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HR function developments in Lithuania

Article in Baltic Journal of Management · May 2010

DOI: 10.1108/17465261011045133

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HR function developments in Lithuania1

Rūta Kazlauskaitė and Ilona Bučiūnienė

ISM University of Management and Economics

Abstract
Purpose – The purpose of this paper is to provide an overview of the past and current
developments of the HR function in Lithuania and their antecedents.
Methodology – The paper discloses the antecedents of HR function developments in
Lithuania through the analysis of the country’s demographic, economic, legal, and cultural
environments and historical HRM developments. Current HR function status is disclosed
through findings of an HR manager/specialist survey at 119 medium and large-sized
organisations, which was part of Cranet 2008-2009 survey.
Findings – A greater part of organisations have HRM departments and HR strategy. In about
half of them HR is represented on the board and is to some extent involved in business
strategy development. HR responsibility is shared by line management and HR function.
About 90% of organisations have a mission statement and business strategy. Trade union
power is low due to its historic heritage; however, findings show that it is gaining a stronger
status. About half of organisations have developed CSR policies, though few offer non-
statutory social welfare schemes. Reward individualisation is higher among private-sector
employers. Downward communication is used to a considerable extent by both private and
public organisations, while upward communication is more extensively practiced by private
sector organisations.
Practical implications – This paper discloses current HR function developments in Lithuania
based on its historical heritage, antecedents in macro/micro environments and empirical data,
which provides valuable insights for local organisations and foreign investors into current
HRM status.
Originality/ value of the paper – The paper discloses premises of the HR function
developments and its current status in Lithuania, which are still under-researched in the
country, and contributes to HRM research in the CEE region.
Keywords – HR function, Lithuania, external context, line management, industrial relations
Paper type – Research paper

Introduction
Following the debate over the applicability of American HRM model to the European context
(Brewster, 1993; Guest, 1997), considerable HRM research attention has been given to the
study of the likely antecedents of national HRM system developments. This resulted in quite
an array of studies in the old EU countries (Berridge, 1992; Mabon, 1995; Mayrhofer, 1995;
Brunstein, 1992; Muller, 1999; Cabral-Cardoso, 2004), followed by research in Central and

1
Published in the Baltic Journal of Management, vol. Vol. 5 No. 2, 2010
 2

Eastern European contexts (Tung & Havlovic, 1996; Garavan et al, 1998; Mills, 1998; Lucas
et al, 2004; Poor et al, 2007).
Taking into account rapid globalisation processes and EU enlargement, researchers have
also entered into the HRM practice convergence/divergence dispute (Mayrhofer et al, 2004),
which has produced numerous comparative HRM studies (Mayrhofer & Brewster, 2005;
Nikandrou et al, 2005) that also provide basis for determining national HRM specifics.
Another field of research interests concerns strategic HRM. Challenged by socio-economic
changes in the world, such as globalisation, demographic changes, etc. (Boselie & Paauwe,
2005), as well as new developments in the nature of managerial work, e.g. nformation
technologies, flatter and more flexible organisations, etc. (Caldwell, 2003), the HR function
is argued to have shifted away from the traditional, functional areas towards value creation in
the organisation.
HR function is now more often viewed as a business partner and is argued to have
become more strategic (Mohrman & Lawler III, 1990; Schuler & Jackson, 2005). Research
has also provided some evidence on the above transformations from various national contexts
(mainly the US and UK). For instance, studies reported enhanced HR integration into
strategic decision-making, activity devolution to line managers, a move away from industrial
relations and collective bargaining to other areas of HR activities (Morley et al, 2006).
Findings of Stavrou and Brewster (2005) research show a convergence trend in SHRM in the
old EU states.
HRM developments in Lithuania are, however, still under-researched in both fields –
national antecedents of HRM and its development towards a more strategic role, with only a
few studies conducted by now (Pundzienė & Bučiūnienė, 2009). This paper will thus first
provide an analysis of HRM specifics in Lithuania based on its historical HRM developments
and a study of macro (demographic, economic, legal, and cultural environments) and micro
(organisational) contexts. Secondly, it will look into the current status of the HR function in
Lithuania.

Antecedents of national HR function developments

International HRM literature is engaged in the debate over the universal and contextual HRM
paradigms, or the “US” and “European” HRM models. Supporters of the contextual paradigm
argue that the “US” model is inapplicable in Europe due to cultural and institutional
differences (Communal & Brewster, 2004), such as differences in organisational autonomy,
 3

organisational exposure to market processes, the role of the group vs individual, trade union
representation, state interference, etc. (Sparrow & Hiltrop, 1997).
Though in the past decades Europe has undergone significant changes in respect to its
unification (common currency, legislative acts, political bodies, etc.), the concept of the
“European” HRM model should be used with caution, for the continent is still composed of
rather heterogeneous national contexts. Some regional HRM similarities and traces of
directional convergence have been determined (Mayrhofer & Brewster, 2005); however,
overall empirical evidence still supports an array of national differences among HRM systems
in Europe, which necessitates a thorough analysis of national antecedents of HRM
developments.
It is also noteworthy that most HRM studies have been conducted from a West European
perspective, which leaves HRM in CEE countries still under-researched (Michailova et al,
2009). Taking into account historical heritage of transition economies, a clearer picture of
HRM in Europe calls for further research on the above region. However, to look into HRM
specifics of a single country, be it West European, or CEE, it is first of all necessary to
determine what in particular conditions national HRM system developments.
Among the factors that are said to impact national patterns of HRM, Brewster (1993)
emphasises the significance of such factors as organisational autonomy, culture and
legislation, business ownership patters, trade union representation, and employee
involvement. Tzafrir et al (2007) suggest that national models of HRM are conditioned by
national, structural, organisational, and individual forces and should be studied from those
perspectives.
Sparrow and Hiltrop (1997) distinguish the following four sets of factors: business
structure (degree of state ownership, organisation size and life expectancy, level of single
family stakeholders, etc.), cultural factors (relationship between managers and subordinates,
distributive justice, reward individualisation, definitions of effective managers, employee
participation, communication, etc.), institutional factors (organisational autonomy, scope of
labour legislation, role of trade unions, social security and welfare provisions, corporate
responsibility, etc.), and HR role and competence (HR decentralisation and line devolvement,
strategic integration, HR experience, functional background, outsourcing, etc.). If we look
closer at the factors included in Sparrow and Hiltrop’s model, we will see that to disclose
them and thus gain insights into national HRM patterns it is necessary to carry out both
analysis of the external context of organisations, which calls for the analysis of secondary
 4

data, and HRM-related factors within organisations, which necessitates primary data on HRM
collection and analysis.

HR function developments in Lithuania

In this section we aim to disclose major premises of the current HR function developments in
Lithuania drawing on the above discussed Sparrow and Hiltrop (1997) model. Respectively
we present a brief overview of factors that are believed to have impact on national patterns of
HRM, such as HR role and competence, business structure, and cultural and institutional
factors.

HR role and competence

In order to understand HR role and function in a transition economy, it is necessary to first
and foremost look into its historical background.
The personnel management function played political, administrative and social roles in
the socialist countries, which determined all personnel management activities (Lucas et al,
2004). In the Soviet countries the so-called “cadre departments”, typically managed by
members of the Communist Party without relevant experience or competence in personnel
management (Pundzienė & Bučiūnienė, 2009), dealt with such personnel issues as hiring and
dismissal, employee data collection and recording, training and development. Personnel
planning and compensation were carried out at the state level, in accordance to central
economy planning. Practices like employee motivation played only a minor role; labour
markets did not exist in socialist countries, so selection was not relevant and labour turnover
hardly existed (Pieper, 1992).
Since the reestablishment of independence in 1990, HRM has undergone tremendous
changes in Lithuania. First it had to develop lacking competencies and secondly to build up a
reputation. Tertiary institutions started teaching HRM as an academic discipline. In 2006
Association of Human Resources Professionals was established, which currently holds 130
corporate and private members and is actively engaged in HR function promotion in the
business world and among students. An interesting and relevant peculiarity of the HR
function is a clear dominance of female employees, which leads to interesting implications
and speculations regarding currently weak strategic integration of HRM in organisations.

Business structure and environment

 5

In this section we extend Sparrow and Hiltrop’s (1997) model of factors affecting national
patterns of HRM by adding an overview of the external organisational context. To be more
specific, we additionally look into the county’s demographics, labour market and economic
situation. The analysis of business structure and contextual factors is based on the data from
Lithuanian Department of Statistics [2] and Eurostat [3].
Business structure. An important aspect of the national economy that has to be taken into
consideration when analyzing antecedents of HRM developments refers to the organisational
distribution in respect to size (Sparrow & Hiltrop, 1997), even though it is generally excluded
from HRM research or used merely as a control variable (Heneman et al, 2000). In Lithuania
93.6 per cent of enterprises (or 76,187organisations) are small-sized (<50 employees). Even
more, 80% of them are micro-sized (<10 employees); large companies (250 plus employees)
constitute mere 0.7%. Such vast predominance of SMEs in the economy has important
constraints on the HR function development, for as a rule such companies have limited
financial resources as well as limited HRM competencies. In most cases, companies with
under 100 employees do not even have an HRM department, and HRM practices are carried
out by non-HRM specialists such as general managers, bookkeepers, etc.
The ownership pattern also plays a significant role in national HRM developments
(Brewster, 1993). Since the reestablishment of independence, majority of public organisations
have been privatised in Lithuania. Currently 81% of gross value added is created by the
private sector. However, the public sector still remains a significant provider of work places
(see labour market situation).
The vast majority of organisations in Lithuania are of domestic capital – foreign-
controlled enterprises make mere 1.6%. It is noteworthy, however, that many of the latter are
large-sized organisations, for cumulatively they account for 11.6% of the total population
under employment. As prior research shows, significant differences in HRM between
Lithuanian and foreign capital companies still persist - strategic and change management roles
are more developed in foreign and mixed-capital organisations (Pundzienė & Bučiūnienė,
2009).
The demographic environment. The situation in this context is rather alarming. First, the
number of the population has been decreasing since 1992 (3.7 mln) and currently (2009)
makes 3.34 million. One of the antecedents of such a situation is the decreased birth rate since

2
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3
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1990 (2.03). The lowest birth rate was reported in 2002 (1.23), which was a consequence of
the Russian crisis. Though a slight growth tendency was observed in the past few years, the
situation was still inadequate; therefore, the government introduced special measures (see
“legal environment”) to boost fertility, which produced satisfactory outcomes – in comparison
to the birth rate of 1.35 in 2007, the respective figure in 2008 was 1.47.
It is also noteworthy that the population is ageing. In 2008, 20.5 per cent of the population
were aged 60 and older. In contrast, it can be said that there are only 6.4% of the population
currently aged 10-14 who are likely to join the labour market in the coming decade.
Another factor of great impact on the population decrease is migration. According to the
official data, over 180 thousand people have emigrated since 2003. The unofficial number is
believed to be higher still. The peak of emigration were the years 2004-2005, which was
inspired by Lithuania’s joining the EU in 2004 and possibilities of legal employment, while
the main reason leading to it was a substantial pay difference between Lithuania and old
Europe. Another emigration peak was in 2008, which again may be accounted for by pay
discrepancies, especially among lower-skill labour. Bearing in mind the low birth rate and
ageing of the population, this will constitute a serious HRM problem in the next few decades,
when it is estimated that by 2040 over 21.9 percent of the EU population will be over 65
(Lipiec, 2001). If the demographic situation does not improve, Lithuania may reach the above
figure much earlier. The current economic recession and rising unemployment levels in
Europe are likely to slow down emigration, as foreign-country nationals are often amongst
those who first suffer redundancy effects. This, however, may in turn lead to a higher
unemployment level in Lithuania, as some emigrants are likely to repatriate and join the
unemployed.
90.6% of the population (aged 25-64) have at least upper secondary education (EU
average 71.5%), and 17.7% (over 15 years) have a higher education degree. The number of
those engaged in higher education has doubled since 2000, which, on the one hand, testifies to
the growing popularity of higher education in the country, while, on the other hand, it has lead
to certain negative effects on the labour market, i.e. higher expectations among the employers
and thus unduly requirements for positions with lower responsibilities. The year 2009,
however, will bring in considerable changes in the higher education system, as the
government has initiated a higher education reform aimed at quality. However, in the long run
it may affect the future development of certain, less popular study fields as well as numbers of
students pursuing higher education, which in turn will introduce significant changes in the
labour market.
 7

HRM is now taught as an academic discipline at tertiary institutions at both undergraduate

and graduate levels; however, HRM majors and specialized degree programmes are still
scarce. Besides HRM specialization is less popular among students in comparison to other
business disciplines (finance, marketing). It is also noteworthy that 58.4% of current
university degree holders are females, which may be one of the explanations of a relatively
high percentage of women in managerial positions (40.7 % in comparison to the EU average
of 32.6%).
The demographic situation has had a strong effect on HRM developments in Lithuania in
the past few years. Decrease and ageing of the population and intense emigration resulted in
significant labour shortage in 2007-2008, which in turn raised the relevance of such HRM
practices as employee recruitment and retention, work arrangements and development of the
elder population.
Economy. The GDP per capita was approximately EUR 9,600 in 2008 (EU average
25,100). Until 2008 Lithuania was among the fastest growing EU economies (8.8 % in 2007);
however, the economic recession hit the country severely and in the first quarter of 2009
Lithuanian GDP fell sharply (minus 2.2%). The rate of inflation has undergone significant
fluctuations too: from 13.1% in 1996 it fell to minus 1.3 in 2003. In 2008 it escalated to
11.1%, which was three times as high as the EU average (3.7%). Since the start of 2009, it has
been falling; however, the average yearly inflation is still 9.4%. The average monthly pay has
tripled in the past decade and is currently estimated at approx. 635 euros. However, since the
start of 2009 it has decreased in both public and private sector organisations by approximately
5%.
The economic and demographic developments of the few past years have considerably
affected HRM in the country. In 2007-2008, growing economy, rising inflation and labour
shortages made organisations introduce pay rises and other reward and compensation
programmes. Rising inflation also emphasised a need for developing labour productivity. The
recent economic downturn, however, has lead to another extreme. Faced with a critical need
to reduce costs, organisations are solving the pay and/or labour reduction dilemma, which
calls for new HR competence development (redundancy, change management, conflict and
stress management, etc.) and has a negative impact on the HR function popularity and
credibility.
Lithuania’s foreign direct investment was growing till 2008, majority of investments
being made into the neighbouring EU countries, while the key economic sectors included
wholesale and retail, real estate, manufacturing, financial intermediation, and logistics. The
 8

growing foreign economic activity enhanced the relevance of such issues as expatriation and
repatriation management, which are relatively new HRM practices in Lithuania.
Labour market situation. The Lithuanian labour force comprises 1.5 million people, of
which nearly 75% are employed by the private sector; the self-employed account for 12%.
Male/female labour distribution is practically identical: 50.6% of the labour market are males.
High female employment is conditioned by the Soviet zero unemployment tradition. In the
post-Soviet period the tradition continued due to the economic situation in the country, where
one working person per family could hardly earn sufficient income. Besides being well
educated women naturally have high fulfilment and achievement needs.
The unemployment rate has undergone dramatic changes in the past decade. After the
1998 recession it reached a peak of 17.4% in 2001, however since then it was falling and
comprised 5.8% in 2008, which was below the EU average (7.0%). The then low
unemployment rate could mainly be accounted for by rapid economic growth and high labour
migration.
As already mentioned, the years 2007-2008 were characteristic of high labour shortages,
which urged businesses to start bringing in labour from non-EU countries, such as
Byelorussia, the Ukraine, Moldova and China. In this period the number of economic
immigrants doubled. Foreign labour mainly worked in transport, manufacturing, construction,
and services. However their numbers were lower than those of emigrants and insufficient to
compensate the then labour shortage in the country. The growing economic immigration
implied a need for developing diversity management competence, which constituted a new
phenomenon for Lithuanian HRM, as the country is rather homogenous in regard to its
resident nationality (84.3% Lithuanians) and religion (79% Roman Catholics).
In 2009, in line with the deteriorating economic situation the unemployment rate has
escalated to 14.3% (May figures), which is currently among the highest in the EU and is
nearly twice as high as its average (8.9%). Thus labour shortage has been replaced by labour
surplus, and HR function is now facing yet another challenge of its competence and
credibility.

Institutional factors
Legal environment. After the reestablishment of independence, employment relations were
regulated by a number of separate laws. It was only in 2002 that the Labour Code was
adopted to meet EU directives and regulations, and it is now the main act regulating major
aspects of employment relations, such as employment contract and its termination, employee
 9

representation, remuneration for work and work hours, annual leave, minimum hourly and
monthly pay, severance pay, etc. In addition to the Labour Code, there are a few other acts
regulating such labour relations such as sickness and maternity social insurance, foreign
employment, employee safety and health, support of the unemployed. On the one hand, these
legal acts have made the work environment more employee-friendly. On the other hand, they
meant change of HRM policies and practices for numerous organisations.
One of the most critical recent legislative changes concerns maternity social insurance. As
already mentioned in the section on the demographic context, to facilitate fertility growth, a
law amendment was made which now provides a 12 month maternity leave with 100%
compensation, and an extra 12-month period with 85% compensation. This as anticipated has
had a positive effect on fertility. However, this has introduced extra challenges for HRM, who
have to attract and develop suitable temporary replacements. Besides it has a negative impact
on employee selection, for some organisations tend to give preference to male candidates.
Current economic recession and subsequently lower payments into the State Social Insurance
Fund have now prompted a discussion over the Sickness and Maternity Social Insurance Law.
Thus the two-year compensation period may be reconsidered and either the leave-period
shortened or insurance payments reduced.
Industrial relations. Trade unions, their structure, striking patterns, collective bargaining
power, and employee right representation play a highly relevant role in the development of
national HRM models (Brewster, 1993; Sparrow & Hiltrop, 1997). In Lithuania trade unions
have had an intricate history. The first union was established in 1892, when Lithuania was
part of the Russian empire. Interestingly, this was much earlier than in other parts of Russia;
besides, its activities were more organized and conscientious (Glovackas, 2008). After the
declaration of independence in 1918 and up to the Soviet annexation in 1940, trade union
movement was rather active in Lithuania. There were about 20 industry specific unions.
During the Soviet period, trade unions operated under the Soviet model and were
government organizations the aim of which was not to represent employees, but the goals of
the Communist Party. Its main activities included distribution of welfare benefits, social event
organising, overlooking of housing construction and provision of catering services. Practically
all employees were members of the trade union. After the reestablishment of independence in
1990, due to the Soviet heritage trade unions were neither popular nor active in Lithuania.
Besides after the removal of the communist party they were not prepared for their new role
(Woolfson & Beck, 2004).
 10

Industrial relations in CEE countries have been generally characteristic of labour

quiescence due to such factors as a tripartite corporatist framework of labour relations, weak
competition among trade unions, and institutional and ideological legacies (Woolfson &
Beck, 2004). However, recent situation in Lithuania indicates some significant changes.
Currently trade unions are gaining popularity and a more serious stand. Today there are three
officially recognized trade union centres; the largest union by industry is that of educational
employees. In 2008 there were 131 strikes in the country. Majority of them were organised by
teachers demanding a higher pay and lower work-load.
In the past two years workers of retail chains, who constitute a numerous labour force
earning minimum wages, started establishing trade unions too, which testifies to the growing
national stand of the unions as well as labour conscientiousness. This will inevitably have
implications on HRM, for employers will have to take into consideration employee needs and
working conditions. Thus it is quite likely that in contrast to the decreasing union membership
in Europe trade unions in Lithuania will grow both in coverage and scope of collective
bargaining.

National culture factors

National culture impact on HRM systems has been given significant research attention
(Sparrow, Schuler & Jackson, 1994; Sparrow & Hiltrop, 1997). Studies in this field by large
rely on the works of Hofstede (2001) and Trompenaars (1996) who argue that cultural values
are deep-rooted and systematically vary from country to country.
Hofstede’s research of national culture dimensions does not include Lithuania; however,
there have been a few other research attempts to do that. According to Mockaitis and
Salciuviene (2004) findings, Lithuania is a country of medium power distance (45),
uncertainty avoidance (67), masculinity (65), and individualism (50), which leads to such
managerial implications: still a rather significant power status, procedure formalisation, and
centralised decision-making. These implications are supported by other studies, which for
instance show that employee empowerment is less practiced in Lithuanian organisations in
comparison to older EU countries (Kazlauskaite et al, 2009; Kazlauskaitė et al, 2006).
However, as GNP is viewed in research as having a strong impact on national values and
culture (Hodgetts & Luthans, 2000), a likely change in the management culture in Lithuania
can be anticipated and along with the growth of national economy, power status and central
decision-making should start transforming into greater employee involvement into the
decision-making process and deterioration of power status significance.
 11

Methodology
The present study of current HRM developments in the country is based on the Lithuanian
data of the Cranet4 (Cranfield Network of International Human Resource Management)
survey. An Internet-based survey of organisations operating in Lithuania with 100 and plus
employees was conducted at two rounds - November 2008 and February-March 2009. A
bigger part of responses, however, were obtained from the first round of the survey. It is
noteworthy that it was the first time that the survey was conducted in Lithuania.
The survey population included top level HR managers/specialists at organisations with
over 100 employees. In total 119 filled-in questionnaires were received. Respondents came
from medium and large-sized organisations from both private and public sectors (see
Appendix 1 for respondent characteristics). The survey employed standard Cranet
questionnaire, which is aimed at studying and comparing a wide range of HRM policies and
practices across numerous national contexts, such as staffing, development, compensation and
benefits, employee relations and communication, etc. This paper, however, will analyse the
survey data following the conceptual model of Sparrow and Hiltrop (1997) and will look into
some Lithuanian patterns of HRM that could not be disclosed through the above-provided
analysis of secondary data on the four factor groups.

Research findings
Findings of the present research will follow the same logic as the above provided analysis of
the secondary data on HR function development that was based on the following four major
groups of factors affecting national HRM patterns: HR role and competence, business
structure, institutional factors and cultural factors.
As the size of an organisation and ownership form (private vs public) are believed to play
a determining role in the development of national patterns of HRM (Brewster 1993; Sparrow
& Hiltrop, 1997), this paper will also look into differences between medium and large, private
and non-private (public, non-profit and mixed) sector organisations. Another relevant
determinant of the HR function in the organisation refers to its capital origin (domestic vs

4
We would like to express our acknowledgements to Cranfield School of Management, UK, for coordinating
Cranfield Network.
 12

foreign); however, due to a small number of foreign capital cases among the respondents, this
factor will not be taken in account. It is also noteworthy that foreign capital representation in
Lithuanian business is quite low (1.6 per cent of entities) in general.

HR role and competence. The current HR role in Lithuania will be studied in this section
based on the following aspects: HR functional background and experience, HR strategic
integration, HRM devolvement to line management and decentralisation, and level of
outsourcing.
HR functional background and experience. First of all, we looked into the figures on the
HR department presence in the respondent organisations (1=yes; 0=no). The greater part of
the respondent organisations reported having an HR department. Besides statistically
significant differences in HR department presence were determined between medium vs large
and private vs other sector organisations – HR departments are more prevalent in large and
non-private organisations (Table 1). In organisations that do not have an HR department,
responsibilities of this function are carried out by general managers (70%), administrative
directors (28.6%), and finance, production, or marketing/sales directors (7.1% each)
(Appendix 2).
Findings on the HR manager/specialist experience show that majority of them (44%) have
1-5 years of experience in HRM (Appendix 2). Those with the richest experience (16-20
years) comprise mere 4.6%. HR specialists with the Soviet personnel management experience
(over 20 years in HRM) constitute 9.2%.
Speaking of the HR manager/specialist competence, findings show that their
background/degrees are mainly in the following fields: business (33.0%), social or
behavioural sciences (21.7%), economics (17.0%), etc. As mentioned in the macro/micro
environment analysis, specialised HRM programmes/degrees are scarce in the country, thus it
can be presupposed that business degree holders may come from other functional/general
management specialisations. Findings also show that in 57.3% of the cases, organisations
prefer recruiting employees for HR responsibility from within organisation, either from the
HR department (30.0%) or from among non-HR specialists (27.3). Personnel/HR specialists
from outside the organisation are employed only in 17.3% respondent organisations.
 13

Table 1
The role of the HR function
Company size Ownership pattern
Medium Large Private Other

Std. Std. Levene’s Std. Std. Levene’s

Mean Dev. Mean Dev. Test Sig. Mean Dev. Mean Dev. Test Sig.

HR department
0.70 0.460 0.91 0.290 0.000 0.77 0.425 0.88 0.332 0.006
presence
HR seat on the
0.56 0.501 0.60 0.494 0.368 0.61 0.491 0.50 0.510 0.272
Board /equivalent
Personnel/HR
1.09 0.801 1.39 0.750 0.940 1.25 0.754 1.13 0.900 0.088
strategy possession
HR involvement in
business strategy 1.65 1.120 1.69 0.903 0.024 1.58 1.010 1.94 0.938 0.251
development
Extent of HR
function
1.55 1.060 1.98 1.141 0.536 1.80 1.153 1.52 1.005 0.696
performance
evaluation
HR decentralization 2.24 0.654 2.62 0.689 0.684 2.51 0.711 2.22 0.604 0.290
Outsourcing 0.63 0.471 0.62 0.406 0.287 0.67 0.443 0.48 0.410 0.587

As to the ratio of the HR department staff to the overall number of employees in the
organisation, there is a statistically significant difference between medium and large-sized
organisations. In medium-sized the ratio stands at 1.14 HR department employee per 100
employees, while in large-sized organisations it is 0.52.
HR strategic integration was measured taking into consideration the following issues: HR
strategy possession, HR representation on the board/its equivalent, HR involvement in
business strategy development, and evaluation of HR function performance.
Survey findings show that HR is represented on the Board or its equivalent in 41.4% of
the respondent organisations. Besides, no significant difference has been determined between
different types of organisations.
The greater part of the respondent organisations have an HR strategy (Table 1, where
2=written, 1=unwritten, 0=none), of which it is formalised by 44.5% and unformalised by
33.6% organisations. Where organisations have a business strategy, majority of the
respondent organisations involve the person with the highest HRM responsibility in its
development. 37.9% do that at the implementation stage; 27.4% involve HRM function in
business strategy development from the outset, and 23.2% do it only through subsequent
 14

consultation. Besides HR involvement in business strategy formation is higher among large-

size organisations (Table 1).
The survey also measured the extent to which the performance of the personnel/HR
function/department is evaluated in organisations. Findings show that the function is valued to
some extent (mean 1.75; where 0=not at all, 4=to a very great extent). A statistically
significant difference was determined between HR evaluation in medium-sized (mean 1.55)
and large-sized organisations (1.98). In the evaluation process, it is top and line management
views that are usually taken into consideration (Table 2).
Table 2
Evaluation of HR function performance
Total Mean* Std. Dev.
responses
Top management 116 .54 .500
Line management 116 .47 .501
Employees 116 .22 .419
Personnel/HR function itself 116 .20 .400
*(0=No, 1=Yes)

HR decentralisation and devolvement to line management. HR decentralisation was

measured by taking into account who (1=line management; 2=line management in
consultation with HR; 3=HR in consultation with line management, 4=HR) has primary
responsibility for key HR practices, such as pay and benefits, recruitment and selection,
training and development, industrial elations, and workforce reduction/expansion). As seen
from survey findings (Table 1), responsibility for major HR practices is divided by line
management and HR. Line management is first and foremost responsible for pay and benefits
management (49.5%) and workforce expansion/ reduction (36.3%). Recruitment and
selection, and training and development practices are dominantly handled by HR department
in consultation with line management, while industrial relations are mainly an HR department
responsibility (51.7%) (Appendix 3). Thus we can see that though there is a transition to
HRM responsibility devolvement to line management, the HRM department is still seen as
having major responsibility.
Outsourcing. Findings on the level of HR practice outsourcing (0=not outsourced;
4=completely outsourced) used in the respondent organisations show that all the studied types
of organisations prefer carrying out most HR practices themselves (Table 1). Practices that are
outsourced to the largest extent include training and development, recruitment and HR
information systems (Table 3). Besides there are some significant differences between types
 15

Table 3
HR function outsourcing
Company size Ownership pattern
Medium-sized Large Private Other

Mean Std N Std Levene’s Mean StdDev Mean Std Levene’s

Dev Mean Dev Test Sig Dev Test Sig

Payroll 0.33 1.068 0.08 0.334 0.001 0.28 0.924 0.00 0.000 0.002
Pensions 0.30 0.865 0.27 0.930 0.860 0.30 0.906 0.24 0.879 0.624
Benefits 0.32 0.760 0.31 0.805 0.922 0.33 0.828 0.28 0.614 0.486
Training and
development 1.93 1.339 2.00 1.327 0.851 2.06 1.288 1.67 1.494 0.116
Workforce
outplacement/ 0.13 0.574 0.08 0.274 0.292 0.13 0.513 0.00 0.000 0.013
reduction
HR information
systems 1.02 1.371 1.15 1.319 0.913 1.16 1.345 0.83 1.341 0.549
Recruitment 1.23 1.155 1.15 1.109 0.550 1.36 1.136 0.58 0.881 0.060
Selection 0.55 0.769 0.59 0.804 0.909 0.61 0.798 0.50 0.885 0.724
Procession of routine
queries from 0.10 0.360 0.14 0.495 0.331 0.15 0.478 0.00 0.000 0.001
managers/employees
of organisations: medium-sized and private ones tend to use more external providers for
payroll. Private organisations also outsource more of workforce outplacement/reduction and
procession of routine queries in comparison to public ones, who do not use external provides
for these services at all.

Business structure. In the present research, business structure factors that have impact on
national HR patterns include possession of mission statement and business strategy, and
organisational performance outcomes. Findings show that the vast majority of the respondent
organisations have business strategy and mission statement in a written or unwritten form.
Besides they are more prevalent among large-sized organisations (Table 4).
 16

Table 4
Business structure factors
Company size Ownership pattern
Medium-sized Large Private Other

Mean Std. Mean Std. Levene’s Mean Std. Mean Std. Levene’s
Dev. Dev. Test Sig. Dev. Dev. Test Sig.

Possession of
1.61 0.670 1.81 0.445 0.000 1.68 0.600 1.79 0.509 0.108
mission statement
Possession of
business/service 1.48 0.731 1.71 0.540 0.002 1.60 0.640 1.54 0.721 0.403
strategy
Service quality 3.92 0.818 3.97 0.782 0.809 4.12 0.758 3.53 0.772 0.680
Level of
3.59 0.783 3.74 0.815 0.883 3.75 0.789 3.36 0.745 0.811
productivity
Profitability 3.20 0.714 3.69 0.970 0.032 3.54 0.808 3.00 1.000 0.845
Rate of innovation 3.74 1.053 3.83 1.053 0.968 3.84 1.076 3.67 0.976 0.439
Environmental
3.58 0.886 3.81 0.694 0.111 3.75 0.751 3.46 0.967 0.159
matters
Annual staff
21.17 19.447 19.69 18.004 0.496 24.87 20.386 7.97 6.662 0.000
turnover
No. average days
absent per 17.01 33.967 19.98 45.085 0.397 21.00 44.606 9.27 4.997 0.076
employee per year

Organisational performance referred to the following outcomes: service quality, productivity,

profitability, rate of innovation, environmental matters (measured in comparison to industry
performance, where 1=at the low end, 5=superior), staff turnover and absenteeism. Findings
show that overall performance of the respondent organisations is above industry average.
Besides, large-size organisations reported higher profitability. As concerns HR-related
outcomes of performance, staff turnover is considerably higher in private sector organisations.

Institutional factors
Factors that were studied under this group included the role of trade unions (proportion of
employees that are union members (1=0%, 6=76-100%), trade union influence in
organisations (0=not at all, 4=to a very great extent) and its changes over the past three years
(3=increased, 2=same, 1=decreased), offer of non-statutory social welfare schemes
(workplace childcare, childcare allowances, career breaks, maternity, parental and paternity
leave, pension schemes, education/training breaks, and private health care, where 1=yes,
0=no) and corporate social responsibility (possession of such CSR policies as corporate value
statement, code of ethics, CSR statement and diversity statement –where 2=written, 1=unwritten,
0=none).
 17

Trade unions. Research findings show that 66% of the respondent organisations have zero
trade union representation (Appendix 5). It is noteworthy that trade union representation is
considerably higher in non-private sector organisations (Table 5).
Majority of the respondent organisations (59.2%) view trade unions as having no impact
on their business management. The comparison of different type organisations revealed a
more significant role of trade unions in large-size organisations. Respondent evaluation of
changes in the trade union role in the past three years revealed that majority of the
respondents consider it unchanged.
Table 5
Institutional factors
Company size Ownership pattern
Medium-sized Large Private Other

Mea Std. N Std. Levene’s Mean Std. Mean Std. Levene’s

n Dev. Mean Dev. Test Sig. Dev. Dev. Test Sig.

Union members/
1.63 1.232 1.95 1.311 0.201 1.62 1.129 2.38 1.583 0.002
total employees
Change in trade
union influence 1.95 0.309 1.98 0.452 0.272 1.96 0.367 2.00 0.459 0.743
during past 3years
Extent to which
trade unions
0.47 0.710 0.82 0.941 0.001 0.55 0.823 1.00 0.873 0.884
influence
organisation
CSR policy 0.61 0.589 1.01 0.582 0.82 0.638 0.78 0.570 0.263
0.471
formalisation
Non statutory social
0.16 0.197 0.17 0.177 0.671 0.17 0.184 0.17 0.199 0.396
welfare schemes

Corporate social responsibility. 68% of respondents have a code of ethics, 59% have
corporate value statement, 52% have a diversity statement, and 38% have a CSR statement
(Appendix 4). The practice is consistent among all types of organisations, as no statistically
significant differences were determined (Table 5).
Cultural factors. The following factors were included in this group of factors affecting
patterns of national HRM: use of career methods (e.g. special projects, involvement in cross-
functional tasks, networking, formal career paths, development centres, succession plans,
planned job rotation, “high-flyer schemes”, secondment, etc; 4 =to a very great extent, 0=not
at all), reward individualisation (employee share schemes, profit sharing, stock options,
flexible benefits, performance related pay, individual and team performance bonus, 1=yes,
0=no), communication of strategy and performance outcome (1=yes, 0=no), downward
communication and upward employee communication (4 =to a very great extent, 0=not at all),
and amount of training (average yearly number of training days per employee).
 18

Findings show that respondent organisations use career-development methods to some

extent (Table 6). Besides, this practice is more applicable in private sector organisations.
Reward individualisation is practiced by a smaller part of the respondents. It is also
considerably higher among private-sector employers. Downward communication is used to a
considerable extent and is higher in large-sized organisations, while upward communication is
more extensively practiced by private sector organisations rather than public ones.
Information on business strategy and performance is communicated to employees in about
half of the respondent organisations. Interestingly, medium-size organisations invest
considerably heavier in their employee training in comparison to large ones (8.6 day/per
employee vs 5.82).
Table 6
Cultural factors
Company size Ownership pattern
Medium-sized Large Private Other

Mean Std. N Std. Levene’s Mean Std. Mean Std. Levene’s

Dev. Mean Dev. Test Sig. Dev. Dev. Test Sig.

Use of career
0.99 0.658 1.28 0.647 0.987 1.18 0.712 1.00 0.431 0.019
methods
Individualisation
0.37 0.407 0.40 0.403 0.856 0.44 0.406 0.17 0.329 0.001
of rewards
Downward
communication 2.18 0.973 2.68 0.674 0.008 2.46 0.877 2.37 0.816 0.522
methods
Strategy &
performance
0.53 0.279 0.59 0.294 0.689 0.57 0.282 0.51 0.285 0.900
communication
of
Upward
communication 1.35 0.667 1.79 0.601 0.570 1.62 0.707 1.37 0.462 0.053
methods
Training days
8.60 11.141 5.82 4.595 0.031 7.66 9.198 5.05 2.872 0.088
average

Discussion and conclusions

This study contributed to research on national HRM contexts in Europe and especially in the
CEE region, as prior works on the HR function in Lithuania were limited, and taking into
account the Soviet “personnel management” heritage, HRM in the Baltic states makes an
interesting filed of research. This paper had two aims – to analyse antecedents of HRM
patterns in Lithuania based on macro and micro economic indicators and provide insights into
the current HR function developments given empirical findings.
As seen from the analysis, HRM/personnel management is a relatively young field of
management in the country. Its current role, competences and relevance in the organisation
 19

have evolved only in the past two decades, which to some extent explains the fact why HR
managers have rather limited experience and there are still nearly about a quarter of
organisations that do not have an HR department. Where present, HR departments have 0.83
HR employee per 100 employees, which in still lower in comparison to other Baltic states
(1.52 in Estonia) and transition economies (e.g. 1.02 in Bulgaria, or 1.14 in Slovenia)
(Brewster et al, 2006). It is also noteworthy that though HR staff is typically not very large in
organisations, the practice of outsourcing, as a cost-reduction mean, is rather moderate. On
the one hand, it can be accounted for by some cultural characteristics, such as power distance
and uncertainty avoidance. On the other hand, there is a notable tendency in many countries
to “re-insource”, as in many cases outsourcing contracts have not brought about the promised
results (Brewster, 2007).
It is noteworthy that research findings showed a greater part of organisations having an
HR strategy and HR-responsible people being involved in business strategy development
either on implementation or through subsequent consultation. Besides, in nearly half of them,
HR managers have a seat on the Board, all of which is indicative of a transition from the
traditional personnel management to more strategic HRM.
HR responsibility devolution to line management is another important feature of strategic
HRM integration (Holt Larsen & Mayrhofer, 2006; Sheehan, 2005). In Lithuania
responsibility for major HR practices is divided by line management and HR. However, as
prior research shows line involvement in HR is country specific (Brewster et al, 2007). Thus
taking into account specifics of Lithuanian cultural context (medium power distance index)
findings of the current study are not surprising, though they are likely to change in the near
future along with management culture transformations and current situation in organisations,
where faced with cost reduction and downsizing organisations will have to start sharing
responsibilities.
Another specific feature of Lithuanian HRM is relatively low trade union representation,
which again is in contrast with the current overall situation in Europe, where collective
bargaining coverage is generally high (Brewster et al, 2007). Survey findings showed that
union members make insignificant numbers, and organisations hardly feel their impact. Low
union popularity and power can be explained by their historic heritage. Having served as a
political body in the Soviet organisation, unions lost their credibility in the eyes of the
contemporary labour generation. However, as seen from the analysis of macro environment,
recent signs of growing union membership numbers and labour conscientiousness allow
anticipating significant changes in the area, which should lead to enhanced union power.
 20

Reward individualisation is practiced by a smaller part of the respondents and is not

surprisingly considerably higher among private-sector employers, who suffer higher levels of
labour turnover. Downward communication is used to a considerable extent by both private
and public organisations, while upward communication is more extensively practiced by
private sector organisations. Information on business strategy and performance is
communicated to employees in about half of the respondent organisations.
As seen from the macro-environmental analysis, HRM has faced serious challenges in the
past few years, where it first had to deal with significant labour shortage and growing
employee centrality, which demanded competence in recruitment, motivation and retention,
and now it is dealing with redundancy and pay reduction problems, which calls for a shift in
competences again.
Macro environment seems to have more relevant effects on HRM developments in
Lithuania than organisational characteristics such as for instance company size or sector, for
result comparison between medium/large-sized and private/public organisations yielded few
significant differences in this study. However, organisational size is a significant antecedent
of overall HRM developments in Lithuania, for small-sized (under 50 employees)
organisations dominate the economy, which as a rule lag behind larger ones in respect to
HRM implementation, as they lack resources and government support as well leadership
competence and attention (Stavrou-Costea & Manson, 2006). Thus one of the limitations of
this paper is that it draws the current HR function picture using data from organisations with
over 100 employees as a point of reference, which does not disclose the overall situation.
Further research thus should be conducted to include small-sized organisations.
Given the current developments in the macro environment, a number of newly emerging
HRM areas of activity can be mentioned. Development of MNCs and growing business
operation transfer to foreign subsidiaries is likely to bring about two challenges for Lithuanian
organisations. On the one hand, such companies will have to gain competence in expatriation
and repatriation management, which is currently lacking in the country, for expatriate failure
may lead to substantial organisational losses (McCaughery & Bruning, 2005). On the other
hand, along with the engagement into foreign operations, the role of the HRM function is
likely to gain an enhanced strategic role, for international HRM management necessitates a
more proactive HRM function (Brewster & Suutari, 2005). Foreign market entrance
necessitates knowledge of other country HRM systems, which points to another limitation of
this paper, i.e. single-nation focus. Thus a comparison of current findings with HRM situation
in other Baltic and transition countries would make a relevant contribution.
 21

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Appendices
Appendix 1. Respondent characteristics
N %
Sector
Private sector 94 83.2
Public sector 13 11.5
Not for profit 2 1.8
Mixed 4 3.5
Total non-private 19 16.8
Total responses 113 100.0
Business ownership
Single family business 30 30.0
Multiple owners 70 70.0
Total responses 100 100.0
Organisation size
Medium-sized (50-249 employees) 61 54.0
Large-sized (250 plus employees) 52 46.0
Total responses 113 100.0
 25

Appendix 2. Characteristics of HR managers/specialists

Years of experience in HRM N %
1-5 48 44.0
6-10 32 29.4
11 15 14 12.8
16-20 5 4.6
21 -56 10 9.2
Total 109 100
Educational background
Business studies 35 33.0
Economics 18 17.0
Social or behavioural sciences 23 21.7
Humanities/Art/Languages 6 5.7
Law 15 14.2
Engineering 9 8.5
Natural Sciences 0.0 0.0
Total 106 100

Appendix 3. Responsibility for major policy decisions

Line Mgt. Line Mgt. in HR dept. in consult HR dept. Total
consultation with with Line Mgt.
HR dept.
N % N % N % N % N %
Pay/benefits 55 49.5 27 24.3 20 18.0 9 8.1 111 100
Recruitment/ selection 12 10.6 24 21.2 56 49.6 21 18.6 113 100
Training/ development 6 5.4 32 28.6 56 50.0 18 16.1 112 100
Industrial relations 21 23.6 8 9.0 14 15.7 46 51.7 89 100
Workforce 41 36.3 42 37.2 24 21.2 6 5.3 113 100
expansion/reduction

Appendix 4. Formalisation of CSR policies

Yes Yes No Total
written unwritten
N % N % N % N %
Corporate values statement 44 42.7 15 14.6 44 37.0 103 100
Diversity statement 21 21.4 31 31.6 46 46.9 98 100
Code of ethics 36 34.6 32 30.8 36 34.6 104 100
CSR* statement 16 16.3 22 22.4 60 61.2 98 100
Communications policy 35 33.3 44 41.9 26 24.8 105 100

Appendix 5. Trade union role

N %
Proportion of members of a trade 0% 70 66.0
union in the total number of 1%- 10% 11 10.4
employees 11%-25% 10 9.4
26%-50% 9 8.5
51-100% 6 5.7
Total 106 100
To what extent do trade unions Not at all 58 59.2
influence organization To a small extent 18 18.4
To some extent 20 20.4
To a great extent 2 2.0
Total 98 100.
How has union influence changed Increased 5 5.8
during the last three years? Same 74 86
Decreased 7 8.1
Total 86 100

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