Ulrich Jürgens,Martin Krzywdzinski,The new worlds of work: Varieties of work in car factories in the BRIC countries

Reviewed by: Merve Sancak, University of Cambridge, Cambridge, UK

‘New Worlds of Work: Varieties of Work in Car Factories in the BRIC Countries’ by Ulrich Juergens and Martin Krzywdzinski sheds an important light onto ‘worlds of work’ in emerging economies, where they investigate personnel relations, employment systems and human resource management (HRM) practices in key original equipment manufacturers (OEMs). Although the impact of multinational corporations (MNCs) on these countries’ economic development has been widely discussed and MNCs’ work systems constituted a significant part of these debates, a systematic analysis based on comprehensive data was missing. Juergens and Krzywdzinski’s book makes a significant contribution in this regard and provides a detailed empirical analysis of the determinants and outcomes of employment and HRM systems in OEMs located in the BRIC countries.

Juergens and Krzywdzinski compare various elements of HRM ¹ among the global and local OEM plants in the BRICs. The plants they study include Volkswagen and Toyota plants in the BRICs, as well as GAZ from Russia, Mahindra & Mahindra from India and Geely from China. ² They first explore the ‘Toyota Way’ and ‘Volkswagen Way’, and discuss the level of convergence between the two ‘ways’ regarding their HRM practices. Later, they examine the activities of each plant. They utilize different theoretical approaches when discussing the determinants and outcomes of the HRM strategies. On the one hand, to scrutinize the determinants of HRM practices, they apply the theories claiming a convergence towards high performance work practices (HPWPs) (Appelbaum, 2000), those maintaining the importance of the National Employment Systems (Marsden, 1999), and those explaining the cultural influences on work practices (Hofstede, 1980). On the other hand, the authors adopt the discussion on high-road and low-road approaches in development when explaining the outcomes of HRM strategies (Pyke and Sengenberger, 1992).

(a) Similarities

The authors first analyse the patterns of convergence among the OEMs’ HRM practices (Appelbaum, 2000; Macduffie, 1995; Womack et al., 1991). They argue that OEMs adopt similar HRM practices as they pursue lean manufacturing and they maintain that ‘the extraordinary reach of processes of global standardization within companies’ is ‘[o]ne of the overarching findings of our [their] study’ (p. 318). First, they show that there are important similarities between the Toyota and Volkswagen Way. Furthermore, they argue that all studied OEM plants have developed very similar HRM practices as the global OEMs have implemented their home country strategies in host locations, and as local OEMs in the BRICs have applied lean manufacturing and have received HRM consultancy from global companies. The similarities among the case plants include ‘stringent and criteria-based selection; […]; employment security; employee appraisal as the basis for managing careers and for pay differentiation; strict selection procedures for shop floor supervisors and entry into management; team organisation; and decentralisation of responsibility for quality and shop floor involvement in improvement activities’, which constitute some of the core elements of HPWPs (p. 309).

The authors show that all OEMs, both the global and local ones, have stringent criteria when recruiting new workers. For instance, the level of education they require when recruiting new workers is much higher than the average level of education in the BRICs and the managers are selected through meticulous evaluation. Furthermore, all studied plants provide certain training to their newly recruited workers, although the training practices may vary regarding the level of standardization and the length of training. The training content and its provision carry out important commonalities across the plants. For instance, the initial training in all companies aims to familiarize the new workers with their tasks and introduce them to the company. Moreover, training is delivered by more experienced staff and each worker’s progress is recorded in an individual skills matrix.

The plants studied in Juergens and Krzywdzinski’s book also have very similar practices regarding employee appraisal, although the local institutional environment still has important influence on these. First, the authors argue that both Toyota and Volkswagen aim to apply their home country practices in the host locations. Furthermore, both the global and local OEMs prefer internal recruitment for positions requiring higher skills. Therefore, they generate the necessary skills within the firm for these positions rather than externally recruiting experienced individuals. They do this not only because these positions require substantial and specific expertise about the company’s own processes, but also because the companies want to prevent the ‘importation of undesirable behaviours’ (p. 182).

The work organization at the shop floor shows a number of similarities across the studied plants as they adopt the Toyota Production System (TPS). The authors explore two elements of TPS, namely teamwork and shop-floor workers’ involvement in improvement processes. They show that all OEMs organize the shop-floor workers as teams managed by team leaders. Furthermore, all studied OEMs have certain measures to involve the shop-floor workers in improvement processes. However, there is still important variance regarding the organization of the teams and shop-floor workers’ involvement in the improvement processes, which is explained below.

(b) Variance

Despite the abovementioned similarities, the HRM practices in the BRICs carry out significant differences and the authors examine whether it is possible to talk about National Employment Systems (Marsden, 1999) and whether ‘varieties of cultures’ (Jürgens and Krzywdzinski, 2016: 39) result in varieties of HRM practices (Hofstede, 1980, 2006). For this, they investigate the local context’s influence on the global and local OEMs’ HRM strategies. First, they examine if there is a common pattern among the local and global OEMs in the same country, and scrutinize if the same global OEM has the same HRM practices in different countries. The authors find important commonalities in terms of HPWPs’ implementation in the same country and differences among the global OEMs’ plants in different locations. They show the local institutional structures and ‘culture’ as the main factors causing these commonalities and variance.

Training and recruitment practices constitute an important example of variance across the studied plants. Although the OEMs have similar standards regarding their employees’ skill characteristics, they apply different measures to generate those skills because of the variance in their institutional environments, namely their public vocational and education (VET) systems and the labour market structures. First, Toyota and Volkswagen have different training and recruitment practices due to the different institutional structures in their home countries (Thelen, 2004; Yamamura and Streeck, 2003). While Volkswagen relies on the public VET system, Toyota chooses more internal measures for skill development. These OEMs also have tried to import these measures to their plants in the BRICs. However, their capacity to do this significantly depends on the local structures in host countries, which also constitute the main factors shaping the local OEMs’ training and recruitment practices.

The authors suggest that labour market regulations significantly affect workers’ mobility, and thus firms’ recruitment and training preferences. When the mobility is high, it is easier for firms to find skilled workers but costlier to invest in training. Therefore, high labour mobility has brought less firm-level training. Furthermore, the extent and quality of the public VET systems, and firms’ accessibility to those systems have a major influence on firms’ recruitment and training practices. When public VET systems aim generate a skilled workforce, as was the case in Brazil and India, firms develop links with VET institutes and recruit their skilled workers from them. There is also a significant variance between Volkswagen and Toyota plants in host locations. As Volkswagen’s skill generation strategy depends on the public VET system, the local public VET systems have become an important factor affecting the company’s activities in host locations and its ability to apply the home country practices. Therefore, while it is easier to repeat some elements of dual training in locations with public VET systems, such as Brazil, Volkswagen gets engaged with the local policymakers to develop Germany-like structures for dual training in countries with weak public VET systems.

Employee development and pay systems constitute two important elements of HRM systems that are significantly influenced by the local institutional environment and cultural factors. First, the authors show that although the TPS has influenced the OEMs’ practices in this regard, each plant still has its unique HRM strategy shaped by their (home and host) country structures. While Volkswagen has job-based employee development and pay systems, Toyota’s strategy is person-based and the institutional arrangements in Germany and Japan have played a significant role in this. Furthermore, the authors show that traditional and cultural elements regarding employee development in the BRICs have significantly affected the plants’ behaviour, and have created obstacles for the global OEMs to import their home country practices. One example of this is the clientelistic relations among inferiors and superiors at the workplace, which hinders the generation of objective measures for workers’ upgrading. Furthermore, social stratification in these countries, especially in India, prevents the advancement of certain workers and hence inhibits the plants to adopt HPWPs in this regard.

OEMs’ ability to import their home country employee development practices to host locations significantly depends on the local arrangements in each country, and especially their similarities with the OEMs’ home country structures. Juergens and Krzywdzinski suggest two groups of BRIC countries in this regard: those ‘closer to the job-based grading system’ including Brazil and Russia, and those ‘with greater affinity to person-based systems’ such as China and India (p. 184). As a result, they argue that it has been much easier for Volkswagen to apply its home country employee development measures in Brazil and Russia while Toyota has had important difficulties in this regard. Furthermore, as India and China have ‘greater affinity to person-based systems’, Toyota has managed to apply its global practices more easily compared to Volkswagen, which needed to modify its functions in these countries.

Similar to employee development, pay systems are significantly shaped by the local context, creating variation between Volkswagen and Toyota Way as well as among the OEM plants in different countries. The authors argue that the system of collective bargaining, the state regulation on wages, and the characteristics of employer organizations and labour unions constitute the main determinants of the pay systems in the studied plants. Thus, the global OEMs’ ability to import home country practices has been limited and depended on the ‘proximity’ of institutions between their home and host countries. The authors show that Russia and Brazil have pay systems similar to the one in Germany (job-based) while the pay systems in India and China are more similar to Japan (person-based). As a result, Toyota’s attempt to import its home country practices to its plants in Brazil and Russia caused serious conflicts in these locations. Volkswagen, moreover, faced important challenges to apply its home country practices in China and India, and had to adapt them to local conditions. As a result, the OEMs’ pay systems vary substantially within and across the BRICs.

Although the shop-floor is organized as teams and teamwork and workers’ involvement in process improvement are promoted in all plants, these practices differ significantly across the plants due to an ‘interplay of company- and country-specific factors’ (p. 267). First of all, the authors highlight the differences between the Toyota Way and Volkswagen Way and show that work teams in Toyota plants are much smaller than the ones in Volkswagen. This has resulted in a higher number of skilled and responsible workers at the shop floor in Toyota. Similarly, workers’ involvement in process improvement varies between Toyota and Volkswagen, as well as among the plants located in the BRICs. In Volkswagen, process improvement is discussed in yearly workshops which aim to yield defined outcomes and recommendations for improvement. Nonetheless, although team leaders and team members can make suggestions, this is very limited and ‘can scarcely be characterized as democracy’ (p. 269). In contrast in Toyota, all workers, including the shop-floor ones, participate in process improvement, which is carried out through quality circle activities. However, the group leaders still have the main responsibility in ensuring the standards in operations.

Local dynamics in the host locations have significantly influenced the studied plants’ shop-floor organization. Hierarchical relations among workers, authoritarian leadership, as well as seniority-based employee development have created important obstacles to teamwork and the inclusion of lower-rank employees in process development in some countries such as China and India. Similarly, the promotion of competition among workers as part of TPS was refused in Brazil and Russia while it was more welcomed in India and China. Lastly, although the local OEMs including Mahindra & Mahindra, Geely and GAZ adopted some measures regarding teamwork and shop-floor workers’ involvement in the improvement activities, these have remained marginal and those activities are still carried out by more senior staff.

Juergens and Krzywdzinski show industrial relations and employee voice at firm level as another critical issue shaped by the local arrangements in the BRICs. As these countries have followed different paths in their development, they have different industrial relations and union structures, which lead to a variation in their employee voice practices. While the local firms in the BRICs are more familiar with the union dynamics and have developed plant-level industrial relations more suitable to the local context, the global OEMs have had significant challenges in this regard. ³ For instance, in Russia, political conflicts have dominated the industrial relations and this has created important challenges for Volkswagen to develop employee representation at company level similar to its home country practices. In contrast, GAZ has had arm’s length relations with unions and did not develop employee voice mechanisms, resulting in low level of union influence in the company. Volkswagen has faced similar difficulties in China and India while managing industrial relations and employee voice strategies in Brazil has been much easier thanks to this OEM’s higher familiarity with the industrial relations structure in this country. It is important to note that in contrast to other local OEMs in the BRICs, Mahindra & Mahindra has faced significant challenges and could not develop consultation structures because of the contentious and militant union structure in India.

(c) Outcomes

The last aspect investigated by Juergens and Krzywdzinski concerns the outcomes of the OEMs’ HRM practices. This issue has especially been highly debated in the development studies literature. The authors explore whether the BRICs follow a ‘high-road’ in their development, i.e. upgrade to higher value-added production and pursue better employment practices, or a ‘low-road’ and produce low value-added and labour intensive goods. The authors argue that although the OEMs in the BRICs use some forms of precarious employment, such as fixed-term employment and agency work, these practices significantly depend on the national labour regulations and hence vary across countries. For instance, in Brazil, high restrictions on agency work and fixed-term contracts have prevented precarious employment while the OEMs in India and China have been employing interns as cheap unskilled workers. Despite these negativities, the authors maintain that ‘[i]n general, the approaches to training and employee development adopted at the car manufacturers can be seen as foundation stones for a future high-road strategy in the BRICs.’ (p. 316).

Critique

The work by Juergens and Krzywdzinski provides a significant insight about the inner-worlds of OEM plants in the BRIC countries. The data they provide is extremely valuable in that it is the most comprehensive data comparing the global and local OEMs’ activities in different locations. The authors base their analysis on an in-depth qualitative study of 14 OEM plants and extensive interview data collected in four years, comprising 353 interviews in total. At the start of the book, the authors provide a detailed descriptive analysis of the studied plants, the environment surrounding them, as well as the characteristics of employees working in those plants. These help the reader to have a clear understanding about the plants as well as a ‘more personal and individual picture of car workers’ diverse lives and experiences’ (p. 49).

Despite its richness and value for the fields of research on the automotive industry, HRM, and economic development, this study contains certain shortcomings. A major limitation of the book is about its theoretical implications. The authors provide a disclaimer at the start of the book and state that their work is an exploratory study because of ‘the limited extent of research in this specific field’. They still maintain that ‘the research is not “theory free” but rests on a number of initial assumptions and expectations.’ (p. 25). Nonetheless, the book does not go far beyond being a descriptive study in most parts. It discusses some theoretical implications in the conclusion sections of some chapters, yet this remains highly limited and does not explain the contribution of the findings to the research strands mentioned at the start of the book. Furthermore, the discussion on the theoretical implications mainly concentrates on the convergence of HRM systems and the impact of national employment systems, while the discussion on cultural factors and high/low road outcomes of those systems is much more limited.

An important critique of the book concerns its claims about these countries’ prospects to follow a high or a low road approach in their development. The authors make significant generalizations when they argue that these countries will follow a high-road strategy and ignore a number of factors that would lead to different outcomes. First, the authors do not differentiate Toyota’s and Volkswagen’s impact on the local economy and the local employment structures. Although they acknowledge that Toyota’s and Volkswagen’s operations in the host locations vary because of the different requirements for these OEMs to apply their home country practices, they do not discuss the differences in the outcomes of those operations. They state ‘[a]t Volkswagen, vocational training rests on cooperation between the company and external actors (state and educational institutions); in contrast, at Toyota training is a purely internal matter.’ (p. 313). Will these two different activities regarding recruitment and training affect the local labour markets in a similar way? Can Volkswagen’s engagement with public VET systems result in more skill upgrading in locations with higher Volkswagen investments? Is it possible to argue that high-road practices will be restricted to Toyota as its employment systems are mainly at firm level? These questions are important in terms of the BRIC countries’ future development yet remain untouched in the book.

Furthermore, the focus on OEMs makes it difficult to generalize the book’s finding to the whole economy in the BRICs. The OEMs employ a very small part of the workforce in these countries and they have significant power to attract skilled workforce and generate skills in the firm. However, this may not be the case for supplier firms as some suppliers, especially the local and smaller ones, have important challenges regarding these issues (Sancak, forthcoming). Therefore, the OEMs’ ‘worlds of work’ may not be applicable to lower tiers of the automotive – auto parts value chain. Moreover, following a ‘high-road’ approach can be unique to the car industry after all, which actually requires workers with higher skills compared to other sectors such as textile. In fact, an important share of the workforce in these countries remain in low-skilled and precarious jobs, which has resulted in ‘segmented labour markets’ (Doner and Schneider, 2016; Lane and Probert, 2009; Schneider and Karcher, 2010). Therefore, the experience of ‘high-road’ in the car industry may not necessarily bring its diffusion to other spheres of the economy in the BRICs.

Although the BRIC countries studied in Juergens and Krzywdzinski’s book are important examples of later industrializers, the generalizability of this book’s findings for other later industrializers is debatable. The BRICs are the exceptional country cases, especially regarding the car industry, because of the size of their domestic markets. In fact, it was argued that the global OEMs in the BRICs have been carrying out higher value-added activities because of the size of the local economy (Biesebroeck and Sturgeon, 2010). As these OEMs aimed to produce for the domestic market, they needed to understand the local demands, and hence they cooperated with local manufacturers and carried out certain design activities in these locations (Biesebroeck and Sturgeon, 2010). These played an important role in the upgrading of the car industry in the BRICs while other emerging economies did not have such experience and are unlikely to have it (ibid).