Human Resource Management in Nepal: A Delphi Study

Abstract

Purpose - This study aims to explore and describe human resource management (HRM) in Nepalese organizations. Specifically, this study addresses three research questions: (a) what are the key human resource (HR) practices in Nepalese organizations?; (b) what are the major tasks and roles of HR departments in Nepalese organizations?; and (c) how is the status of the HR function expected to change within Nepalese organizations? Research design, data, and methodology - For this purpose, we implemented the Delphi method and developed an informed consensus among selected experts concerning the research questions. Results - The findings illustrate that organizations in Nepal adopt a wide range of HR practices commonly used in Western and developed countries. Simultaneously, some HR practices specific to the Nepalese context are also discovered. The experts' consensus on the future of HRM confirms that the evolution of the HR function to a strategic partner of management is evident in Nepalese organizations. Conclusions - Domestic as well as foreign organizations in Nepal try to create HRM systems that place them on a par with global companies. At the same time, they incorporate cultural features specific to Nepal to compete effectively in local markets. While there are few empirical studies describing HR practices in Nepal, this study contributes to broadening our understanding of the current and future status of HRM in Nepal.

1. Introduction

The term globalization has become a cliché, often used to describe influences in almost all aspects of society, including how organizations function. Regardless of whether an organization is domestic or international, the trend of organizations operating across borders has been – and will continue to be – prevalent, inevitably resulting in challenges pertaining to managing personnel internationally. Human resource management (HRM) affects and is affected by how people think and behave and is, therefore, closely related to cultures. Thus, both HRM researchers and practitioners have shown keen interest in the differences and similarities in human resource (HR) practices of different countries.

The fact that most empirical investigations of HRM have been conducted in developed countries poses a dilemma. Consequently, our understanding of HRM in developing countries is comparatively limited (Budhwar & Debrah, 2013). In this article, we aim to explore and describe HRM in Nepal, one of the developing countries in the Asia Pacific region. HRM in Nepal is regarded as being in its infancy. Indeed, Adhikari (2010) identifies features indicative of the underdeveloped status of HRM in Nepal, which include low investment in employee training and the distorted flow of communication. More recently, Gautam (2015) also demonstrates that most managers in Nepal still lack a well-defined awareness of the need for investment in employees and for the HR function to become strategic. Understanding the current status of HRM in Nepal is meaningful in two aspects. First, despite the influx of foreign investment into Nepalese organizations, scholarly attempts to understand HRM in those organizations are lacking. A thorough search resulted in very few academic articles pertaining to HRM in Nepalese organizations, with some having been published before the declaration of Nepal as a federal democratic republic (e.g., Adhikari & Gautam, 2006;

Adhikari & Muller, 2001; Gautam & Davis, 2007). Recently, Nepalese society has been changing markedly, and so do organizations operating within the society. Therefore, we need to update our knowledge of HRM in Nepalese organizations. Second, studying HRM in Nepal may provide insight into the management of personnel not only in Nepal but also in other countries geographically and culturally adjacent to Nepal, such as Bangladesh, Bhutan, India, and Pakistan.

To achieve the research purpose, we pose three research questions: (a) what are the key HR practices in Nepalese organizations?; (b) what are the major tasks and roles of HR departments in Nepalese organizations?; and (c) how is the status of the HR function expected to change within Nepalese organizations? To address these questions, we employed the Delphi method, and collected data from HR experts involved with selected Nepalese organizations. By combining the experts’ knowledge through multiple stages (Okoli & Pawlowski, 2004; Schmidt, Lyytinen, Keil, & Cule, 2001), we derived an informed group consensus regarding the current status and the future of HRM in Nepalese organizations.

2. The Nepalese Context

2.1. Nepalese Culture

The debate on whether organizational culture or national culture is more influential in HRM practices has been ongoing (Gerhart, 2008; Gerhart & Fang, 2005). Nonetheless, it is widely accepted that understanding national culture is crucial in understanding HRM, since HRM is concerned with managing people whose beliefs and values are shaped by their national culture. HRM varies across countries, as it is influenced by cultural as well as institutional factors (Aycan, 2005; Mendonca & Kunango, 1994; Pudelko & Harzing, 2007; Rosenzweig & Nohria, 1994).

Geert Hofstede’s work on national culture (Hofstede, Hofstede, & Minkow, 2010) is regarded as the most reliable and widely used framework that accounts for differences in national culture. A series of studies conducted by Hofstede shows that Nepalese society is primarily collectivistic, with high power distance, low uncertainty avoidance, and low masculinity. However, there exists differing opinions regarding Nepal’s standing on the uncertainty avoidance dimension, as some researchers (e.g., Gautam, Van Dick, Wagner, Upadhyay, & Davis, 2005) argue that Nepal’s national culture is high in uncertainty avoidance. As Gautam (2013) suggests, culture may at times present as a mixture of the bipolar dimensions. Considering this, this study will consider Nepalese society as having the characteristics of both high and low uncertainty avoidance orientations, with a different orientation becoming influential depending on the context.

2.2. Economic Change in Nepal

Nepal was listed as one of the least developed countries globally by the World Bank, with a gross national income per capita (atlas method) of USD 730 in 2016 (The World Bank, 2017). Nevertheless, foreign investment in Nepalese companies has been increasing steadily, by three to five times over the past ten years. In 2017, the number of projects with approved foreign investment was 395, with a total foreign investment value of approximately USD 150 million (Ministry of Industry, 2017). Furthermore, the number of multinational companies (MNCs) entering the Nepalese market is also expected to increase (Maharjan & Sekiguchi, 2016).

Despite the intensifying interaction between the Nepalese workforce and foreign companies, a systematic investigation to understand HRM in Nepal remains lacking, with only a few exceptions (Adhikari, 2010; Gautam, 2015; Gautam & Davis, 2007; Maharjan & Sekiguchi, 2016). One incident indicative of the lack of understanding of HRM in Nepal was the withdrawal of the multinational company Yum! Brands, Inc. — the owner of Kentucky Fried Chicken, Taco Bell and Pizza Hut — from the Nepalese market in 2015. The company closed its doors at all four outlets in Nepal after successfully operating for five years. Although the massive Gorkha earthquake in 2015 played a critical role in this event, a misunderstanding that took place between management and the employees cannot be disregarded. The incident was described as a disagreement between management and the labor union (Gillman, 2015). According to management, the incident was aggravated by the labor union demanding that management comply with the union’s proposed working hours (Rijal, 2015). This successful MNC’s withdrawal drew attention to the lack of proper HR practices that can be successfully implemented in the Nepalese context.

The economic liberalization in Nepal started in the 1980s with the major initiative to liberalize the economy, and continued in the 1990s with the enactment of Industrial Policy 1992 by the Nepalese government (Adhikari, 2010; Gautam, 2015). As part of this change, some management practices and systems – such as the competitive pay and benefits for competent talents and the emphasis on performance management and employee training and development – were adopted from organizations operating in India (Adhikari & Gautam, 2006; Maharjan & Sekiguchi, 2016). Nepalese HRM appears not to have changed markedly since then. According to a survey conducted in 2005, HRM in Nepal was still having trouble in establishing itself as a business partner, with more than 40% of the participating companies stating that HR was involved only in the implementation of strategy, but not in the formation thereof (CRANET, 2006).

Nepalese society has changed considerably since the survey was conducted. In 2007, Nepal abolished the 200-year-old monarchy, and declared a federal democratic republic after a decade-long armed civil uprising. Since then, there has been a distinct increase in foreign investment in Nepalese organizations. This created an urgency for Nepalese organizations to adopt a western HR system and practices, or to design one that incorporates Nepalese cultural values and practices deemed both practical and successful in the foreign investors’ culture (Gautam, 2015).

3. Methodology

The purpose of the study was to explore and describe HRM in Nepal by identifying (a) the key HR practices, (b) the key roles of the HR department within the organizations, and (c) the expected changes in the role of HR department within the organizations. For this purpose, the Delphi method was employed.

3.1. Delphi Method

Originally developed by the Rand Corporation in the 1950s (Dalkey & Helmer, 1963), the Delphi method is used to enable “a group of experts, as a whole, to deal with a complex problem” (Linstone & Turoff, 1975, p.3). This method uses extensive questionnaires compiled through a joint effort of the researcher and a panel of experts in the topic of interest, to obtain a reliable consensus of expert opinions (Hasson, Keeny, & McKenna, 2000). The Delphi method is appropriate for this study, since it aims to aggregate perspectives and ideas from experts and establish their agreement on HRM in Nepal, a complex and unstructured topic. Among the various modified approaches to the Delphi method, Schmidt et al.’s (2001) three-round ranking-type approach was adopted, as it provides ways to systematically collect and analyze experts’ opinions and encourage their consensus on the topic.

3.2. Panel Sampling

Experienced HR managers currently working in Nepal were invited to participate in the study through snowball sampling. Twenty experienced HR managers from diverse for-profit organizations and non-profit organizations expressed their interest in the study, and were therefore included in the panel. All the panel members were experienced practitioners in the field of HRM, with their average experience in HRM being nine years. Among the 20 members included in the original panel, 10 completed all the three rounds of questionnaires, with a response rate of 50 percent. There is no clear consensus regarding the appropriate sample size for a Delphi study, with some studies having fewer than 10 participants (e.g., Skulmoski, Hartman, & Krahn, 2007; Strasser, London, & Kortenbout, 2005). Delbecq, Ven, and Gustafson (1975) suggest that a sample size of 10 to 15 is sufficient, provided that the sample is homogeneous. Therefore, we conclude that the sample size for this study is acceptable, as long as we follow a systematic and comprehensive data collection process and care is taken in interpreting the findings.

3.3. Data Collection and Analysis

The three-round ranking-type Delphi method proposed by Schmidt et al. (2001) was adopted in this study. Initially, a two-week period was allotted for each of the three rounds. However, after the completion of the first round, the data collection process was put on hold due to the Gorkha earthquake that shook the country in April 2015. The second round was conducted after a break of six months, and the third round was conducted after another six months. Throughout the process, the essential features of the Delphi method – which include anonymous response, iteration, controlled feedback, and statistical group response (Dalkey, 1969) – were carefully addressed.

In the first round, the brainstorming stage (Schmidt et al., 2001), an invitation including the consent form was emailed to 20 HR mangers who agreed to participate. Three open-ended questions – each of which pertains to a research question – were used in this round, and participants were encouraged to present their opinions in their own words. In all, 10 participants provided complete responses to these questions, and key themes were identified from the responses.

In the second round, the narrowing down stage (Schmidt et al., 2001), participants were asked to rate the significance of the items (themes) identified from the responses in the first round. All 10 participants submitted complete responses to the questions. After the second round, the relative importance of each item was calculated, and the five most significant ones for each question were selected.

In the third round, the ranking stage (Schmidt et al., 2001), participants were asked to rank the selected items in order of importance. We summarized the responses from the 10 participants with Kendall’s coefficient of concordance, which was used as a consensus criterion indicating the level of consensus among the participants. Its value ranges from 0 to 1, indicating the degree of consensus among the respondents (wherein W > 0.7 indicates strong consensus; W = 0.5 indicates moderate consensus; and W < 0.3 indicates weak consensus) (Schmidt et al., 2001).

4. Results

4.1. HR Practices

The first research question was related to the prevalent HR practices in Nepal. Specifically, participants were asked to identify key practices in various categories of HRM. Table 1 shows the HR practices the respondents perceived as most important in contemporary Nepalese organizations.

Table 1: Key HR Practices in Nepalese Organizations

The most important selection practice is individual interviews, followed by written tests, issues regarding equal employment opportunity, reference checks, and physical fitness tests. The respondents rate on-the-job training as the most important employee training practice, followed by technical training, managerial training, and sexual harassment prevention training. The most important employee development practice is counseling, followed by mentoring, capacity building training, coaching, and performance and development review. The most important compensation and benefits component is rated as salary, followed by provident fund, insurance (medical, accidental, etc.), paid leave, and maternity leave. The most important retention practice is the opportunity to develop capacity, followed by transfer (lateral move), competitive compensation packages, recommendations for upcoming vacancies, and flexible working hours. The most important employee relationship practice is building an open and honest relationship, followed by building a cordial relationship, implementing an open-door policy, involving employees in corporate social responsibilities, and facilitating employee participation in decision making. Last, the most important performance evaluation practice is discussion with the supervisor, followed by self-appraisal, survey by the supervisor, 360-degree evaluation, and survey by peers. As evidenced by Kendall’s coefficient of concordance, agreement was not strong among the panel members (ranging from 0.33 to 0.68), indicating the relatively diverse use of HR practices across organizations in Nepal.

4.2. Major Tasks and Roles in the HR Department

The second research question is concerned with the key tasks and roles performed by HR departments in Nepalese organizations. As presented in Table 2, the most important task of the HR department is concerned with selection, followed by induction and onboarding (i.e., orienting new employees, which aids in retention), training and development, performance management, and health and safety management. The Kendall’s coefficient of concordance shows moderate agreement among the panel members (W = 0.49) for the ranking of an HR department’s key tasks.

Table 2: Major Tasks and Roles of the HR Department

The most vital role assumed by the HR department is related to the implementation of HR policies. In addition, other roles – including formulating organizational strategies, implementing organizational strategies, and providing strategic direction to the organization – are identified as important. The Kendall’s coefficient of concordance shows a weak agreement among the experts (W = 0.33) for the roles of the HR department.

4.3. Expected Changes to HRM

To address the third research question, we asked the panel members to express their views on the critical issues that should be addressed by their HR department. As reported in Table 3, the panel members identified employee capacity building as the most prominent issue, followed by organizational design, collaboration between employees and the management, performance in strategic and transformational roles, and engagement in finance and administrative processes. The Kendall’s coefficient of concordance shows a moderate agreement among the experts (W = 0.53) on the issues that the HR department would have to deal with.

Table 3: Expected Changes to the HR Department

5. Discussion and Conclusions

There are very few empirical studies describing HR practices in Nepal, one of the developing countries in the Asia Pacific region. This study contributes to broadening our understanding by obtaining the experts’ informed consensus regarding the current and future status of HRM in Nepal. The findings show that domestic as well as foreign organizations in Nepal adopt a wide range of HR practices commonly used in Western and developed countries. At the same time, they try to create HRM systems that place them on a par with global companies, while incorporating cultural features specific to Nepal, to compete effectively in local markets.

Previous literature firmly established the need for HRM to adhere to local cultural features and practices. For example, Newman and Nollen’s (1996) study of MNCs showed that work units where managerial practices were consistent with national culture performed better than the units where they were not. Furthermore, a series of empirical studies based on the model of cultural fit suggest that HRM naturally adheres to national culture (Aycan, Kanungo, Mendonca, Yu, Deller, Stahl, & Kurshid, 2000; Aycan, Kanungo, & Sinha, 1999). That is, national culture, along with the environmental conditions of an organization (e.g., industry, market, ownership status), affects the organization’s internal culture and thereby its HRM (Baek & Wang, 2018; Dastane & Lee, 2016). This mechanism linking national culture to HRM is supported by empirical studies. For example, in a study involving 10 countries, Aycan et al. (2000) illustrated that differences in national culture lead to differences in organizational culture and HRM, indicating that HRM naturally adheres to the national culture of the operating country. Expanding this idea, Tayeb (1995) asserts that the practices (the ‘what’ of HRM) can be universal, but the method of carrying out such practices (the ‘how’ of HRM) is influenced by national culture.

The findings of this study can be explained in terms of the sociocultural environment in Nepal. First, HRM in Nepal shows characteristics that are prevalent in collectivist and feminine societies. For example, the HR practices adopted widely and considered important in Nepal include equal employment opportunity practices and fringe benefits. These HR practices foster well-being and equality among employees, values considered vital in a collectivist culture (Aycan, 2005). Indeed, comparable results were observed in comparative studies where collectivist societies (e.g., Japan) were found to favor affirmative action programs more than individual societies (e.g., United States) (Bochner & Hesketh, 1994; Kirkman, Lowe, & Gibson, 2006; Leung & Iwasaki, 1988; Ozawa, Crosby, & Crosby, 1996). In addition, the emphasis on honest and cordial employee relationships reflects the qualities of a feminine society (Friedman, 2007).

High power distance in the Nepalese culture is evident from the practices related to performance evaluation, and employee training and development. For example, the emphasis on discussion with and review from a supervisor in performance evaluation implies that feedback or evaluation from a senior is considered critical (Bochner & Hesketh, 1994). Furthermore, practices such as mentoring and on-the-job training – prevalent in organizations in Nepal – indicate that seniority at work is central in Nepalese organizations.

Regarding uncertainty avoidance, HR practices in Nepal – such as emphasis on open and honest and cordial relationships with employees – display the characteristics of a lower uncertainty avoidance culture. However, some practices – such as mentoring and employee security (provident fund) – also display features of high uncertainty avoidance (Aycan, 2005). This inconsistency may stem from the fact that the practices related to employee security reflect the characteristics of a collective society, as well as those of a high uncertainty avoidance culture. Similarly, the emphasis on close and open relationships is relevant in a high feminine and high power distance culture, as well as a low uncertainty avoidance culture (Aycan, 2005). These seemingly contradictory findings are understandable, given that culture is not necessarily bipolar. As suggested by Gautam (2015), culture emerges sometimes as both individual and collectivistic, masculine and feminine, or both high and low in power distance and uncertainty avoidance.

In a practical standpoint, the findings of this study could assist HR practitioners in Nepal to understand and assess the current status of HRM in their organizations, and to find ways to improve it. In addition, the findings could also help MNCs design and implement HR practices more suited to the Nepalese context. As reported above, the role of the HR department is shifting from a traditionally administrative one toward a more strategic partner. In particular, according to the experts who participated in this study, HR departments are currently involved more in the implementation of HR practices than in the formulation of organizational strategy and the provision of strategic directions, indicating a lower level of the strategic role assigned to HR departments. At the same time, the experts also agree that HRM will take on a more strategic role in the future. Although the administrative role of the HR department is still considered important, it will be required to take part in the organizational design process and the strategic formulation process. Additionally, they collectively predicted that more investment will be directed towards capacity building. Collectively, these predicted changes would turn HR departments in Nepal into developers of employees’ capacities, thereby enabling the departments to make a greater contribution, not only to implementation of the strategy, but also to the formulation of the strategy. In addition, in the follow-up interview conducted after the third-round survey, one expert panel member mentioned that “HR is also the custodian of the organization’s culture, ensuring that the culture aligns with organizational values, and should suggest improvements to the top management team if there are any discrepancies.” HRM in Nepal does have some ground to cover to be considered a crucial part of an organization, although this has already been achieved in some organizations (Adhikari, 2010; Adhikari & Gautam, 2006; Gautam, 2015).

This study is not without its limitations. One distinct limitation is related to the relatively small sample size of the expert participants. Although there exists no clear consensus regarding the proper sample size in studies employing the Delphi method, a larger sample size may have provided a more comprehensive description of HRM in Nepal. In addition, since the panel members were from diverse for-profit organizations in financial and hospitality industries and NGOs, there could not be a strong consensus among them, as indicated by low to moderate levels of the Kendall’s coefficient of concordance values. However, this proves to be an advantage as well, since this study covers diverse sectors of the Nepalese society. Future studies which involve a larger number of experts and diverse institutional factors (e.g., industries, size) would be helpful in providing a more detailed description of HRM in Nepal as well as other developing countries. Another limitation of this study concerns the realm of HRM. Besides those dealt with in this study – selection, training, development, compensation and benefits, retention, employee relationship, and performance evaluation – other essential and/or emerging realms of HRM, such as corporate social responsibility (Hahn & Kim, 2016; Yang & Kim, 2018) and HR information systems (Zin, Ibrahim, & Hassan, 2016), also need to be investigated in future studies.