Comparing National Approaches to Management Training and Development in Europe: An Institutional Perspective

Dr Matias Ramirez School of Management and Organisational Psychology,

Birkbeck Collegem.ramirez@mbs.bbk.ac.uk

Dr Chris MabeySchool of Management and Organisational Psychology,

Birkbeck Collegec.mabey@bbk.ac.uk.

AbstractComparing management development across countries can be associated with two main questions. The first more straightforward question is whether the importance given by firms to the development of managerial skills varies significantly between different countries. The second more challenging question from the point of view of analysis and methodology is whether there are durable and consistent differences in the way managerial skills are developed between countries. This paper uses recent survey data to undertake a comparative analysis of management development across six Western European countries based on an institutional labour market perspective. It suggests while there are visible cross country differences in skills development amongst managers, institutional changes may also challenge some conventional views of how managers are being developed.

Keywords: Management development, national systems, labour markets

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1. IntroductionA broad literature from managerial, human resources and institutional backgrounds suggest that there are durable and consistent differences in the way managerial skills are developed between countries (Thomson et al 2001, Handy 1987, Bournois et al 1997, Lane 1989), although some of these argue that the accelerated pace of globalisation over the last decade is leading to a process of convergence. Nevertheless, while in general there is broad consensus that forms of management development are deeply embedded in the history, culture, educational infrastructure and labour markets of countries, there are also important methodological issues to be resolved around what are the most relevant unit of analyses, how to combine these and the choice of indicators to use.

Given the broad and multifaceted nature of this question, a useful method may be one that relies on a “systems” approach that combines a focus on the individual, the firm and the institutional structures that distinguish country systems of training and skills development. On the one hand, it is possible to draw on a mushrooming literature from the area of human resource management (HRM) that emphasizes the relationship between individual managers and firm level practices. Thus for example, reconciling individual and organisational objectives around the learning firm (Winterton et al 1999, Pedler 1989), matching HRM practices with performance through its link with corporate strategy (Seibert and Hall, 1995) or indeed establishing the links between some of these variables in a more holistic framework of management development (Mabey, 2002) are issues that have been recently addressed in some detail. This reflects a growing recognition that investment in developmental training can significantly improve the motivation, team building capabilities and performance of managers.

On the other hand, from the institutional perspective, a burgeoning literature from the area of comparative societal systems also has potential to enrich our understanding of comparative country analysis of management development. At a general level, it is suggested that the different practices countries undertake in dealing with issues such as training and development represent more than deviations that will disappear as nations advance along a “best practice” trajectory (Hall & Soskice, 2001). Rather, they reflect the existence of different industrial infrastructures and sets of interlocking institutions that shape the paths firms take toward both skill formation and the types of product markets they compete in (Hall & Soskice 2001, Lane 1989, Dore 1986, Boyer 1990, Dosi et al 1988). Hence, although as is often the case, the formal content and label of management skills development between countries may appear similar, the process and definitions behind common terms can diverge significantly. As Lane (1989) comments,

“Although organisational goals may not differ significantly across organisations, courses of action towards reaching these goals do, because action is socially constructed and hence shaped by culture as manifested in societal institutions” (p34).

This methodology, which encompasses the working of labour markets, may help to explain why certain traits in the behaviour of both managers and firms have roots in national systems and stubbornly refuse to disappear in spite of the growing global integration of production and ownership structures. Yet, since the works of Lane (1989) and Dore (1989), more recent empirical comparative analyses of managerial training and development systems from this approach have been absent. Although

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formal descriptions of managerial training and education programmes abound, there has been little attempt to separate out and specifically analyse the functioning of managerial labour markets in societal systems and to integrate this into a more general framework of management development.

This paper therefore provides some recent empirical evidence and analysis of management training and development in a set of countries from Western Europe and frames this within an institutional labour market perspective. In this way, an attempt is made to categorise some of the specific elements of managerial labour markets that can in the future be integrated into a broader systemic framework.

2. A methodology for national comparisons of managerial labour marketsA useful starting point for comparing institutional differences in skills development of managers is Gary Becker’s (1964) distinction between general and firm specific skills. Becker argues that firm specific skills will be of benefit only in the organisation in which skill development takes place. General training on the other hand can be of greater benefit to all firms because the skill is not firm specific. However, unless there exists an institutional mechanism, such as government policy or inter firm agreements to prevent poaching, firms will generally be reluctant to invest in generalist skills, because other firms can free-ride on those firms that have invested in training by offering skilled trainees marginally higher wages, in-so-doing accruing the returns from the investment of others. On the other hand, unless there is a degree of employment security, employees will be reluctant to invest in firm specific skills, for they forfeit employability if they lose their jobs. Many authors, amongst them Estevez-Abe et al (2001), have used this analysis as a starting point to argue that developed industrialised economies tend to adopt specific approaches to training based on important features of their institutional make-up. They argue that three types of skills can be identified: Generalist skills, firms specific skills and also industry specific skills. The latter tend to be vocational type training. Thus, on the one hand northern and central European countries have developed highly coordinated systems of vocational industry training involving employer, state and employee bodies that prevent poaching. This enables high levels of technical and industry specific training to be provided. The so-called Anglo-Saxon countries, such as the UK and particularly the US, adopt a quite different approach. These rely to a greater extent on the forces of demand and supply of skills to determine what skills are generated. Estevez et al (ibid.) argue that in these societies, because coordination between institutions is poor and there is less employment security, generalist training through formal qualifications will be the norm. This assumes employees will pay the cost of their own training, usually through an education system. A third system, based in Japan and to some extent Italy, relies on high levels of firm specific training and job protection.

Table 1 Skill Profiles in 5 European Countries Median length of tenure (years, 1995)

Vocational training Share

Upper secondary/ university education

Skill profile

Germany 10.7 34 81 Firm/industry/occupationalNorway (6.5) 37 82 Industry/occupationalFrance 7.7 28 60 Firm/occupationalDenmark 4.4 31 66 Industry/occupationalUK 5 11 76 Occupational/generalSource: Hall and Soskice (2001). Table 4.3, p170.

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Table 1 above illustrates the training profiles of the labour force in selected countries. Estevez et al (Ibid.) argue that this shows that the UK relies on formal qualifications and generalist skills above specific vocational education. Within the countries that rely on vocational education, the main difference is that while in France the emphasis is on company i.e. firm specific training, Germany, Denmark and Norway rely to a greater extent on a combination of on-the-job training and schools based training, i.e. firm specific and industry training. These different characteristics don’t necessarily indicate that countries using different skills systems are less skill intensive, but that the skill profile of the labour force will shape the types of investment strategies firms are able to undertake.

In this paper the focus is specifically on country differences in relation to management training and skills formation. The discussion will be based on the research conducted on the project: “Continuing training, development and life long learning for managers”, funded by the European Union’s Leonardo fund. This draws on responses to a questionnaire conducted with one line manager and one human resource manager from 700 organisations in 7 European countries. These are the UK, Spain, Germany, Norway, Denmark, Romania and France conducted in 2002. The companies in the questionnaire were randomly picked from comprehensive national databases according to the following criteria. Representative samples of 4 firm size groups were chosen, ranging from between 20 to 100 employees at the minimum to 500 employees and over at the top end. The size distribution between countries was relatively equally weighted, although some differences in industrial structures of national economies are reflected in a small bias towards large firms in Germany and Norway and a small bias towards small firms in Spain. Furthermore, given the restricted sample size, no public sector organizations or utilities were included. This paper will focus on 6 of these 7 countries. Give that institutional developments in Romania respond to a different historical dynamic to that of the other countries, it was felt that this requires a perspective separate to that used in this analysis.

3. Priority given to management development The concept of what is a manager can vary a great deal according to where it is used. In the UK for example, the definition of a manager is extremely loose and can encompass anyone from supervisors to top directors. Many managers in the UK traditionally joined firms straight from secondary education with low levels of formal qualifications (Lane, 1989). In Germany and France on the other hand, engineers-come managers historically attained a high status and the vocational training rivals the rest of the higher education system (Ibid,). In Spain, the common term for managers is directivo, which supposes a high hierarchical position within the company. Although the questionnaire that was used specified that those managers interviewed had a significant level of responsibility, these differences are important from the point of view of understanding the values, attitudes and expectations held by management and their mutual relations.

Nevertheless, in contrast to the wider labour force, it can be relatively safely argued that managers are key carriers of firm specific knowledge and would traditionally command a higher level of trust from organisations than of employees in general. Managers integrate, coordinate, allocate and monitor resources including the tacit knowledge of the firm. For these reasons, developing a coherent programme of skills formation and training is crucial from the point of view of developing competitive advantage.

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To analyse attitudes towards management development and compare practices, a series of questions have been analysed around four principal questions and the responses compared according to country. These are:

1. Commitment toward management development. 2. External or internal forms of training and development. 3. HRD manager views on the most effective means of developing managers. 4. Long-term relationship between managers and firms.

The first question compares the level of commitment of firms in different countries towards management training and development. Thus, the discussion around differences in methods by which skills are attained needs to be put in the context of the importance and priority management training and development is given in different countries. Secondly, firm responses on the degree to which they rely on external and internal forms of training and development are analysed. This follows the previous discussion regarding firm-specific (internal), occupational (industry) and generalist skills (external). The key question for this paper is what sort of skills profile is likely to emerge as a consequence of the different type of training managers receive. The discussion then discusses human resource development manager’s attitudes with respect to what they regard as the most effective means of developing managers. Distinguishing between how managers are developed with what is considered the most effective way of developing managers, allows a distinction to be drawn between the institutional foundations that underpin training and development with the methods HRD managers consider as most effective in developing competencies. Finally a series of responses to questions relating to the level of commitment firms show towards managers themselves in terms of long-term training and retention, as opposed to management development is considered. Combining these questions allows a comprehensive analysis to be made of both the methods used to develop managers, but also of the commitment towards investing in managers and towards managers themselves.

Following the method used by Bournois et al (1994) in their comparisons of management training, the replies of HRD and line managers to specific questions are grouped according to the country of origin of the respondent firm. Figure 1 below measures the response to the question of the priority companies give to management development on a standardised score. Taking an average of line manager and human resource manager scores and comparing the standardised means, it shows that German firms give the highest priority to management development, while French and UK firms give the lowest. Nevertheless, as table 2 in the appendix shows, with exception of Germany, the differences in the mean scores between most countries are not highly significant, suggesting that at least in principle most countries give similar priority to management development.

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Figure 1 Organisation gives high priority to MD.

4. External versus internal approaches to skill formation Given that the ethos towards management development appears not to show substantial differences, we next compare methods of management development. Firstly a comparison is made between the use of internal versus external methods of management development. In figure 2 below (see also tables 3 and 4 in the appendix), HRD managers rank the importance of two methods used for management development on a scale of one to five: qualifications and internal programmes. Here some meaningful differences appear. Although as might be expected in the case of managers, internal programmes are ranked as the most popular methods used in all countries, the UK and Denmark appear to rely to a greater extent on formal qualifications than do other countries in this analysis. This suggests that in these two countries, skill formation for managers is more dependent on courses that carry external accreditation (either in the form of vocational training or general education), in contrast to other countries where skill formation is more reliant on in-house firm specific skills.

Figure 2 Qualifications and internal programmes in management development

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Figure 3 below illustrates the responses from human resource managers on what makes an effective manager on a score of 1 to 5. In other words, rather than responding on how training and development actually takes place, it gauges HRD manager responses on how effective different methods are in making effective managers. In this case it also possible to differentiate between formal qualifications not related to the job (for example degrees), formal education related to the job (for example vocational degrees), experience and education after joining the organisation. The emphasis on institutional variables means that we have left aside responses to inherent personality and ability. In all countries, HRD managers responded that in-house company training and experience are the most effective ways in which managers are developed. This highlights the importance of firm specific skills. In the case of the previous cluster of Denmark and the UK, it however is noticeable that whereas in Denmark vocational education is as important as general education, this is less so in the case of the UK, where vocational courses cover only a small minority of the workforce.

A second significant result is the low value UK managers ascribe to formal education as a means to develop effective managers. This suggests that in the UK, more so than in other countries, formal non-job related qualifications acts as a screening mechanism rather than an effective means of improving managerial skills. By contrast, in the UK it is experience that tends to be more highly valued. Significantly, this can be gained through on-the-job know-how within one or a number of organisations. This reflects the UK’s greater preference for gaining skills through informal and generalist type development. German and Norwegian companies on the other hand continue to emphasise specific internal programmes of company training as most useful for making effective managers.

Figure 3 What makes an effective manager?

5. Long term commitment to managers The final set of indicators illustrated in figure 4 below relate to the longer-term relationship between managers and the firm. This shows firstly HRD manager responses on the commitment by the firm to long-term management development (at least 2 years) and secondly the degree to which managers are expected to remain within the organisation within 5 years. Finally in figure 5, line manager responses to

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whether a career structure exists within the organisation are analysed. Spanish and particularly French HRD managers tend to be more pessimistic regarding long-term retention. Low retention may reflect weak organisational commitment to a long-term relationship with managers, but also may reflect low individual managerial commitment to a long-term relationship with the firm. Thus inter-firm movement of managers between firms can act as a means to enhance personal careers. In either case, low levels of retention can result in disincentives for firms to invest in managerial skills. This is to some extent confirmed by the data that shows both French and Spanish firms showing weaker commitment to long-term management development than other countries.

Figure 4: Long term commitment1

This is despite the fact that, as figure 5 indicates, French firms offer a career path to a larger proportion of their managers than for example the UK, where close to 70% of line managers respond that firms offer no career structure. Denmark on the other hand appears to be the most paternalistic of employers, with internal labour markets for managers covering around 85% of companies.

1 Mean values for all countries were 3.69 for long-term commitment and 3.95 for manager retention on

a 1 to 5 point scale.

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Figure 5 Existence of career structures for managers

6. Categorising management skills and training methods in EuropeThe preceding analysis has shown both the common and contrasting features characterising management development practices in European firms. There have in the past been numerous attempts to fit countries into clear and discrete groups of boxes based on a range of cultural, human resource management and institutional assumptions. However these have often tended to throw up different combinations and have led to confusing sets of typologies emerging (Bournois et al 1994). This underlines the fact that countries are not homogenous and that different combinations will often tend to reflect contrasting methodologies, questions or configuration in the way institutions and cultural values are constructed. Therefore, rather than cluster all the countries according to our predefined sets of variables, a method called discriminate function analysis has been used. This method allows different independent variables (our management development categories) to be combined in such a way that the respondents, to the greatest extent, separate the findings among the dependent variables (i.e. the countries).

The predictor variables used were the following.

Use of internal programmes to develop skills. Use of formal qualifications to develop skills. In-company training as an effective means to develop managers. Experience as an effective means to develop managers. Formal qualifications related to the job as an effective means to develop managers. Formal qualifications unrelated to the job as an effective means to develop managers. Primarily concerned with long-tern development of managers (2 years or more). We expect to retain managers for 5 years or more

The group means were tested and there was statistical difference between country and grouping variables. Discriminant function analysis calculates one less function than the number of groups, although usually only the first two are significant. In this case five functions were calculated, although only the first four are significant. These

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functions accounted for 57.6%, 21.8%, 12.7% and 6.7% of between group variability respectively. Table 5 in the appendix shows that the first discriminate function maximally separates categories of the dependent variable along dimensions consisting of the use of “formal qualifications unrelated to the job as an effective means to develop managers” and “experience as an effective means to develop managers”. Function 1 is therefore related to evaluating two distinct methods for developing managers. Function 2 maximally separates categories of the dependent variable along dimensions consisting of the “use of qualifications for developing managers” and “company training for making effective managers”. This therefore combines an evaluation method with a practice used for developing managers. Function 3 is related to retention and the long-term development of managers, while function 4 focuses on the effectiveness of qualifications related to the job i.e. vocational qualifications. Table 6 in the appendix shows the mean score (group centroid) for each country on each of the functions. Figure 6 plots the first two and most significant functions according to the group centroids.

Figure 6: Plot of 6 countries on two discriminant functions2

This shows that by combining functions 1 and 2, the UK and Germany have approaches towards management development that are quite distinct from other countries. In Germany, companies evaluate experience as by far most important in creating effective managers (function 1) and back this up by relying on in-house training (function 2). Retention of managers in German firms is also high, confirming the fact that experience is specifically related to the importance of firm specific training. The case of the UK shows a less coherent institutional structure. Firms also tend to favour experience as a means to develop managers (function 1), but in practice rely on a combination of non-vocation qualifications (function 2) i.e. generalist

2 DF 1: Maximally separates experience and qualifications unrelated to the job as an effective means to develop managers.DF 2: Maximally separates use of qualifications and company training for making effective managers.

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training and in-house training. This represents a quite different approach to management development. The evidence of the data set for how this links to the longer-term relationship between firms and managers is equivocal. Figure 4 suggested that retention and long-term commitment to management development was similar to other European countries and retention in the UK was not lower than the European average. This suggests that there is no automatic correlation between the use of generalist skills amongst managers and higher turnover. This is despite the fact that line managers in the UK, to a far greater extent than other countries also responded that there was an absence of a career path for them in the firm.

Norwegian, Danish, French and Spanish firms all tend to evaluate formal education more highly than experience as a means to create effective managers. This suggests they rely more on general and vocational skills development for developing managers, than the highly firm specific role of training and development in Germany. Nevertheless, in common with Germany, they also place a high value on in-house company training as a method to train managers.

In relation to function 3, Germany, Norway and Denmark show high levels of retention and long term planning for managers. This tallies with the high emphasis on the development of firm specific skills and developed career structures as institutional theory would suggest. It also emphasises the paternal nature of labour markets in these countries.

Table 7 in the appendix checks the stability of the classification procedure by indicating how well the model predicted how the variables were assigned. It shows that 43.2% of cases were correctly assigned to their countries. This is a good result since it improves the prediction by three times, had the variables been placed in different countries at random. It also shows that the model was best at predicting Germany and UK (60% and 53% respectively), underlining the two quite distinct societal systems towards training and development that have been discussed.

7. Discussion and ConclusionsThe discussion has emphasized some important general characteristics of managerial labour markets. For all countries, the importance of developing firm specific skills was emphasized and in all cases this is backed up by the pre-eminence of internal programmes to develop skills. In the case of Germany this is particularly significant because in contrast to other countries, managers appear to develop their managerial skills almost wholly in-house. This reflects the point made by Lane (1989), that in Germany managers receive extensive managerial training once they have joined the organisation, to strengthen their already strong vocational and technical knowledge.

In the UK it appears that although company training plays an important role, skill profiles are far more generalist in nature. This undoubtedly reflects the general absence of strong coordinated national institutions at managerial level, although contrary to what occurs in the wider labour market, this does not necessarily translate to high turnover of managers. The UK case emphasises the high use of qualifications to develop managers and high regard for experience, but relative to other countries, low emphasis on in-house training and development. This suggests a relative weakness of firm specific skills and greater emphasis on informal learning within and between firms.

The case of Denmark initially at least appeared to have some similarities with the UK, with greater reliance on general qualification for skill development. Denmark is one of the few countries that appears to place a high value on a combination of different methods, reinforcing general, industry and firm specific skills. However this

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reflects its labour market structure that, unlike the UK, combines formal education with a very strong programme of vocational skills, allowing firms to rely less on generalist skills. Denmark’s emphasis on firm specific training and career path for managers, in contrast to France, Spain and the UK, also mark a very close relationship between the firm and its managers.

The pessimistic view of retention of managers in France and Spain is highly significant. The French results contrast with the traditional view of managerial practices espoused by for example Lane (1989), that stress strong internal labour markets, high retention and developed promotion structures for managers. The data may in fact be picking up some quite important changes that have taken place in the French corporate governance system as part of a process of industrial restructuring in the 1990s. During much of the post-war period, the French state played a central role in the promotion of large firms and so-called “national champions”. The large conglomerates that developed were consistent with generalist skills development for managers trained in the Grande Ecoles system, but also strong firm specific promotion structures. During 1990s, the French State consciously retreated from this interventionist role and offered management of large firms the autonomy to restructure (Hancke, 2002). This led to a dismantling of large conglomerates, greater foreign ownership of French firms and strategies based on acquisition and selling off of subsidiaries. Furthermore, Goyer (2001) shows that important elements of the Anglo-Saxon corporate governance structure were introduced to attract international institutional investors. The process of large-scale restructuring may therefore account for shorter-term focus on management development.

One important finding may therefore be that where institutional relations are less co-ordinated, as is the case in the UK, or where the state is less prone to support the coordinating institutions for skills development, as may now be the case in France and Spain, the long-term relationship between firms and managers will be more associated to external cyclical changes in the economy rather than the formal institutional structures in place.

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References

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Winterton, J. and Winterton, R. (1999), Developing Managerial Competence, London, Routledge.

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Appendix Tables

Table 2 Priority to management development

Standardised mean differences (I-J). *. Mean difference is significant at the .05 level.

Table 3 Use of internal programmes

(I-J)Country (J)

Country (I)

Denmark France Germany Norway Spain

DenmarkFrance .41Germany .80* .39Norway .19 -.22 -.61*Spain .30 -.11 -.50* .11UK .004 -.41 -.80* -.19 -.30Standardised mean differences (I-J). *. Mean difference is significant at the .05 level.

Table 4 Use of qualifications

(I-J)Country (J)

Country (I)

Denmark France Germany Norway Spain

DenmarkFrance -.56*Germany -.72* -.16Norway -.55* .01 .17Spain -.60*. .04 .12 .05UK .12 .68* .84* .67* .72*Standardised mean differences (I-J). *. Mean difference is significant at the .05 level.

Country (J)

Country (I) Denmark France Germany Norway SpainDenmark

France -.37Germany .41* .79*Norway .12 .50* -.28Spain -.01 .36 -.42* -.14UK -.24 -.14 -.65* -.36 -.22

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Table 5 Structure MatrixFunction

1 2 3 4 5 Effectiveness of qualifications not

related to job

.840* .103 .156 .007 .350

Effectiveness of Experience

-.239* -.019 -.110 .067 -.053

Use qualifications .057 -.616* .330 .066 .092 Effectiveness of Company training

.015 .488* .284 -.119 -.222

Manager retention -.289 -.015 .758* .354 .400 Long term MD -.178 .249 .511* -.423 .122 Effectiveness of

qualifications related to job

.193 .226 .156 .705* -.300

Use internal programmes

-.235 .422 -.244 .026 .607*

Pooled within-groups correlations between discriminating variables and standardized canonical discriminant functions Variables ordered by absolute size of correlation within function.* Largest absolute correlation between each variable and any discriminant function

Table 6 Functions at Group CentroidsFunction

Country 1 2 3 4 5 DK .647 -.243 .343 9.169E-02 .136 FR .171 -5.184E-02 -.559 -.206 7.420E-02 GE -1.186 .406 .114 4.830E-02 6.233E-02 NO .437 .358 .254 -.308 -9.748E-02 SP .432 .260 -.195 .379 -8.144E-02

UK -.520 -.723 4.168E-02 -5.434E-03 -9.456E-02 Unstandardized canonical discriminant functions evaluated at group means

Table 7 Classification of results Predicted

Group Membership

Total

Countries

DK FR GE NO SP UK

DK 32.7 9.9 5.9 20.8 15.8 14.9 100.0 FR 10.0 39.0 10.0 6.0 18.0 17.0 100.0 GE 4.0 7.1 60.6 3.0 8.1 17.2 100.0 NO 19.0 9.0 15.0 35.0 11.0 11.0 100.0 SP 9.0 23.0 5.0 15.0 39.0 9.0 100.0 UK 7.0 9.0 17.0 5.0 9.0 53.0 100.0

a 43.2% of original grouped cases correctly classified.

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