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HRM in Transition in MNC-Subsidiaries in Hungary and Eastern Europe 2009-2010 (Interim Research report) Budapest 12 May 2011

HR Management in Transition_HU_Eastern Europe 2011

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Page 1: HR Management in Transition_HU_Eastern Europe 2011

HRMinTransition

inMNC-SubsidiariesinHungaryandEasternEurope

2009 - 2010

(InterimResearchreport)

Budapest

12May2011

Page 2: HR Management in Transition_HU_Eastern Europe 2011

CONTENTS

1 Introduction – summarizing conclusions 2

2 Research model and explanations 3

Section A: Subsidiaries analyzed by individual countries, total sample, and total sample without Hungary 5

3 Characteristics of the companies participating in the survey 5

3.1 Company size and legal form 53.1.1 Total number of employees 53.1.2 Revenue 6

3.2 Mandate of the organization 103.3 Origin of the parent company 113.4 Year and form of establishment of the subsidiaries 153.5 Field of operation: sector-industry 173.6 Main directions of development of the companies in the period examined 18

3.6.1 Main strategic issues-orientations 193.6.2 Main competitive factors in the period examined 21

4 CHARACTERISTICS OF THE KEY INDICATORS OF THE HR FUNCTION 23

4.1 Number of HR staff 234.2 The main indicators representing the importance and results of the HR activity 28

4.2.1 Labor cost – operating cost ratio 284.2.2 Age distribution of the employees 304.2.3 Relative weight of the training budget 324.2.4 Level of fluctuation 344.2.5 Time lost due to absence/sickness 36

5 Foreign expats and their roles 39

5.1 Local expats 42

6 The operation of the HR department 44

6.1 The relationship between headquarters and local HR 446.2 Changes in the importance of HR functions 466.3 Typical HR competencies for success 466.4 Primary responsibility of decision making in the main functions of HR 486.5 The role of external HR service providers 51

7 Knowledge management in HR 55

7.1 Personal competency development in HR 557.2 Enablers of HR knowledge flows between the parent company and the subsidiaries 567.3 HR knowledge transfer between the parent company and the subsidiary 56

8 The future tasks of HR 58

8.1 The key business issues, trends for HR to face 588.2 Initiatives to improve the business focus of HR professionals 59

9 Characteristics of the responding individuals 61

9.1 Demographic characteristics and qualification 619.2 Position of the respondents 63

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Section B: Subsidiaries organized into Hungary and in eastern europe and split by ownership 65

10 Characteristics of the companies participating in the survey 65

10.1 Company size and legal form 6510.1.1Total number of employees 6510.1.2Revenue 67

10.2 Mandate of the organization 7110.3 Year and form of establishment of the subsidiaries 7210.4 Field of operation: sector-industry 7510.5 Main directions of development of the companies in the period examined 76

10.5.1Main strategic issues-orientations 7710.5.2Main competitive factors in the period examined 79

11 CHARACTERISTICS OF THE KEY INDICATORS OF THE HR FUNCTION 81

11.1 Number of HR staff 8111.2 The main indicators representing the importance and results of the HR activity 85

11.2.1Labor cost – operating cost ratio 8511.2.2Age distribution of the employees 8711.2.3Relative weight of the training budget 8811.2.4Level of fluctuation 9011.2.5Time lost due to absence/sickness 92

12 Foreign expats and their roles 95

12.1 Local expats 98

13 The operation of the HR department 101

13.1 The relationship between headquarters and local HR 10113.2 Changes in the importance of HR functions 10213.3 Typical HR competencies for success 10313.4 Primary responsibility of decision making in the main functions of HR 10513.5 The role of external HR service providers 109

14 Knowledge management in HR 113

14.1 Personal competency development in HR 11314.2 Enablers of HR knowledge flows between the parent company and the subsidiaries 11414.3 HR knowledge transfer between the parent company and the subsidiary 114

15 The future tasks of HR 116

15.1 The key business issues, trends for HR to face 11615.2 Initiatives to improve the business focus of HR professionals 118

16 Characteristics of the responding individuals 120

16.1 Demographic characteristics and qualification 12016.2 Position of the respondents 123

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1 INTRODUCTION – SUMMARIZING CONCLUSIONS In the research project we examined the HR functions and practical applications of Multinational Company (MNC) subsidiaries in Hungary. The current research is part of a long-term research cooperation – the Central and Eastern European International Research Team (hereinafter CEEIRT) – that is composed of researchers from different universities from the Central and Eastern European (CEE) Region and aimed at examining the changing HR practices and roles in MNC subsidiaries. We seek to understand what trends have emerged in the certain HR practical applications and roles in our area in response to the socio-economic changes in the region and in Hungary. In the pages that follow we summarize the relevant findings in connection with the eight most important topics of the survey. We undertake this analysis first (Section A) by analyzing the findings by country, total sample and total sample without the Hungarian results. Second (Section B) the analysis are reorganized into two samples – Hungary and Eastern Europe – which have been subdivided into American and Canadian firms, German firms, and Other firms and our findings are then based on these 6 groups.

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2 RESEARCH MODEL AND EXPLANATIONS The majority of companies in the competitive sphere in Central and Eastern European (CEE) economies have largely completed those major legal, strategic and structural modifications that followed privatization. They have more or less left the reconstruction of the different company functions behind. With the intensification of competition continuous renewal is now being emphasized. In this situation, the role of human resources becomes particularly important in the private and public sector of these countries. There is a deficit in the HRM (Human Resource Management) literature when it comes to identifying new patterns of Multinational Company (hereafter MNC) involvement and its impact on the HR/HRM activities of these firms.

HRM includes the following functions: HR Planning + Recruitment and Selection + Performance Evaluation + Training and Development + Talent Management + Compensation and Benefits + Industrial and Labour Relations + Employee Communication+HRMS/IT + Other HR related area(s)

This new situation requires new knowledge and a more complete understanding of how people are managed, developed, coordinated, and controlled at MNCs, particularly in the CEE region and specifically in your country. The basic research items can be framed around the following model: The current financial and economic crisis originating in the developed countries has rapidly impacted the world economy. This crisis may negatively impact employment levels at large and medium sized MNC subsidiaries, pressuring MNC Headquarters (HQ) to drastically reduce managerial salary levels. The crisis, however, also provides an opportunity to implement efficient global HR policy responses to enhance the stability of the financial system and stimulate economic growth. Our examination was carried out based on the model shown in the figure below.

Figure 1: Research model

In developing the research model shown in the figure above we implemented international results and several of our own previous surveys. During the analysis we collated the observed picture with the findings of other researchers conducted at the department thus, inter alia, we built on:

HRtoday

(2009)

Keystrategicissues

KeyHRissues

HRroleofHQ

HRroleofsubsidiaries

HRcapabilities&capabilitiesacquisition

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! Models developed in the field of human resource management (Brewster et al, 2004) and

international management (Hill, 2002; Wild et al., 2003). Our own analyses carried out in 2004 involving 42 foreign owned Hungarian subsidiaries based on the integration of these models (Poór, 2009).

! Our domestic and international experience gained during the Cranet1 HR researches being carried out at our department. (Karoliny-Farkas-Poór, 2009; Karoliny-Poór, 2010).

! The results of our collected and published recent theoretical and empirical examinations in the field of knowledge management such as Dobrai-Farkas 2010 and 2008, Dobrai 2008, Dobrai-Farkas 2007, Farkas et al. 2005.)

! Also the research experience we gained over recent years during our analyses in the field of change management (Farkas, 2004), management consulting (Poór, 2010d) and organizational and national culture (Jarjabka, 2009).

! In addition, the most recent HR researches we conducted in relation to the global economic crisis that broke out in 2008 (Fodor-Kiss-Poór, 2010).

In the research we covered the following areas:

! Characteristics of the subsidiaries surveyed: the most important organizational and economic characteristics (origin of the parent company, year of establishment of the subsidiary, main area of operation of the company – sector –, size of the organization – based on revenue and the number of employees – and the evolution of its productivity index, its mandate in the value chain and the main steps, directions of its development).

! Key indicators of the HR function: the number and workload of the staff employed in HR departments, the main indicators representing the importance, results, efficiency characteristics of the HR activity (labor cost – total cost ratio, age distribution of the employees, relative weight of the training budget, level and rate of fluctuation and absenteeism.)

! Most important HR characteristics of the period examined: the importance of the HR function, foreign and Hungarian expats, distribution of roles between central and local HR, the role of local HR in developing and operating the different HRM subsystems, most important key competencies and fundamental sources of professional development of the person interviewed.

! Knowledge management in the field of HR: main directions, methods and characteristics of knowledge flows.

! The future of HR: most significant changes from a HR point of view occurring in the next 12-24 months.

! Data of the respondents: data on the current HR department and its employees. Most of our questions were related to the characteristics of the participating subsidiaries observed in 2009. In some cases (number of staff, revenue and HR efficiency indicators) we collected data from both 2008 and 2009. The statements included in the report were based on the use of descriptive statistical models (frequency, distribution, average). We also presented graphically the data obtained from processing the answers given to several important questions. Several case examples collected during the personal interviews – while ensuring anonymity – were also added to our analysis.

1 CRANET is a non-profit HR research network involving 42 countries and our department is a member since 2004.

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SECTION A: SUBSIDIARIES ANALYZED BY INDIVIDUAL COUNTRIES, TOTAL SAMPLE,

AND TOTAL SAMPLE WITHOUT HUNGARY In this section the analysis is conducted by organizing the responding firms by coutnry in which subsidiary is based in. 3 CHARACTERISTICS OF THE COMPANIES PARTICIPATING IN THE SURVEY 320 foreign owned, legally independent subsidiaries participated in the questionnaire survey. 3.1 COMPANY SIZE AND LEGAL FORM According to the data shown in the table below, the subsidiaries participating in the survey, despite the global financial and economic crisis, generated nearly constant revenue while maintaining the number of full-time employees in the two years examined. Poland and the countries under the label “Rest” did not provide data for 2008.

1. Table: Number of staff and revenue of the participating companies

2008 2009 Number of

employees Revenue in

EUR (million) Number of employees

Revenue in EUR

(million) Total Sample 191,975 33,673 292,697 43,253

Total Sample without Hungary 71,976 4,530 178,724 14,389

Hungary 119,999 29,143 113,973 28,864 Poland 0 0 81,578 7,002 Estonia 1,886 459 16,913 2,730

Romania 24,230 1,520 22,344 1,608 Serbia 20,203 404 23,389 868

Slovakia 21,849 1,145 20,621 1,050 Croatia 3,808 1,003 3,978 755

Rest 0 0 9,901 376 3.1.1 TOTAL NUMBER OF EMPLOYEES Based on the following 3.1.1. and 3.1.2. subpoints we can state that the companies in the survey are split equally between large and small enterpises based on the number of their employees (large enterprises are above 250 persons) or on their revenue. The exceptions are companies in Estonia, Romania, Slovakia, and Croatia. In this relationship it is important to highlight that although a minority of the subsidiaries are SMEs based on their size (number of staff and revenue), all the Hungarian companies analysed are part of larger international companies and thus are regarded as large enterprises from an operational and management point of view.

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2. Table: Number of staff

2008 2009 Total number of employees

of the company

Under 250

251-1000

1001-2000

2001-5000

Over 5000 Total Under

250 251-1000

1001-2000

2001-5000

Over 5000 Total

Total Sample Frequency 79 48 15 16 10 168 154 81 37 24 14 310

Percentage distribution

(%) 47,0% 28,6% 8,9% 9,5% 6,0% 100,0% 49,7% 26,1% 11,9% 7,7% 4,5% 100,0%

Total Sample without Hungary

Frequency 54 21 4 3 4 86 129 81 37 24 14 285

Percentage distribution

(%) 62,8% 24,4% 4,7% 3,5% 4,7% 100,0% 56,6% 26,1% 11,9% 7,7% 4,5% 106,9%

Hungary Frequency 25 27 11 13 6 82 25 25 14 12 6 82

Percentage distribution

(%) 30,5% 32,9% 13,4% 15,9% 7,3% 100,0% 30,5% 30,5% 17,1% 14,6% 7,3% 100,0%

Poland Frequency 0 0 0 0 0 0 41 26 14 7 3 91

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 45,1% 28,6% 15,4% 7,7% 3,3% 100,0%

Estonia Frequency 10 3 0 0 0 13 35 11 3 2 0 51

Percentage distribution

(%) 76,9% 23,1% 0,0% 0,0% 0,0% 100,0% 68,6% 21,6% 5,9% 3,9% 0,0% 100,0%

Romania Frequency 12 5 0 0 2 19 13 5 1 0 2 21

Percentage distribution

(%) 63,2% 26,3% 0,0% 0,0% 10,5% 100,0% 61,9% 23,8% 4,8% 0,0% 9,5% 100,0%

Serbia Frequency 11 5 2 1 1 20 11 5 2 1 1 20

Percentage distribution

(%) 55,0% 25,0% 10,0% 5,0% 5,0% 100,0% 55,0% 25,0% 10,0% 5,0% 5,0% 100,0%

Slovakia Frequency 14 6 2 1 1 24 16 4 2 1 1 24

Percentage distribution

(%) 58,3% 25,0% 8,3% 4,2% 4,2% 100,0% 66,7% 16,7% 8,3% 4,2% 4,2% 100,0%

Croatia Frequency 7 2 0 1 0 10 7 2 0 1 0 10

Percentage distribution

(%) 70,0% 20,0% 0,0% 10,0% 0,0% 100,0% 70,0% 20,0% 0,0% 10,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 6 3 1 0 1 11

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 54,5% 27,3% 9,1% 0,0% 9,1% 100,0%

3.1.2 REVENUE With regard to the revenue we can state that while companies in the lower categories (5-50 billion HUF) could slightly improve their situations, the larger ones (above 50 billion HUF) were able to retain their revenue positions also during the period of the crisis.

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3. Table: Revenue of the subsidiaries participating in the research (million EUR)

2008

Under 5 million

5-20 million

20-50 million

50-100 million

100-500 million

500-1000 million

Over 1000

million Total

Total Sample Frequency 33 25 22 20 32 12 6 150

Percentage distribution (%) 22,0% 16,7% 14,7% 13,3% 21,3% 8,0% 4,0% 100,0%

Total Sample without Hungary

Frequency 25 11 18 6 7 2 0 69

Percentage distribution (%) 36,2% 15,9% 26,1% 8,7% 10,1% 2,9% 0,0% 100,0%

Hungary Frequency 8 14 4 14 25 10 6 81

Percentage distribution (%) 9,9% 17,3% 4,9% 17,3% 30,9% 12,3% 7,4% 100,0%

Poland Frequency 15 0 0 0 0 0 0 15

Percentage distribution (%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 9 4 3 1 1 0 0 18

Percentage distribution (%) 35,7% 28,6% 21,4% 7,1% 7,1% 0,0% 0,0% 100,0%

Romania Frequency 11 7 2 0 2 1 0 23

Percentage distribution (%) 33,3% 38,9% 11,1% 0,0% 11,1% 5,6% 0,0% 100,0%

Serbia Frequency 2 0 3 0 1 0 0 6

Percentage distribution (%) 20,0% 0,0% 60,0% 0,0% 20,0% 0,0% 0,0% 100,0%

Slovakia Frequency 11 0 6 3 1 1 0 22

Percentage distribution (%) 50,0% 0,0% 27,3% 13,6% 4,5% 4,5% 0,0% 100,0%

Croatia Frequency 2 0 4 2 2 0 0 10

Percentage distribution (%) 20,0% 0,0% 40,0% 20,0% 20,0% 0,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0 0

Percentage distribution (%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Under 5 million

5-20 million

20-50 million

50-100 million

100-500 million

500-1000 million

Over 1000 million Total

Total Sample Frequency 67 54 31 33 51 16 8 260

Percentage distribution (%) 25,8% 20,8% 11,9% 12,7% 19,6% 6,2% 3,1% 100,0%

Total Sample without Hungary

Frequency 59 39 27 21 24 7 2 179

Percentage distribution (%) 33,0% 21,8% 15,1% 11,7% 13,4% 3,9% 1,1% 100,0%

Hungary Frequency 8 15 4 12 27 9 6 81

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2009

Under 5 million

5-20 million

20-50 million

50-100 million

100-500 million

500-1000 million

Over 1000 million Total

Percentage distribution (%) 9,9% 18,5% 4,9% 14,8% 33,3% 11,1% 7,4% 100,0%

Poland Frequency 18 15 4 9 12 4 1 63

Percentage distribution (%) 25,0% 25,0% 6,7% 15,0% 20,0% 6,7% 1,7% 100,0%

Estonia Frequency 4 10 10 4 5 1 0 34

Percentage distribution (%) 37,5% 20,8% 20,8% 8,3% 10,4% 2,1% 0,0% 100,0%

Romania Frequency 2 8 1 0 2 1 0 14

Percentage distribution (%) 42,9% 38,1% 4,8% 0,0% 9,5% 4,8% 0,0% 100,0%

Serbia Frequency 0 1 3 0 2 0 1 7

Percentage distribution (%) 36,4% 9,1% 27,3% 0,0% 18,2% 0,0% 9,1% 100,0%

Slovakia Frequency 0 1 6 2 1 1 0 11

Percentage distribution (%) 50,0% 4,5% 27,3% 9,1% 4,5% 4,5% 0,0% 100,0%

Croatia Frequency 0 3 1 2 2 0 0 8

Percentage distribution (%) 20,0% 30,0% 10,0% 20,0% 20,0% 0,0% 0,0% 100,0%

Rest Frequency 0 1 2 4 0 0 0 7

Percentage distribution (%) 0,0% 14,3% 28,6% 57,1% 0,0% 0,0% 0,0% 100,0%

4. Table: Productivity index of the subsidiaries examined (EUR/person)

2008 2009

Number of employees

Revenue in EUR

(thousand EUR)

Average revenue per employee

(EUR/person)

Number of employees

Revenue in EUR

(thousand EUR)

Average revenue per employee

(EUR/person) Total

Sample 191,975 33,672,805 175,402 292,697 43,252,961 147,774

Total Sample without Hungary

71,976 4,530,115 62,939 178,724 14,388,671 80,508

Hungary 119,999 29,142,690 242,858 113,973 28,864,290 253,256 Poland 0 0 0 81,578 7,001,580 85,827 Estonia 1,886 458,500 243,107 16,913 2,730,250 161,429

Romania 24,230 1,519,702 62,720 22,344 1,607,886 71,961 Serbia 20,203 403,900 19,992 23,389 868,000 37,111

Slovakia 21,849 1,145,463 52,426 20,621 1,050,305 50,934 Croatia 3,808 1,002,550 263,275 3,978 754,650 189,706

Rest 0 0 0 9,901 376,000 37,976 As the result of the trends in the number of employees and in the revenue reviewed above, the average productivity index has decreased for the total sample from a low level of 175 thousand EUR/person in

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2008 to 147 thousand in 2009 in the companies examined. The averages increased for Hungary by 104%, Romania (115%) and Serbia (186%) while they decreased for Estonia (66%), Slovakia (97%) and Croatia (72%).

5. Table: Revenue per employee (thousand EUR/person)

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Revenue per employee (thousand EUR/person)

2008

Under 5 thousand EUR Frequency 146 67 79 0 14 18 5 22 8 0

Percentage distribution

(%) 97,3% 97,1% 97,5% 0,0% 100,0% 100,0% 100,0% 100,0% 80,0% 0,0%

5-10 thousand EUR Frequency 2 1 1 0 0 0 0 0 1 0

Percentage distribution

(%) 1,3% 1,4% 1,2% 0,0% 0,0% 0,0% 0,0% 0,0% 10,0% 0,0%

10-20 thousand EUR Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

20-40 thousand EUR Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

40-60 thousand EUR Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

60-100 thousand EUR Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

100-150 thousand EUR Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Over 150 thousand EUR Frequency 2 1 1 0 0 0 0 0 1 0

Percentage distribution

(%) 1,3% 1,4% 1,2% 0,0% 0,0% 0,0% 0,0% 0,0% 10,0% 0,0%

Total Frequency 150 69 81 0 14 18 5 22 10 0

Percentage distribution

(%) 100,0% 100,0% 100,0% 0,0% 100,0% 100,0% 100,0% 100,0% 100,0% 0,0%

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Revenue per employee (thousand EUR/person)

2009

Under 5 thousand EUR

Frequency 254 174 80 58 47 21 11 22 8 7

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Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Revenue per employee (thousand EUR/person)

2009

Percentage distribution

(%) 97,7% 97,2% 98,8% 96,7% 97,9% 100,0% 100,0% 100,0% 80,0% 100,0%

5-10 thousand EUR

Frequency 2 2 0 1 0 0 0 0 1 0

Percentage distribution

(%) 0,8% 1,1% 0,0% 1,7% 0,0% 0,0% 0,0% 0,0% 10,0% 0,0%

10-20 thousand EUR

Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

20-40 thousand EUR

Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

40-60 thousand EUR

Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

60-100 thousand EUR

Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

100-150 thousand EUR

Frequency 0 0 0 0 0 0 0 0 0 0

Percentage distribution

(%) 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Over 150 thousand EUR

Frequency 4 3 1 1 1 0 0 0 1 0

Percentage distribution

(%) 1,5% 1,7% 1,2% 1,7% 2,1% 0,0% 0,0% 0,0% 10,0% 0,0%

Total Frequency 260 179 81 60 48 21 11 22 10 7

Percentage distribution

(%) 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

3.2 MANDATE OF THE ORGANIZATION We also examined how much control these organizations have over the entire value chain. This examination was based on organizations’ responses to which mandate they operated under. These mandates are defined as follows:

1) "Mandate 1" This is a business which markets into the local trading area products manufactured centrally. The business is a small-scale replica of the parent.

2) "Mandate 2" This is a business operating a designated set of component parts for a multi-country or global market. Operational activities locally will be confined to at most packaging, bulk breaking, some final processing and warehousing distributing.

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3) "Mandate 3" This is a business that does not have control of the entire value chain of a business

unit but has activities in a number of parts of the value chain. This might be a preparation of manufacturing activities or a regional logistics brief (responsibility).

4) "Mandate 4" This is a business that develops and markets a limited product service for global markets. Products, markets or basic technologies are similar to the parent company, but exchanges between the subsidiary and the parent are rare.

5) "Mandate 5" This is a business that has the freedom and resources to develop lines of business for either a local, multi-country or a global market. The subsidiary is allowed unconstrained access to global markets and freedom to pursue new business opportunities.

The origin of the mandate model described above goes back to Porter’s (1980) value chain model. During the analysis, after Delany (1998) and White-Poynter (1984), we classified the participants into five groups based on how much of the value chain is covered by the range of activities of the local subsidiary. Based on the responses it can be stated that the mandates of 20% or more of the companies analyzed in the total sample indicated their mandates as either mandate 4 (23%) or 5 (20%). In most regions organizations indicated operating under several mandates with mandate 3 being indicated most often from 23% of organizations in Romania up to 55% of organizations in Croatia. The other popular mandates indicated were mandates 4 and 5. In Hungary 35% organizations indicated operating under mandate 4.

6. Table: Mandates of the companies participating in the survey

Roles and mandates

of your subsidiary

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Mandate 1 Frequency 63 49 14 21 14 5 3 5 0 1

Percentage distribution

(%) 19,9% 21,1% 16,7% 22,1% 28,6% 22,7% 15,0% 20,8% 0,0% 9,1%

Mandate 2 Frequency 54 48 6 25 6 4 6 4 3 0

Percentage distribution

(%) 17,1% 20,7% 7,1% 26,3% 12,2% 18,2% 30,0% 16,7% 27,3% 0,0%

Mandate 3 Frequency 64 45 19 10 8 5 5 7 6 4

Percentage distribution

(%) 20,3% 19,4% 22,6% 10,5% 16,3% 22,7% 25,0% 29,2% 54,5% 36,4%

Mandate 4 Frequency 71 41 30 16 6 5 3 6 2 3

Percentage distribution

(%) 22,5% 17,7% 35,7% 16,8% 12,2% 22,7% 15,0% 25,0% 18,2% 27,3%

Mandate 5 Frequency 64 49 15 23 15 3 3 2 0 3

Percentage distribution

(%) 20,3% 21,1% 17,9% 24,2% 30,6% 13,6% 15,0% 8,3% 0,0% 27,3%

Total Frequency 316 232 84 95 49 22 20 24 11 11

Percentage distribution

(%) 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

3.3 ORIGIN OF THE PARENT COMPANY The subsidiaries participating in the survey in the total sample came from 35 different countries. More than 60% of them came from the following seven countries: Germany (19%), USA (13%), Sweden (6%),

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France (6.6%), Austria (5.7%), and Hungary and Finland (5.4% each), while another 13 countries account for another nearly 27% and the remaining 13% is accounted by 15 countries.

7. Table: Origin of the parent companies of the participating companies

Total Sample Total Sample without Hungary Hungary Poland

Origin of the parent company Frequency %

distribution Frequency % distribution Frequency %

distribution Frequency % distribution

Austria 18 5,7% 18 7,2% 0 0,0% 6 6,3%

Belgium 2 0,6% 1 0,4% 1 1,5% 0 0,0%

Canada 4 1,3% 4 1,6% 0 0,0% 0 0,0%

Croatia 1 0,3% 1 0,4% 0 0,0% 0 0,0%

Cyprus 1 0,3% 1 0,4% 0 0,0% 1 1,1%

Czech R. 8 2,5% 8 3,2% 0 0,0% 1 1,1%

Denmark 7 2,2% 7 2,8% 0 0,0% 2 2,1%

Estonia 5 1,6% 5 2,0% 0 0,0% 0 0,0%

Finland 17 5,4% 16 6,4% 1 1,5% 3 3,2%

France 21 6,6% 14 5,6% 7 10,8% 10 10,5%

Germany 60 19,0% 40 15,9% 20 30,8% 22 23,2%

Great Britain 14 4,4% 11 4,4% 3 4,6% 4 4,2%

Greece 1 0,3% 1 0,4% 0 0,0% 1 1,1%

Hungary 17 5,4% 17 6,8% 0 0,0% 9 9,5%

Ireland 5 1,6% 5 2,0% 0 0,0% 4 4,2%

Israel 2 0,6% 1 0,4% 1 1,5% 0 0,0%

Italy 9 2,8% 8 3,2% 1 1,5% 0 0,0%

Japan 9 2,8% 4 1,6% 5 7,7% 3 3,2%

Latvia 2 0,6% 2 0,8% 0 0,0% 0 0,0%

Luxemburg 3 0,9% 3 1,2% 0 0,0% 0 0,0%

Mexico 1 0,3% 1 0,4% 0 0,0% 1 1,1%

Netherlands 6 1,9% 3 1,2% 3 4,6% 1 1,1%

Norway 4 1,3% 4 1,6% 0 0,0% 2 2,1%

Poland 11 3,5% 11 4,4% 0 0,0% 0 0,0%

Romania 5 1,6% 5 2,0% 0 0,0% 0 0,0%

Russia 1 0,3% 1 0,4% 0 0,0% 0 0,0%

Serbia 1 0,3% 1 0,4% 0 0,0% 0 0,0%

Slovakia 1 0,3% 1 0,4% 0 0,0% 0 0,0%

Slovenia 1 0,3% 1 0,4% 0 0,0% 0 0,0%

South Africa 1 0,3% 0 0,0% 1 1,5% 0 0,0%

South Korea 4 1,3% 3 1,2% 1 1,5% 2 2,1%

Spain 4 1,3% 4 1,6% 0 0,0% 2 2,1%

Sweden 20 6,3% 18 7,2% 2 3,1% 3 3,2%

Switzerland 9 2,8% 8 3,2% 1 1,5% 6 6,3%

USA 41 13,0% 23 9,2% 18 27,7% 12 12,6%

Total 316 100,0% 251 100,0% 65 100,0% 95 100,0%

Page 15: HR Management in Transition_HU_Eastern Europe 2011

Estonia Romania Serbia Slovakia

Origin of the parent company

Frequency % distribution Frequency % distribution Frequency % distribution Frequency %

distribution

Austria 1 1,5% 2 6,1% 0 0,0% 5 18,5%

Belgium 0 0,0% 2 6,1% 0 0,0% 5 18,5%

Canada 4 6,1% 0 0,0% 0 0,0% 0 0,0%

Croatia 4 6,1% 0 0,0% 1 5,6% 0 0,0%

Cyprus 0 0,0% 0 0,0% 0 0,0% 0 0,0%

Czech R. 1 1,5% 0 0,0% 0 0,0% 0 0,0%

Denmark 3 4,5% 0 0,0% 0 0,0% 1 3,7%

Estonia 0 0,0% 5 15,2% 0 0,0% 0 0,0%

Finland 11 16,7% 5 15,2% 0 0,0% 1 3,7%

France 2 3,0% 5 15,2% 1 5,6% 0 0,0%

Germany 3 4,5% 7 21,2% 3 16,7% 3 11,1%

Great Britain 2 3,0% 2 6,1% 0 0,0% 1 3,7%

Greece 0 0,0% 0 0,0% 0 0,0% 0 0,0%

Hungary 0 0,0% 0 0,0% 3 16,7% 3 11,1%

Ireland 2 3,0% 0 0,0% 0 0,0% 0 0,0%

Israel 1 1,5% 0 0,0% 0 0,0% 0 0,0%

Italy 1 1,5% 1 3,0% 2 11,1% 1 3,7%

Japan 1 1,5% 0 0,0% 0 0,0% 0 0,0%

Latvia 2 3,0% 0 0,0% 0 0,0% 0 0,0%

Luxemburg 1 1,5% 0 0,0% 0 0,0% 0 0,0%

Mexico 0 0,0% 0 0,0% 0 0,0% 0 0,0%

Netherlands 0 0,0% 1 3,0% 0 0,0% 0 0,0%

Norway 1 1,5% 0 0,0% 1 5,6% 0 0,0%

Poland 10 15,2% 1 3,0% 0 0,0% 0 0,0%

Romania 0 0,0% 0 0,0% 5 27,8% 0 0,0%

Russia 0 0,0% 0 0,0% 0 0,0% 1 3,7%

Serbia 0 0,0% 0 0,0% 0 0,0% 1 3,7%

Slovakia 0 0,0% 0 0,0% 0 0,0% 0 0,0%

Slovenia 0 0,0% 0 0,0% 0 0,0% 0 0,0%

South Africa 0 0,0% 0 0,0% 0 0,0% 0 0,0%

South Korea 1 1,5% 0 0,0% 0 0,0% 0 0,0%

Spain 1 1,5% 1 3,0% 0 0,0% 0 0,0%

Sweden 11 16,7% 0 0,0% 1 5,6% 2 7,4%

Switzerland 1 1,5% 0 0,0% 0 0,0% 0 0,0%

USA 2 3,0% 1 3,0% 1 5,6% 3 11,1%

Total 66 100,0% 33 100,0% 18 100,0% 27 100,0%

Page 16: HR Management in Transition_HU_Eastern Europe 2011

Croatia Rest

Origin of the parent company Frequency % distribution Frequency % distribution

Austria 1 4,3% 3 16,7%

Belgium 0 0,0% 3 16,7%

Canada 0 0,0% 0 0,0%

Croatia 0 0,0% 0 0,0%

Cyprus 0 0,0% 0 0,0%

Czech R. 6 26,1% 0 0,0%

Denmark 6 26,1% 1 5,6%

Estonia 0 0,0% 0 0,0%

Finland 0 0,0% 1 5,6%

France 1 4,3% 0 0,0%

Germany 1 4,3% 1 5,6%

Great Britain 0 0,0% 4 22,2%

Greece 0 0,0% 0 0,0%

Hungary 2 8,7% 0 0,0%

Ireland 1 4,3% 0 0,0%

Israel 0 0,0% 0 0,0%

Italy 0 0,0% 1 5,6%

Japan 0 0,0% 0 0,0%

Latvia 0 0,0% 0 0,0%

Luxemburg 0 0,0% 0 0,0%

Mexico 0 0,0% 0 0,0%

Netherlands 1 4,3% 0 0,0%

Norway 0 0,0% 0 0,0%

Poland 0 0,0% 0 0,0%

Romania 0 0,0% 0 0,0%

Russia 0 0,0% 0 0,0%

Serbia 0 0,0% 0 0,0%

Slovakia 1 4,3% 0 0,0%

Slovenia 0 0,0% 1 5,6%

South Africa 0 0,0% 0 0,0%

South Korea 0 0,0% 0 0,0%

Spain 0 0,0% 0 0,0%

Sweden 1 4,3% 0 0,0%

Switzerland 0 0,0% 1 5,6%

USA 2 8,7% 2 11,1%

Total 23 100,0% 18 100,0%

Page 17: HR Management in Transition_HU_Eastern Europe 2011

Figure 2: Origin of the parent company (% distribution) s of the participating companies

3.4 YEAR AND FORM OF ESTABLISHMENT OF THE SUBSIDIARIES Over 40% of the foreign owners of the companies participating in the survey came to Hungary realizing greenfield investments and over 50% of them obtained majority control in Hungarian companies during the privatization and the following acquisitions. In the total sample one-third of the subsidiaries were established between 1990 and 1995 (31.2%), Over one quarter (26.0%) of the companies settled between 2001 and 2005, while 23.1% of subsidiaries were established between 1996 and 2000 and the remaining ones (17.9%) in the new millennium.2. In each of 2 The great migration to Hungary took place in the ’90s – in contrast with for example the neighbouring Slovakia where this occurred between 2002 and 2007. Many of the large multinational companies present in Hungary have been operating here continuously for about one and a half decades. However, the actors of some industries (e.g. automotive suppliers) move very fast. If the situation is not favorable, these companies walk away very quickly. However, the decision that these companies stay or leave also depends largely on whether their main buyers stay here or leave. The role of ”cheap manufacturing and service provider” Hungarian subsidiaries with shorter delivery times increased during the crisis.

Page 18: HR Management in Transition_HU_Eastern Europe 2011

the categories for year of establishment the split between companies entering the market through merger and acquisitions and through greenfield investments was fairly even – 46.1% for merger and acquisitions and 44.5% for greenfield investments.

8. Table: Year and mode of entry of the participants

Total Sample Total Sample without Hungary

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total %

distribution Merger,

acquisition Greenfield investment Other Total %

distribution

Before 1990 1 4 1 6 1,9% 0 2 1 3 1,3%

1990-1995 45 45 6 96 31,2% 21 32 5 58 25,1%

1996-2000 33 30 8 71 23,1% 25 19 5 49 21,2%

2001-2005 39 33 8 80 26,0% 37 28 7 72 31,2%

After 2005 24 25 6 55 17,9% 20 23 6 49 21,2%

Total 142 137 29 308 100,0% 103 104 24 231 100,0%

% distribution 46,1% 44,5% 9,4% 100,0% 44,6% 45,0% 10,4% 100,0%

Hungary Poland

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total %

distribution Merger,

acquisition Greenfield investment Other Total %

distribution

Before 1990 1 2 0 3 3,9% 0 1 1 2 2,2%

1990-1995 24 13 1 38 49,4% 8 18 0 26 28,0%

1996-2000 8 11 3 22 28,6% 9 10 2 21 22,6%

2001-2005 2 5 1 8 10,4% 13 14 1 28 30,1%

After 2005 4 2 0 6 7,8% 4 12 0 16 17,2%

Total 39 33 5 77 100,0% 34 55 4 93 100,0%

% distribution 50,6% 42,9% 6,5% 100,0% 36,6% 59,1% 4,3% 100,0%

Estonia Romania

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total %

distribution Merger,

acquisition Greenfield investment Other Total %

distribution

Before 1990 0 1 0 1 1,9% 0 0 0 0 0,0%

1990-1995 6 4 4 14 26,4% 1 2 0 3 14,3%

1996-2000 5 3 2 10 18,9% 3 2 0 5 23,8%

2001-2005 7 4 2 13 24,5% 3 5 0 8 38,1%

After 2005 9 3 3 15 28,3% 1 4 0 5 23,8%

Total 27 15 11 53 100,0% 8 13 0 21 100,0%

% distribution 50,9% 28,3% 20,8% 100,0% 38,1% 61,9% 0,0% 100,0%

Page 19: HR Management in Transition_HU_Eastern Europe 2011

Serbia Slovakia

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total %

distribution Merger,

acquisition Greenfield investment Other Total %

distribution

Before 1990 0 0 0 0 0,0% 0 0 0 0 0,0%

1990-1995 0 0 0 0 0,0% 2 5 0 7 33,3%

1996-2000 3 0 1 4 18,2% 1 3 0 4 19,0%

2001-2005 4 1 3 8 36,4% 6 3 0 9 42,9%

After 2005 5 3 2 10 45,5% 0 1 0 1 4,8%

Total 12 4 6 22 100,0% 9 12 0 72 100,0%

% distribution 54,5% 18,2% 27,3% 100,0% 42,9% 57,1% 0,0% 100,0%

Croatia Rest

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total %

distribution Merger,

acquisition Greenfield investment Other Total %

distribution

Before 1990 0 0 0 0 0,0% 0 0 0 0 0,0%

1990-1995 2 1 0 3 30,0% 2 2 1 5 45,5%

1996-2000 2 1 0 3 30,0% 2 0 0 2 18,2%

2001-2005 4 0 0 4 40,0% 0 1 1 2 18,2%

After 2005 0 0 0 0 0,0% 1 0 1 2 18,2%

Total 8 2 0 10 100,0% 5 3 3 33 100,0%

% distribution 80,0% 20,0% 0,0% 100,0% 45,5% 27,3% 27,3% 100,0%

3.5 FIELD OF OPERATION: SECTOR-INDUSTRY There were 44% of the organizations examined in the total sample engaged in manufacturing and 44% of organizations in trade, tangible and intangible services while 12% of organizations in other industries. In the Hungarian sample 59.5% of the organizations were engaged in manufacturing and 47.5% of organizations in trade, tangible and intangible services whle 13.8% of organizations in other. Other details of the secoral distribution is as follows:

! Nearly 20% of the respondents operate in the service industries in the total sample while in the Hungarian sample nearly 23% of the organizations were in the engineering industry.

! A substantial number of the participants come from the engineering industry (13.9%) and the trade industry (13.6%) in the total sample while substantial participants in the Hungarian sample were in FMCG (13.1%), trade (14.3%), and service (11.9%) industries.

9. Table: Sectoral distribution of the participants

Main sector of

the subsidiary’s

activity

Heavy industry, mining, energy

industry

Light industry Engineering

Chemical and

pharmaceutical

industry

Consumer goods

(FMCG) Trade Services

Financial institutions,

banks Other Total

Total Sample Frequency 31 30 44 10 25 43 60 35 38 316

% distribution 9,8% 9,5% 13,9% 3,2% 7,9% 13,6% 19,0% 11,1% 12,0% 100,0%

Total Sample without Hungary

Frequency 23 25 25 3 14 31 50 29 32 232

% distribution 9,9% 10,8% 10,8% 1,3% 6,0% 13,4% 21,6% 12,5% 13,8% 100,0%

Hungary Frequency 8 5 19 7 11 12 10 6 6 84

Page 20: HR Management in Transition_HU_Eastern Europe 2011

Main sector of

the subsidiary’s

activity

Heavy industry, mining, energy

industry

Light industry Engineering

Chemical and

pharmaceutical

industry

Consumer goods

(FMCG) Trade Services

Financial institutions,

banks Other Total

% distribution 9,5% 6,0% 22,6% 8,3% 13,1% 14,3% 11,9% 7,1% 7,1% 100,0%

Poland Frequency 16 8 16 1 3 7 20 11 11 93

% distribution 17,2% 8,6% 17,2% 1,1% 3,2% 7,5% 21,5% 11,8% 11,8% 100,0%

Estonia Frequency 1 4 5 0 3 6 14 5 13 51

% distribution 2,0% 7,8% 9,8% 0,0% 5,9% 11,8% 27,5% 9,8% 25,5% 100,0%

Romania Frequency 2 3 1 0 1 9 6 0 0 22

% distribution 9,1% 13,6% 4,5% 0,0% 4,5% 40,9% 27,3% 0,0% 0,0% 100,0%

Serbia Frequency 1 5 1 0 3 3 1 5 1 20

% distribution 5,0% 25,0% 5,0% 0,0% 15,0% 15,0% 5,0% 25,0% 5,0% 100,0%

Slovakia Frequency 2 5 1 0 1 4 4 3 4 24

% distribution 8,3% 20,8% 4,2% 0,0% 4,2% 16,7% 16,7% 12,5% 16,7% 100,0%

Croatia Frequency 0 0 1 0 2 1 2 5 0 11

% distribution 0,0% 0,0% 9,1% 0,0% 18,2% 9,1% 18,2% 45,5% 0,0% 100,0%

Rest Frequency 1 0 0 1 1 1 3 0 4 11

% distribution 9,1% 0,0% 0,0% 9,1% 9,1% 9,1% 27,3% 0,0% 36,4% 100,0%

Figure 3: Sectoral distribution of the participants

3.6 MAIN DIRECTIONS OF DEVELOPMENT OF THE COMPANIES IN THE PERIOD EXAMINED

Page 21: HR Management in Transition_HU_Eastern Europe 2011

In relation to the topic indicated in the subtitle, we examined how important the following three strategic orientations were for the respondents:

! growth, market expansion, portfolio expansion, ! stability, efficiency improvement, revenue retention, adapting to the market situation, ! redundancies, rationalization.

3.6.1 MAIN STRATEGIC ISSUES-ORIENTATIONS The majority of the respondents (35%) in the total sample indicated that they were seeking growth and portfolio expansion during the period examined. Almost 35% of the companies surveyed were characterized by stability. The fact that 22.5%, nearly a quarter, of the respondents chose the redundancies and rationalization option indicates a slow recovery from the crisis. Other solutions account for 22% of the answers. A high proportion of Polish and Croatian organizations indicated growth and expansion plans (47.6% and 50% respectively). While the other samples mainly indicated a focus toward seeking stability, for example 38.5% in the Hungarian sample. In the Romanian sample over one third of the organization chose the redundancies and rationalization option.

10. Table: Main strategic issues and orientations

Main

strategic issues,

orientations

Growth, market

expansion, portfolio

expansion

Stability, efficiency

improvement, revenue

retention, adapting to the market situation

Redundancies, rationalization Other Total

Total Sample

Frequency of “yes” answers

153 150 97 32 432

% distribution 35,4% 34,7% 22,5% 7,4% 100,0%

Total Sample without Hungary

Frequency of “yes” answers

122 105 73 15 315

% distribution 38,7% 33,3% 23,2% 4,8% 100,0%

Hungary Frequency

of “yes” answers

31 45 24 17 117

% distribution 26,5% 38,5% 20,5% 14,5% 100,0%

Poland Frequency

of “yes” answers

59 27 34 4 124

% distribution 47,6% 21,8% 27,4% 3,2% 100,0%

Estonia Frequency

of “yes” answers

20 27 15 6 68

% distribution 29,4% 39,7% 22,1% 8,8% 100,0%

Page 22: HR Management in Transition_HU_Eastern Europe 2011

Main

strategic issues,

orientations

Growth, market

expansion, portfolio

expansion

Stability, efficiency

improvement, revenue

retention, adapting to the market situation

Redundancies, rationalization Other Total

Romania Frequency

of “yes” answers

7 11 10 1 29

% distribution 24,1% 37,9% 34,5% 3,4% 100,0%

Serbia Frequency

of “yes” answers

10 16 1 2 29

% distribution 34,5% 55,2% 3,4% 6,9% 100,0%

Slovakia Frequency

of “yes” answers

11 14 6 0 31

% distribution 35,5% 45,2% 19,4% 0,0% 100,0%

Croatia Frequency

of “yes” answers

9 5 4 0 18

% distribution 50,0% 27,8% 22,2% 0,0% 100,0%

Rest Frequency

of “yes” answers

6 5 3 2 16

% distribution 37,5% 31,3% 18,8% 12,5% 100,0%

Figure 4: Main strategic issues and orientations (%)

Page 23: HR Management in Transition_HU_Eastern Europe 2011

3.6.2 MAIN COMPETITIVE FACTORS IN THE PERIOD EXAMINED Optimal plant/organization size was chosen most frequently (21.7%) by the respondents of the total sample to the questions about the most important competitive factros of companies (more then one answer could be marked in this question). Workforce competitive factor (20.7%) followed closely behind as the next most frequent choice. The respondents also deemed financial resources (17.6%), management (16.9%) and production technology (14.5%) to be the next important competitive factors. Production technology reached nearly 20% frequence or more as competitive factor in the Polish sample (19%), Serbian sample 21.3%, and the Rest sample (21.7%).

11. Table: The importance of competitive factors

Competitive factors

Optimal plant/

organization size

Financial resources Workforce Management Production

technology

Protected, regulated

market Other Total

Total Sample

Frequency of “yes” answers

173 141 167 135 116 38 29 799

%

distribution 21,7% 17,6% 20,9% 16,9% 14,5% 4,8% 3,6% 100,0%

Total Sample without Hungary

Frequency of “yes” answers

115 95 125 106 94 31 15 581

%

distribution 19,8% 16,4% 21,5% 18,2% 16,2% 5,3% 2,6% 100,0%

Hungary Frequency

of “yes” answers

58 46 42 29 22 7 14 218

%

distribution 26,6% 21,1% 19,3% 13,3% 10,1% 3,2% 6,4% 100,0%

Poland Frequency

of “yes” answers

48 36 63 51 50 11 3 262

%

distribution 18,3% 13,7% 24,0% 19,5% 19,1% 4,2% 1,1% 100,0%

Estonia Frequency

of “yes” answers

27 23 24 21 14 5 4 118

Page 24: HR Management in Transition_HU_Eastern Europe 2011

Competitive factors

Optimal plant/

organization size

Financial resources Workforce Management Production

technology Protected, regulated

market Other Total

%

distribution 22,9% 19,5% 20,3% 17,8% 11,9% 4,2% 3,4% 100,0%

Romania Frequency

of “yes” answers

9 10 6 10 7 5 3 50

%

distribution 18,0% 20,0% 12,0% 20,0% 14,0% 10,0% 6,0% 100,0%

Serbia Frequency

of “yes” answers

8 9 9 7 10 2 2 47

%

distribution 17,0% 19,1% 19,1% 14,9% 21,3% 4,3% 4,3% 100,0%

Slovakia Frequency

of “yes” answers

12 11 9 5 6 5 2 50

%

distribution 24,0% 22,0% 18,0% 10,0% 12,0% 10,0% 4,0% 100,0%

Croatia Frequency

of “yes” answers

8 3 8 8 2 1 1 31

%

distribution 25,8% 9,7% 25,8% 25,8% 6,5% 3,2% 3,2% 100,0%

Rest Frequency

of “yes” answers

3 3 6 4 5 2 0 23

%

distribution 13,0% 13,0% 26,1% 17,4% 21,7% 8,7% 0,0% 100,0%

Figure 5: The importance of competitive factors

Page 25: HR Management in Transition_HU_Eastern Europe 2011

4 CHARACTERISTICS OF THE KEY INDICATORS OF THE HR FUNCTION In this section we give an overview of the following HR characteristics:

! Number and workload of the HR staff, ! The main indicators representing the importance, results, and efficiency characteristics of

the HR activity (labor cost – total cost ratio, age pyramid, relative weight of the training budget, the fluctuation rate and absenteeism).

4.1 NUMBER OF HR STAFF The average number of employees served by one HR professional decreased from 77 in 2008 to 64 in 2009 in the companies surveyed in the total sample while in the Hungarian sample the ratio (Employees per HR position) increased from 79 in 2008 to 88 in 2009.Increases in the ratio were also seen the Serbian, Slovakian, and Croatian samples. Decreases in the ratio were seen by the Estonian and Romanian samples. In these companies in the total sample nearly 43% of the total number of HR staff carried out administrative tasks while 57% were HR professionals. In the companies in the Hungarian sample 48% of the total number of HR staff carried out administrative tasks while 52% were HR professionals.

12. Table: Number of employees and HR staff in the participating companies (n=63)

2008 HR staff

Number of employees

HR admin staff

HR professional

Total number of HR staff

Employees per HR

position

Total Sample 191 975 1 066 1 451 2 509 77 Total Sample

without Hungary 71 976 446 546 984 73

Hungary 119 999 620 905 1 525 79

Poland 0 0 0 0 0

Estonia 1 886 15 31 38 50

Romania 24 230 204 263 467 52 Serbia 20 203 129 160 289 70

Slovakia 21 849 88 61 149 147

Croatia 3 808 10 31 41 93

Rest 0 0 0 0 0

2009 HR staff

Number of employees

HR admin staff

HR professional

Total number of HR staff

Employees per HR

position

Total Sample 292 697 1 979 2 662 4 605 64 Total Sample

without Hungary 269 308 1 851 2 525 4 340 62

Hungary 23 389 128 137 265 88

Poland 81 578 743 740 1 452 56

Estonia 16 913 228 537 763 22

Page 26: HR Management in Transition_HU_Eastern Europe 2011

2009 HR staff

Number of employees

HR admin staff

HR professional

Total number of HR staff

Employees per HR

position

Romania 22 344 176 227 403 55

Serbia 23 389 128 137 265 88 Slovakia 20 621 76 60 136 152

Croatia 3 978 10 31 41 97

Rest 9 901 38 53 91 109 The HR departments of the companies examined are relatively large as the number of HR staff was higher than 5 persons in the case of more than 52% of the respondents in the total sample in 2009. Fourteen organizations participating in the survey didn’t have an HR department, moreover they didn’t even employ a single HR professional.

13. Table: Number of HR staff

2008

Total

number of HR staff

None 1-4 persons

5-10 persons

11-15 persons

16-20 persons

Over 20 persons Total

Total Sample Frequency 6 73 35 12 9 31 166

% distribution 3,6% 44,0% 21,1% 7,2% 5,4% 18,7% 100,0%

Total Sample without Hungary Frequency

2 48 14 3 7 9 83

% distribution 2,4% 57,8% 16,9% 3,6% 8,4% 10,8% 100,0%

Hungary Frequency 4 25 21 9 2 22 83

% distribution 4,8% 30,1% 25,3% 10,8% 2,4% 26,5% 100,0%

Poland Frequency 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 1 10 3 0 0 0 14

% distribution 7,1% 71,4% 21,4% 0,0% 0,0% 0,0% 100,0%

Romania Frequency 0 5 4 0 2 5 16

% distribution 0,0% 31,3% 25,0% 0,0% 12,5% 31,3% 100,0%

Serbia Frequency 0 12 2 1 2 3 20

% distribution 0,0% 60,0% 10,0% 5,0% 10,0% 15,0% 100,0%

Slovakia Frequency 0 15 3 2 2 1 23

Page 27: HR Management in Transition_HU_Eastern Europe 2011

2008

Total

number of HR staff

None 1-4 persons

5-10 persons

11-15 persons

16-20 persons

Over 20 persons Total

% distribution 0,0% 65,2% 13,0% 8,7% 8,7% 4,3% 100,0%

Croatia Frequency 1 6 2 0 1 0 10

% distribution 10,0% 60,0% 20,0% 0,0% 10,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Total

number of HR staff

None 1-4 persons

5-10 persons

11-15 persons

16-20 persons

Over 20 persons Total

Total Sample Frequency 14 126 67 24 12 52 295

% distribution 4,7% 42,7% 22,7% 8,1% 4,1% 17,6% 100,0%

Total Sample without Hungary Frequency

10 100 49 13 10 30 212

% distribution 4,7% 47,2% 23,1% 6,1% 4,7% 14,2% 100,0%

Hungary Frequency 4 26 18 11 2 22 83

% distribution 4,8% 31,3% 21,7% 13,3% 2,4% 26,5% 100,0%

Poland Frequency 5 34 28 5 4 12 88

% distribution 5,7% 38,6% 31,8% 5,7% 4,5% 13,6% 100,0%

Estonia Frequency 3 20 6 4 2 7 42

% distribution 7,1% 47,6% 14,3% 9,5% 4,8% 16,7% 100,0%

Romania Frequency 1 6 4 1 0 6 18

% distribution 5,6% 33,3% 22,2% 5,6% 0,0% 33,3% 100,0%

Serbia Frequency 0 10 4 1 2 3 20

% distribution 0,0% 50,0% 20,0% 5,0% 10,0% 15,0% 100,0%

Slovakia Frequency 0 16 3 2 1 1 23

% distribution 0,0% 69,6% 13,0% 8,7% 4,3% 4,3% 100,0%

Croatia Frequency 1 6 2 0 1 0 10

% distribution 10,0% 60,0% 20,0% 0,0% 10,0% 0,0% 100,0%

Page 28: HR Management in Transition_HU_Eastern Europe 2011

2009

Total

number of HR staff

None 1-4 persons

5-10 persons

11-15 persons

16-20 persons

Over 20 persons Total

Rest Frequency 0 8 2 0 0 1 11

% distribution 0,0% 72,7% 18,2% 0,0% 0,0% 9,1% 100,0%

In the total sample the average number of employees per HR professional were mostly under 100 employees for 74.9% of the organizations and 94.2% of organizations with 200 persons or less per HR professional. In Hungary 91.6% of organizations have 200 persons or less per HR professional and this pattern is true in the other samples. In the Romanian sample (83.3%) and in the Estonian sample (66.7%) a large number of organizations have under 50 persons per HR employee.3

14. Table: Emloyees per HR professional

2008

Number of employees

per HR professional

Under 50 persons

50-100 persons

101-200 persons

201-500 persons

501-1000 persons

Over 1000 persons Total

Total Sample Frequency 68 55 37 5 1 0 166

% distribution 41,0% 33,1% 22,3% 3,0% 0,6% 0,0%

100,0%

Total Sample without Hungary Frequency 45 22 16 0 0 0 83

% distribution 54,2% 26,5% 19,3% 0,0% 0,0% 0,0%

100,0%

Hungary Frequency 23 33 21 5 1 0 83

% distribution 27,7% 39,8% 25,3% 6,0% 1,2% 0,0%

100,0%

Poland Frequency 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 10 3 1 0 0 0 14

% distribution 71,4% 21,4% 7,1% 0,0% 0,0% 0,0%

100,0%

Romania Frequency 13 1 2 0 0 0 16

% distribution 81,3% 6,3% 12,5% 0,0% 0,0% 0,0%

100,0%

Serbia Frequency 9 6 5 0 0 0 20

% distribution 45,0% 30,0% 25,0% 0,0% 0,0% 0,0%

100,0%

Slovakia Frequency 8 12 3 0 0 0 23 3 It is well known from management theory and practical experience that it is not reasonable to maintain a separate HR apparatus under a certain number of employees (cca. 80-100 persons) within an organization. However, the actual ratio also depends on the industry and the composition of the workforce.

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2008

Number of employees

per HR professional

Under 50 persons

50-100 persons

101-200 persons

201-500 persons

501-1000 persons

Over 1000 persons Total

% distribution 34,8% 52,2% 13,0% 0,0% 0,0% 0,0%

100,0%

Croatia Frequency 5 0 5 0 0 0 10

% distribution 50,0% 0,0% 50,0% 0,0% 0,0% 0,0%

100,0%

Rest Frequency 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Number of employees

per HR professional

Under 50 persons

50-100 persons

101-200 persons

201-500 persons

501-1000 persons

Over 1000 persons Total

Total Sample Frequency 130 91 57 16 1 0 295

% distribution 44,1% 30,8% 19,3% 5,4% 0,3% 0,0%

100,0%

Total Sample without Hungary Frequency 107 58 37 9 1 0 212

% distribution 50,5% 27,4% 17,5% 4,2% 0,5% 0,0%

100,0%

Hungary Frequency 23 33 20 7 0 0 83

% distribution 27,7% 39,8% 24,1% 8,4% 0,0% 0,0%

100,0%

Poland Frequency 41 24 16 6 1 0 88

% distribution 46,6% 27,3% 18,2% 6,8% 1,1% 0,0%

100,0%

Estonia Frequency 28 10 3 1 0 0 42

% distribution 66,7% 23,8% 7,1% 2,4% 0,0% 0,0%

100,0%

Romania Frequency 15 1 2 0 0 0 18

% distribution 83,3% 5,6% 11,1% 0,0% 0,0% 0,0%

100,0%

Serbia Frequency 8 5 7 0 0 0 20

% distribution 40,0% 25,0% 35,0% 0,0% 0,0% 0,0%

100,0%

Slovakia Frequency 8 12 3 0 0 0 23

% distribution 34,8% 52,2% 13,0% 0,0% 0,0% 0,0%

100,0%

Croatia Frequency 3 2 4 1 0 0 10

% distribution 30,0% 20,0% 40,0% 10,0% 0,0% 0,0%

100,0%

Page 30: HR Management in Transition_HU_Eastern Europe 2011

2009

Number of employees

per HR professional

Under 50 persons

50-100 persons

101-200 persons

201-500 persons

501-1000 persons

Over 1000 persons Total

Rest Frequency 4 4 2 1 0 0 11

% distribution 36,4% 36,4% 18,2% 9,1% 0,0% 0,0%

100,0%

Figure 6: Number of employees per HR professional

4.2 THE MAIN INDICATORS REPRESENTING THE IMPORTANCE AND RESULTS OF

THE HR ACTIVITY 4.2.1 LABOR COST – OPERATING COST RATIO The labor cost – operating cost ratio is one of the frequently analyzed indicators of the importance of the HR function in the company’s life. According to assumptions, the effects of HRM have a stronger and more direct influence on the company’s performance if this ratio is higher. About one third (34.9%) of the subsidiaries participating in the survey fell into this category (where the labor cost ratio is higher than 30%) in the total sample. But the vast majority (65.1%) of the companies operated with a relatively low (under 30%) labor cost ratio4. In the Croatian sample (87.5%) and in the Rest sample (90%) the majority of companies operated with a labor cost-operating cost ratio of less than 20% 4 In the case of the respondents participating in the already referred (Farkas-Poór-Karoliny-2007) 2005 Cranet surveys – that involved not only MNCs – the average organizational labor cost ratio in Hungary was 28% that was right in the middle of the 19-38% band calculated in the six Central Eastern European countries examined. The country with the highest average ratio (64%) within the entire sample was the Netherlands.

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15. Table: Labor cost in % of the operating cost

2008

Labor cost in

% of the operating

cost

Under 5 %

5- 10%

11- 20%

21- 30%

31- 40%

41- 50%

Over 50% Total

Total Sample Frequency 9 32 23 17 21 15 19 136

% distribution 6,6% 23,5% 16,9% 12,5% 15,4% 11,0% 14,0% 100,0% Total

Sample without Hungary

Frequency 5 16 13 5 13 7 9 68

% distribution 7,4% 23,5% 19,1% 7,4% 19,1% 10,3% 13,2% 100,0% Hungary Frequency 4 16 10 12 8 8 10 68

% distribution 5,9% 23,5% 14,7% 17,6% 11,8% 11,8% 14,7% 100,0% Poland Frequency 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% Estonia Frequency 1 4 2 1 3 2 2 15

% distribution 6,7% 26,7% 13,3% 6,7% 20,0% 13,3% 13,3% 100,0% Romania Frequency 1 4 3 1 5 2 3 19

% distribution 5,3% 21,1% 15,8% 5,3% 26,3% 10,5% 15,8% 100,0% Serbia Frequency 0 0 2 2 3 1 1 9

% distribution 0,0% 0,0% 22,2% 22,2% 33,3% 11,1% 11,1% 100,0% Slovakia Frequency 0 6 4 1 2 1 3 17

% distribution 0,0% 35,3% 23,5% 5,9% 11,8% 5,9% 17,6% 100,0% Croatia Frequency 3 2 2 0 0 1 0 8

% distribution 37,5% 25,0% 25,0% 0,0% 0,0% 12,5% 0,0% 100,0% Rest Frequency 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Labor cost in % of the operating

cost

Under 5%

5- 10%

11- 20%

21- 30%

31- 40%

41- 50%

Over 50% Total

Total Sample Frequency 14 45 38 26 24 17 25 189

% distribution 7,4% 23,8% 20,1% 13,8% 12,7% 9,0% 13,2% 100,0%

Total Sample without Hungary

Frequency 11 27 24 13 15 8 14 112

% distribution 9,8% 24,1% 21,4% 11,6% 13,4% 7,1% 12,5% 100,0%

Page 32: HR Management in Transition_HU_Eastern Europe 2011

2009

Labor cost in % of the operating

cost

Under 5%

5- 10%

11- 20%

21- 30%

31- 40%

41- 50%

Over 50% Total

Hungary Frequency 3 18 14 13 9 9 11 77

% distribution 3,9% 23,4% 18,2% 16,9% 11,7% 11,7% 14,3% 100,0%

Poland Frequency 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 3 8 8 3 3 3 6 34

% distribution 8,8% 23,5% 23,5% 8,8% 8,8% 8,8% 17,6% 100,0%

Romania Frequency 1 4 5 3 3 0 4 20

% distribution 5,0% 20,0% 25,0% 15,0% 15,0% 0,0% 20,0% 100,0%

Serbia Frequency 1 2 4 4 2 3 1 17

% distribution 5,9% 11,8% 23,5% 23,5% 11,8% 17,6% 5,9% 100,0%

Slovakia Frequency 1 6 3 3 6 1 3 23

% distribution 4,3% 26,1% 13,0% 13,0% 26,1% 4,3% 13,0% 100,0%

Croatia Frequency 3 2 2 0 0 1 0 8

% distribution 37,5% 25,0% 25,0% 0,0% 0,0% 12,5% 0,0% 100,0%

Rest Frequency 2 5 2 0 1 0 0 10

% distribution 20,0% 50,0% 20,0% 0,0% 10,0% 0,0% 0,0% 100,0%

4.2.2 AGE DISTRIBUTION OF THE EMPLOYEES One of the results of human resource management actions is the age distribution of the labor force. The results of our survey in this respect do not confirm the common view that there is no room for employees over 45 years of age in multinational companies as about one fifth of the employees of the subsidiaries participating in the total sample fell within this age group for the year 2009. The proportion of employees under 25 years of age was around 15% and the body consisted of the employees between 25-45 years of age – with a percentage of 66%. The change over time from 2008 to 2009 saw an increase in the 25-45 year old age group and small decrease in the other 2 age categories for the total sample. This change over time was seen in all the samples except for Serbia where the Over 45 years old age category increased from 2008 to 2009 and the number of employees in the other 2 age categories decreased. No information was provided for the Polish and Rest samples for 2008 or 2009.

16. Table: Age group distribution of employees (%)

2008

Age groups Under 25 Between 25 and 45 Over 45 Total

Total 15,85 63,29 20,85 100,00

Page 33: HR Management in Transition_HU_Eastern Europe 2011

2008

Age groups Under 25 Between 25 and 45 Over 45 Total

Sample Total

Sample without Hungary

16,55 67,20 18,29 102,04

Hungary 15,16 61,57 23,27 100,00 Poland 0,00 0,00 0,00 0,00 Estonia 22,21 62,43 15,36 100,00

Romania 19,61 67,90 19,27 106,78 Serbia 14,55 63,64 23,64 101,82

Slovakia 15,00 68,94 16,06 100,00 Croatia 7,00 74,11 18,89 100,00

Rest 0,00 0,00 0,00 0,00

2009

Age groups Under 25 Between 25 and 45 Over 45 Total

Total Sample 14,44 66,05 19,50 100,00

Total Sample without Hungary

13,99 69,86 16,15 100,00

Hungary 14,90 62,19 22,90 100,00 Poland 0,00 0,00 0,00 0,00 Estonia 17,93 68,57 13,50 100,00

Romania 16,05 72,36 11,59 100,00 Serbia 13,64 62,27 24,09 100,00

Slovakia 12,17 70,22 17,61 100,00 Croatia 6,89 74,33 18,78 100,00

Rest 0,00 0,00 0,00 0,00

Page 34: HR Management in Transition_HU_Eastern Europe 2011

Figure 7: Age group distribution of employees (%)

4.2.3 RELATIVE WEIGHT OF THE TRAINING BUDGET Literature considers the relative weight of the training budget (compared to the entire annual labor cost) as an important indicator of modern and effective HR activity. In more than 73% of the companies examined, the relative weight of the training budget was under 3% and only about one quarter of the companies examined spent more than 3% of the annual labor budget on training employees in the total sample for 2009.5 The overall total increased from 2008(156) to 2009 (253). A similar pattern can be seen in the all the samples.

17. Table: Annual training budget in % of the entire annual labor cost

2008

Annual training budget in % of the entire annual labor cost

Under 1% 1- 2% 2- 3% 3- 5% 5-

7% 7-

10% 10 - 20%

Over 20% Total

Total Sample Frequency 28 56 23 29 4 6 4 6 156

% distribution 17,9% 35,9% 14,7% 18,6% 2,6% 3,8% 2,6% 3,8% 100,0%

Total Sample without Hungary

Frequency 17 23 6 11 1 5 4 5 72

% distribution 23,6% 31,9% 8,3% 15,3% 1,4% 6,9% 5,6% 6,9% 100,0%

5TheglobalaverageofthisindicatorcalculatedusingtheformerlymentionedCranetinternationalcomparativeHRdatabase

was3.36%,theEasternEuropeanindexwas3.15%andtheHungarian3.54%(Karoliny-Poór,2010).

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2008

Annual training budget in % of the entire annual labor cost

Under 1% 1- 2% 2- 3% 3- 5% 5-

7% 7-

10% 10 - 20%

Over 20% Total

Hungary Frequency 11 33 17 18 3 1 0 1 84

% distribution 13,1% 39,3% 20,2% 21,4% 3,6% 1,2% 0,0% 1,2% 100,0%

Poland Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 2 4 2 5 1 0 0 2 16

% distribution 12,5% 25,0% 12,5% 31,3% 6,3% 0,0% 0,0% 12,5% 100,0%

Romania Frequency 7 6 1 2 0 1 1 1 19

% distribution 36,8% 31,6% 5,3% 10,5% 0,0% 5,3% 5,3% 5,3% 100,0%

Serbia Frequency 0 4 1 1 0 1 2 0 9

% distribution 0,0% 44,4% 11,1% 11,1% 0,0% 11,1% 22,2% 0,0% 100,0%

Slovakia Frequency 5 4 1 2 0 3 1 2 18

% distribution 27,8% 22,2% 5,6% 11,1% 0,0% 16,7% 5,6% 11,1% 100,0%

Croatia Frequency 3 5 1 1 0 0 0 0 10

% distribution 30,0% 50,0% 10,0% 10,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Annual training

budget in % of the

entire annual

labor cost

Under 1 % 1-2 % 2-3 % 3-5 % 5-7

% 7-10

% 10 -

20 % Over 20 % Total

Total Sample Frequency 30 128 58 44 5 19 4 5 293

% distribution 10.2% 43.7% 19.8% 15.0% 1.7% 6.5% 1.4% 1.7% 100.0%

Total Sample without Hungary

Frequency 20 92 38 28 2 16 4 4 204

Page 36: HR Management in Transition_HU_Eastern Europe 2011

2009

Annual training

budget in % of the

entire annual

labor cost

Under 1 % 1-2 % 2-3 % 3-5 % 5-7

% 7-10

% 10 -

20 % Over 20 % Total

% distribution 9.8% 45.1% 18.6% 13.7% 1.0% 7.8% 2.0% 2.0% 100.0%

Hungary Frequency 10 36 20 16 3 3 0 1 89

% distribution 11.2% 40.4% 22.5% 18.0% 3.4% 3.4% 0.0% 1.1% 100.0%

Poland Frequency 6 25 28 10 1 7 0 1 78

% distribution 7.7% 32.1% 35.9% 12.8% 1.3% 9.0% 0.0% 1.3% 100.0%

Estonia Frequency 4 17 3 11 1 4 1 1 42

% distribution 9.5% 40.5% 7.1% 26.2% 2.4% 9.5% 2.4% 2.4% 100.0%

Romania Frequency 7 11 2 1 0 1 0 1 23

% distribution 30.4% 47.8% 8.7% 4.3% 0.0% 4.3% 0.0% 4.3% 100.0%

Serbia Frequency 0 10 1 1 0 3 3 0 18

% distribution 0.0% 55.6% 5.6% 5.6% 0.0% 16.7% 16.7% 0.0% 100.0%

Slovakia Frequency 2 14 2 4 0 0 0 0 22

% distribution 9.1% 63.6% 9.1% 18.2% 0.0% 0.0% 0.0% 0.0% 100.0%

Croatia Frequency 1 8 1 0 0 0 0 0 10

% distribution 10.0% 80.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%

Rest Frequency 0 7 1 1 0 1 0 1 11

% distribution 0.0% 63.6% 9.1% 9.1% 0.0% 9.1% 0.0% 9.1% 100.0%

4.2.4 LEVEL OF FLUCTUATION The level of fluctuation was under 10% in more than half of the subsidiaries participating in the total sample for 2009 with many companies having barely measurable low values. On the other hand, nearly one quarter of the respondents reported rather high values, between 10 and 20%. Moreover, we found 6.3% companies with levels of fluctuation higher than 30%.6 The total level of fluctuation increased from 2008 (146) to 2009 (158). The Estonian (21.4%), Serbian (36.4%), and Slovakian (27.8%) samples had high (more than 20%) levels of fluctuation in 2009. This was seen in 2008 for these 3 countries as well.

6AnimportantcharacteristicofHRsubsystemsarethedifferentfluctuationindices.Theseindicesarecalculatedbymeansofdividingthenumberofpeoplewholeaveduringtheyearbytheaveragenumberofstaff.Accordingtotheconservativeapproach,thecostofanaverageemployeeleavingamountsto1.5timestheirannualwagecost(Boudreau,2010).However,itisimportanttoseethatdifferentpeople’sleavinghavedifferentconsequences.Ifakeyemployeeleavesthecompany,ithasamuchlargerimpactcomparedtoasimpleemployeeleaving.

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18. Table: Fluctuation rate (%)

2008

The level

of fluctuation

Under 1% 1- 3% 3- 5% 5-

10% 10-

20% 20-

30% 30-

40% Over 40% Total

Total Sample Frequency 18 14 16 37 33 10 5 13 146

% distribution 12,3% 9,6% 11,0% 25,3% 22,6% 6,8% 3,4% 8,9% 100,0%

Total Sample without Hungary

Frequency 13 7 8 14 14 8 2 7 73

% distribution 17,8% 9,6% 11,0% 19,2% 19,2% 11,0% 2,7% 9,6% 100,0%

Hungary Frequency 5 7 8 23 19 2 3 6 73

% distribution 6,8% 9,6% 11,0% 31,5% 26,0% 2,7% 4,1% 8,2% 100,0%

Poland Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 2 1 2 2 2 1 1 3 14

% distribution 14,3% 7,1% 14,3% 14,3% 14,3% 7,1% 7,1% 21,4% 100,0%

Romania Frequency 5 2 3 4 3 0 0 2 19

% distribution 26,3% 10,5% 15,8% 21,1% 15,8% 0,0% 0,0% 10,5% 100,0%

Serbia Frequency 2 0 1 1 3 2 1 0 10

% distribution 20,0% 0,0% 10,0% 10,0% 30,0% 20,0% 10,0% 0,0% 100,0%

Slovakia Frequency 0 2 1 5 3 5 0 2 18

% distribution 0,0% 11,1% 5,6% 27,8% 16,7% 27,8% 0,0% 11,1% 100,0%

Croatia Frequency 4 2 1 2 3 0 0 0 12

% distribution 33,3% 16,7% 8,3% 16,7% 25,0% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

The level

of fluctuation

Under 1% 1- 3% 3- 5% 5-

10% 10-

20% 20-

30% 30-

40% Over 40% Total

Total Sample Frequency 19 17 16 40 40 16 3 7 158

Page 38: HR Management in Transition_HU_Eastern Europe 2011

2009

The level

of fluctuation

Under 1% 1- 3% 3- 5% 5-

10% 10-

20% 20-

30% 30-

40% Over 40% Total

% distribution 12,0% 10,8% 10,1% 25,3% 25,3% 10,1% 1,9% 4,4% 100,0%

Total Sample without Hungary

Frequency 10 7 7 17 17 11 2 4 75

% distribution 13,3% 9,3% 9,3% 22,7% 22,7% 14,7% 2,7% 5,3% 100,0%

Hungary Frequency 9 10 9 23 23 5 1 3 83

% distribution 10,8% 12,0% 10,8% 27,7% 27,7% 6,0% 1,2% 3,6% 100,0%

Poland Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 3 2 0 5 1 2 0 1 14

% distribution 21,4% 14,3% 0,0% 35,7% 7,1% 14,3% 0,0% 7,1% 100,0%

Romania Frequency 4 1 3 3 7 3 1 0 22

% distribution 18,2% 4,5% 13,6% 13,6% 31,8% 13,6% 4,5% 0,0% 100,0%

Serbia Frequency 2 0 1 2 2 2 1 1 11

% distribution 18,2% 0,0% 9,1% 18,2% 18,2% 18,2% 9,1% 9,1% 100,0%

Slovakia Frequency 0 2 3 3 5 3 0 2 18

% distribution 0,0% 11,1% 16,7% 16,7% 27,8% 16,7% 0,0% 11,1

% 100,0%

Croatia Frequency 1 1 0 4 2 1 0 0 9

% distribution 11,1% 11,1% 0,0% 44,4% 22,2% 11,1% 0,0% 0,0% 100,0%

Rest Frequency 0 1 0 0 0 0 0 0 1

% distribution 0,0% 100,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

4.2.5 TIME LOST DUE TO ABSENCE/SICKNESS The average number of days lost annually due to absence was under 5 in approximately 30% of the respondent companies in the total sample for 2009. The most often chosen category (by almost 50% of the subsidiaries) was the 5-20 days. A large number (10) of companies reported an average of 10-20 days. At the same time, we had several respondents (7.5%) who reported an average of more than 40 days of absence. The Polish sample in 2009 had a high number (63.6%) of subsidiaries with more than 20 days of absence. The distribution of frequency for sick leave can be highly influenced by national legislation. For instance, in the case of Hungary the maximum number of days of sick leave per year is 15 days. In 2008 and in 2009 the nearly half of the subsidiaries in the Hungarian reported the number of sick days to be between 5 to 20 days.

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19. Table: The average days absent per employee per annum

2008

Absence / sick leave

Less than 1

day

1-3 days

3-5 days

5-10 days

10-20 days

20-30 days

30-40 days

More than 40

days Total

Total Sample Frequency 8 17 27 58 27 7 6 4 154

% distribution 5,2% 11,0% 17,5% 37,7% 17,5% 4,5% 3,9% 2,6% 100,0%

Total Sample without Hungary

Frequency 3 7 11 33 14 5 2 2 77

% distribution 3,9% 9,1% 14,3% 42,9% 18,2% 6,5% 2,6% 2,6% 100,0%

Hungary Frequency 5 10 16 25 13 2 4 2 77

% distribution 6,5% 13,0% 20,8% 32,5% 16,9% 2,6% 5,2% 2,6% 100,0%

Poland Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

Estonia Frequency 1 0 1 8 5 0 0 0 15

% distribution 6,7% 0,0% 6,7% 53,3% 33,3% 0,0% 0,0% 0,0% 100,0%

Romania Frequency 2 0 2 8 4 1 1 1 19

% distribution 10,5% 0,0% 10,5% 42,1% 21,1% 5,3% 5,3% 5,3% 100,0%

Serbia Frequency 0 2 1 2 1 3 1 0 10

% distribution 0,0% 20,0% 10,0% 20,0% 10,0% 30,0% 10,0% 0,0% 100,0%

Slovakia Frequency 0 3 5 9 3 1 0 1 22

% distribution 0,0% 13,6% 22,7% 40,9% 13,6% 4,5% 0,0% 4,5% 100,0%

Croatia Frequency 0 2 2 6 1 0 0 0 11

% distribution 0,0% 18,2% 18,2% 54,5% 9,1% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

2009

Absence / sick leave

Less than 1

day 1-3

days 3-5

days 5-10 days

10-20 days

20-30 days

30-40 days

More than 40

days Total

Total Sample Frequency 7 22 30 54 34 18 7 14 186

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2009

Absence / sick leave

Less than 1

day 1-3

days 3-5

days 5-10 days

10-20 days

20-30 days

30-40 days

More than 40

days Total

% distribution 3,8% 11,8% 16,1% 29,0% 18,3% 9,7% 3,8% 7,5% 100,0%

Total Sample without Hungary

Frequency 3 10 15 29 21 11 7 11 107

% distribution 2,8% 9,3% 14,0% 27,1% 19,6% 10,3% 6,5% 10,3% 100,0%

Hungary Frequency 4 12 15 25 13 7 0 3 79

% distribution 5,1% 15,2% 19,0% 31,6% 16,5% 8,9% 0,0% 3,8% 100,0%

Poland Frequency 0 3 1 2 6 7 4 10 33

% distribution 0,0% 9,1% 3,0% 6,1% 18,2% 21,2% 12,1% 30,3% 100,0%

Estonia Frequency 1 0 3 7 4 0 0 0 15

% distribution 6,7% 0,0% 20,0% 46,7% 26,7% 0,0% 0,0% 0,0% 100,0%

Romania Frequency 2 0 5 8 3 1 1 1 21

% distribution 9,5% 0,0% 23,8% 38,1% 14,3% 4,8% 4,8% 4,8% 100,0%

Serbia Frequency 0 1 1 1 2 3 1 0 9

% distribution 0,0% 11,1% 11,1% 11,1% 22,2% 33,3% 11,1% 0,0% 100,0%

Slovakia Frequency 0 4 3 5 5 0 1 0 18

% distribution 0,0% 22,2% 16,7% 27,8% 27,8% 0,0% 5,6% 0,0% 100,0%

Croatia Frequency 0 2 2 6 1 0 0 0 11

% distribution 0,0% 18,2% 18,2% 54,5% 9,1% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 0 0 0 0 0 0 0 0 0

% distribution 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

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5 FOREIGN EXPATS AND THEIR ROLES Usually two types of long-term emissaries are distinguished. The ones arriving from abroad from the parent company or from a third country who are also called expatriates and the ones from the Hungarian subsidiary appointed for a long-term deputation abroad at the parent company or subsidiaries operating in other countries.7

! Over 70% of the subsidiaries participating in the total sample didn’t employ foreign expats in non-managerial positions. In those few companies that employed foreign expats in non-managerial positions permanently, the number of these expats was typically between 1 to 10 in nearly one quarter of the replies. Only eighteen out of three hundred and sixteen respondents employed 11 or more such expats. In the Croatian sample almost all subsidiaries did not employ expats (90.9% with no expats).

! The presence of expats employed in managerial positions is more significant, around 46.6% of the respondents employed foreign expats in such positions in the period examined. Where they were present, their number was typically between 1-3 (29%) but a few respondents employed 11 or more expats (5.7%). The subsidiaries in the Estonian and Romanian samples tended to employ less foreign expats than in the other samples (76.5% and 63.6% respectively).

(Note: It is important to indicate that companies send an increasing number of emplyees abroad for a short time, for different projects. Our survey did not cover this issue.)

20. Table: Number of foreign expats

In managerial position

Number of expats None 1

person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

Total Sample Frequency 171 42 51 19 19 8 5 5 320

% distribution 53,4% 13,1% 15,9% 5,9% 5,9% 2,5% 1,6% 1,6% 100,0%

Total Sample without Hungary

Frequency 135 28 35 13 14 5 3 3 236

% distribution 57,2% 11,9% 14,8% 5,5% 5,9% 2,1% 1,3% 1,3% 100,0%

Hungary Frequency 36 14 16 6 5 3 2 2 84

% distribution 42,9% 16,7% 19,0% 7,1% 6,0% 3,6% 2,4% 2,4% 100,0%

Poland Frequency 53 11 15 5 5 5 2 1 97

% distribution 54,6% 11,3% 15,5% 5,2% 5,2% 5,2% 2,1% 1,0% 100,0%

Estonia Frequency 39 5 3 3 1 0 0 0 51

% distribution 76,5% 9,8% 5,9% 5,9% 2,0% 0,0% 0,0% 0,0% 100,0%

7 After Perlmutter (1969), multinational companies following the four personnel straregies have different priorities in their selection and recruitment policies. The company can follow an ethnocentric, polycentric, regiocentric or geocentric selection mechanism. In the ethnocentric orientation, key positions of the local company are held by professionals from the parent company. In polycentric companies, local key positions are held by locals but their promotion to higher positions is very limited. In companies following the regiocentric selection mechanism, locals can hold key positions not only in the subsidiary but also in the center coordinating the management of the region. In companies follwing the geocentric selection mechanism, locals can obtain position even in the top management of the company (Poór, 2009).

Page 42: HR Management in Transition_HU_Eastern Europe 2011

In managerial position

Number of expats None 1

person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

Romania Frequency 14 2 2 0 2 0 1 1 22

% distribution 63,6% 9,1% 9,1% 0,0% 9,1% 0,0% 4,5% 4,5% 100,0%

Serbia Frequency 8 2 5 1 3 0 0 1 20

% distribution 40,0% 10,0% 25,0% 5,0% 15,0% 0,0% 0,0% 5,0% 100,0%

Slovakia Frequency 9 4 6 3 2 0 0 0 24

% distribution 37,5% 16,7% 25,0% 12,5% 8,3% 0,0% 0,0% 0,0% 100,0%

Croatia Frequency 6 1 3 0 1 0 0 0 11

% distribution 54,5% 9,1% 27,3% 0,0% 9,1% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 6 3 1 1 0 0 0 0 11

% distribution 54,5% 27,3% 9,1% 9,1% 0,0% 0,0% 0,0% 0,0% 100,0%

In non-managerial position

Number of expats None 1

person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

Total Sample Frequency 223 25 23 14 13 7 3 8 316

% distribution 70,6% 7,9% 7,3% 4,4% 4,1% 2,2% 0,9% 2,5% 100,0%

Total Sample without Hungary Frequency 159 18 19 13 9 6 2 7 233

% distribution 68,2% 7,7% 8,2% 5,6% 3,9% 2,6% 0,9% 3,0% 100,0%

Hungary Frequency 64 7 4 1 4 1 1 1 83

% distribution 77,1% 8,4% 4,8% 1,2% 4,8% 1,2% 1,2% 1,2% 100,0%

Poland Frequency 67 4 8 4 3 4 1 3 94

% distribution 71,3% 4,3% 8,5% 4,3% 3,2% 4,3% 1,1% 3,2% 100,0%

Estonia Frequency 34 7 4 1 1 1 1 2 51

% distribution 66,7% 13,7% 7,8% 2,0% 2,0% 2,0% 2,0% 3,9% 100,0%

Romania Frequency 17 2 0 1 0 0 0 2 22

% distribution 77,3% 9,1% 0,0% 4,5% 0,0% 0,0% 0,0% 9,1% 100,0%

Serbia Frequency 13 1 2 2 2 0 0 0 20

% distribution 65,0% 5,0% 10,0% 10,0% 10,0% 0,0% 0,0% 0,0% 100,0%

Slovakia Frequency 12 3 2 5 1 1 0 0 24

% distribution 50,0% 12,5% 8,3% 20,8% 4,2% 4,2% 0,0% 0,0% 100,0%

Croatia Frequency 10 0 1 0 0 0 0 0 11

% distribution 90,9% 0,0% 9,1% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 6 1 2 0 2 0 0 0 11

% distribution 54,5% 9,1% 18,2% 0,0% 18,2% 0,0% 0,0% 0,0% 100,0%

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In the majority of the samples the split between the positions of foreign expats in manager and non-manager positions is nearly equal. The exceptions being in the Estonian sample where foreign expats are more likely to be non-managers (83%), the Serbian sample where the foreign expats are more likely to occupy manager positions (84.4%), the Croatian sample where the foreign expats are more likely to occupy manager positions (83.3%), and the Rest sample where the employment of foreign expats are seen to be in non-manager positions.

21. Table: Positions of foreign expats

Manager Non-manager Total Total Sample 54,7% 45,3% 100,0% Total Sample

without Hungary 50,0% 50,0% 100,0%

Hungary 68,4% 31,6% 100,0% Poland 47,8% 52,2% 100,0% Estonia 17,0% 83,0% 100,0%

Romania 51,5% 48,5% 100,0% Serbia 84,4% 15,6% 100,0%

Slovakia 51,0% 49,0% 100,0% Croatia 83,3% 16,7% 100,0%

Rest 26,5% 73,5% 100,0% Over sixty-seven percent of the responding organizations in the total sample had foreign expats from the parent company. The other 32.3% of foreign expats came to the subsidiaries in the total sample from countries different from the country of the parent company. As can be seen in the table below, the subsidiaries in the Polish (75.3%), Romanian (72.8%), and Serbian (82.5%) samples had higher levels of foreign expats coming from the parent company then the other samples.

22. Table: Country of origin of foreign expats

Mother country Other countries Total Total Sample 67,7% 32,3% 100,0% Total Sample

without Hungary 69,3% 30,7% 100,0%

Hungary 63,8% 36,2% 100,0% Poland 75,3% 24,7% 100,0% Estonia 59,8% 40,2% 100,0%

Romania 72,8% 27,2% 100,0% Serbia 82,5% 17,5% 100,0%

Slovakia 52,5% 47,5% 100,0% Croatia 65,0% 35,0% 100,0%

Rest 67,3% 32,8% 100,0%

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5.1 LOCAL EXPATS Below we ouline how typically and to what positions local expats were sent to foreign companeis of MNCs.

23. Table: Number and positions of Local expats

In managerial position

Number of Local expats None 1 person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

Total Sample Frequency 240 25 25 15 9 3 0 2 319

% distribution 75,2% 7,8% 7,8% 4,7% 2,8% 0,9% 0,0% 0,6% 100,0%

Total Sample without Hungary

Frequency 188 14 16 8 7 2 0 0 235

% distribution 80,0% 6,0% 6,8% 3,4% 3,0% 0,9% 0,0% 0,0% 100,0%

Hungary Frequency 52 11 9 7 2 1 0 2 84

% distribution 61,9% 13,1% 10,7% 8,3% 2,4% 1,2% 0,0% 2,4% 100,0%

Poland Frequency 73 7 6 4 5 2 0 0 97

% distribution 75,3% 7,2% 6,2% 4,1% 5,2% 2,1% 0,0% 0,0% 100,0%

Estonia Frequency 46 2 1 2 0 0 0 0 51

% distribution 90,2% 3,9% 2,0% 3,9% 0,0% 0,0% 0,0% 0,0% 100,0%

Romania Frequency 18 1 0 1 2 0 0 0 22

% distribution 81,8% 4,5% 0,0% 4,5% 9,1% 0,0% 0,0% 0,0% 100,0%

Serbia Frequency 16 1 3 0 0 0 0 0 20

% distribution 80,0% 5,0% 15,0% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Slovakia Frequency 16 1 5 1 0 0 0 0 23

% distribution 69,6% 4,3% 21,7% 4,3% 0,0% 0,0% 0,0% 0,0% 100,0%

Croatia Frequency 10 1 0 0 0 0 0 0 11

% distribution 90,9% 9,1% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 9 1 1 0 0 0 0 0 11

% distribution 81,8% 9,1% 9,1% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

In non-managerial position

Number of Local expats None 1

person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

Total Sample Frequency 228 24 30 13 14 1 6 4 320

% distribution 71,3% 7,5% 9,4% 4,1% 4,4% 0,3% 1,9% 1,3% 100,0% Total Sample without Hungary

Frequency 176 14 20 7 11 0 6 2 236

% distribution 74,6% 5,9% 8,5% 3,0% 4,7% 0,0% 2,5% 0,8% 100,0%

Hungary Frequency 52 10 10 6 3 1 0 2 84

% distribution 61,9% 11,9% 11,9% 7,1% 3,6% 1,2% 0,0% 2,4% 100,0%

Poland Frequency 66 7 8 4 8 0 2 2 97

Page 45: HR Management in Transition_HU_Eastern Europe 2011

In non-managerial position

Number of Local expats None 1

person 2-3

persons 4-5

persons 6-10

persons 11-15

persons 16-20

persons Over 20 persons Total

% distribution 68,0% 7,2% 8,2% 4,1% 8,2% 0,0% 2,1% 2,1% 100,0%

Estonia Frequency 43 4 4 0 0 0 0 0 51

% distribution 84,3% 7,8% 7,8% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Romania Frequency 19 0 0 1 0 0 2 0 22

% distribution 86,4% 0,0% 0,0% 4,5% 0,0% 0,0% 9,1% 0,0% 100,0%

Serbia Frequency 16 0 3 1 0 0 0 0 20

% distribution 80,0% 0,0% 15,0% 5,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Slovakia Frequency 16 0 3 1 2 0 2 0 24

% distribution 66,7% 0,0% 12,5% 4,2% 8,3% 0,0% 8,3% 0,0% 100,0%

Croatia Frequency 10 1 0 0 0 0 0 0 11

% distribution 90,9% 9,1% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 100,0%

Rest Frequency 6 2 2 0 1 0 0 0 11

% distribution 54,5% 18,2% 18,2% 0,0% 9,1% 0,0% 0,0% 0,0% 100,0%

! Although more respondents sent than received employees abroad to non-managerial

positions, there was no such foreign deputation in more than 70% of the respondents in the total sample (71.3% for non-managerial positions and 75.2% for managerial positions). Companies that sent employees abroad sent usually 1-5 employees – 20.3% for managerial positions and 21% for non-managerial positions.

! The proportions of companies not sending employees to managerial positions and to non-managerial positions can be seen to be highest in 4 countries Croatia, Estonia, Romania, and Serbia with the proportions being over 80% and in the case of Croatia reaching nearly 91%.

! If employees are sent abroad the typical number of employees were between 1 to 3 persons.

Page 46: HR Management in Transition_HU_Eastern Europe 2011

6 THE OPERATION OF THE HR DEPARTMENT 6.1 THE RELATIONSHIP BETWEEN HEADQUARTERS AND LOCAL HR We found several different function sharing practices among the companies examined.8

! However, the typical solution that was implemented by over one quarter of the respondents in the total sample was that the HR department of the company’s headquarters lays down general guidelines and provides a standard framework for the work of HR departments of the subsidiaries and requires information and reporting from them. While 20% of the companies’ headquarters performed the auditor’s role.

! In addition, in the case of almost 20% of the companies the headquarters was responsible for providing resources and advice when requested.

! Around 15% of the respondents marked that the headquarters provided the detailed HR model, policies, procedures, and rules.

! On the other hand, about 15% of the HR departments of the responding subsidiaries reported getting hands-offs treatment, almost complete freedom from the headquarters and decentralized HR activity. While in almost 6% of companies the headquarters provided central control.

! There are no major deviations from the distribution in the total sample by any of the individual country samples.

24. Table: Typical functions of the HQ HR

Functions

Hands-off,

provide complete freedom

Provide resources and advice

when requested

Provide general

guidelines and

framework for actions

Request information

and reports – auditor’s

role

Provide detailed

HR model, policies,

procedures and rules

Source of all

remotely significant

HR decisions

Other Total

Total Sample Frequency

of “yes” answers

92 135 179 149 107 40 8 710

% distribution 13,0% 19,0% 25,2% 21,0% 15,1% 5,6% 1,1% 100,0%

Total Sample without Hungary

Frequency of “yes” answers

73 111 118 95 71 33 7 508

% distribution 14,4% 21,9% 23,2% 18,7% 14,0% 6,5% 1,4% 100,0%

Hungary Frequency

of “yes” answers

19 24 61 54 36 7 1 202

% distribution 9,4% 11,9% 30,2% 26,7% 17,8% 3,5% 0,5% 100,0%

Poland Frequency

of “yes” answers

41 42 46 40 26 18 1 214

% distribution 19,2% 19,6% 21,5% 18,7% 12,1% 8,4% 0,5% 100,0%

8 Taylor et al. (1966) describe the relationship between the subsidiaries and the parent company with the following three basic systems of relations: In the exportive system of relations, HR systems developed in the parent company are adopted without changes. In the adaptive system of relations, local subsidiaries adapt the HR systems adopted from the parent company according to their local needs. In the integrative system of relations, all good and applicable solutions are attempted to be spread and implemented in all units of the company regardless of the origin of the HR system. Lawler (2006) concluded from his research conducted among American subsidiaries operating in Asia and Europe that the most dominant deciding factor in the adoptation and adaptation of HR systems is the size of local companies. The question is reasonable: which solution should be applied in a certain case? The mentioned authors say that the system to be implemented depends on the sum of the impacts of internal and external factors that form, influence the organization. In certain cases the national culture of the host country and the legal, regulatory environment are considered influencing factors.

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Functions

Hands-off,

provide complete freedom

Provide resources and advice

when requested

Provide general

guidelines and

framework for actions

Request information

and reports – auditor’s

role

Provide detailed

HR model, policies,

procedures and rules

Source of all

remotely significant

HR decisions

Other Total

Estonia Frequency

of “yes” answers

6 27 26 17 19 5 2 102

% distribution 5,9% 26,5% 25,5% 16,7% 18,6% 4,9% 2,0% 100,0%

Romania Frequency

of “yes” answers

1 8 10 10 8 1 0 38

% distribution 2,6% 21,1% 26,3% 26,3% 21,1% 2,6% 0,0% 100,0%

Serbia Frequency

of “yes” answers

7 12 14 8 5 6 1 53

% distribution 13,2% 22,6% 26,4% 15,1% 9,4% 11,3% 1,9% 100,0%

Slovakia Frequency

of “yes” answers

11 12 9 10 9 2 1 54

% distribution 20,4% 22,2% 16,7% 18,5% 16,7% 3,7% 1,9% 100,0%

Croatia Frequency

of “yes” answers

4 8 8 6 3 0 1 30

% distribution 13,3% 26,7% 26,7% 20,0% 10,0% 0,0% 3,3% 100,0%

Rest Frequency

of “yes” answers

3 2 5 4 1 1 1 17

% distribution 17,6% 11,8% 29,4% 23,5% 5,9% 5,9% 5,9% 100,0%

Figure 8: Typical functions of the HQ HR

Page 48: HR Management in Transition_HU_Eastern Europe 2011

6.2 CHANGES IN THE IMPORTANCE OF HR FUNCTIONS Human resource planning was first in the ranking of HR areas considered most critical in the period examined, being a little ahead of employee communication issues in the total sample. In the Hungarian and Croatian samples compensation and benefits was indicated as the most critical areas of HR, while in the Polish sample the most critical area of HR is recruitment and selection. The respondents regarded Industrial labor relations as the least critical area of their work, followed by recruitment and selection as the next least critical area in the total sample. The responding subsidiaries deemed training and development, and talent management as the next least critical areas. In the Romanian and Croatian samples the least critical area of HR work was talent management, while in the Serbian sample the least critical areas were employee communication and industrial labor relations.

25. Table: Critical areas of HR (on a 1 to 5 scale, on average) (Explanation: 1= critical => 5 =not critical)

The average of the answers

The ranking of the areas of HRM critical in 2009

Employee communication

Compensation and benefits

Human resource planning

Talent management

Performance evaluation

Training and development

Industrial-labor

relations

Recruitment and

selection Total

Sample 2,68 2,74 2,62 2,95 2,89 2,98 3,42 3,02

Total Sample without Hungary

2,76 2,86 2,66 3,05 2,89 2,92 3,40 2,89

Hungary 2,48 2,42 2,52 2,71 2,87 3,15 3,46 3,36

Poland 2,70 2,81 3,01 2,88 2,84 2,79 3,49 2,67

Estonia 2,45 2,93 2,20 2,86 2,80 3,02 3,58 3,20

Romania 2,68 3,35 3,11 3,53 3,25 3,26 3,00 3,25

Serbia 3,50 3,25 2,55 3,45 3,15 3,15 3,50 2,95

Slovakia 2,96 3,00 2,29 3,25 3,17 3,25 3,58 3,13

Croatia 2,82 1,36 2,73 3,18 1,91 2,18 2,73 2,55

Rest 2,73 2,64 1,91 2,91 3,00 2,55 2,82 2,45

6.3 TYPICAL HR COMPETENCIES FOR SUCCESS From the somewhat completed list of HRM competency areas identified by one of the most knows HR gurus, Dave Ulrich et al. in 2009, the respondents in the total sample considered the following three to be the most important:

! teamwork (13.2%), ! change management (13.1%), ! personal credibility (12.5%).

However in the Hungarian, Romanian, Serbian, and Rest samples personal credibility are the most important criteria for HR competency success. Also, in the Romanian subsidiaries strategic contribution is the second most critical area of HR competency success.

Page 49: HR Management in Transition_HU_Eastern Europe 2011

Quick decision making and business partnerships were followed, in respect of importance, by knowledge sharing, strategic contribution and the knowledge of foreign languages. In the opinion of the respondents of the total sample, other reasons and the use of HR information systems ranked last among very important HR competencies in their companies in the period examined.

26. Table: The importance of the methods of personal competency development in HR Total Sample Total Sample without

Hungary Hungary Poland Estonia

Very important Very important Very important Very important Very important Ranking of key competencies Frequency %

distribution Frequency % distribution Frequency %

distribution Frequency % distribution Frequency %

distribution 1. Personal credibility (effectiveness, efficient connections, communication skills)

173 12,5% 105 11,0% 68 15,7% 31 8,2% 22 10,9%

2. Change management 181 13,1% 125 13,1% 56 13,0% 52 13,7% 30 14,9%

3. Business partnership 144 10,4% 93 9,7% 51 11,8% 39 10,3% 20 9,9%

4. Quick decision making

163 11,8% 115 12,1% 48 11,1% 51 13,4% 22 10,9%

5. Teamwork 183 13,2% 135 14,2% 48 11,1% 58 15,3% 28 13,9%

6. Strategic contribution (culture management, quick changes, strategic decision making)

113 8,2% 71 7,4% 42 9,7% 25 6,6% 13 6,4%

7. HR services (recruitment-selection, training, performance ecaluation, HR measurement, etc.)

98 7,1% 60 6,3% 38 8,8% 22 5,8% 15 7,4%

8. Knowledge of foreign languages

113 8,2% 79 8,3% 34 7,9% 31 8,2% 15 7,4%

9. Knowledge sharing 119 8,6% 97 10,2% 22 5,1% 44 11,6% 22 10,9%

10. Use of HRMIS (IT) 85 6,1% 68 7,1% 17 3,9% 27 7,1% 15 7,4%

11. Other 14 1,0% 6 0,6% 8 1,9% 0 0,0% 0 0,0%

Total 1386 100,0% 954 100,0% 432 100,0% 380 100,0% 202 100,0%

Page 50: HR Management in Transition_HU_Eastern Europe 2011

Romania Serbia Slovakia Croatia Rest

Very important Very important Very important Very important Very important

Ranking of key competencies

Frequency % distribution Frequency %

distribution Frequency % distribution Frequency % distribution Frequency % distribution

1. Personal credibility(effectiveness, efficient connections, communication skills)

18 18,0% 14 14,4% 9 10,6% 3 7,5% 8 16,0%

2. Change management 8 8,0% 12 12,4% 9 10,6% 7 17,5% 7 14,0%

3. Business partnership 5 5,0% 7 7,2% 13 15,3% 5 12,5% 4 8,0%

4. Quick decision making 10 10,0% 11 11,3% 10 11,8% 4 10,0% 7 14,0%

5. Teamwork 14 14,0% 11 11,3% 11 12,9% 4 10,0% 9 18,0%

6. Strategic contribution (culture management, quick changes, strategic decision making)

18 18,0% 6 6,2% 5 5,9% 1 2,5% 3 6,0%

7. HR services (recruitment-selection, training, performance ecaluation, HR measurement, etc.)

5 5,0% 7 7,2% 4 4,7% 5 12,5% 2 4,0%

8. Knowledge of foreign languages

7 7,0% 7 7,2% 10 11,8% 3 7,5% 6 12,0%

9. Knowledge sharing 5 5,0% 9 9,3% 9 10,6% 6 15,0% 2 4,0%

10. Use of HRMIS (IT) 10 10,0% 8 8,2% 5 5,9% 2 5,0% 1 2,0%

11. Other 0 0,0% 5 5,2% 0 0,0% 0 0,0% 1 2,0%

Total 100 100,0% 97 100,0% 85 100,0% 40 100,0% 50 100,0%

6.4 PRIMARY RESPONSIBILITY OF DECISION MAKING IN THE MAIN FUNCTIONS OF

HR Our current survey confirms the finding also established in other studies (Cranet, 2006 and Karoliny et al. 2009) that members of the management hierarchy have larger responsibility or control in some HR decisions in consultation with the HR department in the total sample. Some responsibility is taken by the local line management in the area of performance evaluation. The local HR deparment was indicated to have responsibility in industrial labor relations and HRMS/IT responsibilities. It was found to be less likely that the primary decision making was made by the local HR in consultation with local line management. In some samples such as the Romanian and Croatian sample the local line management handled more of the responsibilities than the other groups.

Page 51: HR Management in Transition_HU_Eastern Europe 2011

27. Table: Responsibility of decision making in key functions of HR

Total Sample Total Sample without Hungary

Key functions of HR

Local line management

(mgt.)

Primarily local line

mgt. but in consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Human Resource Planning

81 114 52 26 70 72 28 20

Recruitment 85 90 82 53 79 64 51 33

Selection 63 98 67 27 55 53 43 22

Performance Evaluation 103 85 47 23 70 52 31 22

Training and Development 72 117 91 32 61 84 57 27

Compensation and Benefits 84 117 71 39 72 80 47 29

Industrial-Labour Relations

66 58 66 99 61 43 44 59

Employee Communication 67 81 61 50 59 51 36 30

HRMS/IT 54 64 34 97 46 52 21 50

Other 16 24 25 32 12 21 17 26

Hungary Poland

Key functions of HR

Local line management

(mgt.)

Primarily local line

mgt. but in consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Human Resource Planning

11 42 24 6 22 16 10 5

Recruitment 6 26 31 20 37 34 15 5

Selection 8 45 24 5 10 13 9 6

Performance Evaluation 33 33 16 1 11 11 12 5

Training and Development 11 33 34 5 21 39 22 10

Compensation and Benefits 12 37 24 10 21 37 20 15

Industrial-Labour Relations 5

15 22 40 14

20 14 24

Employee Communication 8 30 25 20 13 16 3 8

HRMS/IT 8 12 13 47 12 13 2 8

Other 4 3 8 6 1 4 1 1

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Estonia Romania

Key functions of HR

Local line management

(mgt.)

Primarily local line

mgt. but in consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Human Resource Planning

22 19 4 5 8 5 5 3

Recruitment 21 8 14 7 6 3 6 5

Selection 19 14 10 5 9 5 3 4

Performance Evaluation 29 13 5 3 8 4 4 4

Training and Development 18 17 11 4 7 5 7 2

Compensation and Benefits 23 14 6 7 8 5 6 1

Industrial-Labour Relations 25

6 7 10 6

5 6 4

Employee Communication 24 12 8 6 7 3 7 3

HRMS/IT 17 14 3 15 7 4 4 4

Other 4 5 0 3 2 1 1 5

Serbia Slovakia

Key functions of HR

Local line management

(mgt.)

Primarily local line

mgt. but in consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Human Resource Planning

5 9 3 3 9 12 3 0

Recruitment 5 3 9 3 6 10 3 5

Selection 3 4 10 3 9 10 4 1

Performance Evaluation 4 6 5 5 10 11 1 2

Training and Development 4 6 8 2 6 11 4 3

Compensation and Benefits 6 6 5 2 11 12 0 1

Industrial-Labour Relations 5

5 5 5 8

7 6 3

Employee Communication 5 6 8 1 5 11 5 3

HRMS/IT 2 5 5 8 5 9 6 4

Other 1 1 9 9 3 8 3 2

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Croatia Rest

Key functions of HR

Local line management

(mgt.)

Primarily local line

mgt. but in consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR

department but in

consultation with local line mgt.

Local HR department

Human Resource Planning

4 4 2 1 0 7 1 3

Recruitment 4 3 1 3 0 3 3 5

Selection 4 2 2 3 1 5 5 0

Performance Evaluation 5 2 3 1 3 5 1 2

Training and Development 4 2 2 3 1 4 3 3

Compensation and Benefits 3 1 6 1 0 5 4 2

Industrial-Labour Relations

3 0 1 7 0 0 5 6

Employee Communication 4 0 3 4 1 3 2 5

HRMS/IT 3 3 1 4 0 4 0 7

Other 1 0 1 1 0 2 2 5

6.5 THE ROLE OF EXTERNAL HR SERVICE PROVIDERS Nowadays human resources are managed in many organizations with the involvement of external service providers. Besides traditional HR consultants, an increasing number of service providers have entered the market offering new services (e.g. labor leasing, outsourcing, interim managers, etc.). External service providers were most often used in training and development with regards to the key HR functions as reported by the respondents in the total sample. They were also often involved in HRMS/IT functions and in the area of compensation and benefits. Almost none of the companies used the help of external service providers in human resource planning and in performance evaluation. The role and use of external service providers by the subsidiaries in the total sample were indicated to not have change. In the Hungarian sample after the key function of training and development, the next important functions were recruitment, compensation and benefits, and selection. 28. Table: Role and use of external service providers in the different key functions of HR

Total Sample Total Sample without Hungary

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Human Resource Planning

21 23 41 220 20 20 38 143

Recruitment 43 71 73 126 34 40 54 102

Selection 50 47 79 137 43 23 61 103

Performance Evaluation 41 9 63 199 37 7 56 129

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Total Sample Total Sample without Hungary

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Training and Development 74 61 99 78 62 38 62 67

Compensation and Benefits 35 34 91 152 27 26 56 120

Industrial-Labour Relations

35 20 85 172 27 18 64 120

Employee Communication 41 12 74 186 37 7 53 133

HRMS/IT 39 13 79 150 29 10 50 109

Other 14 7 35 77 11 6 25 66

Hungary Poland

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Human Resource Planning

1 3 3 77 9 5 13 57

Recruitment 9 31 19 24 18 12 20 43

Selection 7 24 18 34 22 8 29 35

Performance Evaluation 4 2 7 70 15 1 26 52

Training and Development 12 23 37 11 30 8 20 35

Compensation and Benefits 8 8 35 32 18 7 29 39

Industrial-Labour Relations

8 2 21 52 11 6 23 53

Employee Communication 4 5 21 53 13 2 27 51

HRMS/IT 10 3 29 41 7 1 7 47

Other 3 1 10 11 10 2 9 33

Estonia Romania

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Human Resource Planning

5 4 10 30 2 5 4 11

Recruitment 9 12 14 14 3 5 3 11

Selection 8 5 9 26 5 2 6 9

Performance Evaluation 8 3 8 30 5 1 6 9

Training and Development 9 12 14 14 6 7 5 4

Compensation and Benefits 2 5 7 35 4 6 5 7

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Estonia Romania

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Industrial-Labour Relations

5 3 10 30 3 1 11 7

Employee Communication 9 0 5 35 6 0 11 5

HRMS/IT 10 2 15 22 5 2 8 7

Other 1 0 2 7 0 0 4 4

Serbia Slovakia

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Human Resource Planning

2 1 1 16 0 4 7 13

Recruitment 2 3 5 10 1 4 6 13

Selection 2 3 6 9 2 4 4 14

Performance Evaluation 4 1 5 10 2 1 8 12

Training and Development 5 2 7 6 4 6 7 6

Compensation and Benefits 0 3 6 11 0 5 5 13

Industrial-Labour Relations

1 1 6 12 1 7 9 7

Employee Communication 2 1 2 15 5 4 4 11

HRMS/IT 2 1 4 13 2 3 10 8

Other 0 4 5 11 0 0 2 6

Croatia Rest

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

Human Resource Planning

0 0 1 10 2 1 2 6

Recruitment 0 1 2 8 1 3 4 3

Selection 0 1 3 7 4 0 4 3

Performance Evaluation 0 0 1 10 3 0 2 6

Training and Development 4 2 4 1 4 1 5 1

Compensation and Benefits 0 0 1 10 3 0 3 5

Industrial-Labour Relations

1 0 1 9 5 0 4 2

Employee Communication 0 0 1 10 2 0 3 6

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Croatia Rest

Key functions of HR Increased Decreased Same

External providers not used

Increased Decreased Same External

providers not used

HRMS/IT 1 0 3 7 2 1 3 5

Other 0 0 0 5 0 0 3 0

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7 KNOWLEDGE MANAGEMENT IN HR Knowledge management means the management and sharing of the collective knowledge (know-how, skills and intellectual skills) of an organization’s employees in an integrated way. In connection with the practice of the indicated topic in the field of HR we examined the following three areas:

! methods of personal competency development in HR, ! enablers of HR knowledge flows, ! directions of HR knowledge flows.

7.1 PERSONAL COMPETENCY DEVELOPMENT IN HR The respondents in the total sample found training at headquarters and cross-cultural training to be the least important methods among the listed methods of personal competency development in the field of HR and they thought that formal learning and mobility to play unimportant roles too. Mobility being either mobility between parent and subsidiary or between subsidiaries. Respondents ranked local training and informal training the most important methods among the examined tools of personal HR competency development in their companies in the period examined. In the Hungarian sample cross-cultural training was found to be the least important method followed by the two types of mobility with local training and informal training being the most important methods of personal competency development in HR. In the Croatian sample local training and informal training were indicated by companies to be the least important methods while the mobility categories and cross-cultural training were the most important methods.

29. Table: The importance of the methods of personal competency development in HR (on a 1-5 scale, on average)

(Explanation: 1= critical => 5 =not critical) The average of the answers

Methods of gaining

competencies

Local training

Informal learning

Formal learning

Training in HQ

Mobility between parent and subsidiary

Mobility between

subsidiaries

Cross-cultural training

Other

Total Sample 2,9 2,9 3,2 3,3 3,2 3,2 3,3 2,9 Total Sample

without Hungary

3,1 3,1 3,3 3,2 3,0 3,0 3,2 3,0

Hungary 2,4 2,4 2,7 3,3 3,7 3,8 3,9 2,6

Poland 3,7 3,2 3,7 3,2 3,0 2,7 2,9 2,7

Estonia 2,5 3,0 3,1 3,2 2,8 2,9 3,2 2,5

Romania 2,9 3,0 3,1 3,8 3,1 3,2 3,8 4,3

Serbia 2,9 3,3 3,3 3,0 3,0 3,7 3,4 3,3

Slovakia 2,0 2,7 2,7 3,0 2,8 3,3 3,6 3,6

Croatia 3,7 3,7 3,2 3,1 2,7 2,6 2,7 4,0

Rest 2,1 2,6 2,6 4,2 4,4 3,8 3,2 4,0

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7.2 ENABLERS OF HR KNOWLEDGE FLOWS BETWEEN THE PARENT COMPANY

AND THE SUBSIDIARIES In respect of the enablers of efficient knowledge flows, i.e. the transfer of knowledge about HR practices and techniques, between the parent company and the subsidiary, the respondents considered the content and kind of knowledge to be least important among the factors examined in the total sample followed by the ability to transfer knowledge and form of knowledge transfer. The most important enabler indicated in the total sample was the motivation to transfer knowledge. In the Polish and Croatian samples all forms of HR knowledge transfer were indicated to be less critical than in the other samples.

30. Table: Enablers of HR knowledge transfer (on a 1-5 scale, on average) (Explanation: 1= critical => 5 =not critical)

The average of the answers

Knowledge flow enablers

Ability to transfer

knowledge

Motivation to transfer

knowledge

Form of knowledge

transfer

Content/Kind of knowledge

Total Sample 3,1 2,9 3,1 3,2 Total Sample

without Hungary 3,3 3,1 3,2 3,3

Hungary 2,5 2,6 2,7 3,0 Poland 3,9 3,7 3,7 3,7 Estonia 2,7 2,5 2,5 2,7

Romania 2,8 2,6 3,1 3,0 Serbia 3,0 3,1 3,0 3,4

Slovakia 2,7 2,7 2,8 2,7 Croatia 3,6 3,5 3,4 3,7

Rest 2,5 1,9 2,9 2,6 7.3 HR KNOWLEDGE TRANSFER BETWEEN THE PARENT COMPANY AND THE

SUBSIDIARY The respondents in the total sample ranked knowledge flows between subsidiaries and knowledge flows to parent company the least important HR knowledge flows among the 4 types of HR knowledge flows provided. Knowledge flow within your subsidiary was second. The most important HR knowledge flow was assigned to knowledge flows from the parent company. In the Polish and Croatian samples the least important HR knowledge flow was indicated to be the knowledge flows within their subsidiary while knowledge flows between subsidiaries being the most important. In the Hungarian sample the respondents ranked slightly higher the knowledge flows within their subsidiaries.

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31. Table: HR knowledge flows (on a 1-5 scale, on average)

(Explanation: 1= critical => 5 =not critical) The average of the answers

Knowledge flows in HR

Knowledge flows within your subsidiary

Knowledge flows from parent

Knowledge flows between subsidiaries

Knowledge flows to parent

Total Sample 2,8 2,7 3,1 3,1 Total Sample

without Hungary

3,1 2,8 3,1 3,0

Hungary 2,0 2,5 3,2 3,4

Poland 4,1 2,9 3,5 3,0

Estonia 2,2 2,8 2,3 2,8

Romania 2,7 2,8 3,2 3,4

Serbia 2,9 2,6 3,6 3,2

Slovakia 2,0 2,4 2,7 2,7

Croatia 3,6 3,0 3,2 2,7

Rest 2,0 3,0 2,6 3,0

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8 THE FUTURE TASKS OF HR 8.1 THE KEY BUSINESS ISSUES, TRENDS FOR HR TO FACE With regard to the key issues of the next 12-24 months, the interviewed HR managers in the total sample considered improving efficiency most imporant. Over 30% respondents thought that this business expectation is the most important tasks HR professionals have to face. In many of the companies this is accompanied by company development and conforming to globalization.

32. Table: Key business challenges in the next 1-2 years

Important

Order of priority of

the key business

directions, challenges

Efficiency improvement

Company development

Company reorganization

Conform to globalization

Distribution development

EU changes

Eastern expansion Other Total

Total Sample Frequency 70 127 98 128 107 125 86 17 758

% distribution 9,2% 16,8% 12,9% 16,9% 14,1% 16,5% 11,3% 2,2% 100,0

% Total

Sample without Hungary

Frequency 59 86 69 91 86 89 75 15 570

% distribution 10,4% 15,1% 12,1% 16,0% 15,1% 15,6% 13,2% 2,6% 100,0

% Hungary Frequency 11 41 29 37 21 36 11 2 188

% distribution 5,9% 21,8% 15,4% 19,7% 11,2% 19,1% 5,9% 1,1% 100,0

%

Poland Frequency 27 35 22 36 28 44 21 0 213

% distribution 12,7% 16,4% 10,3% 16,9% 13,1% 20,7% 9,9% 0,0% 100,0

%

Estonia Frequency 15 21 16 15 27 9 26 0 129

% distribution 11,6% 16,3% 12,4% 11,6% 20,9% 7,0% 20,2% 0,0% 100,0

% Romania Frequency 3 7 10 8 8 8 4 3 51

% distribution 5,9% 13,7% 19,6% 15,7% 15,7% 15,7% 7,8% 5,9% 100,0

% Serbia Frequency 5 6 10 10 9 7 6 4 57

% distribution 8,8% 10,5% 17,5% 17,5% 15,8% 12,3% 10,5% 7,0% 100,0

%

Slovakia Frequency 2 10 6 14 8 11 12 5 68

% distribution 2,9% 14,7% 8,8% 20,6% 11,8% 16,2% 17,6% 7,4% 100,0

%

Croatia Frequency 4 6 3 3 6 8 2 0 32

% distribution 12,5% 18,8% 9,4% 9,4% 18,8% 25,0% 6,3% 0,0% 100,0

% Rest Frequency 3 1 2 5 0 2 4 3 20

% distribution 15,0% 5,0% 10,0% 25,0% 0,0% 10,0% 20,0% 15,0% 100,0

%

Very important

Order of priority of

the key business

directions, challenges

Efficiency improvement

Company development

Company reorganization

Conform to globalization

Distribution development

EU changes

Eastern expansion Other Total

Total Sample Frequency 241 157 86 109 100 52 43 7 795

% distribution 30,3% 19,7% 10,8% 13,7% 12,6% 6,5% 5,4% 0,9% 100,0%

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Very important

Order of priority of

the key business

directions, challenges

Efficiency improvement

Company development

Company reorganization

Conform to globalization

Distribution development

EU changes

Eastern expansion Other Total

Total Sample without Hungary Frequency

170 123 56 84 74 40 31 4

582

% distribution 29,2% 21,1% 9,6% 14,4% 12,7% 6,9% 5,3% 0,7% 100,0%

Hungary Frequency 71 34 30 25 26 12 12 3 213

% distribution 33,3% 16,0% 14,1% 11,7% 12,2% 5,6% 5,6% 1,4% 100,0%

Poland Frequency 67 55 24 33 34 14 11 1 239

% distribution 28,0% 23,0% 10,0% 13,8% 14,2% 5,9% 4,6% 0,4% 100,0%

Estonia Frequency 36 19 9 26 11 4 9 0 114

% distribution 31,6% 16,7% 7,9% 22,8% 9,6% 3,5% 7,9% 0,0% 100,0%

Romania Frequency 17 14 5 7 9 8 1 0 61

% distribution 27,9% 23,0% 8,2% 11,5% 14,8% 13,1% 1,6% 0,0% 100,0%

Serbia Frequency 14 13 3 5 4 3 5 2 49

% distribution 28,6% 26,5% 6,1% 10,2% 8,2% 6,1% 10,2% 4,1% 100,0%

Slovakia Frequency 21 12 8 8 11 8 2 0 70

% distribution 30,0% 17,1% 11,4% 11,4% 15,7% 11,4% 2,9% 0,0% 100,0%

Croatia Frequency 7 3 3 2 1 0 1 0 17

% distribution 41,2% 17,6% 17,6% 11,8% 5,9% 0,0% 5,9% 0,0% 100,0%

Rest Frequency 8 7 4 3 4 3 2 1 32

% distribution 25,0% 21,9% 12,5% 9,4% 12,5% 9,4% 6,3% 3,1% 100,0%

8.2 INITIATIVES TO IMPROVE THE BUSINESS FOCUS OF HR PROFESSIONALS The responding organizations have hitherto put little emphasis on improving the business efficiency of HR professionals. This is also proven by the fact that training in specific areas of HR were most commonly implemented as reported by the professionals surveyed. However, according to the answers, many companies also had business training. Other HR solutions, such as adjusting recruitment resources or criteria to this goal and encouraging this process were implemented only by relatively few companies and were seldom planned.

33. Table: Improving business focus among HR staff

Implemented

Actions improving business focus of HR

staff

Offer training in specific areas of

HR

Offer training

on business

issues

Offer incentives based on

measures and business

performance

Prioritize business

knowledge in the

selection of HR staff

Hire people from outside

HR (business

people)

Offer rotation programmes

(outside the HR department) for

HR staff

Total Sample 110 69 87 63 43 32

Total Sample without Hungary 56 41 64 46 31 24

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Implemented

Actions improving business focus of HR

staff

Offer training in specific areas of

HR

Offer training

on business

issues

Offer incentives based on

measures and business

performance

Prioritize business

knowledge in the

selection of HR staff

Hire people from outside

HR (business

people)

Offer rotation programmes

(outside the HR department) for

HR staff

Hungary 54 28 23 17 12 8

Poland 7 7 10 3 5 3

Estonia 8 14 17 16 12 11

Romania 17 0 0 0 0 0

Serbia 5 7 10 12 4 4

Slovakia 9 5 13 8 7 4

Croatia 5 5 6 4 2 0

Rest 5 3 8 3 1 2

Planned

Actions improving

business focus of HR staff

Offer training on

specific areas of HR

Offer training on business

issues

Offer incentives based on measures

and business

performance

Prioritize business

knowledge in the

selection of HR staff

Hire people from outside HR (business

people)

Offer rotation programmes (outside the HR department)

for HR staff

Total Sample 66 58 35 37 43 59

Total Sample without Hungary 49 49 23 28 34 45

Hungary 17 9 12 9 9 14

Poland 9 7 2 6 6 5

Estonia 16 13 6 4 6 9

Romania 0 0 0 0 0 0

Serbia 10 8 5 3 6 8

Slovakia 6 10 4 9 7 11

Croatia 4 4 4 0 1 5

Rest 4 7 2 6 8 7

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9 CHARACTERISTICS OF THE RESPONDING INDIVIDUALS From the personal characteristics of the interviewed professionals we examined demographic characteristics, their professional qualifications and the characteristics of the positions held. 9.1 DEMOGRAPHIC CHARACTERISTICS AND QUALIFICATION The gender distribution of the professionals participating in the interview is essential equal. This seemingly balanced situation is strongly influenced by the fact that the respondents are representatives holding managerial positions in the HR profession that is otherwise dominated by women and the proportion of men among the respondents is much higher than in HR in general. In the Romanian, Serbian, and Rest samples the number of males dominate among the responding individuals. While in the Estonian, Slovakian, and Croatian samples the number of women dominate.

34. Table: The gender of the responding individuals

Male Female Total

Frequency % distribution Frequency % distribution Frequency % distribution

Total Sample 100 49,8% 101 50,2% 201 100,0%

Total Sample without Hungary 60 50,8% 58 49,2%

118 100,0% Hungary 40 48,2% 43 51,8% 83 100,0% Poland 0 0,0% 0 0,0% 0 0,0% Estonia 14 45,2% 17 54,8% 31 100,0%

Romania 12 54,5% 10 45,5% 22 100,0% Serbia 12 60,0% 8 40,0% 20 100,0%

Slovakia 11 47,8% 12 52,2% 23 100,0% Croatia 4 36,4% 7 63,6% 11 100,0%

Rest 7 63,6% 4 36,4% 11 100,0% More than 80% of the participating individuals in the total sample are over 30 years of age, where over 40% are between 30 and 40 and only a few of the professionals are very young (17.6%). The Estonian sample is an exception in that it has a higher number of professionals in the 26 – 28 years of age category (38.9%). In the Hungarian sample the age category of the participating individuals is in the 40 – 54 years of age category (41.5%)

35. Table: The age of the respondents

Age

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Below 25 years

Frequency 4 4 0 0 3 0 0 1 0 0

% distribution 2,1% 3,8% 0,0% 0,0% 16,7% 0,0% 0,0% 4,3% 0,0% 0,0%

25-29 years Frequency 29 17 12 0 7 7 1 1 0 1

%

distribution 15,5% 16,2% 14,6% 0,0% 38,9% 31,8% 5,0% 4,3% 0,0% 9,1% 30-39 years Frequency 75 54 21 0 5 9 10 15 6 9

%

distribution 40,1% 51,4% 25,6% 0,0% 27,8% 40,9% 50,0% 65,2% 54,5% 81,8%

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Age

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

40-54 years Frequency 59 25 34 0 2 5 8 4 5 1

%

distribution 31,6% 23,8% 41,5% 0,0% 11,1% 22,7% 40,0% 17,4% 45,5% 9,1% 55-59 years Frequency 18 4 14 0 0 1 1 2 0 0

%

distribution 9,6% 3,8% 17,1% 0,0% 0,0% 4,5% 5,0% 8,7% 0,0% 0,0% Above 59 years

Frequency 2

1 1 0 1 0 0 0 0 0

%

distribution 1,1% 1,0% 1,2% 0,0% 5,6% 0,0% 0,0% 0,0% 0,0% 0,0%

Total Frequency 187 105 82 0 18 22 20 23 11 11

%

distribution 100,0% 100,0% 100,0% 0,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Almost all the interviewees participating in the survey in the total sample have university, college or equivalent qualifications (87.4%), some of them also have PhDs (5%). A similar pattern can be found in the other samples.

36. Table: Level of qualificaton

Level of qualification

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

University PhD Frequency 16 11 5 7 1 2 1 0 0 0

%

distribution 5,0% 4,7% 6,0% 7,3% 2,0% 9,1% 5,0% 0,0% 0,0% 0,0% University (MSc) Frequency 211 150 61 82 29 12 9 3 5 10

%

distribution 66,6% 64,4% 72,6% 85,4% 59,2% 54,5% 45,0% 12,5% 45,5% 90,9% College (BSc) Frequency 66 50 16 5 11 6 7 17 4 0

%

distribution 20,8% 21,5% 19,0% 5,2% 22,4% 27,3% 35,0% 70,8% 36,4% 0,0%

Other Frequency 24 22 2 2 8 2 3 4 2 1

%

distribution 7,6% 9,4% 2,4% 2,1% 16,3% 9,1% 15,0% 16,7% 18,2% 9,1%

Total Frequency 317 233 84 96 49 22 20 24 11 11

%

distribution 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% The majority of the interviewees in the total sample obtained qualifications in social sciences (47%) or engineering (26.8%) but we also found professionals with qualifications in natural sciences. In the Croatian sample almost all of the interviewees (90.9%) had obtained qualifications in social sciences. In the Polish and Serbian samples the obtained qualifications are approximately evenly divided between engineering and social sciences.

37. Table: Field of professional qualificaton

Field of professional qualificaton

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Natural sciences Frequency 18 11 7 8 1 1 1 0 0 0

%

distribution 5,7% 4,7% 8,3% 8,2% 2,1% 4,5% 5,0% 0,0% 0,0% 0,0%

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Field of

professional qualificaton

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

Engineering Frequency 85 62 23 38 7 5 8 3 0 1

%

distribution 26,8% 26,6% 27,4% 39,2% 14,6% 22,7% 40,0% 12,5% 0,0% 9,1%

Social sciences Frequency 149 101 48 30 26 7 8 12 10 8

%

distribution 47,0% 43,3% 57,1% 30,9% 54,2% 31,8% 40,0% 50,0% 90,9% 72,7%

Other Frequency 65 59 6 21 14 9 3 9 1 2

%

distribution 20,5% 25,3% 7,1% 21,6% 29,2% 40,9% 15,0% 37,5% 9,1% 18,2%

Total Frequency 317 233 84 97 48 22 20 24 11 11

%

distribution 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

9.2 POSITION OF THE RESPONDENTS Almost half (42%) of the individuals participating in the survey in the total sample are top HR managers: with the title of HR vice president, director, manager or department head The respondents (except the 36 CEOs) work in HR. In the case of the Hungarian, Romanian and Rest samples around at least half of the participating individuals are at the level HR Director or HR Manager. While in the Polish and Serbian samples a high proportion of the individuals participating in the survey were HR professionals or held other non-described positions (54% and 47.6% respectively).

38. Table: Current position

Current position Total

Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

CEO Frequency 36 32 4 12 13 2 0 3 0 2

%

distribution 11,3% 20,6% 5,1% 32,4% 27,7% 14,3% 0,0% 23,1% 0,0% 18,2% HR Vice President Frequency 10 2 8 0 0 0 2 0 0 0

%

distribution 3,1% 1,3% 10,1% 0,0% 0,0% 0,0% 9,5% 0,0% 0,0% 0,0% HR Director /Manager Frequency 80 41 39 3 14 8 5 3 3 5

%

distribution 25,1% 26,5% 49,4% 8,1% 29,8% 57,1% 23,8% 23,1% 25,0% 45,5% HR Department Head

Frequency 44 32 12 2 14 2 4 3 5 2

%

distribution 13,8% 20,6% 15,2% 5,4% 29,8% 14,3% 19,0% 23,1% 41,7% 18,2% HR professional Frequency 32 24 8 10 3 1 5 2 2 1

%

distribution 10,0% 15,5% 10,1% 27,0% 6,4% 7,1% 23,8% 15,4% 16,7% 9,1%

Other Frequency 117 24 8 10 3 1 5 2 2 1

%

distribution 36,7% 15,5% 10,1% 27,0% 6,4% 7,1% 23,8% 15,4% 16,7% 9,1%

Total Frequency 319 155 79 37 47 14 21 13 12 11

%

distribution 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% Over 41% of the respondents in the total sample have worked in their current positions for less than three years. However, the majority have spent longer time, typically 5-10 years (21%) in their current positions. In the Polish sample over half the respondents held their current position for less than 3 years. In the Croatian sample the majority of the responses indicated that they had held their position between

Page 66: HR Management in Transition_HU_Eastern Europe 2011

3-5 years (45.5%). However in the Slovakian sample the majority (58.3%) held their current position for 5-10 years.

39. Table: Time spent in current position

Time spent in current position

Total Sample

Total Sample without Hungary

Hungary Poland Estonia Romania Serbia Slovakia Croatia Rest

0-3 years Frequency 132 96 36 49 20 7 7 6 2 5

%

distribution 41,4% 40,9% 42,9% 51,0% 39,2% 31,8% 35,0% 25,0% 18,2% 45,5%

3-5 years Frequency 83 66 17 25 17 8 6 3 5 2

%

distribution 26,0% 28,1% 20,2% 26,0% 33,3% 36,4% 30,0% 12,5% 45,5% 18,2%

5-10 years Frequency 67 48 19 16 6 3 3 14 3 3

%

distribution 21,0% 20,4% 22,6% 16,7% 11,8% 13,6% 15,0% 58,3% 27,3% 27,3%

10-15 years Frequency 27 18 9 5 6 4 2 0 0 1

%

distribution 8,5% 7,7% 10,7% 5,2% 11,8% 18,2% 10,0% 0,0% 0,0% 9,1%

Over 15 years Frequency 10 7 3 1 2 0 2 1 1 0

%

distribution 3,1% 3,0% 3,6% 1,0% 3,9% 0,0% 10,0% 4,2% 9,1% 0,0%

Total Frequency 319 235 84 96 51 22 20 24 11 11

%

distribution 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

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SECTION B: SUBSIDIARIES ORGANIZED INTO HUNGARY AND IN EASTERN EUROPE

AND SPLIT BY OWNERSHIP In this section the analysis is conducted by organizing the responding firms into 2 different groups – Hungarian sample and Eastern European sample. These 2 different groups are subdivided into 3 groups based on ownership – 1. American and Canadian firms; 2. German firms; 3. Other. 10 CHARACTERISTICS OF THE COMPANIES PARTICIPATING IN THE SURVEY 317 foreign owned, legally independent subsidiaries participated in the questionnaire survey. Three firms from Austria are not included. Therefore the total number of firms is slightly different from analysis done in Section A. 10.1 COMPANY SIZE AND LEGAL FORM According to the data shown in the table below, the subsidiaries participating in the survey, despite the global financial and economic crisis, generated nearly constant revenue in the two years examined. The revenue for Eastern Europe American + Canadian Firms is unusually since only 5 out of 26 participants in the survey answered the question. The Eastern Europe Other sample showed a significant hiring of employees and a resultant increase in revenue.

40. Table: Number of staff and revenue of the participating companies (n=320)

Year 2008 2009

Number of employees

Revenue in EUR

(million) Number of employees

Revenue in EUR (million)

American + Canadian Firms 29 021 4 845 25 672 4 843

German 37 791 13 257 36 678 13 242 Hungary

Other 53 187 11 041 51 623 10 779 American +

Canadian Firms 12 318 70 28 725 2 738

German 26 006 2 072 34 254 4 656 Eastern-Europe

Other 33 652 2 388 115 262 6 808 10.1.1 TOTAL NUMBER OF EMPLOYEES Based on the table below, we can state that the companies in the Hungarian sample have one quarter of their employees in small enterprises (enterprises with less than 250 employees). In the Hungarian sample 40% of firms with German ownership are considered small enterprises. In the Eastern European sample half of the firms are small enterprises. In this relationship it is important to highlight that although a minority of the subsidiaries are SMEs based on their size (number of staff and revenue); all the Hungarian companies analyzed are part of larger international companies and thus are regarded as large enterprises from an operational and management point of view.

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41. Table: Number of staff

2008 Hungary Eastern Europe

Total number of employees of the company

American + Canadian

Firms German Other

American + Canadian

Firms Germany Other

Under 250 Frequency 5 5 15 6 6 42

Percentage distribution (%) 29,4% 25,0% 33,3% 85,7% 46,2% 63,6%

251-1000 Frequency 6 8 13 0 4 17

Percentage distribution (%) 35,3% 40,0% 28,9% 0,0% 30,8% 25,8%

1001-2000 Frequency 2 1 8 0 0 4

Percentage distribution (%) 11,8% 5,0% 17,8% 0,0% 0,0% 6,1%

2001-5000 Frequency 3 3 7 0 1 2

Percentage distribution (%) 17,6% 15,0% 15,6% 0,0% 7,7% 3,0%

Over 5000 Frequency 1 3 2 1 2 1

Percentage distribution (%) 5,9% 15,0% 4,4% 14,3% 15,4% 1,5%

Total Frequency 17 20 45 7 13 66

Percentage distribution

(%) 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

2009 Hungary Eastern Europe Total number of

employees of the company

American + Canadian

Firms German Other

American + Canadian

Firms Germany Other

Under 250 Frequency 5 5 15 13 17 97

Percentage distribution (%) 29,4% 25,0% 33,3% 52,0% 48,6% 58,8%

251-1000 Frequency 4 8 13 4 11 40

Percentage distribution (%) 23,5% 40,0% 28,9% 16,0% 31,4% 24,2%

1001-2000 Frequency 5 1 8 5 4 14

Percentage distribution (%) 29,4% 5,0% 17,8% 20,0% 11,4% 8,5%

2001-5000 Frequency 2 3 7 2 1 9

Percentage distribution (%) 11,8% 15,0% 15,6% 8,0% 2,9% 5,5%

Over 5000 Frequency 1 3 2 1 2 5

Percentage distribution (%) 5,9% 15,0% 4,4% 4,0% 5,7% 3,0%

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2009 Hungary Eastern Europe

Total number of employees of the company

American + Canadian

Firms German Other

American + Canadian

Firms Germany Other

Total Frequency 17 20 45 25 35 165

Percentage distribution

(%) 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

10.1.2 REVENUE With regard to the revenue we can state that in the Hungarian sample, independent of ownership, the companies maintained their revenue from 2008 to 2009. While in the Eastern European sample firms with seem to have more changes in revenue. Mainly this due to higher number of respondents indicating their revenue for 2009 and not indicating revenue in 2008.

42. Table: Revenue of the subsidiaries participating in the research (million EUR)

2008 Hungary

American + Canadian Firms German Other

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

Under 5 million 2 11,1% 2 10,0% 4 9,3%

5-20 million 3 16,7% 3 15,0% 8 18,6%

20-50 million 0 0,0% 2 10,0% 2 4,7%

50-100 million 6 33,3% 1 5,0% 7 16,3%

100-500 million 4 22,2% 7 35,0% 14 32,6%

500-1000 million 2 11,1% 2 10,0% 6 14,0%

Over 1000 million 1 5,6% 3 15,0% 2 4,7%

Total 18 100,0% 20 100,0% 43 100,0% 2008 Eastern Europe

American + Canadian Firms German Other

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

Under 5 million 2 40,0% 1 10,0% 22 40,7%

5-20 million 0 0,0% 2 20,0% 9 16,7%

20-50 million 3 60,0% 2 20,0% 13 24,1%

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2008 Eastern Europe

American + Canadian Firms German Other

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

50-100 million 0 0,0% 1 10,0% 5 9,3%

100-500 million 0 0,0% 2 20,0% 5 9,3%

500-1000 million 0 0,0% 2 20,0% 0 0,0%

Over 1000 million

0 0,0% 0 0,0% 0 0,0%

Total 5 100,0% 10 100,0% 54 100,0%

2009 Hungary Revenue of the subsidiary (EUR)

American + Canadian Firms German Other

Frequency Percentage distribution

(%) Frequency

Percentage distribution

(%) Frequency

Percentage distribution

(%) Under 5 million 2 11,1% 2 10,0% 4 9,3%

5-20 million 3 16,7% 3 15,0% 9 20,9% 20-50 million 1 5,6% 1 5,0% 2 4,7% 50-100 million 4 22,2% 3 15,0% 5 11,6% 100-500 million 6 33,3% 6 30,0% 15 34,9%

500-1000 million 1 5,6% 2 10,0% 6 14,0%

Over 1000 million 1 5,6% 3 15,0% 2 4,7%

Total 18 100,0% 20 100,0% 43 100,0%

2009 Eastern Europe Revenue of the subsidiary (EUR)

American + Canadian Firms German Other

Frequency Percentage distribution

(%) Frequency

Percentage distribution

(%) Frequency

Percentage distribution

(%) Under 5 million 5 31,3% 7 24,1% 47 35,9%

5-20 million 3 18,8% 6 20,7% 30 22,9% 20-50 million 1 6,3% 3 10,3% 23 17,6% 50-100 million 3 18,8% 3 10,3% 12 9,2%

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2009 Eastern Europe

Revenue of the subsidiary (EUR)

American + Canadian Firms German Other

Frequency Percentage distribution

(%) Frequency

Percentage distribution

(%) Frequency

Percentage distribution

(%) 100-500 million 2 12,5% 5 17,2% 17 13,0%

500-1000 million 2 12,5% 4 13,8% 1 0,8%

Over 1000 million 0 0,0% 1 3,4% 1 0,8%

Total 16 100,0% 29 100,0% 131 100,0%

43. Table: Productivity index of the subsidiaries examined (EUR/person)

2008 American + Canadian Firms German Other

Year Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Hungary 29 021 4 845 010 166,948417 37 791 13 256 600 350,787224 53 187 11 041

080 207,589825

Eastern-Europe 12 318 70 300 5,707095 26 006 2 071 700 79,662386 33 652 2 388 115 70,965024

2009 American + Canadian Firms German Other

Year Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Number of employees

Revenue (thousand

EUR)

Average revenue per employee

(EUR/person)

Hungary 25 672 4 842 970 188,647943 36 678 13 242 300 361,042042 51 623 10 779

020 208,802665

Eastern-Europe 28 725 2 737 500 95,300261 34 254 4 655 986 135,925323 115 262 6 808 185 59,067039

The average revenue per employee in the Hungarian sample has increased for all three types of ownership with the American and Canadian firms indicating the largest increase followed by German firms and the Other firms. Again, theEasternEuropeansamplefirmsresultsareslightlyskewedasmentionedearlyduetounderreportingin2008makingitdifficulttomakeanyconclusionsontrendsfrom2008to2009.Therevenueperemployeeisalmostallunder5thousandEUROsperemployeeinallcategoriesunderobservation.

44. Table: Revenue per employee (thousand EUR/person)

2008 Hungary

American + Canadian Firms German Other Revenue per employee (thousand EUR/person)

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

Under 5 thousand EUR 17 94,4% 19 95,0% 43 100,0%

5-10 thousand EUR 1 5,6% 0 0,0% 0 0,0% 10-20 thousand EUR 0 0,0% 0 0,0% 0 0,0%

20-40 thousand EUR 0 0,0% 0 0,0% 0 0,0%

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2008 Hungary

American + Canadian Firms German Other Revenue per employee (thousand EUR/person)

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

40-60 thousand EUR 0 0,0% 0 0,0% 0 0,0%

60-100 thousand EUR 0 0,0% 0 0,0% 0 0,0%

100-150 thousand EUR 0 0,0% 0 0,0% 0 0,0%

Over 150 thousand EUR 0 0,0% 1 5,0% 0 0,0%

Total 18 100,0% 20 100,0% 43 100,0%

2008 Eastern Europe

American + Canadian Firms Germany Other Revenue per employee (thousand EUR/person)

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

Under 5 thousand EUR 5 100,0% 10 100,0% 52 96,3%

5-10 thousand EUR 0 0,0% 0 0,0% 1 1,9% 10-20 thousand EUR 0 0,0% 0 0,0% 0 0,0%

20-40 thousand EUR 0 0,0% 0 0,0% 0 0,0%

40-60 thousand EUR 0 0,0% 0 0,0% 0 0,0%

60-100 thousand EUR 0 0,0% 0 0,0% 0 0,0%

100-150 thousand EUR 0 0,0% 0 0,0% 0 0,0%

Over 150 thousand EUR 0 0,0% 0 0,0% 1 1,9%

Total 5 100,0% 10 100,0% 54 100,0%

2009 Hungary

American + Canadian Firms German Other

Revenue per employee (thousand EUR/person) Frequency Percentage

distribution (%) Frequency Percentage distribution (%) Frequency Percentage

distribution (%)

Under 5 thousand EUR 18 100,0% 19 95,0% 43 100,0%

5-10 thousand EUR 0 0,0% 0 0,0% 0 0,0%

10-20 thousand EUR 0 0,0% 0 0,0% 0 0,0%

20-40 thousand EUR 0 0,0% 0 0,0% 0 0,0%

40-60 thousand EUR 0 0,0% 0 0,0% 0 0,0%

60-100 thousand EUR 0 0,0% 0 0,0% 0 0,0%

100-150 thousand EUR 0 0,0% 0 0,0% 0 0,0%

Over 150 thousand EUR 0 0,0% 1 5,0% 0 0,0%

Total 18 100,0% 20 100,0% 43 100,0%

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2009 Eastern Europe

American + Canadian Firms Germany Other

Revenue per employee (thousand EUR/person)

Frequency Percentage distribution (%) Frequency Percentage

distribution (%) Frequency Percentage distribution (%)

Under 5 thousand EUR 16 100,0% 27 93,1% 128 97,7%

5-10 thousand EUR 0 0,0% 1 3,4% 1 0,8%

10-20 thousand EUR 0 0,0% 0 0,0% 0 0,0%

20-40 thousand EUR 0 0,0% 0 0,0% 0 0,0%

40-60 thousand EUR 0 0,0% 0 0,0% 0 0,0%

60-100 thousand EUR 0 0,0% 0 0,0% 0 0,0%

100-150 thousand EUR 0 0,0% 0 0,0% 0 0,0%

Over 150 thousand EUR 0 0,0% 1 3,4% 2 1,5%

Total 16 100,0% 29 100,0% 131 100,0%

10.2 MANDATE OF THE ORGANIZATION We also examined how much control these organizations have over the entire value chain. This examination was based on organizations’ responses to which mandate they operated under. These mandates are defined as follows:

1) "Mandate 1" This is a business which markets into the local trading area products manufactured centrally. The business is a small-scale replica of the parent.

2) "Mandate 2" This is a business operating a designated set of component parts for a multi-country or global market. Operational activities locally will be confined to at most packaging, bulk breaking, some final processing and warehousing distributing.

3) "Mandate 3" This is a business that does not have control of the entire value chain of a business unit but has activities in a number of parts of the value chain. This might be a preparation of manufacturing activities or a regional logistics brief (responsibility).

4) "Mandate 4" This is a business that develops and markets a limited product service for global markets. Products, markets or basic technologies are similar to the parent company, but exchanges between the subsidiary and the parent are rare.

5) "Mandate 5" This is a business that has the freedom and resources to develop lines of business for either a local, multi-country or a global market. The subsidiary is allowed unconstrained access to global markets and freedom to pursue new business opportunities.

The origin of the mandate model described above goes back to Porter’s (1980) value chain model. During the analysis, after Delany (1998) and White-Poynter (1984), we classified the participants into five groups based on how much of the value chain is covered by the range of activities of the local subsidiary. Based on the responses it can be stated that for the Hungarian sample that the majority of American and Canadian firms indicated their mandates as either mandate 4 (38.9%) or 5 (22.2%). Those firms with German ownership indicated their mandates as being mandate 3 (20.0%) or mandate 4 (35.0%). This pattern is similar to those firms with Other ownership – mandate 3 (26.1%) and mandate 4 (34.8%). In the Eastern European sample a different patter of roles and mandates of the subsidiaries can be seen. Those Eastern European firms with American and Canadian ownership indicated that they operated most often under mandates 1 (26.9%), 2 (23.1%) and 3 (26.9%). Those firms with German ownership

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indicated they operated under most often mandates 2 (33.3%) and 5 (23.1%). While those firms with Other ownership marked that they most often operated under mandates 1 (22%.0), 3 (21.3%), and 5 (22.6%).

45. Table: Mandates of the companies participating in the survey

Hungary

American + Canadian Firms German Other

Roles and mandates

of your subsidiary

Frequency Percentage distribution

(%) Frequency

Percentage distribution

(%) Frequency

Percentage distribution

(%)

Mandate 1 2 11,1% 4 20,0% 8 17,4% Mandate 2 2 11,1% 2 10,0% 2 4,3% Mandate 3 3 16,7% 4 20,0% 12 26,1% Mandate 4 7 38,9% 7 35,0% 16 34,8% Mandate 5 4 22,2% 3 15,0% 8 17,4%

Total 18 100,0% 20 100,0% 46 100,0%

Eastern Europe

American + Canadian Firms Germany Other

Roles and mandates

of your subsidiary

Frequency Percentage distribution

(%) Frequency

Percentage distribution

(%) Frequency

Percentage distribution

(%)

Mandate 1 7 26,9% 6 15,4% 36 22,0% Mandate 2 4 15,4% 13 33,3% 31 18,9% Mandate 3 6 23,1% 4 10,3% 35 21,3% Mandate 4 7 26,9% 7 17,9% 25 15,2% Mandate 5 2 7,7% 9 23,1% 37 22,6%

Total 26 100,0% 39 100,0% 164 100,0% 10.3 YEAR AND FORM OF ESTABLISHMENT OF THE SUBSIDIARIES The foreign owners of more than half (over 50% in all groups) of the subsidiaries examined in the Hungarian sample acquired majority control or carried out the greenfield investments between 1990 and 1995. About one quarter of the companies settled in Hungary between 1996 and 2000 and between 5% to 12% in the new millennium.9 In companies with American and Canadian ownership there more

9 The great migration to Hungary took place in the ’90s – in contrast with for example the neighbouring Slovakia where this occurred between 2002 and 2007. Many of the large multinational companies present in Hungary have been operating here continuously for about one and a half decades. However, the actors of some industries (e.g. automotive suppliers) move very fast. If the situation is not favorable, these companies walk away very quickly. However, the decision that these companies stay or leave also depends largely on whether their main buyers stay here or leave. The role of ”cheap manufacturing and service provider” Hungarian subsidiaries with shorter delivery times increased during the crisis.

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greenfield investments (52.9%) then in companies with German ownership (55.6% merger and acquisitions (M&A)) or with Other ownership (50.0% merger and acquisitions). In the Eastern European sample the subsidiaries in the three groupings followed a different pattern then in the Hungarian sample. where only in the American and Canadian sample did more companies estabilish subsidiaries during 1990 to 1995 (42.9%) then in other periods. In the German subsidiaries sample the majority of companies were established between 2001 and 2005 (45%) with in the Other category the divisions was that 29.9% of companies were established between 2001 and 2005 and 26.1% of companies were established between 1990 and 1995. In contrast to the Hungarian sample the majority of American and Canadian companies established subsidiaries by merger and acquisitions (53.6%). German companies’ subsidiaries were established via greenfield investments (70.0%) instead of M&A as in the Hungarian sample, while in subsidiaries with Other ownership the division is closer with the edge going towards M&A (47.2%) which is similar to the Hungarian sample.

46. Table: Year and mode of entry of the participants

Hungary American + Canadian Firms

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 0 2 0 2 11.8% 1990-1995 6 3 0 9 52.9% 1996-2000 1 3 0 4 23.5% 2001-2005 0 0 0 0 0.0% After 2005 1 1 0 3 11.8% Total 8 9 0 17 100.0% % distribution 47.1% 52.9% 0.0% 100.0%

Hungary German

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 1 0 0 1 5.6% 1990-1995 6 4 0 10 55.6% 1996-2000 2 2 0 4 22.2% 2001-2005 0 1 1 2 11.1% After 2005 1 0 0 1 5.6% Total 20 20 1 18 100.0% % distribution 55.6% 38.9% 5.5% 100.0%

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Hungary Other

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 0 0 0 0 0.0% 1990-1995 12 6 1 19 45.2% 1996-2000 5 6 3 14 33.3% 2001-2005 2 4 0 6 14.3% After 2005 2 1 0 3 7.1% Total 21 17 4 42 100.0% % distribution 50.0% 40.5% 9.5% 100.0% é

Eastern Europe American + Canadian Firms

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 0 0 0 0 0.0% 1990-1995 6 6 0 12 42.9% 1996-2000 4 2 1 7 25.0% 2001-2005 4 1 1 6 21.4% After 2005 1 2 0 3 10.7% Total 15 11 2 28 100.0% % distribution 53.6% 39.3% 33.3% 100.0%

Eastern Europe Germany

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 0 0 0 0 0.0% 1990-1995 0 4 0 4 10.0% 1996-2000 2 5 0 7 17.5% 2001-2005 5 13 0 18 45.0% After 2005 3 6 2 11 27.5% Total 10 28 2 40 100.0% % distribution 25.0% 70.0% 5.0% 100.0%

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Eastern Europe

Other

Year of establishment of the subsidiary

Merger, acquisition

Greenfield investment Other Total % distribution

Before 1990 0 2 1 3 1.9% 1990-1995 15 22 5 42 26.1% 1996-2000 17 12 4 33 20.5% 2001-2005 28 14 6 48 29.8% After 2005 16 15 4 35 21.7% Total 76 65 20 161 100.0% % distribution 47.2% 40.4% 12.4% 100.0% 10.4 FIELD OF OPERATION: SECTOR-INDUSTRY There were 72.2% of the organizations examined in the Hungarian sample with American and Canadian ownership engaged in manufacturing and 27.8% of organizations in trade, tangible and intangible services. While those with German ownership 65% of subsidiaries were engaged in manufacturing, and those with Other ownership 52.1% were engaged in manufacturing. The German owned subsidiaries had 15% of subsidiaries involved in other activities and the rest involved in trade, tangible and intangible services. The Other owned subsidiaries had 6.5% of subsidiaries involved in other activities and the rest involved in trade and services. In the Eastern European sample only 32% of Amercian and Canadian owned firms were active in manufacturing, 36% in trade and services and 32% in other activities. In German owned firms the majority activity was in manufacturing 58.9%, the amount activity in trade and services was 35.9%, and 5% of German owned subsidiaries were involved in other activities. Subsidiaries with Other ownership were predominantly active in trade and services (52.1%), followed by manufacturing (34.6%), and then by other activities (13.3%).

47. Table: Sectoral distribution of the participants

Hungary Hungary Hungary

American + Canadian Firms German Other

Main sector of the subsidiary’s activity

Frequency % distribution Frequency %

distribution Frequency % distribution

Heavy industry, mining, energy industry

1 5.6% 5 25.0% 2 4.3%

Light industry 2 11.1% 2 10.0% 1 2.2% Engineering 7 38.9% 4 20.0% 8 17.4% Chemical and pharmaceutical industry

1 5.5% 0 0.0% 6 13.0%

Consumer goods (FMCG) 2 11.1% 2 10.0% 7 15.2%

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Hungary Hungary Hungary

American + Canadian Firms German Other

Main sector of the subsidiary’s activity

Frequency % distribution Frequency %

distribution Frequency % distribution

Trade 1 5.6% 1 5.0% 10 21.7% Services 2 11.1% 2 10.0% 6 13.0% Financial institutions, banks

2 11.1% 1 5.0% 3 6.5%

Other 0 0.0% 3 15.0% 3 6.5% Total 18 100.0% 20 100.0% 46 100.0%

Eastern Europe Eastern Europe Eastern Europe

American + Canadian Firms Germany Other

Main sector of the subsidiary’s activity

Frequency % distribution Frequency %

distribution Frequency % distribution

Heavy industry, mining, energy industry

2 8.0% 7 17.9% 14 8.5%

Light industry 2 8.0% 7 17.9% 16 9.7% Engineering 3 12.0% 6 15.4% 16 9.7% Chemical and pharmaceutical industry

0 0.0% 0 0.0% 1 0.6%

Consumer goods (FMCG) 1 4.0% 3 7.7% 10 6.1%

Trade 1 4.0% 6 15.4% 24 14.5% Services 5 20.0% 7 17.9% 37 22.4% Financial institutions, banks

3 12.0% 1 2.6% 25 15.2%

Other 8 32.0% 2 5.1% 22 13.3% Total 25 100.0% 39 100.0% 165 100.0%

10.5 MAIN DIRECTIONS OF DEVELOPMENT OF THE COMPANIES IN THE PERIOD EXAMINED

In relation to the topic indicated in the subtitle, we examined how important the following three strategic orientations were for the respondents:

! growth, market expansion, portfolio expansion, ! stability, efficiency improvement, revenue retention, adapting to the market situation, ! redundancies, rationalization.

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10.5.1 MAIN STRATEGIC ISSUES-ORIENTATIONS The majority of the respondents, nearly 43% in those companies with American and Canadian ownership in the Hungarian indicated that they were seeking stability during the period examined. In those subsidiaries with German or Other ownership they are almost equally divided between seeking stability and seeking growth and market expansion. However, in the Eastern European sample those subsidiaries with German ownership are mostly focused on growth and market expansion (48.9%). While those companies with American and Canadian ownership or with Other ownership are equally divided between focusing on growth and stability.

48. Table: Main strategic issues and orientations

Hungary Hungary Hungary

American + Canadian Firms German Other

Main strategic issues, orientations

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Growth, market expansion, portfolio expansion

6 21.4% 12 35.3% 17 28.3%

Stability, efficiency improvement, revenue retention, adapting to the market situation

12 42.9% 12 35.3% 22 36.7%

Redundancies, rationalization 6 21.4% 6 17.6% 12 20.0%

Other 4 14.3% 4 11.8% 9 15.0% Total 28 100.0% 34 100.0% 60 100.0%

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Figure 9: Main strategic issues and orientations (%, Hungarian sample)

Eastern Europe Eastern Europe Eastern Europe

American + Canadian Firms Germany Other

Main strategic issues, orientations

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Growth, market expansion, portfolio expansion

9 33.3% 22 48.9% 85 36.3%

Stability, efficiency improvement, revenue retention, adapting to the market situation

9 33.3% 10 22.2% 85 36.3%

Redundancies, rationalization 9 33.3% 11 24.4% 52 22.2%

Other 0 0.0% 2 4.4% 12 5.1% Total 27 100.0% 45 100.0% 234 100.0%

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Figure 10: Main strategic issues and orientations (%, Eastern European sample)

10.5.2 MAIN COMPETITIVE FACTORS IN THE PERIOD EXAMINED Optimal plant/organization size was chosen most frequently by the respondents in all 3 groups of the Hungarian sample (32.6% American and Canadian, 22.0% German, and 26.7% Other) to the questions about the most important competitive factors of companies (more then one answer could be marked in this question). Financial resources (over 20%) followed closely behind as the next most frequent choice. Although German owned firms noted that workforce factors (22%) were a slightly more important competitive factor than financial resouces (20%). For American and Canadian owned firms and firms with Other ownership workforce factors were deemed the third most important competitve factor by the respondents with management (11%-14%) being the fourth most important competitive factor in all 3 groups. In the Eastern European sample workforce factors were the most important competitive factor chosen by the respondents working at firms with American and Canadian owners and with German owners (25.0% and 26.9% respectively). Those subsidiaries with Other ownership then optimal plant/organization size was chosen most frequently (20.3%). For subsidiaries with American and Canadian owners and with German owners optimal plant organization was the 2nd most important competitive factor followed by production technololgy and management. Eastern European subsidiaries with Other ownership indicated the 2nd most important factor being workforce factors followed by management and financial resources.

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49. Table: The importance of competitive factors

Hungary Hungary Hungary

American + Canadian Firms German Other

Frequency of “yes”

Frequency of “yes”

Frequency of “yes” Competitive

factors answers

% distribution

answers

% distribution

answers

% distribution

Optimal plant/organization size

14 32.6% 13 22.0% 31 26.7%

Financial resources 10 23.3% 12 20.3% 24 20.7%

Workforce 8 18.6% 13 22.0% 21 18.1%

Management 5 11.6% 7 11.9% 17 14.7% Production technology 3 7.0% 6 10.2% 13 11.2%

Protected, regulated market 0 0.0% 4 6.8% 3 2.6%

Other 3 7.0% 4 6.8% 7 6.0% Total 43 100.0% 59 100.0% 116 100.0%

Eastern Europe Eastern Europe Eastern Europe

American + Canadian Firms Germany Other

Frequency of “yes”

Frequency of “yes”

Frequency of “yes” Competitive

factors answers

% distribution

answers

% distribution

answers

% distribution

Optimal plant/organization size

12 18.8% 20 19.2% 83 20.3%

Financial resources 8 12.5% 11 10.6% 75 18.3%

Workforce 16 25.0% 28 26.9% 79 19.3% Management 10 15.6% 18 17.3% 78 19.1% Production technology 14 21.9% 18 17.3% 61 14.9%

Protected, regulated market 2 3.1% 7 6.7% 22 5.4%

Other 2 3.1% 2 1.9% 11 2.7% Total 64 100.0% 104 100.0% 409 100.0%

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11 CHARACTERISTICS OF THE KEY INDICATORS OF THE HR FUNCTION In this section we give an overview of the following HR characteristics:

! Number and workload of the HR staff, ! The main indicators representing the importance, results, efficiency characteristics of the HR

activity (labor cost – total cost ratio, age pyramid, relative weight of the training budget, the fluctuation rate and absenteeism).

11.1 NUMBER OF HR STAFF In 2009 American and Canadian owned firms with subsidiaries in Eastern Europe had an average of employees per HR position than American and Canadian owned subsidiaries in Hungary (165 versus 137). However those subsidiaries with German ownership had a higher average of employees per HR position in the Hungarian sample then in the Eastern European sample. The average number of employees served by one HR professional decreased from 147 in 2008 to 137 in 2009 in the companies surveyed in the Hungarian sample with American and Canadian ownership while in the other 2 groups the average ratio increased slightly (German: 69 to 71 and Other: 68 to 69) the ratio (Employees per HR position). This change in the ratio was in combination with an overall decline in the total number of employees in each of the 3 groups. It seems that not all subsidiaries reported the number of employees during 2008 in the Eastern European sample and as a result any comments on trends from 2008 to 2009 cannot be made.

50. Table: Number of employees and HR staff in the participating companies

2008

Hungary Eastern-Europe

American + Canadian Firms American + Canadian Firms

HR staff HR staff Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

29,021 67 132 198 147 12,318 3 2 5 2,464

German German

HR staff HR staff Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

37,791 212 336 548 69 26,006 185 238 423 61

Other Other

HR staff HR staff Employees per HR position Number of

employees HR admin staff

HR professional

Total number of HR staff

Employees per HR

position Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR position

53,187 341 437 779 68 33,652 258 306 556 61

2009

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Hungary Eastern-Europe

American + Canadian Firms American + Canadian Firms

HR staff HR staff Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

25,672 55 133 187 137 28,725 62 112 174 165

German German

HR staff HR staff Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR

position

36,678 196 325 518 71 34,254 238 277 515 67

Other Other

HR staff HR staff Employees per HR position Number of

employees HR admin staff

HR professional

Total number of HR staff

Employees per HR

position Number of employees HR

admin staff

HR professional

Total number of HR staff

Employees per HR position

51,623 330 419 749 69 115,262 1,096 1,392 2,455 47

The HR departments of the companies examined are relatively large as the number of HR staff was higher than 5 persons in the case of more than 60% of the respondents in all three groups of the Hungarian sample in 2009 with the German owned firms having 30 or more persons in HR in 30% of the subsidiaries and Other owned firms having 30 or more persons in HR in nearly 29% of the subsidiaries. In the Eastern European sample only those subsidiaries with American and Canadian ownership had large HR staff (68%). The subsidiaries with German ownership and Other ownership tended to have small HR staff categorized as less than 5 HR staff (50% and 48.4% respectively). Ten firms in the Eastern sample had no HR staff members in 2009 while in the Hungarian sample 4 firms had no HR staff members.

51. Table: Number of HR staff

Hungary

American + Canadian Firms German Other

2008 Total number of

HR staff Frequency %

distribution Frequency %

distribution Frequency %

distribution None 0 0.0% 1 5.0% 3 6.7% 1-4 persons 6 33.3% 6 30.0% 13 28.9% 5-10 persons 6 33.3% 5 25.0% 10 22.2% 11-15 persons 3 16.7% 0 0.0% 6 13.3% 16-20 persons 0 0.0% 1 5.0% 1 2.2% Over 20 persons 3 16.7% 7 35.0% 12 26.7% Total 18 100.0% 20 100.0% 45 100.0%

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Eastern Europe

American + Canadian Firms Germany Other

2008 Total number

of HR staff Frequency %

distribution Frequency %

distribution Frequency %

distribution None 0 0.0% 0 0.0% 2 3.1% 1-4 persons 5 100.0% 7 53.8% 36 55.4% 5-10 persons 0 0.0% 0 0.0% 14 21.5% 11-15 persons 0 0.0% 0 0.0% 3 4.6% 16-20 persons 0 0.0% 1 7.7% 6 9.2% Over 20 persons 0 0.0% 5 38.5% 4 6.2% Total 5 100.0% 13 100.0% 65 100.0%

Hungary

American + Canadian Firms German Other

2009 Total number

of HR staff Frequency %

distribution Frequency %

distribution Frequency %

distribution None 0 0.0% 1 5.0% 3 6.7% 1-4 persons 6 33.3% 7 35.0% 13 28.9% 5-10 persons 5 27.8% 3 15.0% 10 22.2% 11-15 persons 4 22.2% 1 5.0% 6 13.3% 16-20 persons 0 0.0% 2 10.0% 0 0.0% Over 20 persons 3 16.7% 6 30.0% 13 28.9% Total 18 100.0% 20 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2009 Total number

of HR staff Frequency %

distribution Frequency %

distribution Frequency %

distribution None 1 4.5% 1 2.9% 8 5.2% 1-4 persons 6 27.3% 17 50.0% 74 48.4% 5-10 persons 12 54.5% 7 20.6% 30 19.6% 11-15 persons 1 4.5% 0 0.0% 12 7.8% 16-20 persons 1 4.5% 2 5.9% 7 4.6% Over 20 persons 1 4.5% 7 20.6% 22 14.4% Total 22 100.0% 34 100.0% 153 100.0%

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In the Hungarian sample subsidiaries with American and Canadian ownership there were 50 to 200 employees per HR professional in 83.3% of the firms. Those firms with German ownership had 60% of the firms with under 100 employees per HR professional and 90% of firms with under 200 persons per HR professional. Those firms with Other ownership had 80% of the firms with under 100 employees per HR professional. In the Eastern European sample the majority of subsidiaries in all 3 groups had under 50 persons per HR professional (40% in American/Canadian firms, 50% in German firms, 52% in Other firms).10

52. Table: Emloyees per HR professional

Hungary

American + Canadian Firms German Other

Number of employees per

HR professional 2008

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 50 persons 3 16.7% 7 35.0% 13 28.9% 50-100 persons 5 27.8% 6 30.0% 22 48.9% 101-200 persons 8 44.4% 6 30.0% 7 15.6% 201-500 persons 2 11.1% 1 5.0% 2 4.4% 501-1000 persons 0 0.0% 0 0.0% 1 2.2% Over 1000 persons 0 0.0% 0 0.0% 0 0.0% Total 18 100.0% 20 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Number of employees per HR

professional 2008

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 50 persons 3 60.0% 6 46.2% 36 55.4% 50-100 persons 2 40.0% 3 23.1% 17 26.2% 101-200 persons 0 0.0% 4 30.8% 12 18.5% 201-500 persons 0 0.0% 0 0.0% 0 0.0% 501-1000 persons 0 0.0% 0 0.0% 0 0.0% Over 1000 persons 0 0.0% 0 0.0% 0 0.0% Total 5 100.0% 13 100.0% 65 100.0%

10 It is well known from management theory and practical experience that it is not reasonable to maintain a separate HR apparatus under a certain number of employees (cca. 80-100 persons) within an organization. However, the actual ratio also depends on the industry and the composition of the workforce.

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Hungary

American + Canadian Firms German Other

Number of employees per HR

professional 2009

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 50 persons 1 5.6% 7 35.0% 15 33.3% 50-100 persons 7 38.9% 5 25.0% 21 46.7% 101-200 persons 8 44.4% 6 30.0% 6 13.3% 201-500 persons 2 11.1% 2 10.0% 3 6.7% 501-1000 persons 0 0.0% 0 0.0% 0 0.0% Over 1000 persons 0 0.0% 0 0.0% 0 0.0% Total 18 100.0% 20 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Number of employees per HR

professional 2009

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 50 persons 9 40.9% 17 50.0% 80 52.3% 50-100 persons 6 27.3% 8 23.5% 42 27.5% 101-200 persons 5 22.7% 9 26.5% 23 15.0% 201-500 persons 2 9.1% 0 0.0% 7 4.6% 501-1000 persons 0 0.0% 0 0.0% 1 0.7% Over 1000 persons 0 0.0% 0 0.0% 0 0.0% Total 22 100.0% 34 100.0% 153 100.0%

11.2 THE MAIN INDICATORS REPRESENTING THE IMPORTANCE AND RESULTS OF

THE HR ACTIVITY 11.2.1 LABOR COST – OPERATING COST RATIO The labor cost – operating cost ratio is one of the frequently analyzed indicators of the importance of the HR function in the company’s life. According to assumptions, the effects of HRM have a stronger and more direct influence on the company’s performance if this ratio is higher. Nearly 50% or more of firms in 2009 in the Hungarian sample in all 3 groups had under 20% of the labor cost ratio. However, in those subsidiaries with American and Canadian owners over 40% of the firms had a high labor cost ratio (more than 40%). In the Eastern European sample those firms with American and Canadian ownership and with Other ownership had a lower labor cost ratio (less than 20%) – 56% of firms with Other ownership and 77% of firms with American and Canadian ownership. Those firms with German ownership had a higher labor cost ratio (above 20%) in 73% of the firms.

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53. Table: Labor cost in % of the operating cost

Hungary

American + Canadian Firms German Other

2008 Labor cost in % of the

operating cost Frequency % distribution Frequency %

distribution Frequency % distribution

Under 5 % 3 20.0% 0 0.0% 1 2.7% 5-10 % 3 20.0% 5 31.3% 8 21.6% 11-20 % 0 0.0% 4 25.0% 6 16.2% 21-30 % 3 20.0% 3 18.8% 6 16.2% 31-40 % 0 0.0% 3 18.8% 5 13.5% 41-50 % 3 20.0% 0 0.0% 5 13.5% Over 50 % 3 20.0% 1 6.3% 6 16.2% Total 15 100.0% 16 100.0% 37 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2008 Labor cost in % of the

operating cost Frequency % distribution Frequency %

distribution Frequency % distribution

Under 5 % 2 66.7% 0 0.0% 3 5.8% 5-10 % 1 33.3% 2 15.4% 13 25.0% 11-20 % 0 0.0% 0 0.0% 13 25.0% 21-30 % 0 0.0% 2 15.4% 3 5.8% 31-40 % 0 0.0% 4 30.8% 9 17.3% 41-50 % 0 0.0% 1 7.7% 6 11.5% Over 50 % 0 0.0% 4 30.8% 5 9.6% Total 3 100.0% 13 100.0% 52 100.0%

Hungary

American + Canadian Firms German Other

2009 Labor cost in % of the operating

cost Frequency % distribution Frequency %

distribution Frequency % distribution

Under 5 % 2 11.8% 1 5.3% 0 0.0% 5-10 % 4 23.5% 4 21.1% 10 24.4% 11-20 % 2 11.8% 5 26.3% 7 17.1% 21-30 % 2 11.8% 4 21.1% 7 17.1% 31-40 % 0 0.0% 3 15.8% 6 14.6% 41-50 % 4 23.5% 0 0.0% 5 12.2%

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Hungary

American + Canadian Firms German Other

2009 Labor cost in % of the operating

cost Frequency % distribution Frequency %

distribution Frequency % distribution

Over 50 % 3 17.6% 2 10.5% 6 14.6% Total 17 100.0% 19 100.0% 41 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2009 Labor cost in % of the

operating cost Frequency % distribution Frequency %

distribution Frequency % distribution

Under 5 % 3 33.3% 0 0.0% 6 7.1% 5-10 % 2 22.2% 2 13.3% 22 25.9% 11-20 % 2 22.2% 2 13.3% 20 23.5% 21-30 % 0 0.0% 5 33.3% 8 9.4% 31-40 % 2 22.2% 1 6.7% 12 14.1% 41-50 % 0 0.0% 1 6.7% 7 8.2% Over 50 % 0 0.0% 4 26.7% 10 11.8% Total 9 100.0% 15 100.0% 85 100.0% 11.2.2 AGE DISTRIBUTION OF THE EMPLOYEES One of the results of human resource management actions is the age distribution of the labor force. The results of our survey in this respect do not confirm the common view that there is no room for employees over 45 years of age in multinational companies as about one fifth of the employees of the German and Other subsidiaries participating in the Hungarian sample fell within this age group for the year 2009. In American and Canadian subsidiaries there only about 14% of employees in this age group. In the Eastern European sample the proportion was much lower with only 5% in American and Canadian subsidiaries, 11% in German subsidiaries, and about 18% in Other subsidiaries. The proportion of employees under 25 years of age was fluctuated between 9% and 22% in both samples. The main distribution of employees was in the age group between 25 and 45 with over 60% in this category in both samples. In the Eastern European sample for American and Canadian subsidiaries this percentage rose to 83% for the age group between 25 and 45. There wasn’t really any change over time from 2008 to 2009 and the proportion of the distribution in 2008 and in 2009 was similar.

54. Table: Age group distribution of employees (%)

2008

American + Canadian Firms German Other

Age groups

Under 25

Between 25 and 45

Over 45 Total Under

25 Between 25 and 45

Over 45 Total Under

25 Between 25 and 45

Over 45 Total

Hungary 22.67 63.47 13.87 100.00 12.59 64.47 22.94 100.00 13.34 59.53 27.13 100.00

Eastern-Europe 13.00 83.00 4.00 100.00 20.17 65.23 14.60 100.00 15.00 66.00 19.00 100.00

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2009

American + Canadian Firms German Other

Age groups

Under 25

Between 25 and 45

Over 45 Total Under

25 Between 25 and

45

Over 45 Total Under

25 Between 25 and 45

Over 45 Total

Hungary 22.53 63.07 14.40 100.00 12.28 65.17 22.56 100.00 13.23 60.53 26.25 100.00

Eastern-Europe 9.00 86.00 5.00 100.00 19.00 70.00 11.00 100.00 12.88 69.56 17.56 100.00

11.2.3 RELATIVE WEIGHT OF THE TRAINING BUDGET Literature considers the relative weight of the training budget (compared to the entire annual labor cost) as an important indicator of modern and effective HR activity. In more than 80% of the companies examined in the Hungarian sample, the relative weight of the training budget was under 3% and in each of the three groupings of subsidiaries only 10% to 15% of the firms examined spent more than 3% of the annual labor budget on training employees in 2009.11 In the Eastern European sample 60% of companies spent 2% to 5% on training employees in 2009. A higher percentage of subsidiaries in all 3 groups of the Eastern European sample spent increased amounts of their training budget compared to the Hungarian sample, from 18.5% of Other subsidiaries, to 29.4% of German subsidiaries, up to 38.5% of American and Canadian subsidiaries.

55. Table: Annual training budget in % of the entire annual labor cost

Hungary

American + Canadian Firms German Other

2008 Annual training budget in % of the entire annual labor cost Frequency

% distribution Frequency

% distribution Frequency

% distribution

Under 1 % 2 18.2% 0 0.0% 9 37.5% 1-2 % 0 0.0% 0 0.0% 0 0.0% 2-3 % 5 45.5% 7 43.8% 5 20.8% 3-5 % 4 36.4% 7 43.8% 7 29.2% 5-7 % 0 0.0% 2 12.5% 1 4.2% 7-10 % 0 0.0% 0 0.0% 1 4.2% 10 - 20 % 0 0.0% 0 0.0% 0 0.0% Over 20 % 0 0.0% 0 0.0% 1 4.2% Total 11 100.0% 16 100.0% 24 100.0%

11TheglobalaverageofthisindicatorcalculatedusingtheformerlymentionedCranetinternationalcomparativeHR

databasewas3.36%,theEasternEuropeanindexwas3.15%andtheHungarian3.54%(Karoliny-Poór,2010).

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Eastern Europe

American + Canadian Firms Germany Other

2008 Annual training budget in % of the entire annual labor cost Frequency

% distribution Frequency

% distribution Frequency

% distribution

Under 1 % 2 50.0% 3 37.5% 12 32.4% 1-2 % 0 0.0% 0 0.0% 0 0.0% 2-3 % 1 25.0% 0 0.0% 5 13.5% 3-5 % 1 25.0% 2 25.0% 8 21.6% 5-7 % 0 0.0% 0 0.0% 1 2.7% 7-10 % 0 0.0% 1 12.5% 4 10.8% 10 - 20 % 0 0.0% 2 25.0% 2 5.4% Over 20 % 0 0.0% 0 0.0% 5 13.5% Total 4 100.0% 8 100.0% 37 100.0%

Hungary

American + Canadian Firms German Other

2009 Annual training budget in % of the entire annual labor cost Frequency

% distribution Frequency

% distribution Frequency

% distribution

Under 1 % 2 20.0% 0 0.0% 8 29.6% 1-2 % 0 0.0% 0 0.0% 0 0.0% 2-3 % 4 40.0% 9 56.3% 7 25.9% 3-5 % 3 30.0% 5 31.3% 8 29.6% 5-7 % 1 10.0% 0 0.0% 2 7.4% 7-10 % 0 0.0% 2 12.5% 1 3.7% 10 - 20 % 0 0.0% 0 0.0% 0 0.0% Over 20 % 0 0.0% 0 0.0% 1 3.7% Total 10 100.0% 16 100.0% 27 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2009 Annual training budget in % of the entire annual labor cost Frequency

% distribution Frequency

% distribution Frequency

% distribution

Under 1 % 0 0.0% 3 17.6% 17 21.0% 1-2 % 0 0.0% 0 0.0% 0 0.0% 2-3 % 5 38.5% 6 35.3% 27 33.3% 3-5 % 3 23.1% 3 17.6% 22 27.2% 5-7 % 0 0.0% 1 5.9% 1 1.2%

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Eastern Europe

American + Canadian Firms Germany Other

2009 Annual training budget in % of the entire annual labor cost Frequency

% distribution Frequency

% distribution Frequency

% distribution

7-10 % 3 23.1% 3 17.6% 9 11.1% 10 - 20 % 1 7.7% 0 0.0% 3 3.7% Over 20 % 1 7.7% 1 5.9% 2 2.5% Total 13 100.0% 17 100.0% 81 100.0% 11.2.4 LEVEL OF FLUCTUATION The level of fluctuation was between %-20% in more than half of the subsidiaries participating in both samples for 2009. In German firms in the Hungarian sample 50% of the firms had 10%-20% fluctuation levels. In Other firms in the Hungarian sample 10% of the firms had 20%-30% fluctuation levels and in American and Canadian firms 6.7% of firms had over 40% fluctuation levels. In the Eastern European sample 100% of American and Canadian firms had 3%-10% fluctuation levels (66.7% of firms in the 5%-10% fluctuation category) while over 57% of German firms and 47% of Other firms had between 5% to 20% fluctuation levels. There were 19.6% of Other firms in the Eastern European sample had 20%-30% fluctuation level and 7% of German firms in the Eastern European sample had over 40% fluctuation levels.

56. Table: Fluctuation rate (%)

Hungary

American + Canadian Firms German Other

2008 The level of fluctuation Frequenc

y %

distribution Frequenc

y %

distribution Frequenc

y %

distribution Under 1 % 1 7.1% 1 6.3% 3 8.3% 1-3 % 0 0.0% 0 0.0% 0 0.0% 3-5 % 3 21.4% 2 12.5% 3 8.3% 5-10 % 4 28.6% 4 25.0% 15 41.7% 10-20 % 4 28.6% 7 43.8% 8 22.2% 20-30 % 1 7.1% 1 6.3% 0 0.0% 30-40 % 0 0.0% 0 0.0% 3 8.3% Over 40 % 1 7.1% 1 6.3% 4 11.1% Total 14 100.0% 16 100.0% 36 100.0%

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Eastern Europe

American + Canadian Firms Germany Other

2008 The level of fluctuation

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 1 % 0 0.0% 1 9.1% 12 23.5% 1-3 % 0 0.0% 0 0.0% 0 0.0% 3-5 % 2 50.0% 1 9.1% 5 9.8% 5-10 % 2 50.0% 3 27.3% 9 17.6% 10-20 % 0 0.0% 2 18.2% 12 23.5% 20-30 % 0 0.0% 0 0.0% 8 15.7% 30-40 % 0 0.0% 2 18.2% 0 0.0% Over 40 % 0 0.0% 2 18.2% 5 9.8% Total 4 100.0% 11 100.0% 51 100.0%

Hungary

American + Canadian Firms German Other

2009 The level of fluctuation

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 1 % 3 20.0% 2 11.1% 4 10.0% 1-3 % 0 0.0% 0 0.0% 0 0.0% 3-5 % 2 13.3% 2 11.1% 5 12.5% 5-10 % 5 33.3% 4 22.2% 14 35.0% 10-20 % 3 20.0% 9 50.0% 11 27.5% 20-30 % 1 6.7% 0 0.0% 4 10.0% 30-40 % 0 0.0% 0 0.0% 1 2.5% Over 40 % 1 6.7% 1 5.6% 1 2.5% Total 15 100.0% 18 100.0% 40 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2009 The level of fluctuation

Frequency %

distribution Frequency %

distribution Frequency %

distribution Under 1 % 0 0.0% 1 7.1% 9 17.6% 1-3 % 0 0.0% 0 0.0% 0 0.0% 3-5 % 1 33.3% 2 14.3% 4 7.8% 5-10 % 2 66.7% 4 28.6% 11 21.6% 10-20 % 0 0.0% 4 28.6% 13 25.5% 20-30 % 0 0.0% 1 7.1% 10 19.6% 30-40 % 0 0.0% 1 7.1% 1 2.0%

Page 94: HR Management in Transition_HU_Eastern Europe 2011

Eastern Europe

American + Canadian Firms Germany Other

2009 The level of fluctuation

Frequency %

distribution Frequency %

distribution Frequency %

distribution Over 40 % 0 0.0% 1 7.1% 3 5.9% Total 3 100.0% 14 100.0% 51 100.0%

11.2.5 TIME LOST DUE TO ABSENCE/SICKNESS The average number of days in 2009 in American and Canadian firms and Other firms in the Hungarian sample was 5-20 days in at least 60% of the subsidiaries (60% in American/Canadian firms and 68% in Other firms). Over 71% of German firms in the Hungarian sample had 3-10 days absent in 2009. In the Eastern European sample the average number of days absent was 3-10 days in 62.5% of American and Canadian firms, 5-20 days in 60% of German owned firms, and 5-20 days in 50.7% of Other owned firms. A high number of days absent (more than 40 days) was seen in German owned firms in the Eastern European sample (30%). The distribution of frequency for sick leave can be highly influenced by national legislation. For instance, in the case of Hungary the maximum number of days of sick leave per year is 15 days. In 2008 and in 2009 the nearly half of the subsidiaries in the Hungarian reported the number of sick days to be between 5 to 20 days.

57. Table: The average days absent per employee per annum

Hungary

American + Canadian Firms German Other

2008 Absence / sick leave

Frequency %

distribution Frequency %

distribution Frequency %

distribution Less than 1 day 2 13.3% 1 7.1% 2 5.3% 1-3 days 0 0.0% 0 0.0% 0 0.0% 3-5 days 2 13.3% 6 42.9% 8 21.1% 5-10 days 5 33.3% 5 35.7% 15 39.5% 10-20 days 4 26.7% 0 0.0% 9 23.7% 20-30 days 0 0.0% 2 14.3% 0 0.0% 30-40 days 2 13.3% 0 0.0% 2 5.3% More than 40 days 0 0.0% 0 0.0% 2 5.3% Total 15 100.0% 14 100.0% 38 100.0%

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Eastern Europe

American + Canadian Firms Germany Other

2008 Absence / sick leave

Frequency %

distribution Frequency %

distribution Frequency %

distribution Less than 1 day 0 0.0% 0 0.0% 3 5.7% 1-3 days 0 0.0% 0 0.0% 0 0.0% 3-5 days 1 25.0% 0 0.0% 10 18.9% 5-10 days 3 75.0% 5 38.5% 25 47.2% 10-20 days 0 0.0% 6 46.2% 8 15.1% 20-30 days 0 0.0% 0 0.0% 5 9.4% 30-40 days 0 0.0% 1 7.7% 1 1.9% More than 40 days 0 0.0% 1 7.7% 1 1.9% Total 4 100.0% 13 100.0% 53 100.0%

Hungary

American + Canadian Firms German Other

2009 Absence / sick leave

Frequency %

distribution Frequency %

distribution Frequency %

distribution Less than 1 day 1 6.7% 2 14.3% 1 2.6% 1-3 days 0 0.0% 0 0.0% 0 0.0% 3-5 days 2 13.3% 7 50.0% 6 15.8% 5-10 days 5 33.3% 3 21.4% 17 44.7% 10-20 days 4 26.7% 0 0.0% 9 23.7% 20-30 days 3 20.0% 2 14.3% 2 5.3% 30-40 days 0 0.0% 0 0.0% 0 0.0% More than 40 days 0 0.0% 0 0.0% 3 7.9% Total 15 100.0% 14 100.0% 38 100.0%

Eastern Europe

American + Canadian Firms Germany Other

2009 Absence / sick leave

Frequency %

distribution Frequency %

distribution Frequency %

distribution Less than 1 day 0 0.0% 0 0.0% 3 4.3% 1-3 days 0 0.0% 0 0.0% 0 0.0% 3-5 days 3 37.5% 0 0.0% 12 17.4%

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Eastern Europe

American + Canadian Firms Germany Other

2009 Absence / sick leave

Frequency %

distribution Frequency %

distribution Frequency %

distribution 5-10 days 2 25.0% 7 35.0% 20 29.0% 10-20 days 1 12.5% 5 25.0% 15 21.7% 20-30 days 1 12.5% 1 5.0% 9 13.0% 30-40 days 1 12.5% 1 5.0% 5 7.2% More than 40 days 0 0.0% 6 30.0% 5 7.2% Total 8 100.0% 20 100.0% 69 100.0%

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12 FOREIGN EXPATS AND THEIR ROLES Usually two types of long-term emissaries are distinguished. The ones arriving from abroad from the parent company or from a third country who are also called expatriates and the ones from the Hungarian subsidiary appointed for a long-term deputation abroad at the parent company or subsidiaries operating in other countries.12

! There were 50% of subsidiaries from American and Canadian firms and from German firms in the Hungarian sample who didn’t employ foreign expats in managerial positions. In Other owned firms in the Hungarian sample 36.9% employed 1-3 persons while 37% of these firms didn’t employ any foreign expats. In those few companies that employed foreign expats in managerial positions permanently, the number of these expats was typically between 1 to 10 in nearly half of the replies in all 3 groups of the Hungarian sample. Only around 10% respondents employed 11 or more such expats in German owned firms or in Other owned firms.

! The predominate of firms in all 3 groups of the Hungarian sample did not employ foreign expats in the Hungarian sample – 88.9% of American and Canadian firms, 85.0% of German owned firms, and 68.9% of Other firms.

! The Eastern European sample had similar results to the Hungarian sample with regards to managerial positions and the number of foreign expats in 2009. However, in non-managerial positions in 2009 the 3 groups in the Eastern European sample had slightly higher numbers of foreign expats. In 24.0% of American and Canadian firms 2-10 foreign expats were employed, while in 28.9% of German firms and in 24.6% of Other firms employed 1-10 foreign expats.

(Note: It is important to indicate that companies send an increasing number of emplyees abroad for a short time, for different projects. Our survey did not cover this issue.)

58. Table: Number of foreign expats

Hungary

American + Canadian Firms German Other

In managerial position Number of expats

Frequency %

distribution Frequency %

distribution Frequency %

distribution None 9 50.0% 10 50.0% 17 37.0% 1 person 4 22.2% 3 15.0% 7 15.2% 2-3 persons 4 22.2% 2 10.0% 10 21.7% 4-5 persons 0 0.0% 1 5.0% 5 10.9% 6-10 persons 1 5.6% 2 10.0% 2 4.3% 11-15 persons 0 0.0% 0 0.0% 3 6.5% 16-20 persons 0 0.0% 0 0.0% 2 4.3%

12 After Perlmutter (1969), multinational companies following the four personnel straregies have different priorities in their selection and recruitment policies. The company can follow an ethnocentric, polycentric, regiocentric or geocentric selection mechanism. In the ethnocentric orientation, key positions of the local company are held by professionals from the parent company. In polycentric companies, local key positions are held by locals but their promotion to higher positions is very limited. In companies following the regiocentric selection mechanism, locals can hold key positions not only in the subsidiary but also in the center coordinating the management of the region. In companies follwing the geocentric selection mechanism, locals can obtain position even in the top management of the company (Poór, 2009).

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Hungary

American + Canadian Firms German Other

In managerial position Number of expats

Frequency %

distribution Frequency %

distribution Frequency %

distribution Over 20 persons 0 0.0% 2 10.0% 0 0.0% Total 18 100.00% 20 100.00% 46 100.00%

Hungary

American + Canadian Firms German Other

In non-managerial position Number of expats

Frequency %

distribution Frequency %

distribution Frequency %

distribution None 16 88.9% 17 85.0% 31 68.9% 1 person 1 5.6% 2 10.0% 4 8.9% 2-3 persons 1 5.6% 0 0.0% 3 6.7% 4-5 persons 0 0.0% 0 0.0% 1 2.2% 6-10 persons 0 0.0% 1 5.0% 3 6.7% 11-15 persons 0 0.0% 0 0.0% 1 2.2% 16-20 persons 0 0.0% 0 0.0% 1 2.2% Over 20 persons 0 0.0% 0 0.0% 1 2.2% Total 18 100.0% 20 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

In managerial position Number of expats

Frequency %

distribution Frequency %

distribution Frequency %

distribution None 13 50.0% 21 53.8% 99 58.9% 1 person 0 0.0% 3 7.7% 24 14.3% 2-3 persons 7 26.9% 7 17.9% 21 12.5% 4-5 persons 1 3.8% 2 5.1% 10 6.0% 6-10 persons 1 3.8% 3 7.7% 10 6.0% 11-15 persons 2 7.7% 1 2.6% 2 1.2% 16-20 persons 1 3.8% 1 2.6% 1 0.6% Over 20 persons 1 3.8% 1 2.6% 1 0.6% Total 26 100.00% 39 100.00% 168 100.00%

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Eastern Europe

American + Canadian Firms Germany Other

In non-managerial position Number of expats

Frequency %

distribution Frequency %

distribution Frequency %

distribution None 17 68.0% 25 65.8% 115 68.9% 1 person 0 0.0% 4 10.5% 14 8.4% 2-3 persons 3 12.0% 4 10.5% 11 6.6% 4-5 persons 2 8.0% 2 5.3% 9 5.4% 6-10 persons 1 4.0% 1 2.6% 7 4.2% 11-15 persons 1 4.0% 0 0.0% 5 3.0% 16-20 persons 0 0.0% 1 2.6% 1 0.6% Over 20 persons 1 4.0% 1 2.6% 5 3.0% Total 25 100.0% 38 100.0% 167 100.0%

In American and Canadian firms and in German firms in the Hungarian the majority of foreign expats were in manager positions (85.7% of American/Canadian firms, 92.0% of German firms). While in Other owned firms in the Hungarian sample and in the 3 groups in the Eastern European sample the split between manager and non-manager positions of foreign expats isn’t so great. There are more managers than non-managers, but only 46% to 59% more foreign expat managers than foreign expat non-managers.

59. Table: Positions of foreign expats

American + Canadian Firms German

Manager Non-manager Total Manager Non-manager Total

Hungary 85.7% 14.3% 100.0% 92.0% 8.0% 100.0% Eastern-Europe 59.4% 40.6% 100.0% 57.9% 42.1% 100.0%

Other Manager Non-manager Total Hungary 55.2% 44.8% 100.0% Eastern-Europe 46.3% 40.6% 86.8%

Between sixty-two percent and eighty-five percent of the responding organizations in American and Canadia firms in either sample had foreign expats from a country other than the parent company. However, in German owned firms and in Other owned firms the foreign expats came mostly from the parent country, almost exclusively so in German firms in the Hungarian sample and nearly 3/4 of foreign expats in German firms in the Eastern sample.

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60. Table: Country of origin of foreign expats

American + Canadian Firms German

Mother country

Other countries Total

Mother country

Other countries Total

Hungary 15.1% 84.9% 100.0% 95.1% 4.9% 100.0% Eastern-Europe 37.5% 62.5% 100.0% 74.8% 25.2% 100.0%

Other

Mother country

Other countries Total

Hungary 67.8% 32.2% 100.0% Eastern-Europe 72.8% 27.2% 100.0%

12.1 LOCAL EXPATS Below we ouline how typically and to what positions local expats were sent to foreign companeis of MNCs.

61. Table: Number and positions of Local expats

Hungary

American + Canadian Firms German Other

In managerial position Number of Local expats Frequency %

distribution Frequency % distribution Frequency %

distribution None 13 72.2% 13 65.0% 26 56.5% 1 person 3 16.7% 3 15.0% 5 10.9% 2-3 persons 2 11.1% 0 0.0% 7 15.2% 4-5 persons 0 0.0% 2 10.0% 5 10.9% 6-10 persons 0 0.0% 1 5.0% 1 2.2% 11-15 persons 0 0.0% 0 0.0% 1 2.2%

16-20 persons 0 0.0% 0 0.0% 0 0.0%

Over 20 persons 0 0.0% 1 5.0% 1 2.2%

Total 18 100.0% 20 100.0% 46 100.0%

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Hungary

American + Canadian Firms German Other

In non-managerial position Number of Local expats Frequency %

distribution Frequency % distribution Frequency %

distribution None 13 72.2% 13 65.0% 26 56.5% 1 person 3 16.7% 3 15.0% 4 8.7% 2-3 persons 2 11.1% 0 0.0% 8 17.4% 4-5 persons 0 0.0% 2 10.0% 4 8.7% -10 persons 0 0.0% 1 5.0% 2 4.3% 11-15 persons 0 0.0% 0 0.0% 1 2.2% 16-20 persons 0 0.0% 0 0.0% 0 0.0% Over 20 persons 0 0.0% 1 5.0% 1 2.2%

Total 18 100.0% 20 100.0% 46 100.0%

Eastern Europe

American + Canadian Firms Germany Other

In managerial position Number of Local expats Frequency %

distribution Frequency % distribution Frequency %

distribution None 18 72.0% 33 84.6% 135 80.4% 1 person 0 0.0% 2 5.1% 11 6.5% 2-3 persons 3 12.0% 1 2.6% 12 7.1% 4-5 persons 1 4.0% 1 2.6% 6 3.6% 6-10 persons 2 8.0% 2 5.1% 3 1.8% 11-15 persons 1 4.0% 0 0.0% 1 0.6% 16-20 persons 0 0.0% 0 0.0% 0 0.0% Over 20 persons 0 0.0% 0 0.0% 0 0.0% Total 25 100.0% 39 100.0% 168 100.0%

Eastern Europe

American + Canadian Firms Germany Other

In non-managerial position Number of Local expats Frequency %

distribution Frequency % distribution Frequency %

distribution None 12 46.2% 31 79.5% 131 78.0% 1 person 2 7.7% 4 10.3% 7 4.2% 2-3 persons 6 23.1% 0 0.0% 14 8.3%

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Eastern Europe

American + Canadian Firms Germany Other

In non-managerial position Number of Local expats Frequency %

distribution Frequency % distribution Frequency %

distribution 4-5 persons 2 7.7% 1 2.6% 4 2.4% 6-10 persons 2 7.7% 1 2.6% 8 4.8% 11-15 persons 0 0.0% 0 0.0% 0 0.0%

16-20 persons 0 0.0% 2 5.1% 4 2.4%

Over 20 persons 2 7.7% 0 0.0% 0 0.0%

Total 26 100.0% 39 100.0% 168 100.0%

! The proportions of companies not sending employees to managerial positions and to non-managerial positions can be seen to be highest in all 6 groupings from 46% of American and Canadian firms in the Eastern European sample for non-managerial positions up to 84.6% of German owned firms in the Eastern European sample for managerial positions.

! If employees are sent abroad the typical number of employees were between 1 to 3 persons in both samples (over 10% in all groups except German firms in the Eastern European sample for employees in managerial positions which had 7% of local expats).

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13 THE OPERATION OF THE HR DEPARTMENT 13.1 THE RELATIONSHIP BETWEEN HEADQUARTERS AND LOCAL HR We found several different function sharing practices among the companies examined.13

! The typical solution that was implemented by over one quarter of the respondents in the Hungarian and Eastern European samples was that the HR department of the company’s headquarters lays down general guidelines and provides a standard framework for the work of HR departments of the subsidiaries and requires information and reporting from them..

! In addition, in the case of almost 15% to over 20% of the companies in the Hungarian sample, 10% to 17% in the Eastern European sample, the headquarters was responsible for providing detailed HR model, policies, procedures, and rules.

! Around 10% to 14% of the respondents in German and Other firms in the Hungarian sample marked that the headquarters provided resources and advice when requested. A higher percentage of firms in the Eastern European sample marked this function as being important, 13% to 26%.

! Around 10% to 15% of the respondents in German and Other firms in the Hungarian sample indicated that the headquarters were hands-off and provided complete freedom. A higher percentage of firms in the Eastern European sample marked this function as being important, 14% to nearly 18%.

62. Table: Typical functions of the HQ HR

Hungary

American + Canadian Firms German Other

Functions Frequency

of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Hands-off, provide complete freedom 1 2.0% 7 14.9% 11 10.4%

Provide resources and advice when requested 4 8.2% 5 10.6% 15 14.2%

Provide general guidelines and framework for actions

16 32.7% 13 27.7% 32 30.2%

Request information and reports – auditor’s role 14 28.6% 14 29.8% 26 24.5%

Provide detailed HR model, policies, procedures and rules

11 22.4% 7 14.9% 18 17.0%

13 Taylor et al. (1966) describe the relationship between the subsidiaries and the parent company with the following three basic systems of relations: In the exportive system of relations, HR systems developed in the parent company are adopted without changes. In the adaptive system of relations, local subsidiaries adapt the HR systems adopted from the parent company according to their local needs. In the integrative system of relations, all good and applicable solutions are attempted to be spread and implemented in all units of the company regardless of the origin of the HR system. Lawler (2006) concluded from his research conducted among American subsidiaries operating in Asia and Europe that the most dominant deciding factor in the adoptation and adaptation of HR systems is the size of local companies. The question is reasonable: which solution should be applied in a certain case? The mentioned authors say that the system to be implemented depends on the sum of the impacts of internal and external factors that form, influence the organization. In certain cases the national culture of the host country and the legal, regulatory environment are considered influencing factors.

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Hungary

American + Canadian Firms German Other

Functions Frequency

of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Source of all remotely significant HR decisions 2 4.1% 1 2.1% 4 3.8%

Other 1 2.0% 0 0.0% 0 0.0%

Total 49 100.0% 47 100.0% 106 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Functions Frequency

of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Frequency of “yes” answers

% distribution

Hands-off, provide complete freedom 10 14.5% 14 17.7% 48 13.4%

Provide resources and advice when requested 9 13.0% 21 26.6% 81 22.6%

Provide general guidelines and framework for actions

21 30.4% 15 19.0% 82 22.9%

Request information and reports – auditor’s role

13 18.8% 15 19.0% 66 18.4%

Provide detailed HR model, policies, procedures and rules

12 17.4% 8 10.1% 51 14.2%

Source of all remotely significant HR decisions

4 5.8% 5 6.3% 24 6.7%

Other 0 0.0% 1 1.3% 6 1.7%

Total 69 100.0% 79 100.0% 358 100.0% 13.2 CHANGES IN THE IMPORTANCE OF HR FUNCTIONS Employee communication was indicated to be one of the HR areas considered most critical in the period examined, being a little ahead of compensation and benefits in American and Canadian firms in the Hungarian sample. Also deemed critical in this group was human resource planning. In the other 5 groups no one area leaned toward a critical area of HR in 2009 and the average of the answers were around 3.5 or higher. Areas of least imporatance as a critical area of HR were recruitment and selection (American and Canadian firms in Hungarian sample), training and development (German firms and Other firms in Hungarian sample), and industrial labor relations (Eastern European sample).

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63. Table: Critical areas of HR (on a 1 to 5 scale, on average) (Explanation: 1= critical => 5 =not critical)

The average of the answers

Hungary Eastern-Europe

American + Canadian

Firms German Other

American + Canadian

Firms German Other

The ranking of the areas of HRM critical in 2009

The average of

the answers

The average of

the answers

The average of the

answers

The average of

the answers

The average of

the answers

The average of the

answers

1. Employee communication 1.89 2.65 2.63 2.46 2.79 2.80

2. Compensation and benefits 2.00 2.90 2.37 2.78 3.11 2.82

3. Human resource planning 2.11 2.95 2.50 2.30 3.17 2.61

4. Talent management 2.61 2.75 2.74 2.61 3.41 3.05 5. Performance evaluation 2.61 2.90 2.96 2.92 3.03 2.85

6. Training and development 2.72 3.40 3.22 2.60 2.77 3.03

7. Industrial-labor relations 3.22 3.42 3.57 3.32 3.43 3.41

8. Recruitment and selection 3.72 3.20 3.28 3.00 2.44 2.97

13.3 TYPICAL HR COMPETENCIES FOR SUCCESS From the somewhat completed list of HRM competency areas identified by one of the most knows HR gurus, Dave Ulrich et al. in 2009, the respondents in the Hungarian sample considered the following four to be the most important:

! change management (14.5% American and Canadian, 11.8% German, 12.7% Other), ! personal credibility (13.6% American and Canadian, 16.4% German, 16.5% Other), ! business partnership (11.8% American and Canadian, 11.8% German, 11.8% Other), ! teamwork (10.0% American and Canadian, 11.8% German, 11.3% Other),

However in the Eastern European sample the following competencies were considered to be the most important:

! teamwork (15.7% American and Canadian, 12.2% German, 14.4% Other), ! change management (12.2% American and Canadian, 12.2% German, 13.0% Other), ! quick decision making (11.3% American and Canadian, 11.5% German, 12.4% Other), ! personal credibility (9.6% American and Canadian, 12.2% German, 10.8% Other), ! business partnership (11.3% American and Canadian, 8.8% German, 9.8% Other),

In the Eastern European sample teamwork was considered to be a more important competency than in the Hungarian sample and quick decision making was indicated to a be an important competency.

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64. Table: The importance of the methods of personal competency development in HR (

Hungary

American + Canadian Firms German Other

Very important Ranking of key competencies

Frequency %

distribution Frequency %

distribution Frequency %

distribution

1. Personal credibility (effectiveness, efficient connections, communication skills)

15 13.6% 18 16.4% 35 16.5%

2. Change management 16 14.5% 13 11.8% 27 12.7%

3. Business partnership 13 11.8% 13 11.8% 25 11.8%

4. Quick decision making 12 10.9% 13 11.8% 23 10.8%

5. Teamwork 11 10.0% 13 11.8% 24 11.3%

6. Strategic contribution (culture management, quick changes, strategic decision making)

8 7.3% 12 10.9% 22 10.4%

7. HR services (recruitment-selection, training, performance evaluation, HR measurement, etc.)

10 9.1% 10 9.1% 18 8.5%

8. Knowledge of foreign languages 8 7.3% 8 7.3% 18 8.5%

9. Knowledge sharing 8 7.3% 4 3.6% 10 4.7%

10. Use of HRMIS (IT) 6 5.5% 4 3.6% 7 3.3%

11. Other 3 2.7% 2 1.8% 3 1.4%

Total 110 100.0% 110 100.0% 212 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Very important Ranking of key competencies

Frequency %

distribution Frequency %

distribution Frequency %

distribution 1. Personal credibility (effectiveness, efficient connections, communication skills)

11 9.6% 18 12.2% 73 10.8%

2. Change management 14 12.2% 20 13.5% 88 13.0%

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Eastern Europe

American + Canadian Firms Germany Other

Very important Ranking of key competencies

Frequency %

distribution Frequency %

distribution Frequency %

distribution 3. Business partnership 13 11.3% 13 8.8% 66 9.8%

4. Quick decision making 13 11.3% 17 11.5% 84 12.4%

5. Teamwork 18 15.7% 18 12.2% 97 14.4% 6. Strategic contribution (culture management, quick changes, strategic decision making)

9 7.8% 10 6.8% 51 7.6%

7. HR services (recruitment-selection, training, performance evaluation, HR measurement, etc.)

9 7.8% 9 6.1% 41 6.1%

8. Knowledge of foreign languages 10 8.7% 16 10.8% 51 7.6%

9. Knowledge sharing 10 8.7% 14 9.5% 71 10.5%

10. Use of HRMIS (IT) 7 6.1% 12 8.1% 49 7.3%

11. Other 1 0.9% 1 0.7% 4 0.6% Total 115 100.0% 148 100.0% 675 100.0%

13.4 PRIMARY RESPONSIBILITY OF DECISION MAKING IN THE MAIN FUNCTIONS OF

HR In our current survey in American and Canadian firms in the Hungarian sample most of the key functions of HR were the responsibility primarily of local line management, but in consultation with the HR department. In all three groups of the Hungarian sample the industrial labor relations and HRMS/IT systems which are the key functions of the local HR department. In German firms in the Hungarian sample recruitment, training and development, and employee communication were the key functions primarily of the local HR department, but in consultation with the local line management while most of the other functions are primarily done by the local line management in consultation with the HR department except as noted above. The key HR function of performance evaluation in German firms and in Other firms are done by local line management. In American and Canadian firms in the Eastern European sample recruitment and selection, and performance evaluation are key functions performed primarily by local line management in consultation with the HR department. Also industrial labor relations are key functions of the local HR department. The other key functions are performed by the local HR department in consultation with the local line

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management. In German firms in the Eastern European sample a different trend can be seen where most functions are performed solely by the local line management. The one exception being training and development where the role is primarily the local line management, but in consultation with the HR department. In Other firms the key functions of HR are performed primarily by management, some being by the local line management exclusively (recruitment, performance evaluation, industrial labor relations, and employee communication) and some being primarily by local line management in consultation with the HR department (selection, training and development, compensation and benefits, HRMS, and human resource planning).

65. Table: Responsibility of decision making in key functions of HR

Hungary American + Canadian Firms

Key functions of HR Local line

management (mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 0 10 7 1

Recruitment 1 8 5 4 Selection 1 9 7 1 Performance Evaluation 1 10 7 0

Training and Development 1 9 8 0

Compensation and Benefits 1 7 8 2

Industrial-Labor Relations 0 3 4 11

Employee Communication 1 6 6 5

HRMS/IT 1 3 3 11 Other 0 1 0 2

Hungary German

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 3 8 6 3

Recruitment 2 5 8 5 Selection 2 11 4 2

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Hungary German

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Performance Evaluation 9 8 2 1

Training and Development 4 5 9 2

Compensation and Benefits 3 12 4 1

Industrial-Labor Relations 2 3 3 11

Employee Communication 3 5 8 4

HRMS/IT 3 3 3 11 Other 1 2 4 1

Hungary Other

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 8 24 11 2

Recruitment 3 13 18 11 Selection 5 25 13 2 Performance Evaluation 23 15 7 0

Training and Development 6 19 17 3

Compensation and Benefits 8 18 12 7

Industrial-Labor Relations 3 9 15 18

Employee Communication 4 19 11 11

HRMS/IT 4 6 7 25 Other 3 0 4 3

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Eastern-Europe American + Canadian Firms

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 6 8 4 1

Recruitment 5 5 9 4 Selection 4 3 5 3 Performance Evaluation 4 3 6 2

Training and Development 6 8 4 5

Compensation and Benefits 6 11 4 2

Industrial-Labor Relations 5 5 3 9

Employee Communication 5 5 1 5

HRMS/IT 4 5 2 4 Other 3 2 2 1

Eastern-Europe German

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 8 7 6 4

Recruitment 19 8 5 6 Selection 7 4 4 5 Performance Evaluation 8 4 4 4

Training and Development 9 15 10 4

Compensation and Benefits 16 9 8 5

Industrial-Labor Relations 10 3 7 8

Employee Communication 9 2 5 4

HRMS/IT 7 6 4 2

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Eastern-Europe German

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Other 1 2 4 4 Eastern-Europe Other

Key functions of HR

Local line management

(mgt.)

Primarily local line mgt. but in

consultation with the HR department

Primarily local HR department but in consultation with

local line mgt.

Local HR department

Human Resource Planning 56 56 18 13

Recruitment 55 49 36 23 Selection 44 46 31 14 Performance Evaluation 58 45 20 14

Training and Development 46 61 42 16

Compensation and Benefits 50 60 34 20

Industrial-Labor Relations 46 35 34 39

Employee Communication 45 44 30 18

HRMS/IT 35 41 15 41 Other 8 17 11 18

13.5 THE ROLE OF EXTERNAL HR SERVICE PROVIDERS Nowadays human resources are managed in many organizations with the involvement of external service providers. Besides traditional HR consultants, an increasing number of service providers have entered the market offering new services (e.g. labor leasing, outsourcing, interim managers, etc.). External service providers were in both samples in general were not used. In cases where they were used in American and Canadian firms in the Hungarian sample the use of external service providers for training and development, and for compensation and benefits stayed the same. In German firms the use of external service providers for training and development decreased. In Other firms the use of external providers in employee selection decreased and in training and development the use stayed the same. In Eastern Europe in German firms the use of external providers for training and development increased and for compensation and benefits the use stayed the same. In Other firms the use of external service providers for training and development stayed the same. Almost none of the companies used the help of external service providers in human resource planning and in performance evaluation.

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66. Table: Role and use of external service providers in the different key functions of HR

Hungary American + Canadian Firms

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 0 1 2 15 Recruitment 2 6 6 4 Selection 1 5 5 7 Performance Evaluation 0 0 2 16 Training and Development 2 3 10 3 Compensation and Benefits 3 4 8 3 Industrial-Labor Relations 4 0 4 10 Employee Communication 2 1 6 9 HRMS/IT 1 0 5 12 Other 0 0 3 3

Hungary German

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 0 0 0 20 Recruitment 0 9 1 10 Selection 0 7 2 11 Performance Evaluation 1 1 0 18 Training and Development 2 10 4 4 Compensation and Benefits 1 1 9 9 Industrial-Labor Relations 1 1 2 16 Employee Communication 0 1 6 13 HRMS/IT 2 3 5 10 Other 1 1 2 5

Hungary Other

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 1 2 1 42 Recruitment 7 16 12 10 Selection 6 12 11 16

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Hungary Other

Key functions of HR Increased Decreased Same External providers not used

Performance Evaluation 3 1 5 36 Training and Development 8 10 23 4 Compensation and Benefits 4 3 18 20 Industrial-Labor Relations 3 1 15 26 Employee Communication 2 3 9 31 HRMS/IT 7 0 19 19 Other 2 0 5 3

Eastern-Europe American + Canadian Firms

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 1 4 5 16 Recruitment 4 6 3 13 Selection 4 5 5 12 Performance Evaluation 2 0 10 13 Training and Development 5 3 8 9 Compensation and Benefits 3 5 5 12 Industrial-Labor Relations 1 5 5 15 Employee Communication 1 3 10 12 HRMS/IT 2 0 5 13 Other 1 0 1 13

Eastern-Europe German

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 3 1 10 25 Recruitment 9 4 8 18 Selection 5 2 14 18 Performance Evaluation 8 0 11 20 Training and Development 16 4 9 9 Compensation and Benefits 4 2 16 16 Industrial-Labor Relations 4 2 15 18 Employee Communication 7 0 13 18

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Eastern-Europe German

Key functions of HR Increased Decreased Same External providers not used

HRMS/IT 3 0 8 17 Other 1 1 2 12

Eastern-Europe Other

Key functions of HR Increased Decreased Same External providers not used

Human Resource Planning 14 15 23 101 Recruitment 21 28 42 71 Selection 32 16 41 73 Performance Evaluation 25 7 35 95 Training and Development 39 31 44 49 Compensation and Benefits 20 19 35 89 Industrial-Labor Relations 20 11 44 86 Employee Communication 29 4 30 100 HRMS/IT 24 10 37 76 Other 9 5 22 41

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14 KNOWLEDGE MANAGEMENT IN HR Knowledge management means the management and sharing of the collective knowledge (know-how, skills and intellectual skills) of an organization’s employees in an integrated way. In connection with the practice of the indicated topic in the field of HR we examined the following three areas:

! methods of personal competency development in HR, ! enablers of HR knowledge flows, ! directions of HR knowledge flows.

14.1 PERSONAL COMPETENCY DEVELOPMENT IN HR The respondents in the Hungarian sample found informal learning and other methods to be the most important methods among the listed methods of personal competency development in the field of HR and they thought that formal learning and local training to play important roles. In the Eastern European sample none of the methods were indicated to be critical with the average of the answers being greater than 2.8 in all the categories except for other where American and Canadian firms gave an average answer of 2.3. Respondents in the Hungarian sample in all 3 groups ranked mobility as the least important methods among the examined tools of personal HR competency development in their companies in the period examined. In the Eastern European sample the least important methods were local training in American and Canadian firms; local training and formal learning in German firms; and formal learning, training in HQ, and cross-cultural training in Other firms.

67. Table: The importance of the methods of personal competency development in HR (on a 1-5 scale, on average)

(Explanation: 1= critical => 5 =not critical) The average of the answers

Hungary Eastern-Europe

American

+ Canadian

Firms German Other

American +

Canadian Firms

German Other

Methods of gaining competencies The average of the answers The average of the answers

Local training 2.5 2.2 2.4 3.5 3.4 3.0 Informal learning 1.8 2.4 2.6 3.0 3.2 3.1 Formal learning 2.3 2.7 2.9 3.3 3.4 3.3 Training in HQ 3.6 3.6 3.1 3.2 3.3 3.2 Mobility between parent and subsidiary 4.0 3.8 3.4 3.2 2.8 3.0

Mobility between subsidiaries 3.8 3.7 3.8 2.9 3.1 3.0

Cross-cultural training 3.2 3.9 4.2 2.8 3.2 3.2 Other 1.8 3.3 2.7 2.3 3.1 3.0

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14.2 ENABLERS OF HR KNOWLEDGE FLOWS BETWEEN THE PARENT COMPANY

AND THE SUBSIDIARIES In respect of the enablers of efficient knowledge flows, i.e. the transfer of knowledge about HR practices and techniques, between the parent company and the subsidiary, the respondents considered the ability to transfer knowledge to be most important among the factors examined in German firms and Other firms of the Hungarian sample while in American and Canadian firms the most critical knowledge flow enabler was indicated to be the motivation to transfer knowledge followed closely by the ability to transfer knowledge. The least important enabler indicated in the Hungarian sample was the content and kind of knowledge. In the Eastern European sample the motivation to transfer knowledge was deemed to be the most important enabler. In American and Canadian firms in the Eastern European sample the ability to transfer knowledge and the motivation to transfer knowledge were indicated to be have an equal critical level. However, in the Eastern European sample as a whole these knowledge flow enablers were not seen to be that critical as the average of the answers was 3.1 or greater.

68. Table: Enablers of HR knowledge transfer (on a 1-5 scale, on average) (Explanation: 1= critical => 5 =not critical)

The average of the answers

Hungary Eastern-Europe

American + Canadian

Firms German Other

American + Canadian

Firms German Other

Knowledge flow enablers The average of the answers The average of the answers

Ability to transfer knowledge 2.3 2.5 2.6 3.5 3.3 3.2

Motivation to transfer knowledge 2.2 2.6 2.7 3.5 3.1 3.0

Form of knowledge transfer 2.5 2.5 2.8 3.6 3.4 3.1

Content/Kind of knowledge 3.2 2.8 3.0 3.6 3.6 3.1

14.3 HR KNOWLEDGE TRANSFER BETWEEN THE PARENT COMPANY AND THE

SUBSIDIARY The respondents in the total sample ranked knowledge flows within your subsidiaries as the most important HR knowledge flows among the 4 types of HR knowledge flows provided in the Hungarian sample. Knowledge flows from the parent company was second. The least important knowledge flow in the Hungarian sample for American and Canadian firms and for German firms was knowledge flows to the parent company. In the Eastern European sample knowledge flows from the parent company was deemed to be the most important HR knowledge flows among the 4 types of HR knowledge flows while knowledge flows within their subsidiary was deemed least important.

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69. Table: HR knowledge flows (on a 1-5 scale, on average)

(Explanation: 1= critical => 5 =not critical) The average of the answers

Hungary Eastern-Europe

American + Canadian

Firms German Other

American + Canadian

Firms German Other

Knowledge flows in HR The average of the answers The average of the answers

Knowledge flows within your subsidiary

1.7 2.0 2.0 3.4 3.7 3.0

Knowledge flows from parent 2.4 2.6 2.5 2.8 3.0 2.8

Knowledge flows between subsidiaries

3.0 3.0 3.4 3.2 3.6 3.0

Knowledge flows to parent 3.7 3.6 3.2 3.0 3.3 2.9

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15 THE FUTURE TASKS OF HR 15.1 THE KEY BUSINESS ISSUES, TRENDS FOR HR TO FACE With regard to the key issues of the next 12-24 months, the interviewed HR managers in the Hungarian sample considered improving efficiency most imporant. Over 31% respondents thought that this business expectation is the most important tasks HR professionals have to face. In many of the companies this is accompanied by company development, company development and company reorganization. The findings are similar in the Eastern European sample.

70. Table: Key business challenges in the next 1-2 years Hungary

American + Canadian Firms German Other

Very important Order of priority of the key business directions, challenges

Frequency % distribution Frequency %

distribution Frequency % distribution

1. Efficiency improvement 16 34.8% 19 39.6% 36 31.0%

2. Company development 10 21.7% 8 16.7% 16 13.8%

3. Company reorganization 7 15.2% 4 8.3% 19 16.4%

4. Conform to globalization 7 15.2% 4 8.3% 14 12.1%

5. Distribution development 5 10.9% 5 10.4% 16 13.8%

6. EU changes 0 0.0% 6 12.5% 6 5.2% 7. Eastern expansion 1 2.2% 2 4.2% 9 7.8%

8. Other 2 4.3% 0 0.0% 1 0.9% Total 46 100.0% 48 100.0% 116 100.0% Hungary

American + Canadian Firms German Other

Important Order of priority of the key business directions, challenges

Frequency % distribution Frequency %

distribution Frequency % distribution

1. Efficiency improvement 1 3.2% 1 2.0% 9 8.6%

2. Company development 7 22.6% 10 20.0% 24 22.9%

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Hungary

American + Canadian Firms German Other

Important Order of priority of the key business directions, challenges

Frequency % distribution Frequency %

distribution Frequency % distribution

3. Company reorganization 5 16.1% 11 22.0% 13 12.4%

4. Conform to globalization 7 22.6% 9 18.0% 21 20.0%

5. Distribution development 3 9.7% 5 10.0% 13 12.4%

6. EU changes 7 22.6% 9 18.0% 20 19.0% 7. Eastern expansion 1 3.2% 5 10.0% 5 4.8%

8. Other 0 0.0% 1 2.0% 1 1.0% Total 31 100.0% 50 100.0% 105 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Very important Order of priority of the key business directions, challenges

Frequency % distribution Frequency %

distribution Frequency % distribution

1. Efficiency improvement 15 21.7% 31 28.2% 122 31.5%

2. Company development 11 15.9% 25 22.7% 85 22.0%

3. Company reorganization 7 10.1% 10 9.1% 37 9.6%

4. Conform to globalization 14 20.3% 16 14.5% 52 13.4%

5. Distribution development 12 17.4% 15 13.6% 45 11.6%

6. EU changes 4 5.8% 8 7.3% 27 7.0% 7. Eastern expansion 6 8.7% 5 4.5% 19 4.9%

8. Other 0 0.0% 0 0.0% 4 1.0% Total 69 100.0% 110 100.0% 387 100.0%

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Eastern Europe

American + Canadian Firms Germany Other

Important Order of priority of the key business directions, challenges

Frequency % distribution Frequency %

distribution Frequency % distribution

1. Efficiency improvement 10 15.6% 7 7.4% 41 10.4%

2. Company development 11 17.2% 12 12.6% 63 16.0%

3. Company reorganization 8 12.5% 17 17.9% 44 11.2%

4. Conform to globalization 9 14.1% 14 14.7% 68 17.3%

5. Distribution development 8 12.5% 15 15.8% 63 16.0%

6. EU changes 12 18.8% 18 18.9% 59 15.0% 7. Eastern expansion 6 9.4% 12 12.6% 56 14.2%

8. Other 1 1.6% 4 4.2% 7 1.8% Total 64 100.0% 95 100.0% 394 100.0% 15.2 INITIATIVES TO IMPROVE THE BUSINESS FOCUS OF HR PROFESSIONALS The responding organizations have hitherto put little emphasis on improving the business efficiency of HR professionals. This is also proven by the fact that training in specific areas of HR were most commonly implemented as reported by the professionals surveyed in both samples. In Other firms in the Eastern European sample offereing incentives based on measures and business performance and prioritizing business knwoledge in the selection of HR staff were two other actions implemented to improve the business focus of HR staff.

71. Table: Improving business focus among HR staff Hungary

American + Canadian Firms German Other

Actions improving business focus of HR staff

Implemented Planned Implemented Planned Implemented Planned

Offer training on specific areas of HR 10 5 13 5 31 7

Offer training on business issues 6 2 10 1 12 6

Offer incentives based on measures and business performance

5 2 9 3 9 7

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Hungary

American + Canadian Firms German Other

Actions improving business focus of HR staff

Implemented Planned Implemented Planned Implemented Planned

Prioritize business knowledge in the selection of HR staff

4 0 4 3 9 6

Hire people from outside HR (business people) 1 1 2 3 9 5

Offer rotation programmes (outside the HR department) for HR staff

1 2 1 6 6 6

Eastern Europe

American + Canadian Firms Germany Other

Actions improving business focus of HR staff

Implemented Planned Implemented Planned Implemented Planned

Offer training on specific areas of HR 6 6 11 8 38 33

Offer training on business issues 4 7 4 6 32 34

Offer incentives based on measures and business performance

7 3 6 3 48 17

Prioritize business knowledge in the selection of HR staff

3 4 4 4 38 18

Hire people from outside HR (business people) 2 5 2 3 27 23

Offer rotation programmes (outside the HR department) for HR staff

3 7 3 3 18 32

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16 CHARACTERISTICS OF THE RESPONDING INDIVIDUALS From the personal characteristics of the interviewed professionals we examined demographic characteristics and also thier professional qualifications and the characteristics of their positions held. 16.1 DEMOGRAPHIC CHARACTERISTICS AND QUALIFICATION The gender distribution of the professionals participating in the interview in the Hungarian sample from American and Canadian firms are more likely to be male (55.6%) while those from German firms are split equally between male and female and the ones from Other owned firms were more likely to be female (55.6%). However, the gender distribution of the professionals participating in the interview in the Eastern European sample from American and Canadian firms are split equally between male and female while those from German firms and Other firms are more likely to be male (56.3% and 50.5%, respectively).

72. Table: The gender of the responding individuals

Hungary

American + Canadian Firms German Other

Gender Frequency % distribution Frequency %

distribution Frequency % distribution

Male 10 55.6% 10 50.0% 20 44.4% Female 8 44.4% 10 50.0% 25 55.6% Total 18 100.0% 20 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Gender Frequency % distribution Frequency %

distribution Frequency % distribution

Male 4 50.0% 9 56.3% 46 50.5% Female 4 50.0% 7 43.8% 45 49.5% Total 8 100.0% 16 100.0% 91 100.0%

More than 80% of the participating individuals in the 3 groups of the Hungarian sample are over 30 years of age. They are predominiantly in the 40 and 54 years age group in German and Other owned firms while in the American and Canadian owned firms most of the respondents were in the 30-39 years group or in the 40-54 years group. There were only a few of the professionals in the very young age group of below 29 years old (18.2% and less). In the Eastern European sample those interviewees from American and Canadian firms were mostly in the 40-54 years age group (71.4%), while those from Other owned firms were predominately in the 30-39 years age group (57.0%). Respondents from German owned firms were likely to be in the 25-39 years age group (37.5%) or the 30-39 years age group (31.3%).

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73. Table: The age of the respondents Hungary

American + Canadian Firms German Other

Age Frequency % distribution Frequency %

distribution Frequency % distribution

Below 25 years 0 0.0% 0 0.0% 0 0.0%

25-29 years 3 16.7% 1 5.0% 8 18.2%

30-39 years 6 33.3% 6 30.0% 9 20.5%

40-54 years 6 33.3% 10 50.0% 18 40.9%

55-59 years 3 16.7% 3 15.0% 8 18.2%

Above 59 years 0 0.0% 0 0.0% 1 2.3%

Total 18 100.0% 20 100.0% 44 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Age Frequency % distribution Frequency %

distribution Frequency % distribution

Below 25 years 0 0.0% 1 6.3% 3 3.8%

25-29 years 0 0.0% 6 37.5% 11 13.9%

30-39 years 2 28.6% 5 31.3% 45 57.0%

40-54 years 5 71.4% 2 12.5% 17 21.5%

55-59 years 0 0.0% 2 12.5% 2 2.5%

Above 59 years 0 0.0% 0 0.0% 1 1.3%

Total 7 100.0% 16 100.0% 79 100.0% Almost all the interviewees participating in the survey in both samples have university, college or equivalent qualifications (over 89%). In the Hungarian sample 11% of interviewees at American and Canadian firms had PhDs. In the other 5 groups the number of those with PhDs is between 4% to 5%.

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74. Table: Level of qualificaton

Hungary

American + Canadian Firms German Other

Level of qualification Frequency %

distribution Frequency % distribution Frequency %

distribution University PhD 2 11.1% 1 5.0% 2 4.3%

University (MSc) 14 77.8% 16 80.0% 31 67.4%

College (BSc) 2 11.1% 2 10.0% 12 26.1%

Other 0 0.0% 1 5.0% 1 2.2% Total 18 100.0% 20 100.0% 46 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Level of qualification Frequency %

distribution Frequency % distribution Frequency %

distribution University PhD 1 4.0% 2 5.1% 8 4.8%

University (MSc) 19 76.0% 26 66.7% 102 61.4%

College (BSc) 4 16.0% 8 20.5% 38 22.9%

Other 1 4.0% 3 7.7% 18 10.8% Total 25 100.0% 39 100.0% 166 100.0% The majority of the interviewees in the Hungarian sample obtained qualifications in social sciences (55% in American/Canadian owned firms, 75% in German owned firms, 50% in Other owned firms) followed by qualifications in Engineering (22% in American/Canadian owned firms, 20% in German owned firms, 32% in Other owned firms). HR professionals in American and Canadian owned firms also had qualifications in the Natural Sciences (22%). In the Eastern European sample respondents from American and Canadian owned firms were equally split between qualifications in Engineering and in Social Sciences (38.5%). While those from German owned firms had their qualifications mainly in Social Sciences (43.6%), followed by Engineering (30.8%). Respondents in the Eastern European sample with Other owners mostly had qualifications in Social Sciences (43.0%%) followed by Other qualifications (28.5%) and then Engineering (24.2%).

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75. Table: Field of professional qualificaton

Hungary

American + Canadian Firms German Other

Field of professional qualification

Frequency % distribution Frequency %

distribution Frequency % distribution

Natural sciences 4 22.2% 0 0.0% 3 6.5%

Engineering 4 22.2% 4 20.0% 15 32.6% Social sciences 10 55.6% 15 75.0% 23 50.0%

Other 0 0.0% 1 5.0% 5 10.9% Total 18 100.0% 20 100.0% 46 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Field of professional qualification

Frequency % distribution Frequency %

distribution Frequency % distribution

Natural sciences 2 7.7% 2 5.1% 7 4.2%

Engineering 10 38.5% 12 30.8% 40 24.2% Social sciences 10 38.5% 17 43.6% 71 43.0%

Other 4 15.4% 8 20.5% 47 28.5% Total 26 100.0% 39 100.0% 165 100.0%

16.2 POSITION OF THE RESPONDENTS Almost half (greater than 42%) or more of the individuals participating in the survey in the Hungarian sample in all 3 ownership groups have the title of HR Director/ Manager. Between 11% to 22% of respondents had the title of HR professional or other. In the Eastern European sample only those subsidiaries with American and Canadian owners had nearly 50% of respondents with the title of HR Department Head. German owned firms had over 46% of respondents with the title of HR professional or Other title. Those firms with Other owners worked mostly as HR Director/ Manager or HR Department Head (49.6%).

76. Table: Current position

Hungary

American + Canadian Firms German Other

Current position Frequency %

distribution Frequency % distribution Frequency %

distribution CEO 1 5.9% 0 0.0% 3 6.7% HR Vice 2 11.8% 1 5.9% 5 11.1%

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Hungary

American + Canadian Firms German Other

Current position Frequency %

distribution Frequency % distribution Frequency %

distribution President HR Director/ Manager 9 52.9% 11 64.7% 19 42.2%

HR Department Head

1 5.9% 3 17.6% 8 17.8%

HR professional 2 11.8% 1 5.9% 5 11.1%

Other 2 11.8% 1 5.9% 5 11.1% Total 17 100.0% 17 100.0% 45 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Current position Frequency %

distribution Frequency % distribution Frequency %

distribution CEO 3 27.3% 6 23.1% 21 18.3% HR Vice President 1 9.1% 0 0.0% 1 0.9% HR Director/ Manager 5 45.5% 4 15.4% 31 27.0% HR Department Head 2 18.2% 4 15.4% 26 22.6% HR professional 0 0.0% 6 23.1% 18 15.7% Other 0 0.0% 6 23.1% 18 15.7% Total 11 100.0% 26 100.0% 115 100.0% Over 40% of the respondents in the Hungarian sample with American and Canadian and Other ownership have worked in their current positions for less than three years. Those subsidiaries with German ownership have spent less than 5 years in their current position. In the Eastern European sample firms with Other ownership had 66% of respondens who spent less than 5 years in their current position while those with American and Canadian ownership had nearly 70% of the respondents with less than 5 years of experience in their current position. German owned subsidiaries had nearly 50% of respondents with less than 3 years of time spent in their current position.

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77. Table: Time spent in current position

Hungary

American + Canadian Firms German Other

Time spent in current position

Frequency % distribution Frequency %

distribution Frequency % distribution

0-3 years 8 44.4% 6 30.0% 22 47.8% 3-5 years 3 16.7% 3 15.0% 11 23.9% 5-10 years 5 27.8% 5 25.0% 9 19.6%

10-15 years 2 11.1% 5 25.0% 2 4.3%

Over 15 years 0 0.0% 1 5.0% 2 4.3%

Total 18 100.0% 20 100.0% 46 100.0%

Eastern Europe

American + Canadian Firms Germany Other

Time spent in current position

Frequency % distribution Frequency %

distribution Frequency % distribution

0-3 years 10 38.5% 19 48.7% 64 38.3% 3-5 years 8 30.8% 11 28.2% 47 28.1% 5-10 years 5 19.2% 8 20.5% 35 21.0% 10-15 years 1 3.8% 1 2.6% 16 9.6%

Over 15 years 2 7.7% 0 0.0% 5 3.0%

Total 26 100.0% 39 100.0% 167 100.0%