THE REALITIES OF HUMAN RESOURCE MANAGEMENT · PDF fileThe coming of HRM 22 A new agenda? 28...

THE REALITIES OF HUMANRESOURCE MANAGEMENT

Prelim (jl/d) 27/3/00 12:02 pm Page i

MANAGING WORK ANDORGANIZATIONS SERIES

Edited by Dr Graeme Salaman, Professor of Organisation Studiesin the Faculty of Social Sciences and the Open Business School, theOpen University

Current titles:

Peter Anthony: Managing CultureDavid Casey: Managing Learning in OrganizationsTimothy Clark: Managing ConsultantsRohan Collier: Combating Sexual Harassment in the WorkplacePaul Iles: Managing Staff Selection and AssessmentIan McLoughlin and Stephen Gourlay: Enterprise Without UnionsGraeme Salaman: ManagingJenny Shaw and Diane Perrons: Making Gender WorkKeith Sisson and John Storey: The Realities of Human Resource

ManagementJohn Storey and Keith Sisson: Managing Human Resources and

Industrial Relations

Prelim (jl/d) 27/3/00 12:02 pm Page ii

THE REALITIES OF HUMANRESOURCE MANAGEMENT

MANAGING THE EMPLOYMENT

RELATIONSHIP

Keith Sisson and John Storey

Open University PressBuckingham � Philadelphia

Prelim (jl/d) 27/3/00 12:02 pm Page iii

Open University PressCeltic Court22 BallmoorBuckinghamMK18 1XW

e-mail: [email protected] wide web: http://www.openup.co.uk

and 325 Chestnut StreetPhiladelphia, PA 19106, USA

First Published 2000

Copyright © Keith Sisson and John Storey 2000

All rights reserved. Except for the quotation of short passages for the pur-pose of criticism and review, no part of this publication may be repro-duced, stored in a retrieval system, or transmitted, in any form or by anymeans, electronic, mechanical, photocopying, recording or otherwise,without the prior written permission of the publisher or a licence from theCopyright Licensing Agency Limited. Details of such licences (for repro-graphic reproduction) may be obtained from the Copyright LicensingAgency Ltd of 90 Tottenham Court Road, London, W1P 9HE.

A catalogue record of this book is available from the British Library

ISBN 0 335 20620 4 (pb) 0 335 20621 2 (hb)

Library of Congress Cataloging-in-Publication DataSisson, Keith.

The realities of human resource management : managing theemployment relationship / Keith Sisson and John Storey.

p. cm – (Managing work and organizations series)Includes bibliographical references and index.ISBN 0-335-20620-4 – ISBN 0-335-20621-21. Personnel management. 2. Strategic planning.

3. Organizational change. I. Storey, John, 1947– II. Title. III. Series.HF5549.S654 2000658.3–dc21

99-088067

Typeset by Type Study, ScarboroughPrinted in Great Britain by St Edmundsbury Press Ltd, Bury St Edmunds,Suffolk

Prelim (jl/d) 27/3/00 12:02 pm Page iv

CONTENTS

Preface ixList of abbreviations xiii

1 INTRODUCTION: THE STORY SO FAR 1The starting point: from rhetoric to reality 1The nature of the employment relationship 7The changing patterns of employment 10

A service economy 10The shrinking workplace 12The polarization of the occupational structure 12Feminization 14An interim conclusion 15

Changing business strategies and structures 16Changing recipes 19

The era of collective bargaining 19The coming of HRM 22

A new agenda? 28The rest of the book 31Suggested further reading 31

2 MANAGING STRATEGICALLY 33The resource-based view 34

v

Prelim (jl/d) 27/3/00 12:02 pm Page v

An array of models 37Universal models 37Contingency models 41

Developing a strategic approach 46Identifying strengths and weaknesses 49Closing the information gap 51Vision and mission 60Changing the culture 62

Conclusions 64Suggested further reading 65

3 MANAGING FOR HIGH PERFORMANCE:ORGANIZATIONAL STRUCTURES ANDPROCESSES 67The underlying developments 69

Divisionalization 72Budgetary devolution 74Marketization 76New structures, new problems 78

A focus on the ‘flexible’ organization 80A focus on the ‘lean’ organization 84Managing employee performance 87The need to balance flexibility and security 90Suggested further reading 92

4 INVOLVEMENT AND PARTICIPATION:THE KEY TO SUCCESS? 93Types of involvement and participation 94

Communications (information disclosure) 95Direct participation 96Indirect or representative participation 98Financial participation 100

The case for involvement and participation 100The evidence of practice 104

Good news, bad news 104A question of process? 109A question of choice? 113


The realities of human resource management

vi

Prelim (jl/d) 27/3/00 12:02 pm Page vi

5 RESHAPING THE WAGE/WORK BARGAIN:PAY AND WORKING TIME 117Key issues in the effective management of pay 118

Selecting a pay system 119An appropriate pay structure 126Single status? 128

Towards flexible working: an array of options 129Changes in the duration of working time 133The distribution of working time 136


6 IMPROVING COMPETENCES AND CAPABILITIES I:TRAINING AND DEVELOPMENT 143The case for training and development 146A training renaissance? 152

Modern apprenticeships 154National Vocational Qualifications 156Lifelong learning 158Investors in People 159

Continuing problems? 161Work organization, employment relations and

competitive strategies 162The role of management 164Conclusions 167Suggested further reading 167

7 IMPROVING COMPETENCES AND CAPABILITIES II:RECRUITMENT AND SELECTION 168Recruitment 170

Stemming the flow 172Being clear about needs 174Making better use of the internal labour market 176Rethinking external sources 178

Selection 180Choosing appropriate methods 180Improving interview performance 185


Contents

vii

Prelim (jl/d) 27/3/00 12:02 pm Page vii

8 MANAGING WITH TRADE UNIONS 189Recognizing trade unions 190The structure of collective bargaining 195

The unit 195The level 197

Resolving conflicts 203Strike-free? 204Arbitration? 204

The partnership question 206Conclusions 214Suggested further reading 214

9 MANAGING THE HR/IR FUNCTION 215The nature of the HR/IR contribution 216Realizing the HR/IR contribution 218

A key role for line managers 218Delivering specialist services 224A seat at the top table? 228

Auditing the specialist function 231Conclusions 236Suggested further reading 237

10 THE KEY ISSUES 238Balancing flexibility and security 241Managing individually and collectively 245Integration, integration, integration 250Suggested further reading 253

References 254Index 272


viii

Prelim (jl/d) 27/3/00 12:02 pm Page viii

PREFACE

This book builds upon our previous volume (Storey and Sisson,1993) in this series and, like that book, it has been written withtwo main audiences in mind: practising managers, and studentsof business and management. The managers whom we seek toaddress are just as likely to be in line, general and project positionsas they are to be specialist human resource or industrial relations(HR/IR) practitioners. A crucial feature of the new developmentsin the area has been the way in which vital new initiatives havebeen driven, as well as delivered, by managers from outside thespecialist function. The adage that every manager needs to be his orher own people-manager has rarely been as relevant as it is now.

The issues discussed in this book are all of critical contempor-ary importance. Restructuring, continuous improvement, in-volvement and participation, pay and working time, training anddevelopment, recruitment and selection, and other themes associ-ated with managing in a highly competitive environment consti-tute the heart of the analysis. We have tried to deal with them inboth a practical and an academically rigorous fashion. Critically,the book eschews the approach of so many recent managementbooks that purport to offer easy solutions. We do not believe thereare any quick fixes of this kind: indeed, in our experience most arelikely to end in tears.

ix

Prelim (jl/d) 27/3/00 12:02 pm Page ix

In bringing the results of research to bear upon issues of the day,however, we are also conscious of the need to deal with the ‘sowhat?’ question. Here our experience is that most managers arelooking for directions rather than specific recipes. Our treatmentshould therefore serve the large part of the needs of most practis-ing managers who want to be briefed on the main themes. For thissegment of our audience the book can be used either for privatereading or as part of a short course programme.

The second audience whose needs we have tried to meet will befound among the student population. Here we have in mind MBAstudents and undergraduates typically taking a course in humanresource management (HRM). The latter group of readers is likelyto be from a wide range of courses – business, engineering andmany more. The common element is the need for a relativelyshort, affordable, up-to-date analysis of themes and topics rel-evant to the management of human resources today. With thetrend towards modularization there are increasing numbers ofstudents who are exposed to just one main course (or ‘module’) onthe management of the human resource. Conventional texts arenot geared to the needs of these students. It is intended that thisone will be. To meet their needs, the content is up to date and rel-evant to contemporary organizational management practice. Thestyle is intended to be approachable, to the point and not litera-ture-bound. The material is arranged into chapters each of whichcould appropriately constitute the required reading for a week-by-week programme extending over ten weeks (an increasinglystandard module in higher education).

The book is distinctive in two other key regards. Most books areeither ‘about’ HRM (as personnel management has increasinglycome to be known) or ‘about’ industrial relations. This one isabout both, which is why the term ‘employment relations’ or theacronym HR/IR is used in this book. In the real world, problemsof motivation, communication, discipline and the wage/effortbargain are suffused with collective and individual aspects. More-over, collective bargaining continues to affect nearly half theworking population in the UK and recent and forthcoming legis-lation is likely to put a premium on information and consultationwith collective forms of employee representation, be they union ornon-union. In our view, managing the employment relationship


x

Prelim (jl/d) 27/3/00 12:02 pm Page x

will demand both an individual and a collective perspective andso this is how we approach the issues.

There is a further central rationale to this book. Not only isthe great bulk of material, certainly on human resource manage-ment, which managers and students of management are likely tocome across, highly prescriptive but it also gives the strong impres-sion that there is a ‘universal’ solution. Typically, it consists of state-ments asserting how managers should devise training programmes,evaluate training, conduct appraisal and so on, regardless of thesituation. Alternatively, it takes the form of the presentation of so-called leading edge thinking arising from the experience of one ofthe world’s large multinational companies at one moment in timeor a development in Silicon Valley or somewhere equally remote.The problem with this type of literature is not that advice is prof-fered or thought stimulated (on the contrary these are laudableobjectives), rather it is that it takes no account of the context – andcontext is absolutely critical. The vast majority of workplaces inmost developed countries belong to small and medium-sizedenterprises and their managers have to grapple with a particularframework of legislation, corporate governance arrangements,trade union structure, historical legacy and so on.

The problem is compounded because much of this literaturelacks any basis in empirical evidence. The result is that a totallymisleading impression is often given about trends and develop-ments. No wonder, as Chapter 1 argues, there is such an enormousgap between the rhetoric and the reality of managing employmentrelations.

This is increasingly unforgivable as more and more evidencebecomes available from surveys and cases. Indeed, it is not toomuch of an exaggeration to say that the field in the UK hasexploded since the publication of our Managing Human Resourcesand Industrial Relations in 1993. Outlets for serious research, suchas the Human Resource Management Journal and the InternationalJournal of Human Resource Management, have firmly establishedthemselves, while the Institute of Personnel and Development hassponsored major investigations into such issues as performancemanagement and the ‘lean organization’. The first findings of thewide-ranging 1998 Workplace Employee Relations Survey are alsoavailable, with the detailed results to come.

Preface

xi

Prelim (jl/d) 27/3/00 12:02 pm Page xi

Reflecting these weaknesses in so much of the literature, wehave set ourselves the objectives of analysing the complexities ofprocess and context, taking close note of empirical research find-ings about actual practice, while at the same time identifying whatit all means for the practitioner. The task has proved to be ademanding one in the wake of the election of a Labour govern-ment with a massive majority, the signing of the ‘social chapter’ ofthe EU Maastricht Treaty and the prospect of economic and mon-etary union, coupled with the substantial increase in research evi-dence.


xii

Prelim (jl/d) 27/3/00 12:02 pm Page xii

LIST OF ABBREVIATIONS

ACAS Advisory, Conciliation and Arbitration ServiceBIFU Bank, Insurance and Finance UnionBPR business process reengineeringBT British TelecomCAC Central Arbitration CommitteeCCT compulsory competitive tenderingCEC Commission of the European CommunitiesCIR Commission on Industrial RelationsCLIRS Company Level Industrial Relations SurveyCNC computer numerical controlDfEE Department for Education and EmploymentDPA departmental purpose analysisDTI Department of Trade and IndustryEDAP Employee Development and Assistance ProgrammeEIRO European Industrial Relations ObservatoryEMU economic and monetary unionERT European Round Table of IndustrialistsGMB General, Municipal and Boilermakers UnionGNVQ General National Vocational QualificationsHR human resourcesHRM human resource managementHRP human resource planning

xiii

Prelim (jl/d) 27/3/00 12:02 pm Page xiii

ICL International Computers LtdIES Institute of Employment StudiesIiP Investors in PeopleIPA Involvement and Participation AssociationIPD Institute of Personnel and DevelopmentIPM Institute of Personnel ManagementIPRP individual performance-related payIR industrial relationsIRRR Industrial Relations Review and ReportIRRU Industrial Relations Research UnitIRS Industrial Relations ServicesIT information technologyITB industrial training boardMCR management of change reportMNC multinational companyNAAFI Navy, Army and Air Force InstitutesNACAB National Association of Citizens Advice BureauxNEDO National Economic Development OfficeNVQ National Vocational QualificationOD organizational developmentplc public limited companyPMS performance management systemPRP performance-related paySBU strategic business unitSME small and medium-sized enterprisesTEC Training and Enterprise CouncilTQM total quality managementUCW Union of Communication WorkersVET vocational and educational trainingWERS The 1998 Workplace Employee Relations Survey


xiv

Prelim (jl/d) 27/3/00 12:02 pm Page xiv

INTRODUCTION: THESTORY SO FAR

The starting point: from rhetoric to reality

This book is about managing employment relations. Approxi-mately half the total population of the country is in some form ofpaid work or employment and is thus directly party to such arelationship. In consequence, the way in which this part of the lifeexperience is handled carries a wide range of political, social andeconomic implications. Central to the concerns of most managersand students of management reading this book, however, is likelyto be the link between the management of employment relationsand competitiveness.

Just about every book on the subject and many a companychairman’s statement, make the same point: it is people whichmake the difference. The workforce is the most vital asset. Tech-nology and capital can be acquired on varying terms by a widerange of players around the world: the real, sustainable competi-tive advantage, or edge, has to come ultimately from the way thatcapable and motivated teams utilize these resources. In Ulrich’s(quoted in MacLachan, 1998: 37) words,

Sooner or later, traditional forms of competitiveness – cost,technology, distribution, manufacturing and product features

1

1

Chapter 1 (jl/d) 27/3/00 10:00 am Page 1

– can be copied. They have become table stakes. You musthave them to be a player, but they do not guarantee you willbe a winner . . .

Winning will spring from organizational capabilities suchas speed, responsiveness, agility, learning capacity andemployee competence. Successful organizations will be thosethat are able to quickly turn strategy into action; to manageprocesses intelligently and efficiently; to maximize employeecontribution and commitment; and to create the conditionsfor seamless change.

Statements such as these constitute the conventional wisdom. Themessage has been repeated ad nauseam by ranks of chief execu-tives, management ‘gurus’ and politicians. The real cause for sur-prise today is not the message but that so little has been doneto put it into effect: the management of employment relationsremains the Cinderella function of management.

Signs of significant change are certainly easy to find. Indeed, itis possible to talk in terms of a restructuring of UK employmentrelations (see, for example, Gallie et al., 1998). The most funda-mental change has been the decline in joint regulation by collec-tive bargaining. According to the first findings of the 1998Workplace Employee Relations Survey (WERS), the proportion ofworkplaces recognizing trade unions had fallen from 66 per centin 1984 to 53 per cent in 1990; between 1990 and 1998 it fell afurther eight points to 45 per cent (Cully et al., 1998: 28). Mean-while, the proportion of workplaces with no union memberincreased from 27 per cent in 1984 to 36 per cent in 1990, to 47 percent in 1998. In the words of the authors of the first findings, ‘Thissignals, clearly, a transformation in the landscape of Britishemployment relations, particularly when contrasted with the rela-tive stability and continuity that has characterised the system formuch of the post-war period’ (Cully et al., 1998: 28).

A second major change is the growth in the different forms ofso-called atypical or non-standard forms of employment. Figure1.1, which also comes from the first findings of the 1998 WERS,gives a good overview. Most obvious is the growth in part-timework. Part-time employees account for around one-quarter of theworkforce and they make up the majority of the workforce in a


2


similar proportion of the workplaces. Significantly, this figure isup from 16 per cent in 1990 (Cully et al., 1998: 6).

For the most part, however, these changes have largely reflectedchanges in the patterns of employment and are the unintendedconsequences of the business strategies and structures underpin-ning them. They have less commonly been the result of consciousmanagement decisions about managing employment relations, letalone their redesign.

The yawning gap between the rhetoric and the reality ofemployment relations can be most graphically illustrated bystudying the diffusion of the ‘new’ management practices whichhave been grouped according to four main areas of activity inTable 1.1. Although many of these practices are by no means new,they have nonetheless come to be associated with change andoffer the most robust set of data with which to make our points.

In the case of appraisal and reward it will be seen that just overone-half of non-managerial employees are subject to some formof appraisal. Only one in ten of these employees has individualperformance pay, however, raising questions about the amount

Introduction: the story so far

3

2017

26

4043

40

60

48

68

3

7

31

35

11

5

60

50

40

30

20

10

0Gone up About the same Gone down Never used

Per

cent

Employees on fixed-termcontracts

Temporary agencyemployees

Contractors

Part-time employees

Figure 1.1 Change in the use of different forms of labour over the pastfive years

Source: Cully et al., 1998


of attention such arrangements have received in the prescriptiveliterature. More enjoy the benefits of share ownership (one inseven) and profit sharing (one in three), but they remain verymuch a minority.

In the case of involvement and participation, the signs of activityare greater but again for most types of activity less than half ofworkplaces were affected. Thus, 37 per cent of workplaces reported


4

Table 1.1 Percentage of workplaces using ‘new’ managementpractices and employee involvement schemes

Appraisal and rewardMost non-managerial employees have performance formally

appraised 56Individual PRP scheme for non-managerial employees 11Employee share ownership scheme for non-managerial employees 15Profit-sharing scheme operated for non-managerial employees 30

Involvement and participationWorkplace level joint consultative committee 28Regular meetings of entire workforce 37Problem-solving groups (e.g. quality circles) 42Staff attitude survey conducted in last five years 45Workplace operates a system of team briefing for groups of

employees 61Most employees work in formally designated teams 65

Training and developmentMost employees receive minimum of five days training a year 12Most supervisors trained in employee relations skills 27

Status and securityGuaranteed job security or no compulsory redundancy policy 14‘Single status’ between managers and non-managerial employees 41Workplace operates a just-in-time system of inventory control 29Attitudinal test before making appointments 22

Base: all workplaces with 25 or more employeesFigures are weighted and based on response from 1,926 managers

Source: Cully et al. (1998)


regular meetings, 42 per cent said they had some kind of problem-solving group such as quality circles and 45 per cent that they hadused staff attitude surveys. Only teamworking and team briefingwere reported as practised in a majority of workplaces.

The latter data need to be treated with some caution, however.Around two-thirds of workplaces (65 per cent) reported thatemployees worked in formally designated teams. Yet only ahandful (5 per cent of those with teams) had something resem-bling the semi-autonomous teamworking which has come to beregarded as the leitmotif of new forms of work organization, i.e.respondents said team members had to work together, hadresponsibility for specific products or services, jointly decidedhow work was to be done, and appointed their own team leaders.If, in Peters’s (1987: 302–3) uncompromising words, ‘the onlypossible implementers’ of a strategy of quality production are‘committed, flexible, multi-skilled, constantly retrained people,joined together in self-managed teams’, the UK clearly has a verylong way to go.

The next dimension is training and development. Here too the evi-dence is hardly supportive of a paradigm shift. Despite the wide-spread importance attached to training by the Government, only12 per cent, or one in eight, said that most employees received aminimum of five days training per year. Perhaps even more sur-prising is that only 27 per cent, or one in four, said they trainedmost supervisors in employee relations skills. Such skills havebeen found to be strongly correlated with both the more advancedforms of involvement and participation and with their estimatedsuccess of these schemes more generally (see, for example, Euro-pean Foundation for the Improvement of Living and WorkingConditions, 1997: ch. 9).

The final cluster to be considered involves status and security.Here it will be seen from Table 1.1 that less than half of workplaces(41 per cent) had single-status arrangements between managerialand non-managerial employees, and only 14 per cent, or one inseven, guaranteed job security or had a no-compulsory redun-dancy policy.

Details of the combinations of practices are also illuminating(Cully et al., 1998: 11). There is some evidence of practices oper-ating together, possibly suggesting the development of a more


5


strategic approach in the sense of the integration or ‘bundling’ ofpractices. Training, teamworking and supervisor training appearto go together, as do individual performance pay, profit sharingand share ownership. Single status is associated with the firstcluster but not the second, however, suggesting that direct par-ticipation and financial participation are seen as alternativesrather than complementary as might have been expected.

Perhaps most telling, though, are the figures for the totalnumber of practices. The practices listed, it hardly needs empha-sizing, are far from being revolutionary. Indeed, most personneltexts seem to assume them to be standard in today’s workplace.Moreover, the figures also measure workplace incidence only andnot scope of the practice (as in the case of teamworking discussedabove). In the circumstances, the finding that only one in five (20per cent) had half or more of the 16 practices and only one in fifty(2 per cent) had 10 or more is little short of staggering.

The significance of this is that it looks as if the 1998 WERS find-ings will also provide further evidence, to add to that increasinglyavailable for the USA (see, for example, Becker and Huselid, 1998)and EU member countries (see European Foundation for theImprovement of Living and Working Conditions, 1997) establish-ing a positive link between the adoption of these ‘new’ practicesand performance. In the words of the team responsible for the1998 WERS first findings (Cully et al., 1998: 25), ‘workplaces witha high number of “new” management practices were substantiallymore likely to report high productivity growth’.

Critically, too, the UK continues to lag behind the internationalcompetition as the Government’s 1998 White Paper on competi-tiveness argues (DTI, 1998). Not everything can be laid at the doorof the management of employment relations – lack of investmentin R&D and plant and equipment is perhaps the major issue – yetit is a significant contributory factor. The UK remains in essence alow paid, low skill, low productivity economy.

Our task in this opening chapter is to put managing employ-ment relations into context so that there can be a better under-standing of the problem. The chapter goes back to basics inreminding us of some of the complexities of the employmentrelationship. It outlines the main developments in employmentpatterns and business strategies and structures which have been


6


so important in recent years. It considers the main recipes put for-ward and their limitations. It evaluates the new agenda that isemerging.

The overall conclusion is that the significance of managingemployment relations in competitive success will certainly grow.Most critically, however, the key to realizing the potential thatimproved performance in this area can bring does not lie in thepursuit of the latest techniques. Indeed, this is likely to be counter-productive, diverting attention from what really needs to be doneand encouraging cynicism on the part of employees. Rather it willdepend not only on doing more of the ‘basic’ things, such as train-ing and development, and information and consultation, and butalso on making sure that they are properly integrated in the sensethat policies and practices are both complementary and com-patible with business strategy. It is in showing how this mightbe done, despite all the obstacles, that the book tries to make itssignificant contribution.

The nature of the employment relationship

In discussing the employment relationship, it has become fashion-able to emphasize the importance of the ‘psychological contract’.The term is rarely spelt out but is generally understood to meanthe expectations, aspirations and understandings which employ-ers and employees have of each other (see Herriot et al., 1998).It is highlighted because the rupture in the traditional contract,above all of managerial employees, is seen as a major issue inmanaging employment relations. In a nutshell, the worry is thatintensifying competitive pressures, largely generated in a globalmarketplace, are encouraging continuous change and cost-cut-ting, meaning the employer can no longer deliver the job security,promotion opportunities and pay increases which have been thequid pro quo for employees’ loyalty, commitment and skills.

Important though the debate is in highlighting the fundamentalproblem – the need to balance flexibility with security – it needs tobe kept in perspective. It is not just that talk of a psychologicalcontract has a hollow ring for many non-managerial employees:more worrying is the danger that it blinds people to the fact that


7


the employment relationship has several key facets which have tobe taken into account if it is to be effectively managed. Most obvi-ously, it embraces an economic exchange or relationship. Employ-ees make their contribution to achieving the organization’sobjective and, in return, they receive a level of remuneration.Putting a price on this contribution is no easy matter, however; themarket rarely determines a unique price in the way that manyeconomists lead us to believe. Especially difficult is ensuring thatemployees deliver what they are supposed to, which gets us in-to very difficult waters: there needs to be a variety of controlmechanisms in place. This is not automatic. In effect, managementis buying the right to exploit the individual’s contribution andnothing more.

There are difficulties, too, in treating employees as a form ofhuman capital as many pundits urge. One, the so-called infor-mation barrier, is that investment in human capital, being intan-gible, is difficult to measure and therefore difficult to justify. Theother, the so-called externality problem, is that organizationscannot guarantee that they will capture the returns made on intan-gible investments. For example, performance-enhancing organiz-ational innovations require up-front training investments of botha general and company-specific nature, which enterprises risklosing if employees leave before the returns can be captured.

The second distinguishing feature of the employment relation-ship is that it involves a social relationship. Typically, employeesattend a workplace, be it fixed or transitory, where they interactwith other employees and with managers. According to the WERSfirst findings quoted above, around two-thirds work in formallydesignated teams in which their colleagues affect their contri-bution. Inevitably, concepts such as a fair day’s work come to besocially determined, as does what is acceptable and unacceptablebehaviour on the part of employees and managers alike. In group-ing people together in occupations and workplaces, workorganization also creates the basis for collective action on the partof employees, which underpins trade unions and collective bar-gaining.

The employment relationship is also complicated because itinvolves a legal relationship. Employers are required by law togive employees a contract of employment. Although this contract


8


of employment itself rarely spells out the mutual obligationsof employers and employees, it provides the underpinning ofspecific obligations, rights and standards emanating from statutesand court judgements regulating the relationship.

This brings us to our final point. The fact that the employmentrelationship is a social and legal as well as an economic relation-ship means that it is deeply embedded in both particular nationaland organizational contexts. As Bach and Sisson (2000) empha-size, it has long been recognized that key features of the UK’s busi-ness system are especially inhospitable to treating people as thekey to success. The most important of these features can be sum-marized as follows:

1 An overwhelming emphasis on shareholder value as the keybusiness driver as opposed to the interests of other stakeholders.

2 Institutional share ownership by investment trusts and pen-sions funds rather than banks which encourages a focus onshort-term profitability as the key index of business perform-ance rather than long-term market share or added value.

3 Relative ease of takeover, which not only reinforces the pressureon short-term profitability to maintain share price but alsoencourages expansion by acquisition and merger rather than byinternal growth.

4 A premium on ‘financial engineering’ as the core organizationalcompetence and the domination of financial management, bothin terms of personnel, activities and control systems, over otherfunctions.

Furthermore, two key features of the UK’s overall industrial rela-tions system mean there have been few, if any, of the countervail-ing pressures found in most other developed economies toencourage investment in human capital:

1 A tradition of ‘voluntarism’ in virtually every area of UKemployment relations (including vocational education andtraining), which means that the framework of legal rights andobligations (individual and collective) is much less than in otherEU countries.

2 A highly decentralized and diverse structure of collective bar-gaining, deeply embedded in procedural rather than substantive


9


rules, which means that the UK does not possess the detailedmulti-employer agreements which supplement and extend thelegislative framework in most other EU countries.

It is important to remember, too, that the 1980s and early 1990ssaw the few countervailing pressures even further reduced. Indi-vidual employment rights were whittled away and the role oftrade unions curtailed. Perhaps even more importantly, the WagesCouncils, which had provided a statutory floor of pay and con-ditions, were abolished and there was further reduction in thecoverage of the multi-employer agreements which had fulfilleda similar function elsewhere. Indeed, such agreements all butdisappeared in key sectors such as metalworking. The declineof sector regulation means that there are few acknowledged stan-dards or benchmarks for organizations to follow.

The changing patterns of employment

Our attention now turns to the changing patterns of employmentwhich are one of the two sets of considerations which help to putboth the changes in and diversity of employment relations prac-tice into relief. These patterns are many and varied, but four standout: the ongoing shift from manufacturing to services; the shrink-ing size of workplaces; the polarization of the occupational struc-ture; and the feminization of the workforce.

A service economy

As the first column in Table 1.2 confirms, the UK is very much a ser-vice economy; less than one in five workplaces are in manufactur-ing. The changing balance between public and private services isalso evident: for example, a significant proportion of employees inhealth services are now to be found in the private sector. The com-position of the workforce, column 3 suggests, is also criticallyaffected. Part-time working is much less prevalent in manufactur-ing, whereas it is the predominant pattern in sectors such as hotelsand restaurants. Levels of pay and productivity are also closely cor-related with sector, as columns 5 and 6 show clearly. Not only do


10


Tab

le 1

.2T

he s

igni

fican

ce o

f sec

tor

Dis

trib

utio

n of

Wor

kpla

ces

wit

hW

orkp

lace

s w

ith

Low

pay

ing

Hig

h pr

oduc

tivi

tyw

orkp

lace

s by

no p

art-

tim

em

ost e

mpl

oyee

sw

orkp

lace

sgr

owth

wor

kpla

ces

sect

or (%

)em

ploy

ees

(%)

part

-tim

e (%

)(%

)(%

)

Man

ufac

turi

ng18

361

534

Ele

ctri

city

, gas

, wat

er0

510

055

Con

stru

ctio

n4

390

149

Who

lesa

le a

nd r

etai

l18

1443

851

Hot

els

and

res

taur

ants

63

5548

29Tr

ansp

ort a

nd c

omm

unic

atio

ns5

234

060

Fina

ncia

l ser

vice

s3

205

062

Oth

er b

usin

ess

serv

ices

923

710

34Pu

blic

ad

min

istr

atio

n6

91

042

Ed

ucat

ion

140

402

42H

ealt

h13

150

1734

Oth

er c

omm

unit

y se

rvic

es4

851

1923

All

wor

kpla

ces

100

1626

941

Bas

e: a

ll w

orkp

lace

s w

ith

25 o

r m

ore

empl

oyee

s, e

xcep

t col

umn

5, w

here

it is

all

wor

kpla

ces

five

or m

ore

year

s ol

d w

ith

25em

ploy

ees

Figu

res

are

wei

ghte

d a

nd b

ased

on

resp

onse

s fr

om 1

,929

man

ager

s fo

r co

lum

n 1,

1,9

14 fo

r co

lum

ns 2

and

3, 1

,890

for

colu

mn

4 an

d1,

668

for

colu

mn

5.So

urce

: Cul

ly e

t al.

(199

8)


sectors such as hotels and restaurants have the largest proportionsof employees earning less than £3.50 per hour, but they are alsocharacterized by some of the lowest levels of productivity.

The first findings of the 1998 WERS do not give us a breakdownof union membership by sector. Fortunately a recent analysis ofthe Labour Force Survey data does (Cully and Woodland, 1998). Itshows that the decline of manufacturing and the shift to the ser-vice sector have been associated with the decline of union recog-nition and collective bargaining.

The shrinking workplace

One of the developments that the shift from manufacturing to ser-vices has contributed to is shrinkage in the size of workplace. Astrong impression of the significance of the size of workplacescomes from Table 1.3. Column 1 confirms the long-standingassociation between union membership and the size of work-place. Other things being equal, the larger the workplace, themore likely collective bargaining and vice versa. In addition, morethan twice as many smaller workplaces had 25 per cent of employ-ees earning less than £3.50 an hour as opposed to 9 per cent in thecase of larger ones. Productivity growth was also less (33 per centagainst 42 per cent, 50 per cent and 56 per cent for workplaceswith 100–199 employees, 200–499 employees and 500 or moreemployees, respectively).

Smaller workplaces, it also emerges, are less likely to have the‘new’ employment practices discussed in the previous section.The proportion with no practices (8 per cent) was four times thatof larger workplaces, while the number with five or more (28 percent) was only about half as many (Cully et al., 1998: 26).

The polarization of the occupational structure

The occupational structure of the UK workforce has also alteredmarkedly. Data from the Labour Force Survey in Table 1.4 showthat the blue-collar workers in manufacturing represent a dwin-dling minority as manufacturing shrinks. The largest single groupsare ‘managers and administrators’ (4,306,000) followed by ‘clerical’(4,096,000). The two groups of ‘professional’ and ‘professional and


12


Tab

le 1

.3T

he s

igni

fican

ce o

f wor

kfor

ce s

ize

Wor

kpla

ce s

ize

Uni

on d

ensi

ty:

Any

uni

on m

embe

rs:

Uni

on r

ecog

niti

on:

Low

pay

ing

Hig

h pr

oduc

tivi

ty%

of e

mpl

oyee

s%

of w

orkp

lace

s%

of w

orkp

lace

sw

orkp

lace

sgr

owth

wor

kpla

ces

who

are

mem

bers

(%)

(%)

25–4

923

4639

1240

50–9

927

5241

838

100–

199

3266

576

4220

0–49

938

7767

450

500

or m

ore

4886

782

56

All

wor

kpla

ces

3653

459

41

Bas

e fo

r co

lum

ns 1

–4: a

ll w

orkp

lace

s w

ith

25 o

r m

ore

empl

oyee

s; fo

r co

lum

n 5

all w

orkp

lace

s fiv

e or

mor

e ye

ars

old

wit

h 25

empl

oyee

sFi

gure

s ar

e w

eigh

ted

and

bas

ed o

n re

spon

ses

from

1,8

89 m

anag

ers

for

colu

mns

1–3

; 1,8

90 fo

r co

lum

n 4

and

1,6

68 fo

r co

lum

n 5.

Sour

ce: C

ully

et a

l. (1

998)


technical’ amount to 5,517,000, whereas ‘craft and related’ accountsfor 3,370,000. More people are employed in ‘personal and protec-tive services’ (2,986,000) than are ‘plant and machine operators’(2,589,000).

Arguably, the main divide is no longer between blue-collar andwhite-collar but between managerial and professional groups, onthe one hand, and the rest, on the other. Much of the interest andtarget of the human resource management (HRM) discussed later,it can be argued, is the managerial and professional group. Sig-nificantly, for example, the focus of many of the WERS questionsis implicit recognition of this. Managers are expected to be subjectto individual performance pay, appraisal, a special status andsecurity whereas for other employees it is an open question. Occu-pation is not so relevant where membership of trade unions is con-cerned (see column 2 of Table 1.4). Important, however, is thepattern of regulation: even if members of trade unions and/orprofessional organizations, managers and professional employeesare typically covered by individual contracts rather than by col-lective agreements.

Feminization

The fourth and final dimension to be considered is sex. Thegrowth in the proportion of women in the labour force reflects the


14

Table 1.4 The significance of occupation

Employment Union membership(%) (%)

Managers and administrators 16 20Professional 10 50Associated professional and technical 10 46Clerical 15 25Craft and related 12 34Personal and protective services 11 28Sales 8 9Plant and machine operators 9 38Others 8 26

Source: column 1 Labour Market Trends, 1998b; column 2 Labour Market Trends, 1998a


shifts in sector and occupation discussed above. As is clear fromTable 1.5, the distribution remains skewed. Manufacturing andconstruction have relatively few women, whereas women pre-dominate in sectors such as retail or hotels.

In terms of its implications for managing employment relations,the most important variable is working time. Nearly half thewomen in work are part-time. Other studies (see, for example, thereview in Gallie et al., 1998) tend to confirm that training anddevelopment opportunities are less for part-time employees as arepay levels and other benefits.

An interim conclusion

There have been fundamental and interrelated changes in thepatterns of employment which help to explain much of both therestructuring and the diversity of employment relations to beobserved in the UK. The decline of joint regulation, for example,can be associated with the reduction in the manufacturing work-force, along with highly unionized sectors such as coal, and ashrinking in the size of workplaces more generally. The growth inpart-time work and the feminization of the workforce reflects theexpansion in the service sector. The growing interest in HRM canbe related, above all, to the increasing proportion of managers andprofessional workers in the workforce.

It would be wrong, however, to imply that it is possible to readoff employment relations practice from a single set of structural


15

Table 1.5 Workplaces by gender

Workplaces Workplaces Workplaceslargely male: largely female: mixed> 75% male > 75% female (%)

Private sector 32 22 46Public sector 14 49 37

Base: all workplaces with 25 or more employeesFigures are weighted and based on responses from 1,914 managersSource: Cully et al. (1998)


variables. There is a number of crosscutting dimensions con-tributing to the enormous diversity of practice. Take training,development and security, for example. A part-time femaleemployee of one of the large retail chains might be expected toenjoy greater de facto security, training and development oppor-tunities than her counterpart in a small family-owned store. Lessexpectedly, the same is likely to be true of the comparison withmale full-time employees in some sectors of manufacturing orprotection services; it may even be true of managers in thesesectors. Much depends on the business systems, strategy andstructure of employing organizations, and so it to these that theanalysis now turns.

Changing business strategies and structures

The 1980s and 1990s saw major changes in business strategies andstructures underpinning the changes in both employment rela-tions management and the patterns of employment. In the case ofwhat might be termed the ‘external face’ of organizations therewere considerable changes in the portfolio of many companies.For example, the second Company Level Industrial RelationsSurvey (CLIRS) found that, over the five years until 1992, morethan two-thirds of companies with more than 1000 employees inthe UK reported cases of merger and acquisition and a similarnumber investment in new locations. Almost the same number,however, reported the closure of existing sites, nearly half divest-ment and 40 per cent the rundown of existing sites. Many of thesechanges were associated with each other. Thus, the authors foundthat nearly three-quarters of the companies reported both growthand closure or rundown, with 20 per cent citing growth only and8 per cent neither (Marginson et al., 1995: 20).

A second significant change is the growing internationalizationof the UK economy. In the preparatory work for CLIRS in 1992, 975companies were identified as having more than 1000 employeesin the UK. Of these, 759 were UK-owned and 216 foreign-owned.Of the UK-owned companies, almost half (360) were themselvesmultinational including about one-third of the companies, dis-cussed below, that had been privatized since 1979 (Marginson et al.,


16


1995: 4, 20). Overall, then, almost seven out of ten large companiesin the UK were multinational.

A third major change, externalization, involves the subcontract-ing of activities previously performed inside the organization.This is closely associated in many people’s minds with privatiza-tion and programmes of compulsory competitive tendering. AsFigure 1.1 has already confirmed, however, such developmentsare widespread and reflect the conventional wisdom that manage-ment should focus on its ‘core’ activities, allowing much greaterplay for the ‘market’ in areas of so-called ancillary services such ascatering, cleaning and distribution.

There have also been significant changes on the inside oforganizations, reflecting the revolution in information processingfacilities. One, divisionalization, involves the break-up of the large-scale hierarchical organization into a number of semi-autonomousor ‘quasi’ businesses responsible for most, if not all, activitieswithin their jurisdiction. Examples include teamworking undercellular manufacturing, ‘executive agencies’ and ‘trusts’ in thepublic services, the break-up of companies such as Courtauldsand ICI into separate and independent organizations and, in thecase of multinational companies (MNCs), the coming of inter-national product or service divisions with responsibility for indi-vidual products or related products either on a European orworldwide basis. The second, budgetary devolution, involves theallocation to the lowest possible unit within the organization ofresponsibility for managing activities within financial resources ortargets. A third development is a variant of the externalization dis-cussed in the previous section. It involves seeing the organizationas an internal market in which ‘services’ are traded between ‘pur-chasers’ and ‘providers’ to ensure that different groups are moreresponsive to the needs of each other and that activities are costeffective. The NHS, where the district health authorities formerlyresponsible for total health care provision within a given area,have been split into purchaser authorities and provider trusts, isthe extreme example.

Both these external and internal changes are profoundly im-portant in understanding why there has been restructuring, butlittle redesign, of employment relations in the UK. For example, atthe same time as the changing portfolios have reinforced many of


17


the implications of the business system, they have also led to shiftsout of manufacturing and reductions in the size of many organiz-ations as the result of divestment and externalization. Many moreworkplaces in the UK find themselves competing for investmentwithin the MNCs’ internal market at the same time as they haveto justify retaining activities in-house through market testing.Meanwhile, divisionalization, devolved budgeting and internalmarkets have involved a fundamental shift from management bytask to management by financial performance. In the words ofmanagement consultants McKinsey & Co. discussing develop-ments in the electronics sector:

Decentralisation to small units has limited the scale of am-bition to that of the units rather than the company as a whole.‘Numbers driven’ rather than ‘issue driven’ planning hasreinforced a focus on short term results rather than long term investment to create major new businesses. The limited roleof the centre in many UK companies has meant that thepotential synergies and scale benefits of a large company – increating a customer franchise, in product development and inattracting and developing highly talented management –have not been achieved.

(McKinsey & Co./NEDO, 1988: 49)

Coupled with the changing patterns of employment described inthe previous section, these developments have also made a sig-nificant contribution to the diversity of employment relationspractice. For example, developments such as the externalizationof activities, divisionalization and budgetary devolution havecombined to encourage the fragmentation of employment sys-tems, leaving managers to cope in a contingent fashion in the bestway they can. Critically, too, developments in the public sectormean that it no longer has the function of the model ‘goodemployer’.

Most fundamentally, the sheer pace and extent of the change inbusiness portfolios has been a consideration in its own right. Notonly has it produced considerable insecurity on the part of man-agers and employees alike, which is inimical to developing long-term relationships, but it has also made it difficult to develop aconsistency in approach of almost any kind. Indeed, organizations


18


are littered with half-finished initiatives, which have had to beinterrupted because of takeover or merger or change of businessdirection or divestment, leading to considerable cynicism not onlyon the part of employees but also on the part of senior managerswho are supposed to be implementing them.

Changing recipes

The era of collective bargaining

For much of the period following the ending of the Second WorldWar in 1945, personnel management played second fiddle toindustrial relations. Personnel management, rightly or wrongly,was regarded as an administrative function concerned with oper-ational matters relating to recruitment and selection, appraisal,reward and training policies and practices directed towards theindividual employee. Industrial relations, which focused on tradeunions, collective bargaining and the handling of grievances anddisputes and so could be suitably regarded as concerned with col-lective labour issues, was seen as the area for strategic initiative.

Unusually for the UK, theory and practice were closely inter-twined. Writers such as Flanders (1970) argued impressively thecase for collective bargaining. Collective bargaining, he sug-gested, should be seen primarily not as a bargaining but as a rule-making process. Collective bargaining, for which he suggesteda better description would be joint regulation, made it possibleto agree the key procedural and substantive rules governingthe employment relationship. An added advantage was that itenabled workers themselves to shape the decisions affecting themthrough democratic activity within the trade union. More to thepoint, others argued (see, for example, Clegg, 1960), collectivebargaining was to be preferred to other vehicles for promotingparticipation and involvement such as works councils and wor-ker directors.

Collective bargaining recognized that the enterprise involved anumber of stakeholders with plural and, sometimes, conflictinginterests. Trade unions did not compromise their independencein collective bargaining: they were the permanent opposition. In


19


principle, other analysts (see, for example, McCarthy and Ellis,1973) argued, collective bargaining could be extended to almostevery aspect of the working environment. They saw collectivebargaining shifting from simply dealing with claims, disputes andgrievances, i.e. a largely reactive role, to a more proactive or ‘pre-dictive’ function.

The practice seemed to bear out the theory. Collective bargain-ing was by far and away the most important process in UK indus-trial relations. Even the incoming Conservative government ofEdward Heath in 1970 recognized this. Many saw the IndustrialRelations Act 1971 as a legal attack on the power of trade unions,but it did not question the primacy of collective bargaining. Thiswas explicitly accepted as the most important method of deter-mining pay and conditions of employment. The number alreadycovered by collective bargaining was extensive and there wasoptimism that it would grow as non-manual workers achievedrecognition for their trade unions. The breadth and depth of col-lective bargaining was also impressive. Like other Europeancountries, a framework of multi-employer agreements, mostnegotiated at national level, provided the foundations. To this,however, had been added throughout the 1950s and 1960s some-thing that seemed to be lacking in the European practice, whichwas the deep involvement of shop stewards and other local tradeunion representatives at workplace level in the application andextension of the agreements reached at higher levels.

The conventional wisdom was that good practice equated withformalized procedures. Government led the way. A feature of allof the nationalization acts in the late 1940s was the inbuilt statu-tory requirement for managers of the new public corporations tonegotiate and consult with recognized trade unions. Private sectorcompanies were left in no doubt that they were to follow thisexample. Continuation of, and indeed elaboration of this formulacould be seen clearly in the report of the Royal Commission onTrade Unions and Employers’ Associations published in 1968: theprevailing levels of industrial conflict were too high and thesource could be traced to inadequacies in the national or industry-level negotiating bodies such as the National Joint IndustrialCouncils which were supposed to regulate these things. For a hostof reasons, much of the activity in industrial relations had shifted


20


to the level of the workplace, where it was typically more difficultto control and regulate. The nature of the relations between, forexample, plant managers and individual shop stewards washighly informal and fragmented, with agreements typically adhoc, makeshift and unwritten. The Commission’s classic recom-mendation was that the divide between the ‘two systems’ (theformal national-level arrangements and the informal localarrangements) should be closed by moving towards the formaliz-ing of the latter.

Clearly reflecting this same recipe was the elaboration of pro-cedures within individual companies for all manner of problemsrelating to discipline and grievance-handling. Indeed, the central-ity of installing and following procedures became the leitmotif ofacceptable practice. Sophisticated companies were, it was main-tained, already pursuing these steps anyway. The need for theofficial spelling-out of these formal procedures was mainly todisseminate this modern good practice to the less enlightened.Illustrations include the codes of practice on discipline and griev-ance-handling as promulgated by the Advisory, Conciliationand Arbitration Service (ACAS). Notably, these ‘codes’ were notin themselves legally mandatory in any direct sense. However,observance or breach of these formulations of recommended prac-tice could be used in tribunals and courts as evidence of behaviourshould a case be brought to law.

It has become clearer since that this was very much the era of thelarge manufacturing workplace employing men in full-time jobs.Even at the time, it represented only a partial characterization.Large swathes of the economy, notably in services and among smalland medium-sized enterprises (SMEs) more generally, remaineduntouched by trade unions and collective bargaining. Significantly,too, in the light of later developments, even where it was wellingrained, including the car industry, the famed workplace bar-gaining was relatively narrow in its scope, focusing largely on the‘wage/effort’ relationship and rarely extending to wider issues.

A number of non-union companies such as IBM and Marks &Spencer were already pursuing what was to become known as theHRM approach. As early as 1974, for example, Fox had drawnattention to the variety of identifiable approaches with his codi-fication of four styles – traditionalist; sophisticated paternalist;


21


sophisticated modern; and standard modern – which were tobecome the building-blocks of later modelling (see, for example,Purcell and Sisson, 1983). These, together with the dominant prag-matic approach, are set out below:

1 The traditionalist style was based on a firm belief in manage-ment’s right to manage without interference. It was character-ized by adamant hostility to trade unions and is associatedtherefore with a refusal to recognize unions, still less to negoti-ate with them.

2 The sophisticated paternalistic style was also marked by opposi-tion to trade unionism but it differed from the former in the wayin which the management of companies practising this styleintroduced an array of benefits and positive personnel devicesto substitute for collective bargaining. These included above-average arrangements relating to pay, welfare and consultation.

3 Sophisticated moderns were sophisticated in a rather differentway. They recognized that, at least in certain industries, itwould be unrealistic to seek to defend absolute managerial pre-rogative. Workforce expectations of trade union representationwere met with a set of measures which legitimate these expec-tations but which nonetheless sought to contain and channelthe consequences. Thus joint procedures which contained andinstitutionalized conflict were honed.

4 Standard moderns represented the pragmatic stance. This wasperhaps the predominant style in Britain. It was reactive andopportunistic rather then principled, the approach adopted atany one time depending primarily on the nature of the pres-sures experienced.

The coming of HRM

The term ‘human resource management’ (HRM) emerged inBritain in the mid to late 1980s and continues to be surrounded bycontroversy (Storey, 1995). A critical issue is the meaning to beattached to it. One way in which HRM has come to be used is asimple relabelling of personnel management and industrial rela-tions, arguably designed to capture the benefits of the other mean-ings. For others, however, HRM denotes above all a more strategic


22


approach. Four aspects are involved. One is the link between man-aging human resources and business strategy; it is the state ofcompetition, which, in effect, is requiring management to makechanges. A second is the key role which senior line managers areexpected to play – managing human resources becomes theirmajor activity. A third is the emphasis on the integration of poli-cies and practices with each other as well as with business strat-egy. Fourthly, and finally, HRM has come to be associated with avery specific approach, which is discussed in detail in Chapter 2.

For the present, it is enough to appreciate the main contrastbetween the thinking associated with HRM and the era of collec-tive bargaining. A number of common themes continually appearand reappear in the debate. The first emphasizes the model ofmanagement as a strategic actor. Management’s approach toemployment relations has to be business-focused, if not business-led. Senior line managers in particular can no longer afford toallow specialist HR/IR managers to maintain a ‘system’ for itsown sake. The key decisions in employment relations must haveregard to the business strategy and be taken by line managers. Asecond theme is an emphasis on flexibility: management, it isargued, needs to develop the capacity to respond more quickly tobusiness conditions. This is reflected in developments as diverseas: the introduction of devolved organizational structures; thegrowth of outsourcing; and a range of flexibility in working time,task and functional flexibility. The third theme relates to arrange-ments for managing the employment relationship. Managementis no longer supposed to see collective bargaining as the primarymechanism. Rather, more emphasis on the direct relationship withindividual employees is regarded as the bedrock of the system.The implication is that unions are at best unnecessary and at worstto be avoided. Similarly, although it is a moot point whether themodel can do without a firm basis in procedures to ensure consis-tency of behaviour, the impression given is that ‘flexibility’ iseverything and the desired state is that management ‘can do’ andshould be able to do anything it likes. This is hardly compatiblewith the notions of rights and obligations set out in legislation orcollective agreements. Figure 1.2 summarizes the main contrasts.

A critical point to note is that there is a Jekyll and Hyde qualityabout HRM. Not only are there, as Chapter 2 outlines, a variety of


23



24

Figure 1.2 IR and HRM: the differencesSource: Storey (1992: 35)


approaches including ‘universal’ and ‘contingency’ models, but itis conveniently forgotten in most formulations that there are so-called hard and soft versions too. In Storey’s words,

The one emphasises the quantitative, calculative and busi-ness-strategic aspects of managing the headcounts resourcein as ‘rational’ a way as for any other economic factor. By con-trast, the ‘soft’ version traces its roots to the human-relationsschool: it emphasises communication, motivation and leader-ship.

(Storey, 1989: 8)

Both versions share key elements of the analysis and the pre-scription of the HRM approach: that organizations are under pres-sure to rethink their approach to managing people; that they areand should be seeking a better fit between their human resourcestrategies and business strategies; and that they are and should betransforming their practice. The two versions differ fundamen-tally, however, in their views on the direction that this transform-ation should take. The ‘soft’ version entails a range of specificpolicies and practices, which are people-centred and designed towin commitment. On the other hand, the ‘hard’ version admitsany practice that advances the business strategy. In certain cir-cumstances, the response might entail very low pay or substantialemployment insecurity.

With the benefit of hindsight, it is not difficult to understandwhy the new paradigm received so much attention. Not only didit seem to offer a guide to best practice, which was far bettergrounded and integrated than ever before, but it was alsoextremely optimistic. Here was a model that appeared to be ableto satisfy everyone (apart from unions): it met the demand foreconomic efficiency and yet could also seemingly make a signifi-cant contribution to improving the quality of working life. No lessimportant, the stress on the significance of the management ofhuman resources to the competitive advantage of the organizationappeared to give the HR/IR function, if not necessarily specialistHR/IR managers, the status which so many commentators, inparticular in the UK and USA, had been seeking. Important, too,was that HRM became institutionalized in business schools whereit has provided an opportunity to develop new courses and to


25


occupy a central place on MBA programmes. Personnel manage-ment, rightly or wrongly, had been seen largely as low-leveladministrative routine and so has been ignored in the curricula ofkey management programmes such as the MBA. Human resourcemanagement, with its emphasis on strategy, strategic choice andcompetitive advantage, has proved to be much more acceptable.Most importantly, HRM was ambiguous: it is not stretching thepoint too far to suggest that it admitted of any number of possi-bilities.

These sentiments chimed well with the political climate. Anx-ious to avoid what they saw as the failures of the past, the fourConservative governments in power between 1979 and 1997sought to introduce an ‘enterprise culture’ in which individualsand organizations, rather than governments, were to be heldresponsible for economic performance. Thus, as well as rejectingthe maintenance of full employment as a major policy objective,they in effect abandoned the commitment of their predecessors tovoluntary collective bargaining as the most effective method ofdetermining pay and conditions. Trade unions and collective bar-gaining were seen as major factors in the stickiness of the responseof wages to changes in demand and supply; and the governmenthas introduced a series of Employment Acts to limit the powers oftrade unions. The following quotation from the 1992 White Paperdealing with industrial relations, People, Jobs and Opportunity,gives a very strong flavour of its ideal state, even if its descriptiveaccuracy is open to question:

There is new recognition of the role and importance of theindividual employee. Traditional patterns of industrial rela-tions, based on collective bargaining and collective agree-ments, seem increasingly inappropriate and are in decline. . .

Many employers are replacing outdated personnel prac-tice with new policies for human resource management,which put the emphasis on developing the talents andcapacities of each individual employee. Many are also look-ing to communicate directly with their employees ratherthan through the medium of a trade union or a formal workscouncil. There is a growing trend to individually negotiatedreward packages which reflects the individual’s personal


26


skills, experience, efforts and performance. Employees inturn have higher expectations of their employer. They areincreasingly aware of the contribution they are making – asindividuals – to the business for which they work. Theywant to know how it is performing and to contribute to itsdevelopment. They increasingly expect to influence theirown development and to be rewarded for their achievementand initiative . . .

They also want the opportunity to influence, in some casesto negotiate, their own terms and conditions of employment,rather than leaving them to the outcome of some distantnegotiations between employers and trade unions . . .

(Employment Department, 1992)

There were major flaws nonetheless. HRM’s ambiguity causedmuch worry. The more work that was done, the more it emergedthat there was a massive gap between the rhetoric and the realityof HRM. Not only were relatively few organizations pursuing thepractices, as the first findings of the 1998 WERS (Cully et al., 1998)have emphatically confirmed, ironically it was mostly unionizedcompanies that were doing so. Most SMEs showed no signs of aclear-cut approach of any description; if they did, it was mostlyassociated with Charles Dickens’s Bleak House (see, for example,Sisson, 1995), judging by the grievances being raised with ACASand Citizens Advice Bureaux.

Critically, HRM overestimated the ability of managers torespond to their environment by moving upmarket into qualityproducts and by bringing about the associated changes inemployment relations. Faced with the relatively poor take-up ofthe model in the USA, two of the key figures central to theirpropagation had to recognize that

‘strategic’ human resource management models of the 1980swere too limited . . . because they depended so heavily on thevalues, strategies and support of top executives . . . While wesee [these] as necessary conditions, we do not see them assufficient to support the transformational process. A modelcapable of achieving sustained and transformational changewill, therefore, need to incorporate more active roles of otherstakeholders in the employment relationship, including


27


government, employees and union representatives as well asline managers.

(Kochan and Dyer, 1992: 1)

The key point that most commentators missed is that strategicchoices are not made in a vacuum. The structures within whichthis choice is exercised, for example the corporate governancearrangements described earlier, are profoundly important: theycan support or hinder the approach. Moreover, such structures aredeeply rooted. They are not easily changed and decision-makersmay even fight shy of trying to do so, preferring instead to arguethat there is no alternative to reducing costs. There is no simplemodel of the factors that support the development of so-calledstrategic HRM. It seems clear, however, in Streeck’s (1992: 10)words, that a ‘regime of free markets and private hierarchies is notenough to generate and support a pattern of . . . quality produc-tion’. It is those countries, such as Germany and Japan, withregimes characterized by interlocking and mutually reinforcinginstitutional arrangements and processes, which seem to offer themost favourable environment for this kind of approach for man-aging employment relations.

A new agenda?

Although the full impact of the developments described here,notably those outlined in the first findings of the 1998 WERS(Cully et al., 1998), have yet to be absorbed, there has already beena significant shift of mood reflecting experience of the last decade.Thus, while many pundits continue to be extremely upbeat and toproclaim a set of nostrums about the ‘hypertext organization’,‘agile production’ and the ‘open-book’ company, there is a muchgreater note of caution, indeed humility, on the part of more seri-ous commentators. Typically, these either are reluctant to specu-late about the future or, more honestly, admit to being undecided.Significantly, faced with a not dissimilar pattern of developmentsin the USA, this is exactly what erstwhile leading proponents ofthe ‘transformation thesis’, including Cappelli, Katz and Oster-man, have recently done (Cappelli et al., 1997: 226).


28


Some issues are becoming clearer, however, which give usgreater confidence in our approach to the subject matter of laterchapters. Most critically, there is a growing consensus, in the USA(Cappelli et al., 1997: 226) as well as the UK (Sisson and Margin-son, 1995: 117) and Europe (CEC, 1997), about the major challengefacing management for the foreseeable future, even if there is noeasy answer. To paraphrase Herriot et al. (1998), given the inten-sifying competition and/or pressure on scarce resources,management has to reconcile two seemingly conflicting require-ments: to cut costs to the bone and yet at the same time promotethe security, autonomy and teamwork, which are the conditionsfor innovation into new markets, products and services. TheEuropean Commission’s Green Paper Partnership for a NewOrganization of Work (CEC, 1997: 5) puts it nicely in suggestingthat the policy challenges could be ‘summarised in one question:how to reconcile security for workers with the flexibility whichfirms need’.

The introduction of the third and critical stage of economicand monetary union (EMU) at the beginning of 1999 (thesetting up of the European Central Bank with responsibilityfor EU-wide monetary policy and the timetable for the intro-duction of a single currency) is likely to be especially import-ant here. Regardless of its adoption of the euro, the UK isunlikely to escape the significant pressure for restructuring thatthe greater transparency of prices and costs, coupled with thedevelopment of a single capital market, will generate. Indeed,there are strong grounds for suggesting that the pressure inthe UK is likely to be greater than in most other countriesbecause of the presence of a large number of MNCs (see below),one of the loosest set of arrangements governing closures and therelatively low levels of productivity (see, on this point, Cressey,1998).

Also clear is that, with the UK’s signature of the ‘social chap-ter’ and its incorporation into the Treaty of Amsterdam in 1997,the future direction of the European social dimension is alsolikely to have a profound effect on employment relations in theUK. In particular, it is difficult to escape the conclusion that,whatever else happens, the European connection signals the endof the ‘voluntarism’ that has characterized UK employment


29


relations for a century. This is because our European partnershave much stronger traditions of regulation in employment rela-tions than the UK (for further details, see CEC, 1989: 8–12). In theearly days of the European Community, the ‘Roman-Germanicsystem’ associated with the original six members of the Euro-pean Economic Community was dominant. This tended to prior-itize statutory regulation. In recent years, however, as thenumber of EU members has increased and concerns about sub-sidiarity have grown, the so-called ‘Nordic system’ of Denmarkand Sweden has become more prominent. This puts the empha-sis on collective agreements, which are subsequently madelegally enforceable. Good examples would be the agreements onparental leave and equality of treatment for part-time workersreached under the social policy protocol process. These werenegotiated by the European social partner organizations andsubsequently given legal force by the European Commission inthe form of directives requiring their implementation by memberstates.

Significant, too, is that much of the recent legislation providesfor information and consultation through employee representa-tives from trade unions or some form of works council, reflectingthe importance attached by our EU partners to both representative(i.e. collective) and direct (i.e. individual) participation. As well asthe specific arrangements covering information and consultationin MNCs, there are general provisions in such areas as collectiveredundancies and transfers of undertakings, health and safety,and working time. So far, the UK government, while giving strongsupport to the notion of ‘partnership’ at workplace level, hasopposed the introduction of a universal right to representation,preferring the approach of providing for issue-specific employeerepresentation in each of the areas. This cannot go on for ever,though. Indeed, the European Commission has a draft directiveon national-level information and consultation to go alongsidethat dealing with multinational companies. UK management, itseems, is going to have to get used to the idea of managing indi-vidually and collectively as we have previously argued (Storeyand Sisson, 1993: 231–2).

A third issue likely to be of increasing importance in both thetheory and practice of employment relations is that of integration.


30


Historically, there has been a tendency to put the main emphasison ‘best practice’ in the individual areas of employment relations– the ‘best’ payment system, the ‘best’ performance appraisalsystem and so on. Yet there is a growing body of evidencereviewed in later chapters to suggest that it is not ‘best practice’which is important. Indeed, its pursuit can be counterproductive,encouraging the mistaken belief that practices have automaticeffect and promoting cynicism when things go wrong. Rather it isthe way that practices are configured, i.e. fit together and makesense to employees in the particular situation, that creates theadded value. Given the importance of the particular situation, it isdifficult to draw up hard-and-fast rules governing integration,although key pointers are given in Chapter 10. An importantimplication, however, is that improving the management ofemployment relations is within the grasp of any organization andnot just larger ones.

The rest of the book

As well as reviewing the latest thinking and developments, the restof the book tries to show how the management of employmentrelations can be improved despite the very real obstacles to befound in the UK. It begins by tackling the issue of managing strate-gically. Various models are discussed and there are suggestions onhow an organization might go about developing a more strategicapproach. Chapters 3 and 4 deal with the relatively novel topics(novel in HR/IR texts) of managing restructuring and involvementand participation. Chapter 5 focuses on two issues at the heart ofthe employment relationship: pay and working time. Chapters 6and 7 are concerned with improving the organization’s compe-tences and capabilities; Chapter 6 is concerned with training anddevelopment, and Chapter 7 with recruitment and selection. Chap-ter 8 focuses on managing with trade unions and, in particular,considers the much-heralded trend towards ‘partnership’. Chapter9 deals with another issue rarely receiving attention: the manage-ment of the HR/IR function and how its contribution might berealized and organized. The final chapter returns to the issues ofthe new agenda and discusses the practical implications.


31


Suggested further reading

Chapters 1–3 of Managing Human Resources and Industrial Relations(Storey and Sisson, 1993) carries much more detail on the historical andinstitutional background. For changes in the nature of work, see thereport of Gallie and his colleagues (1998) Employment in Britain Survey.Strongly recommended are the two volumes dealing with the detailedreporting of the findings of the 1998 Workplace Employee RelationsSurvey (Cully et al., 1999; Millward et al., 2000).


32


THE REALITIES OF HUMAN RESOURCE MANAGEMENT · PDF fileThe coming of HRM 22 A new agenda? 28...

Documents

Transcript of THE REALITIES OF HUMAN RESOURCE MANAGEMENT · PDF fileThe coming of HRM 22 A new agenda? 28...