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Global HRM: Sweden Research

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Global HRM: Sweden Research

  1. 1. Rebecca Mattia, Alyssa Majewski, Min Jeong Lee, Almer Ljesnjanin, Taewon Kim,Yihan Xu,Cameron Bashner, Justin Wood, Hanxiao Ye Global Human Resources Management December 8th, 2016 Final Paper Sweden Sweden is one of the largest countries in Europe. It’s the third largest country in Western Europe behind Spain and France. Sweden’s population is about 9.5 million people and the capital is Stockholm.They are run by a constitutional monarchy and the life expectancy of men and women is about 80 years old. Their parliament is called the Riksdag and it is made up of 349 members. They have a mixed system of high-tech capitalism and welfare benefits. Sweden joined the European Union in 1995 and they have a highly skilled labor force. The rule of law is very well maintained in Sweden and they ranked number 4 in the corruptions perception index out of 175 countries. (Sweden-An Overview) Trade agreements are currently being negotiated with countries that include United States and Japan as well. Sweden has a general election and the speaker of the house then picks a candidate to become the Prime Minister also known as the Swedish Statsminister. The nomination is put to a vote in the entire chamber and then they all have to come up with a decision. 175 people is the confirmation vote. If 175 isn’t reached than they all have to find another candidate that is fit to become the new prime minister. When it comes to Sweden’s politics it has a western european history of democracy beginning with the vikings and then onto royal power. (Sweden-An Overview) The constitution of Sweden consists of four laws. The four laws are the instrument of government, the act of succession, the freedom of the press act, and the fundamental law on freedom of expression. The instrument of government basically just acknowledges all of Sweden’s basic laws and rights that are given to the people. Sweden has long been an egalitarian and tolerant society. This sentiment has slowly built up due to historical circumstances. Since the 1980s the Swedish government has purposely embraced and enacted feminist, anti-racist, progressive, and anti-fascist stances. Over 1000 years of existence as a sovereign state allowed for this development and the development of a strong culture and national institutions. Throughout much of the history of the country, there was relative similarity of ethnicity, religion, and language that led to a strong national identity. In the 1940’s and 1960’s there was a large amount of immigrants from southern Europe, and these workers were allowed to immigrate freely and gain full citizenship. Sweden also has the largest amount of incoming refugees per capita of any nation. (Countries and their Culture: Sweden) “The principle of equal-opportunity has had a strong position in Swedish society, much due to the long predominance of the social democratic party” (Absolutely Swedish). The idea of social classes is not prevalent in Swedish society. A blue-collar worker might make the same amount of money as a white collar, and they have the same opportunities for education and other
  2. 2. opportunities. The ideal that everyone has the same value is ingrained in Swedish culture. It is strong enough even to the extent that some people think it has gone too far and that it limits personal freedom (Absolutely Swedish). Swedish people are also known for being anti-argumentative, and fairly agreeable. This had led to foreigners viewing Swedes as “undercooked and formal” (Absolutely Swedish). Also, there are several important Etiquette in Sweden culture. The first important etiquette is about Meeting and Greeting. Business Personnel in Sweden are typically fairly reserved and as such it is important that all dealings are formal and serious until it is deemed acceptable by the respective Swedish personnel to allow events to become more relaxed.Second etiquette is about the Gift Giving Etiquette.And there are couples of rules about the gift. If you are invited to a Sweden’s home then it is suggested that you take the same type of gift as you would give.And if you choose to give flowers, then ensure that it should not include white lilies or chrysanthemums. The reason for this that both types of flowers are typically given at funerals.Also if you are personally given a gift, then it is custom to open it upon receipt. The third etiquette is about what to wear in the business meeting. Business wear in Sweden is conservative. As such, we advise the following rules that Men should wear good quality suits with silk ties and shirts.Women should wear conservative business dresses or a suit.Due to the egalitarian values of Sweden, it is strongly recommended that you do not wear anything flashy. Even senior directors or executives do not dress any more elaborately than average employees. As such, avoid ostentatious or, obvious jewelry.Finally Key suggestions​ ​of etiquette in Sweden are that younger people are likely to move more quickly to a first name basis than older people. And personal space is important in Sweden and as such it is recommended that you maintain an awareness of someone’s personal space and that you do not invade it. Avoid any unnecessary touching. There are many advantages to the business climate within Sweden. Fixed-term contracts in businesses are common in Sweden and are helpful for the private sector because with fixed-term contracts, labor productivity and growth rate of employment increases (Sweden). Sweden was ranked third by Transparency International in terms of the most corruption-free countries in the world --- it ranked third out of 168 countries (Sweden’s Business Climate). Because it is ranked high, people would trust investing in Swedish businesses. Also, Sweden, being the largest market in the Baltic Sea region, opens the market opportunity in Northern Europe and the Baltic Sea region (Sweden’s Business Climate). Investors that will be able to expand their market will have more chances of having their product known to more customers. Moreover, it established a presence in the Nordic region, became attractive as a choice for American and foreign companies because it has a well-educated labor force, excellent telecommunications network, and a stable political environment (Sweden’s Business Climate). Such characteristics are appealing to those that are willing to invest. Not only does Sweden have such attractiveness, but it also has economic opportunities to grow from its technology-driven
  3. 3. global competition. It leads in adopting new technologies and setting new consumer trends (Sweden’s Business Climate). Therefore, its technology advancement is favorable to those who are willing to invest. Through trade, capital, and foreign investment, Sweden demonstrates its global competitiveness (Sweden’s Business Climate). Manufacturers have the advantage of conducting a test market because there are numerous demanding customers and high levels of technical sophistication (Sweden’s Business Climate). It should be noted that there are many disadvantages in regards to Sweden’s business climate. Although the residents in Sweden gain a higher income and welfare than any other countries around the world, they still pay a lot of money on taxation. “​The ​effective taxation rate in Sweden is commonly cited as among the highest in the world”. The total tax rate in Sweden which reaches almost 57 percent of GDP is the highest-level around the world. Starting a business here could be very expensive. Furthermore, the corporate tax rate in Sweden is decreased from twenty-six percent to twenty-two percent (Trading Economics). Compared with the average corporate tax of other European Union countries and OECD countries, the corporate tax rate of Sweden is lower but still involves a high Social Security Tax Rate for the corporations in Sweden. The Social Security Tax Rate for the corporations in Sweden almost amounts to thirty-two percent of the GDP. However, the social security tax rate for the corporation in other European countries and OECD countries are mostly around 23 percentage of GDP (Trading Economics). Therefore, the corporations need to burden the high corporate tax rate and social security tax rate of the corporations, which most corporation could not offer. Sweden does not have large population. “​Sweden consequently has a low population density of 21 inhabitants per square kilometre (54/sq mi)” (Wikipedia) . ​Its low population not only constrained its development on manufactures but also lead to high labor cost. In that case, doing business here, employers need to pay more to employees compared with other countries.Low population also lead to limited talent pool. Some job requires specific skills. It is hard for employees to find enough employees who owned specific skills in domestic areas. Due to the shortage of labor forces and talent poll, Swedish companies have to search for professions from other countries. In that case, many international employees are in Swedish company. However, managing people owns different backgrounds and cultures could be hard. Establishing business in Sweden, employers have to know how to manage people from different countries and have experience of international group work. Sweden has completed and rigid tax system to give overall benefits to their citizens. In Sweden, companies have duty to pay a large amount of tax to social safety net program. Social safety net program is a program that helps people who have low income and meet difficulty of living. Different companies pay different rate of tax to social safety net program. Companies hiring more employees who have specific skill need pay more to the social safety net program compared with companies only hired unskilled employees. In that case, doing business in company, employers need to focus on control the number of employees and keep balance between the skilled and unskilled employees, in order to control the cost.
  4. 4. Despite these limitations on business climate, Sweden has “the lowest income inequality and the smallest gap in gender employment rate” in the world based on the Fact Monster. Specifically, the rate of men in employment is only four percentage more than the rate of women in employment. Moreover, Sweden could be acknowledged as a country which has the greatest gender equality. For example, not only women but also men could take 480 days off for parental leave. In addition, the work hours in Sweden have also cut down to six hours per day, which are much less than the work hours in the United States. Although people have less hour for work, the productivity has increased due to less stress and distraction at work. For example, A Toyota’s service center on the Sweden’s west coast had reported an unexpected increase in profit after it shifts the work hours from eight to six more than decade ago (BBC News). Human Resource manager also should notice the difference of the work hours from domestic countries and other countries around the world. When it comes to challenges in business, everyone around the world runs into them. In Sweden, education plays a key role in the growth of Sweden's well being.Within the Swedish school system, the Education Act regulates that from the age of six, students will begin school for free. This then follows the act of mandating students attendance in school for the next nine years (export.org) With the deterioration of Mathematics and science scores, it has began to affect the future in some fields of the workforce. To see that the newer generations are not excelling in reading and mathematics which is having a negative effect on the demand for staff in SET fields including science, engineering, and technology. With this being said, a increase for suitable ICT (information and communications technology) and engineering specialists is needed but is a challenge to find. To find suitable employees to fill these positions, Sweden needs to improve the quality of the education in order to hire qualified people for the positions that are in demand. (oecd.org)These are all very important avenues in terms of innovation so many small businesses are trying to increase communication with universities to increase interests in these fields. Another HR-Specific challenge stems from the slightly different practices Sweden performs in regards to recruitment. For instance, Sweden is considered one of the highest position-based OECD countries in comparison to others. The OECD defines “position-based” as a method in which all kinds of applicants are allowed to apply. A multinational who is “career-based”, or highly selective with internal applicants, may have to consider carefully. (oecd.org). It should also be noted that Sweden takes women and disabled individuals into great consideration when undergoing recruitment. Other countries may have vastly different preferences. For example, the United States usually does not have a particular preference; however, it is noted within the Country Profile from the OECD that it takes particular military veterans into consideration (oecd.org).
  5. 5. With longer life expectancies and people staying at their jobs for a longer amount of time, it may begin to create a more challenging time for the young job seekers. The existence of longer life expectancies is also prominent in the fact that there is also a specific problems amongst older generations in the Swedish workforce: retirement. According to Pablos and Tennyson’s Handbook of Research on Human Resources Strategies for the New Millennial Workforce, there is a particular case in Sweden in which its older generation of employees and employers have much trouble balancing their views and agreements on retirement. Specifically, as the authors describe it, both sides have difficulty overgoing “phased retirement” or simply known as “gradual retirement”. This is problematic for both the employee and employer due to dissatisfaction from change and a decrease in output respectively. It should also be taken into consideration that failure of knowledge sharing occurs more frequently when a “phased retirement” plan does not succeed. Even with the gradual process of retiring, that knowledge that the older employee had inevitably goes to waste. However, authors found research that concludes when proper managerial action and planning is implemented, both the organization and the employee benefit from this particular form of retirement. As a multinational doing business with this particular country, an internal problem amongst those within the organization can be seen as quite a challenge. This would be not only in regards to younger job seekers, but for employers who are concerned about the decrease in output that may rise from undergoing a “phased retirement,” (Pablos & Tennyson 351-357). Another important challenge in Sweden is that moving towards a shorter work day, 6 hours days to be exact, and many companies that implemented this change have seen positive results in employee satisfaction. In comparison to America, where here a majority of Americans work around fifty hours a week and almost twenty percent of Americans work over sixty hours a week, Sweden clearly offers a very differently paced work environment and this could be very challenging for international assignees or businesses and therefore something the HRM department needs to handle. In fact, there is approximately a hundred hour gap between the amount of hours individuals work per year in comparison to the United States. According to the Country Profiles created by the OECD, an individual in Sweden works 1,735 hours per year. In the United States, an individual works 1,840 hour per year. (oecd.org) To further extend upon that, Sweden has approximately eight more leave days per year in comparison to the United States. However, several studies have shown that there is actually a cap on productivity, meaning that it peaks after about 40 hours. This means that Americans might be overdoing it and aren’t actually any more efficient at getting work done on that schedule than the Swedes. For someone getting paid an hourly rate, the six hour work day may not be preferable and therefore negotiations about wages may ensue. When working in Sweden, HR professionals will have to handle this discrepancy in working time between Sweden and other countries because if handled correctly, this could potentially be just as much of a benefit to them as it is a challenge. For example, at Toyota in Gothenburg, Sweden the change to a six hour work day was made 13 years ago and since then they have reported an increase in productivity and decreased turnover.
  6. 6. Research has shown that when people have more time to maintain a healthier work-life balance, they are less likely to leave positions quickly, take fewer sick days and are happier employees in general around the workplace (Benson).As a result, this could potentially save companies a large amount of money by not having to spend as much money on training new employees, paying for sick days, etc. Lastly, a final human resource management challenge is the high absolute union membership in Sweden. With about 85% membership, this is something human resource management professionals should obviously be knowledgeable about and will have keep in mind when dealing with negotiations. ​In Sweden, there are about 3.5 million trade unionists. Although there are a number of non-employed members, particularly being students, the level of union organisation is high.
  7. 7. Work Cited “Absolutely Swedish: Outlining a Modern Character.” ​Smorgabord, sverigeturism.se. Accessed 12 December 2016. Benson, Thor. “What the U.S. Could Learn from Sweden’s 6 Hour Workday”. attn: http://www.attn.com/stories/3472/sweden-six-hour-workday?utm_source=facebook&utm_mediu m=rerun1&utm_campaign=reruns BUREAU OF ECONOMIC AND BUSINESS AFFAIRS. "Sweden." ​U.S. Department of State. U.S. Department of State, 05 July 2016. Web. 08 Dec. 2016. http://www.state.gov/e/eb/rls/othr/ics/2016/eur/254421.htm “Countries and their Cultures: Sweden”. ​Countries and their Cultures, everyculture.com. Accessed 12 December 2016. “​European Union Indicators.” Trade Economic.​ Antonio J Fernandes Sousa, 12/05/2016 ​http://www.tradingeconomics.com/european-union/indicators Export.gov. "Sweden Market Overview." ​Export.gov. N.p., 20 July 2016. Web. 4 Dec. 2016.
  8. 8. https://www.export.gov/apex/article2?series=a0pt0000000PAzLAAW&type=Country_Commerc ial__kav “​Interesting Facts About Sweden.” Fact Monster Leslie Gome, 02/05/2016 http://factmontster.com/interesting-facts-about-sweden/ OECD. “Human Resources Management Country Profiles UNITED STATES - OECD.” ​United States. N.p., Web. Dec. 2016. http://www.oecd.org/gov/pem/OECD%20HRM%20Profile%20-%20United%20States.pdf OECD. "Human Resources Management Country Profiles SWEDEN - OECD." ​Sweden. N.p., 6 Dec. 2012. Web. 4 Dec. 2016. https://www.oecd.org/gov/pem/OECD%20HRM%20Profile%20-%20Sweden.pdf OECD. "Public Employment and Management." ​Acquiring Capacity - OECD. N.p., Web. 04 Dec. 2016.​http://www.oecd.org/gov/pem/acquiringcapacity.htm Pablos, Patricia OrdoÌ​nÌ​ez De, and Robert D. Tennyson. "Chapter 18: A Case of Phased Retirement in Sweden." ​Handbook of Research on Human Resources Strategies for the New Millennial Workforce. Hershey, PA: Business Science Reference, 2017. N. pag. Print.
  9. 9. Savage, Maddy. “​The truth about Sweden’s short working hours” BBC News. John Reith, 02/11/2015 http://www.bbc.com/news/business-34677949 “Sweden-an overview.” “ Facts and Figures.” Last updated 28 December 2015 Copyright 2013-2016 Swedish Institute https://sweden.se/society/sweden-an-overview/ “​Sweden Economic Indicator.” Trade Economic.​ Antonio J Fernandes Sousa, 12/05/2016 http://www.tradingeconomics.com/sweden/indicators Tarique, I., Briscoe, D. and Schuler, R. (2016). International Human Resource Management: Policies and Practices for Multinational Enterprises. Fifth edition. London: Routledge Wikipedia. "Taxation in Sweden." Wikimedia Foundation, 16 Nov. 2016. Web. 04 Dec. 2016. https://en.wikipedia.org/wiki/Taxation_in_Sweden World Bank Group. "Sweden's Business Climate." ​Sweden Business Climate. Enterprise Surveys, n.d. Web. 08 Dec. 2016.​http://www.enterprisesurveys.org/reports/sweden-report