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HRD as a factor of developing of international competitiveness of Russian MNCs
Victoria S. Tsybova
Research Associate,
Graduate School of Management, St. Petersburg State University
Address: 199004, Russia, St. Petersburg, Volkhovskiy Per. 3.
E-mail: [email protected]
Elena K. Zavyalova
Professor,
Graduate School of Management, St. Petersburg State University
Address: 199004, Russia, St. Petersburg, Volkhovskiy Per. 3.
E-mail: [email protected]
Stream: Strategic HRD and Performance
Submission type: Working paper
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Abstract
Purpose – The focus of this paper is the review of the existing approaches to the defining factors
that foster and prevent firm’s international competitiveness. The paper is based on the analysis of
HRD as a key factor for international competitiveness. This is a pre-phase of the major project
on empirical investigation of HRD practices used in competitive Russian MNCs.
Design/methodology/approach – The paper relies on a quantitative data received from the
structured interviews with the representatives of 20 Russian MNCs, which were identified
according to the certain criteria. The questionnaire contains 9 sections and 62 items.
Findings – Expected results should show that HRD activities are the driver for the company’s
internalization and able to foster international competitiveness of Russian MNCs.
Research limitations/implications – The paper highlights relevance of further research on
Russian MNCs and outlines research directions. The limitation is that here is presented only
theoretical phase of this research.
Practical implications – The paper points out the role of using particular HRD practices for
increasing international competitiveness.
Originality/value – Despite the important role of HRD for developing company’s international
competitiveness, there are few researches aimed to highlight particular HRD practices in Russian
competitive MNCs. Therefore, the objective of this paper is to fill in gaps in the literature
regarding this research area.
Key words – HRD, international competitiveness, Russian MNCs.
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Introduction
In the context of the global economy, the competitiveness of companies operating in
international markets is extremely important. The strategic competitiveness refers to the ability
of the company to operate successfully and develop in the long period in terms of
competitiveness (Kleiner, 2012). There are numerous studies of Russian economists which treat
it at different levels – macro, micro and meso-economic. Depending on the angle of the analysis
authors suggest that there are many factors that facilitate and increase the competitiveness of
companies. For instance, most researchers agree that competition of Russian companies is
prevented by the fragmentation of the Russian economy, the obsolescence of equipment and
technology, lack of the attention of the state to industrial sectors. But equally important factor is
the lack of knowledge and skills in the field of management (Kleiner, 2012; Hudokormoff,
2005).
The comprehensive nature of this problem requires the use of the modern developments in the
field of strategic management theory, especially the resource-based approach. Availability of
external and internal resources can be considered as the cornerstone of the company's
competitiveness. However, in practice, the availability of resources may not be sufficient: no less
important factor is how well the company's management is able to use the available resources
(Medvedev, 2012).
In the modern theory of strategic management considerable emphasis is made on the internal
organizational variables as determinant of the competitive position of the company. One of the
variables is the quality of the human resources in the company and management's ability to
allocate these resources. So the main purpose of this study is to investigate the role of HRD for
international competitiveness of Russian MNCs.
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Theoretical Background
The source of International competitiveness
The openness of national markets, the reduction of trade barriers and the whole process of
globalization and internationalization have led to such intense competition that companies
everyday face new threats. These could be new substitute products, the bankruptcy of suppliers,
changes in tax legislation, exchange rates, the global crisis, and etc. So the topic of international
competitiveness is currently central and is studied by many researchers from various economic
disciplines. There is no generally accepted definition of "international competitiveness". Based
on the analysis of some of them, we suggest that international competitiveness is the actual or
potential ability of the company to meet customers’ needs in the foreign markets and compete
with other market players by product’s quality, price, placement, etc.
The world's leading researchers in the field recognize that the main criteria for identifying
competitive company are the market share and profitability. The positive dynamics of these
indicators in the long term, says that the company's product is in demand that means – it’s
competitive, the industry in which the company operates is strengthening in the domestic or
foreign markets, and it contributes to the national economy as workplaces, taxes, fees and other
payments (Snowdon and Stonehouse, 2006).
The most complex system of sources of competitive advantage has been proposed by the
scientist in the field of strategic management R. Grant (2002). One suggested approach is to the
allocation of the internal and external sources. The external sources include, for example,
changes in consumer tastes, the emergence of new products and services on the market, the new
directions of foreign policy, changes in world oil prices, and etc. The internal sources of the
company are its resources and business processes that determine the nature and speed of reaction
to external changes. So the quality of the internal environment also leads to an increase or a loss
of competitiveness.
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Since the company’s environment is uncertain and unstable, it is almost impossible to control or
even predict future changes and to be proactive. That is why the need to build a competitive
business on the basis of internal resources and competences became a topical issue in the 90s.
According to this approach, the company is seen as a special combination of resources and
expertise, and these resources and competences are the primary determinants of its strategy
(Barney, 1991). Thus, the company should not neglect the importance of the internal resources to
ensure the competitiveness and not merely to improve its quality for the benefit of current
business, but also look for new opportunities to use the available resources.
Moreover, the company receives a competitive advantage, not when implementing the strategy
that creates value and can not be simultaneously introduced by competitors, but when
competitors can not duplicate benefits of this strategy. On the basis of this statement, there are
four properties required of the internal resources, particularly human resources to create
competitive advantage (Barney, 1991):
value: created by correlating individual competences of the candidate to the
requirements of the organization and work, because an employee can contribute to
the success of the company, and it is difficult to replace him by another employee;
rarity is associated with cognitive abilities of employees, for example, the number
of talented employees is limited, and many companies are now faced with a
shortage of talented employees they need;
inimitability: the competitors can not identify the specific source of competitive
advantage in the mass of human resources. Moreover, they can not copy a unique
situation as a result of the history of this company, as well as the norms and values
that now influence the behavior within the team;
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not substitutable: human resources can be replaced in the short term by technology,
but in the long term – not, because the same human resources can be used in the
production of various goods and services (as opposed to technology).
Lepak and Snell (1999) conclude that the resource-based view emphasizes the strategic
importance of competencies based on knowledge, in terms of their direct connection with
achieving and maintaining a competitive advantage. Key competences should be developed
within the organization, while other may be submitted for outsourcing. We can say that human
resources play a key role because it is the only resource that can accumulate, apply and transfer
existing knowledge. The knowledge generated by the company itself or acquired by it, which
allow to predict changes, to create innovations and to make the strategic decisions, gives the
competitive advantage to the company. In the XXI century, the ability to create, share and
increase knowledge replaces possession and / or control of the assets as the primary source of
competitive advantage (Klochko, 2012). We suggest that now the ability to create, accumulate,
share and transfer knowledge is a core source of international competitiveness.
So as employees are the only resources of the company that are able to create, accumulate, share
and transfer knowledge, human resources is seen as main source of value, economic growth and
international competitiveness (Barney, 1991; Pfeffer, 1994; Prahalad and Hamel, 1990). The
competitive position of the leading international companies are increasingly determined by the
knowledge, experience, activity, disclosure of creativity involved in a common cause and
responsibility of key personnel. Thus, to be able to meet market and organization developments,
employees need to develop as well.
HRD as factor for developing company’s competitiveness
In recent years, companies seek to increase the effectiveness of human resources through the
creation of optimal working conditions and enhancing knowledge workers. Training and
retraining, skills development is directly related to the problem of creation, preservation and
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maintenance of the company's global competitive advantage. Investments in the human resources
are seen as investments in the company's competitiveness.
However, Kleiner (2012), as one of the major obstacles enhances the competitiveness of Russian
companies, calls "dis-management" that presents at all levels of governance. At the company’s
level it is manifested in the conflict of interests of major groups: owners, managers, professionals
and employees, which significantly reduces the efficiency of the using of human potential.
Significance of the "dis-management" exacerbated in the modern situation of the labor market.
Most current research on issues of strategic human resource management focuses on the global
problem of skills shortages (Grant Thornton International…, 2011). One of the most effective
approaches to solving the problem of attracting, retaining and effective use of qualified
personnel is the development and introduction of the concept, which is called “human resource
development (HRD)”.
The literature presents two approaches to the problem of HRD. First, a narrow, refers to the
development of such practices as learning, career planning, training. This direction is
characterized by the following key terms: “education”, “learning”, “knowledge acquisition”. The
second approach is systemic in nature and refers to HRD as to “integrated and holistic, conscious
and active approach to improving knowledge of the working activities and behavior with using a
wide range of teaching methods and strategies” (Joy-Matthews, Megginson, and Surete, 2006).
The key definitions it uses are “release of latent possibilities and potential”, “improving or
enhancing the organization object”, “realization of potential”, “movement towards better, more
complex and developed state”. It is obvious that this approach is consistent with the requirements
of strategic management in a modern innovative economy based on knowledge.
Due to the relevance of this issue, in the current literature there are many definitions of "HRD".
It is related to the fact that different authors treat it depending on the subject and the object of
their study. Some authors believe that HRD is an integrated process to improve the efficiency of
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organization by combined use of training and development, career management and
organizational development (McLagan and Suhadolnik, 1989). Others suggest that HRD can be
seen as the process of development and disclosure of employees’ expertise to improve
individual, team, process and organizational performance (Swanson and Holton, 2009). Mankin
(2009) highlights that HRD includes a number of organizational practices that focus on learning:
education, development, job training, career management and continuous professional training,
organizational development, knowledge management and organizational learning. Furthermore,
based on the deep literature review, Hamlin and Stewart (2011) point out four key elements of
HRD:
improvement of individual and group performance;
improvement of organizational performance;
development of knowledge, skills and competences;
strengthening of human potential and personal growth.
Analyzing presented definitions we can suggest that basically for organization HRD means that
new knowledge has to be learned and skills trained. According to Marrewijk and Timmers
(2003): “learning is established when organizations structurally determine the need for
knowledge and a collective competence profile, and use this as a basis for human development”.
Swanson and Holton (2001) argue that HRD is process of employees’ skills development which
is aimed to increase company’s effectiveness. So HRD practices are aimed to promote new
approaches to management and organization of activities in which commitment and flexibility of
employees and their willingness to respond quickly to changing market conditions are assumed
to be a key source of competitive advantage (Ezzamel et al., 1996).
Research on the influence of HRM on organizational performance such as productivity,
efficiency and profitability became the object of attention of many authors (MacDuffie, 1995;
Youndt et al., 1996; Pfeffer, 1998; Collins and Clark, 2003). Authors highlight the importance of
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organizational learning in the relationship between HRM and performance; and they suggest that
innovation is promoted and sustained where HRM practices are in place to manage the three
stages of the organizational learning cycle – the creation, transfer and implementation of
knowledge (Shipton et al., 2005). In the modern literature, there are also a number of studies
devoted particularly to the interdependence of HRD and companies’ performance and
competitiveness. For instance, Ruona (2000) finds a mediating effect of personnel qualification
and efforts on relationship between HRD practices and organizational effectiveness. Many
authors point out that the aim of HRD is to improve company’s performance and effectiveness
(Swanson and Arnold, 1996; Swanson, 1996; Adhikari, 2010). Some authors study HRD in a
particular context and find out positive relation between specific HRD practices and performance
management (Buchner, 2007; Adhikari, 2010). Others admit the importance of HRD for the
company’s competitiveness and effectiveness and offer ways for HRD improvement by
examining HRD strategy; improving perceptions of HRD; improving performance
results; and improving HRD roles and client relationships (Gilley, 1998).
Thus, we believe that the use of specific HRD practices, combined in HRM system, lead to the
creation of certain type of employees’ behavior, which in turn should contribute to achieving
organizational goals and meet the organization’s business strategy.
Methodology
Much attention is now being given to the theory and practice of HRD in developing countries,
which include Russia. Nevertheless, the analysis of information sources shows that to the date
there is no systematic research, combining the concept of strategic management and HRD as a
means of achieving the objectives of competitiveness of Russian MNCs in the global
environment.
The purpose of the pilot study is to find out particular HRD practices, which is used in
competitive Russian MNCs.
Following criteria was used to identify competitive MNCs:
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the share of international operations;
number of employees;
raise of the operational profit for the research period.
Table 1 presents the sample that is going to be analyzed in the pilot study.
Table 1 Sample characteristics
Company Industry
Operational
profit growth
(2011-2012)
Number of
employees
OJSC AvtoVAZ Car manufacturing 194% 66052
OJSC ALROSAProduction of natural
diamond4% 31183
OJSC VTB Bank Banking 21% 11620
OJSC VimpelCom Telecommunication 38% 21463
OJSC LSR group Construction 23% 18
OJSC Dixy group Retail network 30% 560
OJSC KAMAZ Car manufacturing 117% 42196
OJSC M.video Retail network 17% -
OJSC Lenenergo Fuel & energy complex 228% 6056
OJSC LUKOIL Oil and gas 3% 1969
OJSC MegaFon Telecommunication 20% 16587
OJSC Moscow Exchange Investment 31% 898
OJSC MRSK Volgi Energy 48% 22709
OJSC OGK-2 Energy 191% 9887
PJSC Uralkali Mining industry 6% 11843
CJSC SCAA LenSpetsSMU Construction 12% 229
OJSC TGC-1 Energy 40% 7097
OJSC AK Transneft Oil and gas 13% 881
OJSC Enel Russia Energy 11% 3295
Research Design
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Empirical data will be collected via structured interviews with company’s representatives. The
questionnaire contains 62 items which is divided in 9 sections:
Section 1. The objectives of the organization (11 questions)
Section 2. Decision-making process (3 questions)
Section 3. Training of employees (10 questions)
Section 4. Management (6 questions)
Section 5. Assessment (4 questions)
Section 6. Human Resource Management (4 questions)
Section 7. The values of the organization (1 questions)
Section 8. Management and development of talented employees (7 questions)
Section 9. Information about the organization (16 questions)
There are different types of questions – open, multiple-choice, closed, with a Likert-scale
answers. The questionnaire is a comprehensive tool for assessment of all the spheres of
company’s activities.
Expected Results
Our previous studies devoted to the problem under consideration (Ardishvili, Zavyalova and
Minina, 2011; Zavyalova, Ardishvili and Kosheleva, 2012) showed that there are differences in
the management of human capital and human resources in both developed and developing
countries, which is manifested both at the macro- and microeconomic level. Despite the fact that
several researchers indicates among the factors that increase the competitiveness of Russian
companies, the quality of education and the creative potential of Russian employees (Kleiner,
2012; Hudokormoff, 2005), there is a danger that with traditional management technologies this
advantage will not be used.
The number of Russian MNCs is significantly lower than in developed countries. But, large
Russian companies are already active abroad, including organizing its subsidiaries there.
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In a line with the concept of R. Ramamurti (2009), among a large group of Russian MNCs can
be represented as natural-resources vertical integrators. Some Russian firms focused on
operations in the CIS countries can implement a strategy that is close to the local optimiser
strategy. With the rising prices of factors of production in Russia, for Russian firms it is
increasingly difficult to play the role of low-cost partner. In the activities of Russian
metallurgical corporations can be found some of the elements of the strategy of the global
consolidator. Only a limited number of Russian companies actually implementing a strategy of
global first-mover and owns the advanced technology that could find the global application,
although the idea of technological leadership lies in the concept of increasing of national
competitiveness of Russia. So the purpose of the future empirical research is the study of
approaches to the use of human resources in Russian companies with different strategies in
international markets and to identify the most effective strategies.
Moreover, the results will provide us with HRD activities, which have an influence on the
international competitiveness of Russian MNCs.
Conclusion
Ensuring the competitiveness of businesses in the XXI century, in the context of globalization,
innovation, knowledge and technology, it is becoming more difficult task for companies. The
ability to anticipate changes, to initiate them and quickly make effective strategic decisions
becomes the main factor in proving its leading position in the market.
Among the internal and external sources of international competitiveness crucial role now play
internal resources of the company. The quality and variety of resources and company's ability to
create knowledge define the speed and effectiveness of response to changes in the market
environment.
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Human resources in Russia are characterized by high level of skills and development potential,
which is the leading factor in the formation of the international competitiveness of Russian
MNCs.
In order Russian MNCs can effectively use high human potential, they need to develop and
implement cutting-edge technology for human resource development. The combination of the
availability of labor as a factor of production and highly effective use of methods of working
with personnel will allow Russian MNCs to compete with foreign companies in both domestic
and foreign markets.
For the first time the subject of research in the context of solving problems of improving the
competitiveness of Russian MNCs in the international markets will be the technology of human
resources development. Moreover, to solve practical problems of increasing international
competitiveness of Russian companies will be used the concept of human capital. There will be
also studied the relationship between objective economic indicators of competitiveness,
management technology and human resource development.
The results obtained in this study can be used to improve management technologies in Russian
MNCs seeking to increase competitiveness and enter international markets.
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