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International Journal of Application or Innovation in Engineering & Management (IJAIEM)

Web Site: www.ijaiem.org Email: editor@ijaiem.org


Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

THE ROLE OF HR DEPARTMENT IN


MANAGING EMPLOYEE RELATIONS IN
MULTINATIONAL SUBSIDIARIES
Eleni Triantafillidou1, Dr. Theodore Koutroukis2
1
PhD candidate, Democritus University of Thrace, Department of Economics, University Campus GR-69100 Komotini-
Greece
2
Associate Professor, Democritus University of Thrace, Department of Economics, University Campus GR-69100 Komotini-
Greece

Abstract
Human Resource Management is a core enterprise function that is managing employees, the most valuable resource. Human
Resource Management main areas include recruitment, selection, training and development, performance appraisal and
compensation management. Employee Relations is an interdisciplinary field studying the relationship between employers and
employees taking into consideration the role of state and the labor market. Human Resources Department plays a significant
role in planning, developing, applying and reviewing strategies, practices and policies affecting employees. The aim of this
paper is to analyze the literature review concerning the role of HR Department in managing employee relations and introduce
the scientific research that will be conducted during the preparation of a PhD Thesis. The scientific research will explore issues
related to employee involvement and participation practices and their impact on employees and Organizations.
Keywords: Human Resources Management – Employee Relations – HR Department – Employee Involvement and Participation–
Multinational subsidiaries

1. INTRODUCTION
Human Resources (HR) Management is a core organizational function which handles all issues related to employees
that are employed in Organization. The employment relationship is an issue of great importance for HR Department.
More specifically, HR department is responsible for planning, organizing, implementing, controlling and reviewing
successful employee relation strategies that benefit both employees and Organizations. A multinational corporation, is a
business that operates in one country (the parent country) and produces products or services in one or more foreign
countries (host countries) (Mondy and Noe, 2005). Multinational Organization is also considered an enterprise
employing human resources in more than one country in order to produce products and/or offer services. The OECD, in
its Multinational Corporate Guidelines (2011), states that multinationals are businesses operating in all sectors of the
economy. They are usually businesses or other entities located in more than one country and are linked together so that
they can coordinate their activities in a variety of ways. One or more of these entities may be able to exercise a
significant influence on the activities of the others, but their degree of autonomy within the business network varies
from multinational to multinational. Their capital may be private, public or mixed. According to Dau (2013), the term
“multinationality” refers to the extent to which one Organization has international operations and includes: (a)
characteristics that are place-based and dynamics of knowledge in host markets, (b) knowledge ties that link the
network of parent company and international subsidiaries across geographic space, and (c) strategic decisions and
organizational changes that enterprises make to develop and sustain their network of international subsidiaries. The
purpose of this paper is to explore the role of HR department in managing employee relationships in multinational
subsidiaries. We review the literature in the fields of employee relations and the role of HR department in determining
strategies for successful employee relations management. Unfortunately, over the last years, research gives insufficient
attention on how the HR department handles employee relationships in multinational Organizations and how employee
involvement and participation practices can affect employee attitudes and behaviors and the Organization as a whole.
Our research aims to examine and explore the exact status of HR departments in managing employee relations in
multinational subsidiaries in Greece and the benefits, opportunities, costs and threats of employee involvement and
participation (EIP) perceived from both management and employee side. This article is a brief description of the
structure and the objectives of the PhD thesis of one of the authors.

Volume 8, Issue 12, December 2019 Page 44


International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

2. OBJECTIVES OF THE STUDY


A. To study employment relations in multinational enterprises and particularly in subsidiaries located in
Greece. Particularly we examine EIP forms and practices and the factors affecting the effectiveness of
EIP practices.

EIP practices and processes are linked to outcomes that could be beneficial both for employees and Organizations.
According to Cabrera, Ortega, et al.(2003), employee participation includes a variety of management forms and
practices including, participative management, employee involvement programs, empowerment or workplace
democracy. These practices aim in involving employees in sharing of information and making decisions. Employee
participation may be direct or indirect. Direct participation involves the employees themselves, whereas indirect
participation takes place through an employee representative body, such as the trade union or the works council. Cox,
Marchington & Suter (2009), in their study include measures of EIP breadth and depth. EIP breadth refers to the
number of different EIP practices used together in a workplace and EIP depth refers to the quality of EIP practices.
More specifically the two ways that EIP depth can be measured is a. assessing how frequently an EIP practice takes
place and b, how much time is given to employees for this EIP practice. The measures of EIP breadth that they propose
are: 1. Team briefing: a system of meetings between line managers or supervisors and all workers for whom they are
responsible, 2. Problem solving groups: groups that solve specific problems or discuss aspects or performance, 3.
Survey: a formal survey of employees’ views or opinions, 4. Information on investment plans: whether Management
regularly gives employees, or their representatives, any information about internal investment plans or not, 5.
Information on the financial situation of the establishment: whether Management regularly gives employees, or their
representatives, any information about financial situation of the establishment or not, 6. Information on the financial
situation of the organization: whether management regularly gives employees, or their representatives, any information
about the financial situation of the whole Organization or not, 7. Information on staffing: whether Management
regularly gives employees, or their representatives, any information about staffing plans or not, 8. Existence of a joint
consultative committee: whether a joint consultative committee exists or not. The proposed measures of EIP depth are:
1. the frequency of team briefing, 2. the amount of time allocated to employee questions in the team briefing, 3. the
permanency of problem solving groups, 4. the proportion of employees participating in PSGs, 5. the frequency of joint
consultative committees and 5. the mode of representative selection for joint consultative committees (they are
selected by management, employee representatives or employees).
Wilkinson, Townsend & Burgess (2013), propose an employee involvement and participation architecture. The
dimensions of the proposed architecture include the level of EIP, the form of EIP, an example of EIP and the scope of
issues covered. The first level of EIP is Individual the form is informal, the examples of EIP are off-the-record
conversations and e-mails and the issues covered are workloads rosters and personal matters. The second level of EIP
is work unit the forms are a) Formal direct (through line managers) an example is department meetings and the scope
of issues are department-specific issues and downward communication and b) Formal direct (through teams/groups)
examples are team-working and task participation and the issues covered are operational matters. The third level of EIP
is Organization level that includes a. Formal direct through cross-department committees and employee surveys
concerning health and safety, customer interaction, employee satisfaction, Profitability/efficiency, Strategy and
Operational matter and b. Formal indirect (through union) through enterprise bargaining and Joint Consultative
Committees (JCCs) covering issued related to wages, working conditions and bargaining grievances. They also
mention ten EIP programmes including: Daily team briefs/shift change over meetings, Monthly department meetings,
Annual employee opinion survey, Employee focus groups, Cross-department meetings (excluding health and safety),
Workplace health and safety meetings, Whole of staff meetings , JCC or similar committee involving union
representatives, Union meetings (aside from JCCs and bargaining meetings), Enterprise bargaining meetings (with
union delegates).
Brown, Geddes & Heywood (2007), examine four types of group employee-involvement (EI) schemes including
autonomous groups, quality circles, joint consultative committees and task forces direct participation.
To sum up employee participation can be direct and indirect/representative. Direct participation further can be divided
into 1) consultative participation (meetings with supervisor, attitude surveys, employee suggestion plans) and 2)
delegative participation (scheduling of work, improving work processes, absence control). Representative participation
is participation through employee representation bodies as trade unions, worker directors and European Works
Councils.

Volume 8, Issue 12, December 2019 Page 45


International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

Another issue that our research will examine is the factors or conditions that determine and affect EIP practices.
According to Cabrera, Ortega & Cabrera (2003), the amount of competition, the sector, the business strategy, the
organizational size and the amount of indirect participation affect the levels of employee involvement and participation.
Mitonga-Monga, Coetzee, & Cilliers (2012), study the relationship between the perceived leadership style and
employee participation. The results of their study indicate that the perceptions of leadership style have a significant
influence on the perceptions of employee participation. Therefore, leadership is a factor that affects employee
participation. O'Donoghue, Stanton & Bartram (2011), investigate preconditions of participation such as management
support, union presence, perceived benefits, legislation and policy, and participatory ethos. For them management
support is the necessary precondition to the establishment of employee participation, which only occurs when
management believes that there is a perceived benefit gained when implementing participation practices. Other
preconditions were of subordinate importance compared to management support and perceived benefits. To sum up the
factors influencing EIP practices are competition, sector, business strategy, organizational size, leadership,
management support and perceived benefits.

B. To study employee level outcomes of EIP

Employee participation is considered a key element in the successful implementation of new management strategies
and plays an important role in determining the degree of job organizational commitment and engagement of
employees.

b1. EIP and organizational commitment


According to Bhatti and Qureshi (2007), employee participation may affect employee commitment and create
comparative advantage for the organization. Increasing employee participation will have a positive effect on employee
commitment, satisfaction and productivity. Bosak, Dawson, Flood & Peccei (2017), showed that employee involvement
climate level was positively associated with individual level employee attitudes as job satisfaction and affective
commitment. Cox, Zagelmeyer & Marchington (2006), examine the impact of EIP on employee perceptions. The
results of this study support that EIP practices are associated with higher levels of organizational commitment and job
satisfaction. More specifically greater breadth and depth of direct and indirect EIP practices affect employee
commitment to Organization. Moreover affective, continuance commitment and normative commitment moderated the
relationship between employee participation and organizational performance (Butali and Njoroge, 2018). It is
accepted that employee participation has a positive effect on organizational commitment (Scott-Ladd, Travaglione, &
Marshall, 2006; Tezergil, Köse & Karabay, 2014) Moreover, perceived organizational support mediates the
relationship between employee participation and organizational commitment (Park, 2015). Therefore, we will study
how different forms of organizational commitment as affective commitment, continuance commitment and normative
commitment are related to employee participation.

b2. EIP and organizational engagement


Unfortunately, little theoretical and empirical research examines the relationship between employee involvement and
participation and organizational engagement. Organizational engagement is important especially for research in the
field of organizational psychology. There are signs that employee involvement and participation affect organizational
engagement. Our study will explore how employee participation affects organizational engagement and dimensions of
organizational engagement including vigor, dedication and absorption.

b3. EIP and motivation


Employee involvement and participation in decision making could be a tool for enhancing employee motivation and
lead to positive work attitudes and higher productivity (Noah, 2009; Kuye and Sulaimon, 2011). Han, Chiang &
Chang, (2010), state that employee participation in decision making can satisfy the needs of human growth, such as
self-actualization and fulfillment, and through these mechanisms increase employees’ motivation contributing to
positive work attitudes (Wilkinson 2013). According to Irawanto (2015), employee participation in decision-making
could have a significant power for employee motivation. Employee participation in decision-making has a significant
effect on increasing employee motivation. Employees who participate in decision making fell that they are an important
part of Organization so they are expected to show strong motivation and commitment towards their Organization.
Therefore, there are positive findings of a relationship between employee participation in decision-making and their
motivation.

b4. EIP and trust

Volume 8, Issue 12, December 2019 Page 46


International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

Kougiannou, Redman & Dietz (2015), find support in their study that there are positive significant relationships
between both trust and organizational justice and works councils as form of employee participation. Morgan and
Zeffane (2003), in their study notice that employees expressed greater trust in management when employee
involvement is through the formal hierarchy – via consultation by supervisors or higher managers. In contrast, trust in
management falls when employee involvement is outside the formal hierarchy, or via indirect means. In addition,
employees trust falls when communication is indirect, through colleagues, meetings or the union, even if the latter may
be part of a formal structure. On the other hand, employees are more likely to develop trust when they experience
involvement through direct contact with senior management.

b5. EIP and justice


Organizational justice components are (1) Distributive Justice: which means appropriateness of outcomes with
subcomponents (a) equity, (b) equality and (c) need, (2) Procedural Justice: which means appropriateness of the
allocation process with subcomponents (a) consistency,(b) lack of bias, (c) accuracy, (d) representation of all concerned,
(e) correction and (f) ethics, (3) Interactional Justice: which means appropriateness of the treatment one receives from
authority figures with subcomponents (a) interpersonal and b) informational justice. (Cropanzano, Bowen & Gilliland,
2007). Ohana, Meyer & Swaton, (2013) study the influence of the procedural justice as a result of employee
participation in decision-making in social enterprises. They also examine if any potential link exists between employee
participation and commitment. The results confirm positive relationship between employee participation, procedural
justice and affective commitment.

C. To study organizational level outcomes of EIP including benefits and opportunities, costs and threats,
effectiveness and added value of EIP practices.

c1. Benefits and opportunities


Koutroukis (2015), empirically investigates the potential benefits of European Works Councils (EWC’s) as form of
employee participation for both employee and management side. The benefits for the employee side are considered to
be: (1) the access to the highest level of Group Management; (2) assurance that the worker has the right to get
information at the Group Level; (3) rise of consultation with foreign colleagues and conclusion of common opinions;
(4) cause of international cross pollination; (5) development of a European dimension of the company and its
industrial relations; (6) provision of steering and checking through European dialogue; (7) provision of support for
decision making; (8) positive effects on employee - management cooperation; (9) positive effect on industrial
relations within the group; (10) positive effects on local/ national employee participation. The main benefits and
opportunities for the management side are considered to be: (1) the perceived value; (2) the improvement of strategic
planning; (3) the increase of trust between employees and management; (4) the positive impact on employee
commitment; (5) the increase of co-operation/ competition between workplaces; (6) the improvement of employees’
understanding of reasons for management decisions; (7) positive effects through involving employees more closely in
the business; (8) benefits from hearing employee views; (9) contribution to the development of a corporate culture; (10)
contribution to the increasing of productivity; (11) support for organizational change within company; (12) the increase
of employee motivation; (13) the operation as counterpart to the internationalisation of capital; (14) facilitation of
communication at the European level; (15) a “vehicle” for information and consultation; (16) the international cross
pollination; (17) the development of a European dimension of the company and its industrial relations; (18) the support
provision for decision making; (19) positive effects on industrial relations within the group; (20) positive effects on
local/national employee participation.

c2. Costs and threats


According to Koutroukis (2015), the main costs and threats of participation viewed from management side are (1) the
raise of employee expectations; (2) the increase of bureaucracy; (3) the cause of rigidities in industrial relations; (4) the
foster of calls for transnational collective bargaining within multinational groups; (5) the slowdown in managerial
decision making; (C36) the leading to breaches of confidentiality concerning internal information; (C37) the cause of
financial costs to the subsidiary company (Koutroukis, 2004).

c3. Effectiveness and added value


Koutroukis (2012) makes an extended research in European Works Councils (EWC) as a form of employee
participation and proposes a two-group classification of the factors that contribute to the effectiveness of EWC’S. The
first classification concerns the nature and features of the Organizations and includes: the origin of the company
(Brownfield or Greenfield investment); the approach of management (decentralization and centralization of decision

Volume 8, Issue 12, December 2019 Page 47


International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

making); the organizational structure and the inter-corporate decision-making levels; the degree of internationalization
of corporate operations and the role of subsidiary/local management. The second classification of factors concerns the
field of employment relation and includes: the nature and structure of trade union; the employee-management relations
(cooperative or competitive); the degree of formalism (written formal or no agreements determining the employment
terms) and the level of regulations (national and transnational); the previous experience of employee representatives in
employee participation schemes (whether national works councils were in place or not); the relations between trade
unions and works councils (degree of trade union involvement in the selection/appointment of the employee
representatives)
According to Irawanto (2015), employee participation: (1) gives an opportunity to employees to achieve their goals, (2)
is useful for searching for ideas among the employees, (3) assigns responsibilities to employees and (4) is considered a
key element in the successful implementation of new management strategies Participation is an organizational
mechanism that gives the employees the right to make decisions and take an amount of responsibility, so that they feel
aware of contributing to organizational performance. As result participation increases employee motivation, bringing
about benefits for both individual and organizational effectiveness and outcomes like higher output and better quality.
Kougiannou, Redman & Dietz (2015), view works councils as an employee voice and participation mechanism but is
also a management tool and its usefulness is an important outcome and factor of effectiveness for both employees and
Organization. In their study, they conceptualize works councils effectiveness, taking into account both employee
representatives and management perspectives. This study conceptualizes effectiveness in terms of three outcomes. (1)
Usefulness: participants’ perceptions of the usefulness of the works council as form of participation for the
Organization and the employees; (2) Performance: participants’ perceptions of the level of the works council
productivity, quality, effectiveness and interpersonal relationships; and (3) Satisfaction: the representatives’ satisfaction
with works council outcomes.

D. To study EIP and Organizational Learning effects

According to Han, Chiang & Chang (2010), employee participation in decision making (EPDM) has impact on
employees’ positive cognition and attitudes which can lead to knowledge-sharing behavior. Participation in decision
making is considered as one of the aspects that can facilitate learning (Chiva et al., 2007; Scott-Ladd and Chan 2004).
High level of Employee involvement and Participation is prerequisite for organizational learning. Indeed, without a
significant level of participation, individual members in an organization have neither the opportunity nor the
motivation for individual learning that may, in turn, lead to organizational learning. But in order to realize the
potential of individual, collective and organizational learning, it is essential that employees are granted a significant
level of power and authority over their work. Where employees play a passive role in the organization, it is probably
unrealistic for managers to expect them to contribute creative ideas or knowledge to help achieve organizational
objectives (Lopez et al., 2006). Therefore, we will examine whether employee participation has a positive effect on
organizational learning.

E. To suggest ways to further improve employee relations, implications for management and employee
relations theory.

Insufficient and poor quality of management practices, affecting employee relations have negative impact on employees
and Organizations. More specifically, employees are dissatisfied, frustrated, less productive and ready to abandon the
Organization if the opportunity is given. This will have negative impact for the whole Organization as it means costs,
low productivity and difficulties when implementing changes. Therefore, it will be useful to analyze the state of
employment relations in multinational subsidiaries and make suggestions to improve them and benefit employees and
Organizations. In addition, future researchers interested in this field will gain insights and continue the research.

3. CONCLUSIONS
The role of Human Resources Department in handling employee relations in multinational corporations has not yet
received the deserved attention. As years pass by and change, so does the role of Human Resource function in planning
and developing strategies for employee relations management. In addition, nowadays new challenges arise as how HR
department could advance organizational learning through employee involvement and participation practices. This is a
new agenda in HRM and employee relations issues. In this article, we made an effort in outlining the fundamental and
significant role of HR department in planning and applying practices that involve employees and benefit both
employees and the Organization as a whole. Our research aims to examine and explore the exact status of HR

Volume 8, Issue 12, December 2019 Page 48


International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

departments in managing employee relations in multinational subsidiaries in Greece and the benefits, opportunities,
cost and threats of employee participation perceived from both management and employee side. For the purpose of this
study, we organize an empirical research based on the state of the art literature review in order to collect data and give
new insights in employee relations and human resources management theory, research and practice.

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International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: editor@ijaiem.org
Volume 8, Issue 12, December 2019 ISSN 2319 - 4847

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