Eastern Europe

Looking at Eastern Europe's history, several main events can be identified that have an impact on today's business or cultural situation. First, the two World Wars had a major impact on the creation of the political and economic gap between Eastern and Western Europe, especially the Second World War. Eastern Europe came under the influence of the former Soviet Union, which implied that all countries were under direct political, military and economic control resulting in a very centralized economy. This type of economy had a profound impact on the HRM practices that were used in those countries, which is further explained in the next chapter. Secondly, under Gorbatsjov as the president of the former Soviet Union, contact with Western Europe was sought, resulting in the break-up of the Soviet Union and the start of a new era for Eastern Europe. Slowly, but gradually a shift was realized from a central towards a market economy, again with the necessary implications for (HR) management.

The qualities that were required by managers of Eastern European enterprises were the ability to bargain, the possession of a network of suppliers and purchasers, and the ability to manipulate production and financial data. This style of management was driven by the response to the allocation of resources by a centralized bureaucracy in which rivalry between enterprises for resources led to unnecessary hoarding of materials. The history of Eastern Europe still impacts today's business operations. Many personnel directors and executives have their jobs because of Party connections rather than technical expertise. Creativity and original thinking was not encouraged or reinforced under the centralized government control. Top down communication was the norm. Common US practices such as MBO or 360-degree feedback, or Western European structures such as strong employee involvement or self-management work teams will not be easily transferred to the Eastern European work environment. Business practices that stem from political corruption or organized crime activities are still realities and may violate other countries' laws and ethical norms. Despite the great changes that have occurred in Eastern Europe, western managers must patiently accept these differences and strive to form successful business relationships given environmental and political constraints.

As mentioned before, the dominant political system in Eastern Europe was communism. This implied that a lot of the large companies were state-owned and the government heavily influenced trade unions. The view projected to the outside world by communist governments, was that of in a worker's state, such as the Soviet Union and its Eastern European satellites, the interest of the workers were as one with the government, because the government was controlled by a dictatorship of the proletariat. The problem with such a unitarist system is that it allows for little realistic criticism that might afford changes and reforms to meet real challenges. In theory trade unions were a separate entity from the Communist Party, but in reality they were often controlled by Party members. This meant that under communism, unemployment was unknown due to manipulation with statistical data and hidden unemployment.

The transition from a central to a market economy was initiated together with the transition from a communist to a capitalist political regime, and was started in 1989 after the fall of 'the iron curtain'. This transition had several consequences. First, due to the hidden unemployment and in an attempt to make organizations more efficient and to cut costs, unemployment rose. Still now a major problem faced by Eastern European countries is persistent structural unemployment. Secondly, after a couple of years a lot of state-owned companies were privatized. In these companies usually an employee culture of the planned economy remained. The system of Human Resource Management and industrial relations in Eastern Europe has been undergoing enormous change since 1989 and will continue to do so for some time to come.

The fundamental problem is the transition from a unitarist system, very tightly controlled by communist governments that influenced every corner of the economy, to a more pluralist system operating in some type of free market. It is obvious to most observers that some form of pluralistic balance needs to be achieved to contain uncontrolled free market forces. At present most Eastern European countries are stuck in the transitional phase between these two states. For instance, work habits have changed dramatically - with 50-hour weeks and taking work home more and more the norm. At the same time, absenteeism is low, indicating a strong commitment to the job.

In general, the HRM world is divided in three blocks: Europe, the United States and Japan. Strikingly, two of these groups are perhaps very large in economic power, but are also single countries. Inherently, cultural cohesion in these groups is much larger, because there are not divided by a difference in history, currency, politics or even religion as much as Europe. This means that even though Europe is seen as one of the three clusters in HRM, cultures and therefore management practices very widely. Therefore, due to the large differences between European countries, dealing with Europe as a whole is unjustified and will result in HRM policies that are either wrong for certain countries or get stuck at a too global level. This last option will render them unusable because they could be applied everywhere and don't in effect give specific conclusions or implications. In order to effectively aid managers to develop and manage HRM policies, Europe can be divided into three blocks: Northwest Europe, Mediterranean Europe and Eastern Europe.

Under Eastern Europe also fall Central European countries, such as Poland, Czech Republic and Hungary. Of course this division is highly subjective and can also be brought about in five areas or more, but one has to realize that on the one hand the areas' HRM relevant characteristics must be coherent enough to be able to group and on the other hand, the division can not be realized in too great detail so that the different parts lose its significance in terms of economic and geographic size. Researchers (e.g., Adler, Campbell & Laurent, 1989; Hofstede, 1980) have questioned the universal application of western HR theories and models outside its territory. Research reports that differences in cultures, values and attitudes impact the transferability of HR practices across national boundaries and that these factors must be accounted for when conducting business outside western countries. An possible solution for this problem is to apply western HRM practices to Eastern Europe requires a dual perspective. A dual perspective is a mix of both domestic and imported practices, and recognizes that management practices are influenced by - and bounded by - national culture. Using a dual approach, a customized HRM model integrating both personal and domestic experiences with imported, foreign experiences can be developed.