The Practice of Human Resources Management

The Practice of Human Resources Management

HRM is concerned with all aspects of how people are employed and managed in organisations. It covers activities such as:

Strategic HRM
Human Capital Management
Knowledge Management
Resourcing [HRP, recruitment, selection, talent management performance management, reward management, learning and development]

It draws from behavioural sciences, industrial relations, management etc. HRM is a strategic, integrated and coherent approach to employment, development and well-being of people working in organisations.

Definition:

Beer et al, 1984:”HRM involves all management decisions and action that affect the nature of the relationship between the organisations and its employees – its human resources.”
Guest, 1987: “HRM comprises a set of policies designed to maximise organisational integration, employee commitment, flexibility and quality of work.”
Legge, 1989 adds that human resources are valuable and are a source of competitive advantage.

Objectives of HRM:

Ensure that the organisation is able to achieve success through people
Increase organisational effectiveness and capability
Learn and capitalise on opportunities

HRM has an ethical dimension and so is concerned about the rights and needs of people in organisations. HR goals may also be analysed as:

Contribution [what employee behaviour is expected]
Composition [headcount, skills mix etc]
competence [ability desired]
Commitment [level of attachment and identification].

Guest[1991] also includes the following policy goals:

Strategic integration of HRM issues into strategic plans to ensure coherence.
High Commitment in pursuing agreed goals
High quality e.g. in management of employees and investment in high quality employees.
Functional flexibility and the existence of an adaptable organisation structure capable of innovating.

People must be managed as assets and HRM policies must align with business policies and corporate strategy and developing a close fit between HR policies, procedure and systems.

Theories of HRM:David Guest [1997]:

Strategic Theories – good fit between HR practices and the internal/external context produces superior performance
Descriptive theories. These either list HR policy areas and outcomes or adopt a systems approach. They are largely non-prescriptive.
Normative theories establish norms/standard patterns which are prescribed as best practice implying ‘one best way’.
Other theories [Boselie et al [2005] include:
Contingency theory –HRM is influenced by organisation’s environment and circumstances
Resource-based View- HRM delivers added value through strategic development of its rare, hard to imitate/substitute human resources.
AMO theory: Performance =Ability + Motivation + Opportunity to Participate. Attending to employee interests e.g. skills requirements, motivations and quality of the job.

Diversity of HRM. There are no universal characteristics of HRM: many models exist; practice are diverse “HRM covers a vast array of activities and shows a huge range of variations across occupations, organisational levels, business units, firms, industries and societies” [Boxal’ 2007]

Storey [1989] distinguishes between:

Hard version:
An organisation achieves competitive advantage through People an important resource.
People have to be acquire, developed and deployed to benefit the organisation
Focus is on the quantitative and business-strategic aspects of managing human resources in a ‘rational’ way as for other economic factors.
Soft Version has roots in humanism [Human relations school founded by Elton Mayo-1933. People are responsible and progressive beings. Productivity is related to job satisfaction e.g. liking co-workers or having pleasant supervision. Storey’s soft approach highlights:
Treating employees as valued assets.
As a source of competitive advantage through commitment [‘hearts and minds], adaptability and skills.
Involvement, communication and leadership.
Views employees as means not objects

However is has been said that “the rhetoric is soft [but] the reality is often hard” with the interests of the organisation prevailing over those of the individual.”

One aim of HRM is to promote commitment – identification and involvement in a particular organisation. But other authors have asked “Commitment to what?” employee involvement is often on the company’s terms. Power remains firmly in the hands of the employer. This restricts mutuality [belief that management and employees share the same concerns and therefore ought to work together].

Unitary and Pluralist employee relations. HRM is characterised by the unitary not pluralist view –emphasis on individual not collective contracts agreements. The unitary view stresses:

People share the same goals and should work as one team.
Interests of members are recognised but are subordinate to those of the enterprise.
Hence emphasis on strategic integration and strong cultures which flow from top management vision and leadership.
People must be committed to the strategy and must fir the culture.
High commitment and alignment of HR strategy and business strategy

The pluralist view:

Interests of employees may not coincide with those of employers
Unitarist view may be naive, unrealistic and against interests of employees.
People are assets not variable costs; they should be treated as human capital. They make significant contribution to organisational success.

However there is a process of “capitalising on humanity “rather than investing in human capital. There is a one-sided focus on organisational outcomes at the expense of employees.

Development of the concept of HRM.

The terms HRM and HR have virtually replaced the term ‘personnel management’ though the practice is rather synonymous so it has been labelled “old wine in new bottles”. However HRM has the virtue of emphasising treating people as a key resource. Guest [1987] and Storey [1995] regard HRM as a substantially different model built on unitarism. People are assets not variable costs.

HRM emerged fully in the 1980s with the ‘matching’ model and the Harvard framework.

Matching Model of HRM was developed by Fombrun et al [1984] at the Michigan School:

HR systems and organisational structure should be managed so as to be congruent with organisational strategy – hence matching model. They further said there is a human resource cycle which consists of: selection, appraisal, rewards and development.

Harvard Framework. Beer at al [1984]

Today’s pressures demand a “broader, more comprehensive and more strategic perspective” one human resources.
There should be a longer term perspective which treats people as assets not variable costs.
HRM belongs to line managers who should accept more responsibility for aligning HR policies with strategy.

Reservations: HRM continues to be a controversial topic among academics:

Promises more than it can deliver. It has deficiencies as a theory. Guest [1991]: HRM is an “optimistic but ambiguous concept” – all hype and hope. It heralded outcomes asunrealistically high.There is a disjunction between rhetoric and reality; between HRM practice and theory.It remains an unfinished project.
Morality of HRM. Has been accused of being manipulative or even positively immoral. It is a form of ‘control by compliance’. Employees are expected to be committed to what the organisation wants. It preaches mutuality but the rhetoric exploits workers. It a wolf in sheep’s clothing: a form of deceit which brainwashes workers to become willing slaves; who are used as means to an end.

Ethical Dimension of HRM:

Treating people equally concerning opportunities for employment, learning & development etc
Procedural justice – fair consistent transparent
Distributive justice- rewards in accordance with contribution and receiving what was promised.
Natural justice – what standards are to be achieved or rule to be followed
Not treating people as mere factors of production.
Concern for the wellbeing of employees not mere pursuit of commercial gain
Security of employment
Environment which protects health and safety
Reasonable balance between life and work
Protection against harmful practices at work e.g. bullying, harassment, discrimination etc.

STRATEGIC HRM.

Strategic HRM is the interface between HRM and strategic management”. HRM is a strategic, integrated ad coherent approach.

Concept of Strategy: Chandler [1962] defines strategy as “the determination of the long term goals and objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out those goals.” It has three fundamental characteristics:

1)It is forward looking. – deciding where you want to go and how you get there i.e. both means and ends.. it is a declaration of intent which defines long term goals to guide purposeful action to deliver required results

2)Organisational capability depends on resource capability [it quality and quantity]. Competitive advantage comes from the acquisition and effective use of bundles of distinctive resources that competitors cannot imitate.

3)Strategic fit. Congruence between HR strategies and business strategy in the context of the internal/external environment. A firm must match its capabilities and resources to its available opportunities.

Formulation of Strategy. This is a process which is often described as logical, step by step resulting in a formal written statement. This is often a misrepresentation of reality. Formulation can never be rational and linear. Strategy is often based on assumption that the future will resemble the past. Strategy formulation is not a deterministic, rational and continuous process. Mintzberg [1994]: “sometimes strategies must be left as broad visions, not precisely articulated, to adapt to changing environment”. He stressed that strategic management is a learning process. Also Tyson [1997] pointed out that strategy:

Has always been emergent and flexible
Come about through action and reaction
Always directed towards change
Is conditioned by the management process itself.

Strategic HRM is not just about planning but also implementation. It must:

Ensure that the organisation has the skilled, committed well-motivated employees to achieve sustained competitive advantage; with vertical alignment of HR strategy and business strategy.
Strategic HRM is largely about integration and adaptation
HR policies must cohere across policy areas and across hierarchies
Must be accepted and used by line managers in their everyday work.

Strategic HRM is based on:

Resource based view and strategic fit.

Resource Based View of Strategic HRM:

The range of range of resources an organisation has [including its human resources] produce its unique character and creates competitive advantage.

Competitive advantage arises where resources are not perfectly mobile across firms
Such resources include experience, knowledge, judgement, risk-taking propensity wisdom of individuals in the firm
Resources which give competitive advantage must have four attributes
Valuable
Rare
Imperfectly imitable
Non-substitutable
Managers must look inside the firm for such resources.

There are 3 important components of HR practices and systems:

Human capital pool consisting of the stock of employee knowledge, skills, motivation and behaviours.
Flow of human capital through the firm – movement of people and knowledge.
Dynamic processes through which organisations change and renew themselves.

There must be strategic fit between resources and opportunities. Investing in people increases their value to the firm. Creating firms which are “more intelligent and flexible than competitors” through hiring and developing talented staff thus enhancing the firm’s human and intellectual capital. The challenge is to find, assimilate, compensate and retain talented individuals.

Strategic Fit: Linking HRM practices vertically with the strategic management processes of the organisation; and horizontally through coordination or congruence across HRM practices.

1)Best Practice approach –assumes there is a set of best HRM practices that are universal; are best in any situation: when adopted these lead to superior organisational performance. The list of such practices :

Pfeffer [1998]:
Employment security
Selective hiring
Self-managed teams
High compensation contingent on performance
A skilled and motivated workforce.
Guest [1999] adds:
Careful use of selection tests
Recognition that training is an on-going activity
Job design to ensure flexibility, commitment and motivation. Employees getting responsibility, autonomy to use knowledge and skills.
Two-way Communication to ensure everyone is fully informed.
Employee share ownership programmes.
Delery & Doty [1996]
Use of internal career ladders and results oriented appraisal
Performance based compensation
Employment security
Employee voice
Broadly defined jobs.
It is difficult to accept that there is a universal best practice. Perhaps’ good practice’ not ‘best practice’.

2)Best Fit Approach. This is in line with contingency theory. HR strategy should be congruent with context and circumstances of the firm in terms of vertical integration and alignment. Best fir has three models: life cycle, competitive strategy and strategic configuration.

Life Cycle Best Fit Model. Is based on the four stages of a firm’s development: start-up; growth, maturity and decline. [Product life cycle]. Effectiveness depends on a fit with an organisation’s stage of development. HRM programmes, practices, procedures etc change to meet new needs through a series of stages as the organisation becomes more complex.
Best fit and competitive strategies. Porter [1985] identified three strategies:
Innovation –being a unique producer.
Quality –delivering quality goods and services.
Cost leadership – managing expense.

Schuler & Jackson [1987] say role characteristics must match preferred strategy.

Schuler & Jackson [1987: Role Behaviours appropriate to for different strategies.

Innovative / Quality / Cost-leadership Strategy

High degree of creative behaviour

Longer term focus

Relatively high level of cooperation & inter-dependent behaviour

Moderate degree of concern for quantity
Equal degree of concern for processes & results
Greater degree of risk taking

High tolerance of ambiguity and unpredictability.

Relatively repetitive &predictable behaviour
More long term/intermediate focus
Modest amount of cooperative, interdependent behaviour
High concern for quality
Modest concern for quantity of output
High concern for processes [how goods/services are made/delivered]
Low risk taking activity.

Commitment to goals of the organisation.

Relatively repetitive &predictable behaviour
Rather short term focus

Primarily autonomous/individual activity.

Modest concern for quality
High concern for quantity of output
Primary concern for results

Low risk taking activity.

Relatively high degree of comfort with stability.

3)Strategic configuration. Delery & Doty [1996]. To be effective organisations must match strategy to ideal types defined by theories e.g. Miles & Snow [1978]:

Prospectors. Environment characterised by rapid and unpredictable changes. They have low levels of formalisation/specialisation but high on decentralisation. Relatively few hierarchical levels.
Defenders. Operate in more stable and predictable environments. Engage in more long term planning. Have more mechanistic/bureaucratic structure. Have coordination through formalisation, centralisation, specialisation and vertical differentiation.
Analysers. Combination of prospector and defender. Operate in stable environments like defenders and in markets which constantly require new products [like prospectors]. Not usually initiators of change [like prospectors] but follow changes more rapidly than defenders.
Reactors are unstable organisations operating in what they believe are unpredictable environments. Lack consistent, well articulated strategies. Do not take long range planning.

Comments on best fit. This seems more realistic than the best practice model. “It is necessary to avoid falling into the trap of contingent determinism”- claiming that the context determines strategy absolutely. There is danger of matching HR practices and policies mechanistically. It is possible that HR policies may fit instead into social legitimacy goals.Best fit models tend to be static not taking into account processes of change.

Bundling. This is the development and implementation of several HR practices together so that they are inter-related and so complement and reinforce each other. – A process of horizontal integration [use of ‘complementarities]. “Practices within a bundle are interrelated and internally consistent; that ‘more is better’ with respect to impact on performance due to overlapping and mutually reinforcing effects of multiple practices”. E.g.

Employees can acquire skills through: Careful selection and training.
Multiple incentives [financial and non-financial rewards]
Most models include involvement, careful selection, extensive training and contingent compensation, employment security, reduction of status barriers between workers and management, investment in building worker skills.

Bundling aims at achieving high performance through coherence where mutually reinforcing sets of HR policies and practices contribute to attainment of the organisation’s strategies for matching resources to organisational needs, improving quality and performance etc. HRM is holistic it is concerned with the organisation as atotal system or entity. It is not interested in isolated programmes and techniques or ad hoc development of HR practices.It produces synergy which makes greater impact. High commitment, performance and involvement are examples of bundling – groups of a number of HR practices. It is however difficult to decide how to relate different practices together.

Significant features of strategic HRM:

Sustained advantage depends on unique resources and capabilities within a firm
Competitive advantage arises from high quality people than competitors
Competitive advantage based on effective management of people is hard to imitate.
Organisational capability – the organisation able to find, assimilate, reward and retain talented individuals.
Unwise to pursue ‘best practices’ –universalistic perspective
Best fit [Delery & Doty] is preferred if organisation can avoid falling into contingent determinism.
Best fit can be pursued in a number of ways.
Improved performance can come through ‘bundling’.

General HR Strategies “A strategy, whether it is an HR strategy or any other kind of management strategy must have two key elements: there must be strategic objectives [i.e. things the strategy is supposed to achieve], and there must be a plan for action [i.e. the means by which it is proposed that the objectives will be met]”

General strategies refer to the overall system or bundle of complementary HR practices the organisation proposes to adopt. The three main ones are: