HUMAN RESOURCE MANAGEMENT

BMG346J2

Week Two: Strategic Human Resource Management

Norma Heaton Tel: 90366632

Room1D14 Email: ne.heaton@ulster.ac.uk

OBJECTIVES

• To define and clarify strategic HRM and

HRM strategy

• To articulate the link between business

strategy and HR strategy

• To assess theoretical approaches to strategic

HRM

DEFINING HUMAN RESOURCE

MANAGEMENT

“… a strategic and coherent approach to the management of

an organisation‟s most valued assets - the people working

there who individually and collectively contribute to the

achievement of its objectives ”

(Armstrong, 2006:3)

Torrington, Hall & Taylor (2005) argue that HRM is difficult

to define, since it is used in two ways:

• to describe the generic activities of managing people

(HRM mark 1)

• to denote a particular approach to managing people which

is clearly distinct from personnel management (HRM mark

2)

HRM mark 1: the generic term

• This refers to the key objectives to be achieved:

– Staffing objectives – planning, recruiting, selecting

– Performance objectives – training, developing, rewarding

– Change-management objectives

– Administration objectives – compliance with legislation, arrangements for pay etc

Defining HRM via Roles and Objectives

HUMAN RESOURCE MANAGEMENT

Performance Objectives

Staffing Objectives Administrative Objectives

Change-management Objectives

Line Managers

Consultants and Advisers

Subcontractors

Human Resource Specialists

Human Resource Generalists

Why the interest in HRM mark 2?

• The 1980s business climate

* Increased product market competition

* Recession

* New technology

• Government desire to reform industrial relations

* Firms encouraged to introduce new practices

• Restructuring of the economy

* Decline of old industries, rise in service sector

• Recognition of the need to improve British management

• Influence of the „excellence‟ literature

The Harvard Framework of HRM (US)

Stakeholders

Interests:

Shareholders

Management

Employee

Government

Community

Unions

Situational

Factors:

Workforce

Business

conditions

Management

philosophy

Labour market

Unions

Laws and values

HRM policy

choices:

Employee

influence

HR flow

Reward systems

Work systems

HR outcomes:

Commitment

Competence

Congruence

Cost

effectiveness

Long-term

consequences:

Individual

well-being

Organisational

effectiveness

Societal

well-being

Attractiveness/advantages of the

Harvard model

• Recognises different stakeholder interests

• Acknowledges the importance of “trade offs”

• Widens the context of HRM to include “employee influence”

• Acknowledges a broad range of contextual influences

• Emphasises strategic choice

Strategic HRM and HR strategy

• Tyson‟s (1995) definition of HR strategy: “the

intentions of the corporation both explicit and

covert, toward the management of its employees,

expressed through philosophies, policies and

practices” (Cited Torrington, Hall and Taylor,

2005:28)

• HR strategy need not be written or explicit

• Strategy may be formed rather than formulated

Business and HR strategy

• Separation model

– No relationship between organisational and HR strategy

• Fit model

– Recognition of the importance of people in achievement of organisational strategy

• Dialogue model

– Recognises the need for two-way communication

• Holistic model

– Represents people as the key to competitive advantage

• HR driven

– Places HR strategy in prime position

Theoretical perspectives of Strategic

Human Resource Management

• Is there one best way to carry out HR

activities? UNIVERSALIST

APPROACH/BEST PRACTICE

• Should HR policies and activities “fit”

particular circumstances? BEST FIT

• Should the focus be on long-tem

sustainability? RESOURCE BASED VIEW

UNIVERSALIST APPROACH

Guest‟s four policy goals for

HRM1. Strategic integration

* Ensuring HRM is integrated into strategic planning

2. Commitment

* Ensuring that employees feel bound to the organisation

3. Flexibility

* Ensuring an adaptable structure

4. Quality

* Ensuring high quality goods and services through high quality, flexible employees

The Universalist Approach (UK) - Guest (1989)

HRM Policies

Organisational/job design

Management of change

Recruitment & selection

Socialisation

Appraisal, training,

development

Reward systems

Communication

HR Outcomes

Strategic integration

Commitment

Flexibility/adaptability

Quality

Organisational Outcomes

High job performance

High problem-solving,

change, innovation

Innovation

High cost effectiveness

Low turnover, absence,

grievances

Components of best practice HRM

(adapted from Marchington and

Wilkinson,2005) • Employment security and internal labour markets

• Selective hiring and sophisticated selection

• Extensive training, learning and development

• Employee involvement, information sharing and

worker voice

• Self-managed teams / teamworking

• High compensation contingent on performance

• Reduction of status differentials

Bundles of human resource practices

• EI/employment security/reduction of differentials

• Teamworking/incentives/training

• Selection/flexibility/internal promotion

• The more the better – but how many are needed?

• What happens if achievement of one contradicts another?

HRM and performance – the USA

studies

• Huselid (1995) survey of 1,000 organisations concluded that “the magnitude of the return for investments in high performance work practices is high”

• Pfeffer (1998) argues that best practice HRM has the potential to have a positive impact irrespective of size, sector or country

• Ref: Marchington and Wilkinson (2005)

HRM and performance – studies in

the UK

• West‟s (2002) research in the NHS shows three

practices have a strong impact on performance –

training, teamwork and appraisal

• Guest (2003) looked at the extent of adoption of

best practice HR and its effectiveness and

concluded that research methods used impact on

results

– Subjective measures lead to a positive message

– Objective measures lead to a less consistent message

Questions about the best practice-

performance link

• Direction of causality

• Little consistency in HR practices in the bundle

• Variation in proxies used to measure performance

• Dangers in relying on self-report scores from HR

managers

• Doubts about how much autonomy organisations

have in decision making

Universal application of best

practice HR?

• Boxall and Purcell stress the need to understand where, how and when it is applied

• Marchington and Wilkinson express doubts about it at a conceptual level

– It works best on the assumption that employers have a long-term perspective

– Easier to engage in best practice HRM when labour costs form a low proportion of costs

– Is “flexible” employment compatible with “best practice” HRM?

Critique of best practice in

Beardwell, Holden and Claydon

(2004)• The validity of the research methods?

• Problems associated with inconsistencies in

the models

• Direction of causality

• Applicability to organisations in highly

competitive markets

• Underlying theme of “unitarism”

Best-fit HRM

• Assesses the extent to which there is

vertical integration between an

organisation‟s business strategy and its

HRM policies and practices

• Demonstrate vertical integration through

– Linking business goals to individual objectives

– Measurement and rewarding of business goals

Designing HRM to fit organisational

goals

• Life cycle models

– Start-up

– Growth

– Maturity

– decline

• Competitive advantage models

– Cost reduction

– Quality enhancement

– Innovation

Life cycle models

• Start-up

– Need for committed, flexible staff

– Little formalised practice

– HR combined with other managerial tasks

• Growth

– Formal and systematic HR procedures

– Need for specialist advice

– Maintenance of employee motivation and morale

Life cycle models (2)

• Maturity

– “golden age” with high commitment practices

– May be followed by increasing focus on control of

labour costs

– Doubts about sustainability of positive psychological

contract

• Decline

– Rationalisation and redundancy

– Services contracted out

Competitive advantage models: Cost

reduction

• Resourcing

– Ad hoc

– Tight performance management

• Learning and development

– Poor on non-existent

• Employee relations

– Little EI or communication

• Reward management

– Low pay levels, no additional benefits

• HR function

– Lacking influence

Quality enhancement

• Resourcing– Sophisticated recruitment and selection

• Learning and development– Extensive training, long-term focus

• Employee relations– Well developed systems

• Reward management– Competitive pay and benefits

• HR function– Potentially large influence

Innovation

• Resourcing

– Focus on competencies and transferable skills

• Learning and development

– Individual responsibility

• Employee relations

– Informal communications

• Reward management

– Cafeteria reward system, some share ownership or profit sharing

• HR function

– Advice and support, potentially some influence

Limitations of best fit models

(Marchington and Wilkinson)

• Models are deterministic and top down in

orientation

• There are multiple influences on organisations

• Managers do not have complete control over

workers

• Lack of attention to institutional forces

• Categorisation of “real” organisations can be

difficult

Limitations of best-fit models

(Beardwell, Holden and Claydon)

• Reliance on rational planning approach

• Lack of sophistication in description of

generic strategies

• Employee interests ignored

• Lack of internal context

Resource based view of the firm

• RBV analyses strategy from “inside out”

• Focuses on internal resources and the unique factors which enable organisations to remain viable

• Competitive advantage requires four attributes:– Value: the resource makes a difference

– Rarity: there is a shortage of these resources

– Imperfect imitability: difficult for other employers to copy these resources

– Non-substitutable: resources cannot be rendered obsolete or unnecessary

Problems with the resource-based

view (Torrington, Hall and Taylor)

• Focus on “firms” and “competitive

advantage” make this less relevant for the

public sector

• Too much time may be spent on measuring

and not everything that is measured is of

critical value

Conclusions

• Best practice suggests there is one best way in

which HRM should be delivered and that this has

a positive impact on organisational performance

• Best fit HRM is the idea that HR practice should

and does vary between organisations, depending

on business strategy or product market

circumstances

• The resource based view focuses on internal

resources

References

• Armstrong,M. (2006) A Handbook of Human Resource Management. London: Kogan Page

• Beardwell,I., Holden,L. and Claydon,T. (2004), Human Resource Management: a contemporary approach, London: FT/Prentice Hall

• Boxall,P. and Purcell,J. (2000) Strategic human resource management: where have we come from and where should we be going?, International Journal of Management Reviews, Vol 2, Issue 2, pp183-203

• Guest,D. (1989) Personnel and HRM: can you tell the difference? Personnel Management, Jan 1989

• Guest,D., Michie,J., Conway,N. and Shehan,M. (2003) Human Resource Management and performance, British Journal of Industrial Relations, Vol 41, No 2, pp291-314

References ctd• Huselid,M. (1995) The impact of human resource practices on

turnover, productivity and corporate financial performance, Academy of Management Journal, Vol 38, No 3, pp635-672

• Marchington,M. and Wilkinson,A. (2005) Human Resource Management, London: CIPD

• Pfeffer,J. (1998) The human equation; building profits by putting people first, Boston: Harvard Business School Press

• Torrington, D., Hall,L. and Taylor,S.(2005) Human Resource Management. London: FT/Prentice Hall

• West,M. (et al) (2002) The link between the management of employees and patient mortality in acute hospitals, International Journal of Human Resource Management, Vol 13, No 8, pp1299-1310