposite.
The RBV SHRM approach offers speci? c insights into the value of internal resources in securing successful international operations (Bonache and Fernandez, 1999; Harvey et al. , 2000).
Speci? cally particular groups of human resources are seen to have an honoured position within companies where they transfer tacit knowledge to new markets and provide sustainable competitive advantage (Prahalad and Hamel, 1990; Scullion and Starkey, 2000). Taylor et al. ‘s (1996) study used the RBV approach to identify the critical role of HRM competence within international ? ms, the part senior management play in identifying the company’s potential to develop HRM competence and the different groups of human resources who constitute ? rm strategic human resources. However, the weaknesses of this SHRM approach are its omission to clearly depict the interplay between internal resources and environmental factors, and the recurring evidence that ? rms struggle with the challenges of their competitive sector to achieve distinctiveness and success through their human resources and HRM practices (Boxall and Purcell, 2003, 2008). Once again the strategic groups literature provides speci? insights here in querying whether the pursuit of competitive advantage through the leveraging of the ? rm’s distinctive resources is restrained by the in? uence of their closest strategic group (Panagiotou, 2006, 2007).
Clearly each of the SHRM approaches (table stake best practice, best-? t and RBV) have some resonance and these perspectives are summarised in Table I in terms of their initial focus and the levels of context where their attention is directed. There is an overall tendency across the SHRM literature for tensions, contradictions and imbalance (Boselie et al. 2009) as evidenced in the overly prescriptive best practice approach, the highly contingent best ? t approach (focusing on speci? c market or national context factors) and the RBV’s spotlight on the internal resources of the organisation. Individual adoption of these approaches is unlikely to provide a meaningful depiction of how companies might pursue competitive advantage via their human resources or HRM practices. Instead it is argued that companies can use a combined and simultaneous version of the three SHRM approaches in an attempt to balance the external and internal perspectives adopted by the best-? and RBV approaches, while also recognising the important in? uence industry isomorphism (table stakes) has on the creation of a set of HRM practices (Boxall and Purcell, 2003, 2008).
Even where such a combined and simultaneous model of SHRM has been advocated (Boxall and Purcell, 2003, 2008) there appears insuf? cient understanding of, and insight into, the industry or sectoral level of analysis (Boselie et al. , 2009; Boxall, 2003; Paauwe, 2008; Paauwe and Boselie, 2008). By exploring SHRM practices and approaches across an industry, rather than across speci? national or company contexts, a better understanding of the internal and external challenges faced by competing organisations to achieving distinctive HRM strategies and practices becomes manifest. Alongside this evaluation of the SHRM approaches, the strategic groups literature highlights that these clusters of close rivals may compound the SIHRM approaches Primary focus Level Company/? rm The role of strategic groups 519 Resource based view (RBV) Competitive advantage achieved through developing resources Internal which are Valuable, Rare, Inimitable, Non-substitutable and Rent achieving Best ? Based on crafting HRM practices tied to strategic management External models – typically through strategic analyses tools of market position Based on aligning HRM practices to different international and domestic cultural and institutional contexts and company demand for standardisation Best practice Originally identi? ed as sophisticated practices capable of External achieving competitive advantage Now associated with HRM practices which are “table stakes” essential for operating with social legitimacy within an industry Competitive market National contexts and competitive market Industry Table I.
The initial focus of SIHRM approaches PR 41,4 challenges ? rms already face in realising differentiation through their human resources and HRM practices.
Indeed where industry analyses highlight the importance of conformance of industry members, to particular HRM practices and systems, strategic groups suggest another layer of orthodoxy among closest rivals which limit the pursuit of distinctive competitive advantage by ? rms. Research design Analysis of strategic groups requires an industry focus and this research was undertaken within the context of the international hotel sector.
This sector has been identi? ed as international by nature (Litteljohn, 2003; Litteljohn et al. , 2007) with companies achieving growth through a range of market entry modes, typically engaging with different equity partners (Whitla et al. , 2007). Managing portfolios of hotels with diverse ownership arrangements (such as the asset light options of management contracts, franchises and part equity agreements) has created challenges for international hotel companies (IHCs) (Beals, 2006; Eyster, 1997; Gannon et al.
, 2010; Guilding, 2006).
Traditionally hotel general managers (HGMs) have been seen as strategic human resources (Boxall and Steeneveld, 1999; Marchington et al. , 2003) responsible for creating pro? table hotel units through their leadership and operational expertise in the hotel industry (Forte, 1986; Kriegl, 2000; Ladkin and Juwaheer, 2000). However, the asset light market entry modes developed more recently as a result of IHC portfolio expansion have resulted in managers and executives experiencing different challenges and requiring enhanced skills sets.
At the heart of this study was the aim to explore how IHCs have developed IHRM strategies and practices to manage their international managerial resources within the broader context of the sector’s competitive forces, growing industry concentration and in the presence of strategic groups (Curry et al.
, 2001; Litteljohn, 1999; Roper, 1995). Any attempt to capture people management strategies and practices across an industry, as well as at the ? rm level, involves the adoption of a comprehensive sample of organisations. This study used an industry de? nition of global operations based on companies operating hotels across ? e out of the six economically viable continents, as a purposive sample technique (Saunders et al. , 2000). This research stage comprised substantial secondary data collection on the broader international hotel industry with information on service levels, ownership modes, brands, portfolios and geographical penetration and the information is captured in Table II. Only nine companies met these global criteria and eight of these nine companies granted access to their senior human resource executives (typically Vice Presidents of Human Resources) and administrative teams, and HR systems and materials.
The ? eldwork interviews took place at the European corporate headquarters, regional of? ces and in hotel units for the eight companies. Interviews with the senior HR executives for each of the eight companies form the main part of the data. These interviews lasted around four hours on average. In addition, time was also spent with administrative teams, reading documentation and observing meetings. A checklist was developed to complement the interview questions and data, and to systemise the collection of company documentation, observations and interactions with the administrative teams (Robson, 2002).
Documentation included HRM policies, performance appraisal forms, training manuals, organisational charts, company communications, job descriptions, succession plans and demonstrations and hard copies of HR databases.
The interview 520 International hotel companies Suggested strategy and methods of growth Differentiation strategies – based on the power of the company’s hotel brand name. Expansion in prime city centre and resort locations and the development of hotel clusters in countries or regions achieved through management contracts and joint ventures Various strategies deployed at the different market levels.
Budget brands operate on a no frills strategy. International luxury properties follow a differentiation (premium price) strategy. One third of properties are owned and two-thirds are management contract arrangements. Growth through management contracting, franchising or marketing agreements and some ownership Focused differentiation strategy based on distinctive design and architectural features associated with properties and attention to detail service style.
Grows solely by securing management contract agreements with select investors Differentiation strategy based on developing modern and ef? ient ? rst class hotels. Growth achieved through management contracting, rather than ownership, and a global partnership with one of America’s largest international hotel corporations Operates at different market levels – particularly concerned with distinctiveness and value for money and therefore a broad hybrid strategy is identi? ed Mixed type of operation is used across portfolio; approximately 46 per cent owned, 21 per cent leased, 22. 5 per cent management contracts and 10. 5 per cent franchised (continued) 150 ? Prestige international brand National UK mid-market brand 48 Number of hotels
Brands Number of countries Anglo-American Premium Britbuyer 900 Nine brands at international and domestic levels: Upscale Mid market Budget 50 Contractman International 200 Four luxury or upscale brands 35 Euroalliance One upscale brand 16 50 * Euromultigrow 2,500 ? Seventeen brands split into: Upscale and midscale Economy and budget Leisure hotels 73 521 The role of strategic groups Table II. Pro? les of global hotel companies in sample PR 41,4 522 International hotel companies 2,300 ? Five brands: two at mid market Prestige brand Budget brand Holiday resorts 63 FranchiseKing Globalalliance
USBonusbranda 700 Seven brands Two at both mid market and budget levels Prestige brand Suites Holiday resorts Prestige brand Mid-market brand – North America 63 35 USmixedeconomy Note: a This company did not participate in the ? nal stages of the research Table II. Number of hotels Brands Number of countries Suggested strategy and methods of growth Hybrid strategy based on presence across a range of market sectors but competitively priced in each sector.
Company documentation states the aim as “To be the preferred hotel system, hotel management company, and lodging franchise in the world.
To build on the strength of the FranchiseKing name utilising quality and consistency as the vehicle to enhance it’s perceived ‘value for money’ position in the middle market. ” Focused differentiation strategy based on international exposure and expertise in the luxury hotel market. Growth through management contracting, franchising or marketing agreements and some ownership Deploys several strategies including a hybrid strategy for its domestic units and a differentiation (with premium price) strategy for most of its international properties at the prestige level.
Growth through management contracting and franchising, with limited ownership Adopts a variety of strategies including a hybrid strategy for its domestic units and a differentiation (with premium price) strategy for most of its international properties.
Growth through management contracting some ownership and franchising 190 Prestige brand Mid-market brand – North America 70 460 transcripts, ? eldwork notes and documentation allowed cases to be written for each company which were sense-checked by industry informants and against the research team’s notes and observations.
Access was granted to the eight companies on the basis of offering con? dentiality to participants and organisations. Each company was protected through the allocation of pseudonyms and all data and notes collected removed company names and trademarks to provide con? dentiality. This is in keeping with the widely acknowledged dif? culties of gaining access within this industry (Litteljohn et al. , 2007; Ropeter and Kleiner, 1997). The cases built on the interview transcripts, observations and company documentation data meant that ualitative analysis was achieved through the tools and computer aided techniques recommended by key authors (Miles and Huberman, 1994; Silverman, 1997, 1999).
The process of initial coding identi? ed HRM practices, management criteria and company strategies and characteristics. Descriptive coding was then used to highlight speci? c activities and relationships between HRM practices and approaches, and company characteristics. Further interpretive coding and analytic coding were highlighted through the themes presented by the respondents and the theoretical relationships arising from the data and initial coding (Silverman, 1997, 1999).
Of particular importance were the themes of similar and distinctive HRM practices deployed by the companies, strategic groups and across the sample. Results Across the sample of eight IHCs evidence of common HRM interventions deployed included: a reliance on strong internal labour markets for unit management positions; training programmes with universal components; the use of performance appraisal as a mechanism for monitoring and evaluating human resources talent, the deployment of speci? c contractual agreements and conventions; the recurrent use of corporate communications channels; and speci? HRM responses to cultural and international challenges. The shared aims of these practices indicated that the IHCs were adopting the table stake version of the best practice SHRM approach across their international portfolios (Boxall and Purcell, 2003, 2008; Boselie et al.
, 2003, 2009). The next stage of data examination involved the identi? cation of company speci? c HRM practices based on the best ? t and RBV SHRM approaches. However, subsequent analysis of the qualitative data began to identify another layer of similar HRM interventions centred on the appearance of strategic groups within the sample.
There appeared to be similarities between the companies based on strategic variables such as parent company ownership, the scope of the hotels organisations’ activities (levels of internationalisation, geographical coverage, and market segments); resource commitments (including size, brands and market entry modes); and centric and transnational orientations. As a result the sample was demarcated into three strategic groups.
These are labelled the Multi-branders, Mixed Portfolio Purchasers and Prestige Operators.
Table III summarises the strategic similarities and differences between the three groups and their IHC members. Patterns of HRM interventions across the three strategic groups are apparent from the data supplied by the executives, their teams and the documentation. These patterns focus around six areas: The role of strategic groups 523 PR 41,4 Similarities Differences 524 Table III. International hotel company strategic groups Strategic Group 1 – The Multi-branders (two companies) National cultural origins FranchiseKing and Parent companies – related horizontally Euromultigrow diversi? d Mid-market brand dominates in Large size – 2,000 ? hotels one company while distinct High levels of internationalisation but brands used for different market strong domestic base (French and USA) segments by other Multiple brands (luxury to budget) Dif? culties aligning parent company, brand One company uses more names and operations franchising Hybrid strategies Range of market entry modes Ethnocentric orientation Global organisation Strategic Group 2 – The Mixed Portfolio Purchasers (two companies) Britbuyer and Similar size (between 400 and 1,000 hotels) Diversi? ation of parent companies is different USmixedeconomy Mid-position in internationalisation index Strong domestic presence and distinctive One company has more international operations ownership/partial ownership of Range of market entry modes hotels Acquisitive growth of European prestige brands One company has much smaller Brands offered at similar market levels Challenges of aligning disparate domestic budget brand domestic interests and international portfolios, corporate strategies and new acquisitions Ethnocentric orientation but with some geocentric aspirations Multinational rganisation Strategic Group 3 – The Prestige Operators (four companies) Two companies have separate Parent companies – related diversi? ed Anglo-American domestic operations Similar size (between 50 and 202 hotels) Premium Similar levels of low internationalisation Contractman Two companies have grown Focus on luxury, ? st class hotel market International through strategic partnerships (resort and business) Euroalliance Strategies broadly differentiation and Globalalliance One company uses a broader focused differentiation range of market entry modes Growth primarily through management contracting Broadly geocentric but with some aspects of ethnocentrism Transnational organisation (1) (2) (3) (4) (5) (6) the levels where HRM is focused; different views about management skills and transferability across brands; how international and domestic operations function; extent of owner in? ence and cultural differences; how and where managerial talent is found; and where speci? c career interventions emerge. Table IV captures some of the comments from interviews across these six levels and the three strategic groups.
The HRM interventions and features developed by the three strategic groups are outlined in Table V along with the strategic variables which distinguish the groups. Strategic group 1: Multi-branders The sheer size and scale of their multi-branded operations indicated parallels between the HRM approaches taken by the Multi-branders (see comments in Tables IV and V).
Both companies boasted a critical mass of hotels in key countries or regions of the world resulting in more localised recruitment and development approaches. For example, they operated “UK only” management training schemes and then speci? c recruitment initiatives tailored to educational systems, notably the French training and German apprenticeship schemes. The size of these two companies also meant they allowed their distinct brands to develop individually which had apparently resulted in some speci? brand HRM practices. Both companies recognised there were few opportunities for managers to transfer between the different brands leading to bottlenecks in internal labour markets, where some brands grew more quickly and offered extensive transfer and promotion possibilities.
The Multi-branders had attempted to deal with these issues in slightly different ways, though both now had structures, enabling moves between managerial levels across brands to achieve some overall parity across their company.
In one company (Euromultigrow) there was a guide to the different positions within each brand to encourage internal brand transfers of human resources. This guide was based on extensive negotiations with managers across the company’s brands, although parent country nationals (PCNs) dominated among these managers and the company’s University was responsible for the roll-out training for this guide. Franchiseking had developed a competency-based HRM system designed to identify common areas of expertise across its brands and as one HR executive identi? d all managers with line responsibilities had to attend and use this framework. The competencies were developed in accordance with a HRM consultant ? rm and used existing and future “high potential” managers across the company’s portfolio to identify appropriate behaviours of successful managers.
Competencies were heavily in? uenced by the company’s existing management team comprising mainly PCNs. The company then ran a series of training sessions for its senior managers so the competencies formed the basis for all selection, performance appraisal, promotion and training decisions and activities.
These attempts to closely manage their large portfolios of standardised brands across geographically disparate locations meant the Multi-branders adopted an ethnocentric orientation to internationalisation with PCNs dominant in subsidiary management positions, which runs somewhat counter to their critical mass of units and attempts to localise too. The Multi-branders commented less extensively, compared with the members of the other two strategic groups, on the level of interference from property owners where management contracts were used.
They argued this was probably because their highly standardised brands, even at full-service levels, meant owners knew what to expect, and they did not attempt to interfere in the day-to-day management of hotels. The selection of managers for managed properties was also less troublesome for the Multi-branders.
In most cases executives could appoint whomever they wanted and The role of strategic groups 525 PR 41,4 526 The levels of focus for HRM Table IV.
Responses from HR executives from the strategic groups Multibranders “Our area, regional human resource executives run national versions of our company University training and recruitment programmes to ? t with national vocational education. ” Assistant HR director for Euromultigrow EAME “We have a critical mass of hotels in certain countries and have built real presence so we need to adopt some of their practices as long as they ? t now with our competences. ” Corporate Training and Development Director FranchiseKing “In France, Germany, the UK and the Benelux and Scandinavian countries, where we have critical mass, they have some ? xibility for recruitment and training. It has been a bit of a struggle with our acquisition of M to get this right, though.
” Britbuyer HR EAME director “Some areas, with more hotels, have a little bit more autonomy than others and we have them do their own management recruitment and training, based on our head-of? ce materials. ” Vice President HR USmixedeconomy Mixed Portfolio Purchasers Prestige Operators “We run a graduate management programme to ensure we have our next crop of managers waiting in the wings. We also have an executive management programme which includes an MBA – both are designed to get us the GMs of the future. Corporate Director of Human Resources Globalalliance “Our graduate management programme is being revitalised for next year and we’ll be targeting the brightest from the hotel schools in Holland and Switzerland for EAME. All our graduates must have language skills and meet speci? c knowledge requirements.
” Anglo-American Premium Vice President of HRs “I don’t think graduate management schemes per se work. Instead we recruit graduates, mainly from Switzerland and the Dutch schools, into real jobs and although they’re a hotel resource, we (headquarters) monitor their progress and target them with speci? courses to try and bring them on. ” HR Vice President Euroalliance (continued) Multibranders “We had to respect what was there. The predominant national culture of the newly acquired company) meant that we had a lot of communicating and educating to do within our company and within theirs. We moved managers within (names the acquired company) between units to give them a fresh start and many of them are still with us.
It worked out well really. ” Regional HR director USmixedeconomy Mixed Portfolio Purchasers Prestige Operators Views about management skills “No, not so many people transferred.
It was and transferability across brands quite common between one brand and also quite common between (names two other company brands at the same market level) but not at all between the others. It was dif? cult, not good. Now we will have a stronger parent company from this new structure. ” HR Vice President for Euromultigrow GMs skills needs “fall into four skill sets which.
.. one is managing myself based on the premise that if I can’t manage myself then I can’t really manage anybody else. Then managing others and then the third one is problem solving and decision making and the fourth one is pro-active achievement.
Very dif? cult to measure, but the actual achievement levels and the go for it and taking that extra risk, the entrepreneurial part.
And then there is the languages and “We have been training them in the use of behavioural event interviewing to help them, “When we acquired company [M] there was cultural bit. ” HR Vice President Euroalliance . . . to spot the competencies. This allows us a bit of a standoff basically because they to see where in the portfolio of brands they wanted to be acquired by somebody else.
.. It “It feels it is dif? ult to see where a young manager’s next move is in an international can move to” Corporate Training and didn’t help that the CEO of our company company without the right language skills Development Director FranchiseKing went ‘round their hotels saying ‘get rid of this’ or ‘do that’. Things have changed now, to allow widening of transfer options. “Anglo-American Premium Vice again. There’s more appreciation of what President of HRs [acquired company] does right on the international scene and we’re a lot more “There are core or critical parts to our open to learning from them.
It’s now twobusiness; marketing and sales, managing way. ” Britbuyer HR EAME director human resources, ? nancial management, creative decision –making and leadership. These need to be displayed across cultures across properties to make it as a GM. ” Vice President HR Contractman International (continued) The role of strategic groups 527 Table IV. PR 41,4 528 How international and domestic operations function “For an international GM you need languages and international experience – that is why some managers from brands back home don’t make it.
Vice President HR USmixedeconomy Table IV. Multibranders “Most of these potential GMs do tend still to be the same nationality as the company, but I don’t know why. We don’t necessarily want that, at all. ” HR Vice President for Euromultigrow “All GMs are informed that the best way to read and become familiar with the (competency) guide is to read the English version ? rst – this is the authoritative version. ” Corporate Training and Development Director FranchiseKing Mixed Portfolio Purchasers Prestige Operators “Why the four different parts of the world?
Well each one has some strengths.
I mean that States you take marketing and very different human resources. Asia you still have the luxury of being able to have a lot of employees and a far bigger budget because costs are lower. Japan because the way, the mentality of the Japanese market and customer is different, and Europe to do same thing but with a very tight budget because costs are so high. ” Vice President HR EAME Contractman International “Our domestic brand managers aren’t our international mangers. There is no transfer, well ok I can think of one or two.
You need international experience which creates a bit of a catch 22 – because it is the old thing of ‘you can’t get the job without the experience and you can’t get the experience without the job’. ” Britbuyer HR EAME director “A future GM must have worked outside his or her home country before they can be promoted to this level. It is important for managers to have language skills not only to help them operate in particular locations but also because there are far more career opportunities for those individuals who can demonstrate language pro? ciency. Transfers are then an important aspect of developing a career. Anglo-American Premium Vice President of HRs (continued) Multibranders “Well most of the time, it depends on the case of course, most of the time, the shareholder of the hotel will be an investor but he will not be an operational actor. He is interested in the bottom line, not what goes on inside the hotel.
” HR Vice President for Euromultigrow Mixed Portfolio Purchasers Prestige Operators “Usually owners interview the three candidates we put forward for each GM position and invariably, well they select the candidate preferred by the company, though Vice Presidents often have to use some powers of persuasion. Anglo-American Premium Vice President of HRs “We have to know our owners really well to give them the GMs they want and need. That’s a tough call when you’re growing so much. ” Vice President HR Contractman International “Some owners are really dif? cult and have to be managed carefully. That’s where our Regional guys come in.
Others are great and they are our business partners, with us for the long haul. ” HR Vice President Euroalliance “Owners do have a lot of in? uence because if we give them somebody and they say ‘we don’t think this guy’s any good’, well!
Although we could force them on them it isn’t a very sensible thing to do. So the owning company does have a big bearing on the GM slot. ” Corporate Director of Human Resources Globalalliance (continued) Extent of owner in? uence and cultural differences “We have owners, for example, . . .
but we have owners who are very, very clear about the people who we are likely, or more often than not, we can’t employ. Usually it’s in terms of nationalities and colours, race and sexual preferences they don’t like.
It is their hotel and if they say ‘I don’t want somebody with red hair’ then you don’t put somebody “Owner interference depends on our brands, with red hair in, it’s as simple as that. ” Britbuyer HR EAME director the more exclusive the brand the more in? uence but mainly we propose people ‘this candidate has our ? rm support’. “The frequency of moves our managers Obviously the quality of the relationship make are also driven by how tightly an with the owner is very important and you owner wants to hang on to them.
So we’re must respect their wishes pertaining to GMs constrained by hardship factors, and but it doesn’t cause us much trouble really. ” owner’s predilections and preferences. ” Vice President for HR FranchiseKing Regional HR director USmixedeconomy The role of strategic groups 529 Table IV. PR 41,4 530 How and where managerial talent is found Table IV. Multibranders “We have our area, regional human resource people help our GMs identify their managers who might one day make it, who have the potential to be GMs too.
The area human resource people then run some courses and do the training we have developed through our company university. HR Vice President for Euromultigrow Mixed Portfolio Purchasers Prestige Operators “How do we manage our GMs? Well we include all managers here – well it’s a very integrated approach to career development, or management development and the annual appraisal and it all comes together with succession planning and the work we coordinate here (gestures to the corporate head-of? ce). ” Corporate Director of Human Resources Globalalliance “We’re [the executive team] in the hotels a lot, and the President was really great, yesterday he was saying ‘You know everybody whether you’re ? ance or business development or marketing, when you’re in the hotels and you spot people who are really good, notice it, you know get a note of the name, make sure that we’re also all talent spotting our own people. ” HR Vice President Euroalliance “We must therefore nurture excellence in every one of our employees, especially our local nationals – the people who live in the countries where we operate hotels. ” Vice President HR EAME Contractman International “At the Vice President and divisional director levels we’re always travelling, listening to what are people are saying and telling them about what’s happening across the company.
And spotting talent too. ” Anglo-American Premium Vice President of HRs (continued) “I mean I am very conscious from this conversation we are not doing all we could to develop the next generation of GMs. It is partly because the number two position in some units has disappeared. So there aren’t enough opportunities for heads of departments to move on and develop their experience. We haven’t had a problem so far but as we increase (grow) we might be struggling for the right calibre of GMs in a “Some of our approach to identifying GM few years time.
Britbuyer HR EAME potential is systematic, some is opportunistic. We’re trying to become more director systematic, through the new competencies process. We’ve recognised we have to have “You must realise that traditionally we have more local nationals and fewer expatriates. ” consciously developed very good resident managers/EAMs (Executive Assistant Corporate Training and Development Managers) so when these individuals took Director FranchiseKing over their own units there was a very low risk of failure.
Since our purchases and down-sizing, however, there are now some properties that no longer have a number 2 manager. Thus we have effectively stopped developing this ‘almost’ risk free human resource – it may cause us problems in the long term.
” Vice President HR USmixedeconomy Multibranders “Our restructuring of brands and growth in franchising means we have to be clear about what managers do to make the hotels successful. Our company university is critical for training to our brands so all our managers know. ” Assistant HR director for Euromultigrow EAME Potential GMs . . “It’s very intensive (the assessment centre) with personal counselling, tests to see where their stresses and strains are, and management skills across the board, running from 8 in the morning to 10 at night.
It’s really very intensive and we have people “When we go outside, well we steal from the from across the world, with different “Performance of our business is crucial and competition and just rely on the grapevine or languages and cultures, the mix of people is seen to be the best element of these maybe on-spec applications.
There’s some that is why so much investment and events. “Anglo-American Premium Vice development had been made in this area of use of executive search but that’s very President of HRs expensive. ” Regional HR director competencies and performance management. There’s been a clear growth in USmixedeconomy “For the assessment centre a report is pro? ts since the competencies were ? rst written on them based on what we feel they developed.
” Vice President for HR demonstrated, in the way they acted during FranchiseKing the course.
What is okay and the right way, what’s to be demonstrated and what’s to be discussed, where they feel they need development in, and from that we can more or less determine the time span its going to take so that they’ll be ready to be a GM, and what has to happen in-between so the individual development is planned. ” Corporate Director of Human Resources Globalalliance “In fact it is incredibly incestuous and people just seem to appear or materialise. We wouldn’t directly poach someone, well . .
. , but if someone made it clear to us they’d be interested then we’d feel ? e about calling them up. ” Britbuyer HR EAME director “They all go on a leadership development programme and I design and I teach those with a co-trainer, I like to see that I’m there with them for a full week and we run an assessment process with the leadership development programme. So they’re booked for tests and exercises based on the four management skills areas and they have individual feedback during the brief to let them know how they’re doing. This sets them with an individual plan for the future. ” HR Vice President Euroalliance
Mixed Portfolio Purchasers Prestige Operators Where speci? c career interventions emerge The role of strategic groups 531 Table IV.
PR 41,4 Strategic groups Strategic group variables HRM outcomes Brands and market segmentation Multi-branders Hard brands, serving several different market levels 532 Mixed Portfolio Purchasers Prestige Operators Allows more localisation of management talent due to standardisation and clear criteria for operating brands Movement within and between brands facilitated to prevent career bottlenecks Some soft (international) and some Dif? ult to facilitate movement hard (domestic) brands between international brands due to recent purchases, no transfer between domestic and international brands due to skills mismatch Importance of communication to assimilate new acquisitions Softer brands Emphasis on transfers to develop managerial experience of different countries/markets, and types of hotels Encourages and facilitates employees at all levels to gain international experience Large diverse organisations, structured on the basis of brands and some geographical factors Critical mass of units in some locations Organised on International and domestic divisions.
Slow assimilation of newly purchased international brand Some critical mass of units Companies have developed guides to articulate management positions and skills across brands Critical mass allows multi-unit UGMs and more local recruitment and selection activities Some local recruitment and selection, less development through strong internal labour market and more acquisition of management talent Critical mass allows more localisation of management talent but not co-ordinated effectively throughout the companies Regional of? es co-ordinate transfers and HRM practices but also learn from subsidiaries to pass experience, knowledge and expertise on across other regions. IT plays an important role here Across company recruitment and development schemes rather than localised versions. Provides single ports of entry at (sub) department management level to locals (continued) Structure and organisation Multi-branders Mixed Portfolio Purchasers Prestige Operators
Smaller portfolios organised on regional lines Limited critical mass of units Table V. The IHC strategic groups, their strategic variables and the HRM outcomes Strategic groups Centric orientation Multi-branders Strategic group variables Primarily ethnocentric HRM outcomes The role of strategic groups Mixed Portfolio Purchasers Prestige Operators Highly standardised services seem to facilitate low reliance on PCNs at subsidiary level though they are prevalent at executive level Dif? ult to discern – bypassing of PCNs still mainly in place for acquired companies, some stages through acquisitions locations with HCNs (critical (McKiernan, 1992) mass) but dominated by Western nationals Aspiring geocentric Attempts to harness managerial talent from around the world regardless of nationality through co-ordinated and integrated HRM activities UGMs still primarily from Western (European and American) backgrounds, executives in particular 533 Methods of growth and market entry expertise Multi-branders Growth through hard brands and the development of suitable investors (master franchisees and owners)
Mixed Portfolio Purchasers Prestige Operators UGMs have speci? c knowledge and skills in operating highly standardised hotel services and passing knowledge onto others (franchisees) HRM mechanisms de? ne performance and selection criteria for managers and employees Acquisition used alongside mixed UGMs are likely to have expertise methods of market entry (mainly in exploiting value from purchased properties management contracts) De-layering of organisational hierarchies (disappearance of deputy UGM position) and local recruitment initiatives were seen to help realise returns on their acquisitions Managers demonstrate speci? Growth primarily through pro? ciency in managing more management contracting, some marketing agreements, and equity luxurious and culturally adapted hotels and their owners investment.
Global but local More extensive and integrated outlook HRM interventions, which support extensive transfers and development opportunities, throughout human resources, not just managers Table V. PR 41,4 534 only in a few hotels or in speci? c countries and with speci? c types of owners (for example, governments) were there two or three managers presented to owners in a “beauty parade”.
The Multi-branders were more concerned about the co-ordination of franchise operators and training and communication were seen to be vital mechanisms for managing these issues. These were the only companies who identi? ed mandatory training courses for managers and held speci? c courses that their franchise partners were obliged to attend. Constant travelling by corporate executives was seen to further reinforce company values and assist in harmonization between geographically disparate franchised, managed and owned units.
Both companies showed evidence of strong similarities associated with managing their multi-branded, and multi-market entry strategies and large, diverse portfolios. Dividing their HRM interventions into areas or countries where there was a critical mass of units was appropriate given the scale of their operations. Strong values, often based on the origins of the company, ? were communicated through frequent communiques and training opportunities further reinforced the brand standards and achieved appropriate levels of corporate synergy in the face of competition from their smaller but potentially more nimble competitors.
Strategic group 2: Mixed Portfolio Purchasers The Mixed Portfolio Purchasers had been through considerable periods of change and growth prior to the researchers’ ? eldwork. In addition to acquiring smaller European hotel chains they had substantially expanded their domestic and international portfolios through other acquisitions and mixed market entry methods.
Both had international and larger domestic sections which were managed almost completely separately, although