Strategic HRMLecture 4

Strategic HRMAims of the session:

To outline the concept of ‘strategic’ HRM & explore several of its components

To critically evaluate some of the assumptions upon which strategic HRM is founded

Approaches to strategic HRM At least three theoretical approaches can be identified:

1. A resource-based view of the firm & the perceived value of human capital (Barney 1991).

2. Alignment of employment policies & practices with business strategy – fit or contingency approach (the Harvard framework).

3. A ‘one best way’ of managing human resources – the ‘universalist approach.’

Barney (1991)

For a resource to result in sustained competitive advantage it must meet four criteria:

1. It must be valuable

2. It must have rarity

3. It needs to be inimitable

4. It must be non-substitutable

Rarity is related to value...The assumption that the most valued

competence is cognitive ability due to future needs for adaptability & flexibility,

Cognitive ability is distributed unevenly & those with high levels of it will be rare.

Inimitable

Competitive advantage is difficult to determine – where or what does it come from?

If an individual in Firm A goes to Firm B they can never re-create what they did in Firm A – why?

Because of ‘social complexity’ & ‘causal ambiguity’.

Non-substitutable

In the short term human resources can be substituted by other resources e.g. technology.

In the long run the human resource cannot be substituted because it’s the only resource that doesn’t become obsolete.

Fit or contingency approaches to Strategic HRMFit or contingency approaches focus on two areas -

external & internal:

External: that HR strategy fits with the demands of business strategy

Internal: that all HR policies & activities fit together into a coherent whole & are mutually reinforcing

Strategic HRMExternal pressure

HR strategy Fit Business strategy

The fit between HRStrategy &business strategyP.92 Tyson

Internal pressure

Universalist approachDavid Guest’s model (1989) an example of this

approach – HRM as ‘best practice’

One model of labour-management – a ‘high commitment’ model – is related to high organisational performance in all contexts

Has four central components

Guest’s model (1989)1: A set of HRM policy goals

2: A set of HRM policies

3: A ‘cement’ that binds the system

4: A set of organisational outcomes

Guest’s Model

HRM Outcomes HRM Policy goals

HRM Policies

‘Cement’ that binds the whole - culture

HRM’s policy goals1. Strategic Integration: ensure that HRM is fully integrated into strategic

planning; HRM policies cohere across policy areas & organisational hierarchies

2. Commitment: concerned with binding employees to the organisation & securing commitment to high performance

3. Flexibility: the organisation as a whole must be flexible, adaptive & receptive to innovation, at the individual level it calls for functional flexibility

1. Quality: can only be delivered through the development of quality staff & this is a priority for senior management

HRMs goals & policies are…A package - each is necessary to ensure the right kind

of organisational outcomes - acceptance of the ‘package’ is the basis of strategic integration

Goals only achieved if the right policies are in place & this is one element that makes it strategic

There are 6 key policy areas

The HRM policies1. Recruitment, selection & socialisation

2. Appraisal, training & development

3. Organisation & job design

4. Communication systems

5. Reward systems

6. Change management

The ‘cement’Support from key leaders at every level of the

organisation

A ‘strong’ culture, moulded by either the present leadership or powerful ‘founding fathers’

Conscious strategy to pursue success through full & effective utilisation of human resources

HRM’s organisational outcomesHigh job performance

High acceptance of innovation & change

High cost effectiveness

Low labour turnover, absences & grievances

Guest’s model: a caveatFour preconditions are necessary for it to have a chance of success:

1. A ‘green-field site’

2. A professional management team

3. Intrinsically rewarding work

4. Security of employment

Guest’s ModelValues underpinning it are unitarist

Contrasts with the values of personnel management which emphasised collective & pluralist values

Question over the role of trade unions

How is the ‘model’ translated into practice?

Through the management of performance at every level of the organisation

By the use of tools such as performance management & performance appraisal

Critiques of Strategic HRMAmbiguity over the term itself - what does HRM

mean?

In USA is a generic term & used interchangeably with personnel management

Hard & soft versions are a rewording of Theory X and Theory Y

Torn between individualism & collectivism

Ability of line managers to ‘manage’ people

Legge: contradictions in HRMSerious problems with ‘integration’ - HRM

strategies will always be subordinate to business strategy

Decentralisation of costs/profits to SBUs leads to short-term thinking which undermines the ‘developmental’ direction of HRM

Flexibility vs. quality

Teamwork vs. individual pay

Legge (1996) critique of GuestCommitment to what?

The organisation?

The job?

Work group?

Career?

Family?

Noone (1992)HRM is a set of management practices –one

approach & not a general theory of management

HRM tries to resolve long-standing core issues of labour management - power, control, conflict, resistance, dependence & consent – it’s doing nothing new

Its origins in USA are also important

SummaryHR strategy must be context specific

It’s impossible to replicate what another organisation does

Difficult to say which HR policies are critical & are the key triggers for change

Outcomes not always clear

Relationship between HR strategy & business strategy is problematic

Further reading for this sessionBarney, J. (1991) ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, 17 (1): 99-120

Guest, D. (1987) Human Resource Management and industrial relations, Journal of Management Studies, 24, 503-21

Guest, D. (1989) HRM: Implications for industrial relations in Storey, J. (ed) New Perspectives on Human Resource Management. London: Routledge

Keenan, A and Paterson, J. (2008) Human Resource Management Ch 2

Legge, K. (1993) ‘HRM: A Critical Analysis in Storey, J. (ed) New Perspectives on Human Resource Management. London: Routledge

Legge, K. (1995) ‘HRM: rhetoric, reality and hidden agendas’ in Storey, J. (ed) New Perspectives on Human Resource Management. London: Routledge

Storey, J. 1995) (ed.) Human Resource Management: A Critical Text. London: Routledge

Storey, J and Sisson, K. (1993) Managing Human Resources and Industrial Relations. Buckingham: Open University Press