From socialism to capitalism; the effects of Hungarian human resources practices

Executive Overview What are the human resources management practices within communist and formerly communist companies? Many of the managers from capitalist countries forming joint ventures with state-owned enterprises in communist and formerly communist countries have only superficial ideas about these enterprises' human resources management practices and their effects. The more lurid dysfunctional practices of these organizations are well known, and foreigners often (mistakenly) assume that these result from incompetence. However, such practices have evolved within complex systems of organizational behavior which were largely successful in achieving their real objectives: political control and production quantity. This article presents a detailed analysis of four human resource management practices in Hungarian companies: (1) the weak performance pressures, (2) substantial pay-at-risk compensation systems, (3) promotion-through-connections, and (4) ambiguous responsibilities. These practices result in numerous dysfunctions: excessive bargaining between supervisors and subordinates, pervasive distrust, the de-legitimation of managers, and responsibility avoidance. Unfortunately, these practices are changing slowly, at best, under economic reform. The article concludes with suggestions for both Local and foreign managers.