Business strategies and human resource management: uneasy bedfellows or strategic partners?

John Purcell

University of Bath School of Management Working Paper Series

2005.16 This working paper is produced for discussion purposes only. The papers are expected to be published in due course, in revised form and should not be quoted without the author’s permission.

University of Bath School of Management Working Paper Series

School of Management

Claverton Down Bath

BA2 7AY United Kingdom

Tel: +44 1225 826742 Fax: +44 1225 826473

http://www.bath.ac.uk/management/research/papers.htm

2005

2005.01 Bruce A. Rayton Specific Human Capital as an Additional Reason for Profit Sharing

2005.02

Catherine Pardo, Stephan C. Henneberg, Stefanos

Mouzas and Peter Naudè

Unpicking the Meaning of Value in Key Account Management

2005.03 Andrew Pettigrew and Stephan C. Henneberg

(Editors)

Funding Gap or Leadership Gap – A Panel Discussion on Entrepreneurship and Innovation

2005.04 Robert Heath & Agnes Nairn

Measuring Affective Advertising: Implications of Low Attention Processing on Recall

2005.05 Juani Swart Identifying the sub-components of intellectual capital: a literature review and development of measures

2005.06 Juani Swart, John Purcell and Nick Kinnie

Knowledge work and new organisational forms: the HRM challenge

2005.07 Niki Panteli, Ioanna Tsiourva and Soy Modelly

Intra-organizational Connectivity and Interactivity with Intranets: The case of a Pharmaceutical Company

2005.08 Stefanos Mouzas, Stephan Henneberg and Peter Naudé

Amalgamating strategic possibilities

2005.09 Abed Al-Nasser Abdallah Cross-Listing, Investor Protection, and Disclosure: Does It Make a Difference: The Case of Cross-Listed Versus Non-

Cross-Listed firms

2005.10 Richard Fairchild and Sasanee Lovisuth

Strategic Financing Decisions in a Spatial Model of Product Market Competition.

2005.11 Richard Fairchild Persuasive advertising and welfare in a Hotelling market.

2005.12 Stephan C. Henneberg, Catherine Pardo, Stefanos Mouzas and Peter Naudé

Dyadic ‘Key Relationship Programmes’: Value dimensions and strategies.

2005.13 Felicia Fai and Jing-Lin Duanmu

Knowledge transfers, organizational governance and knowledge utilization: the case of electrical supplier firms in

Wuxi, PRC

2005.14 Yvonne Ward and Professor Andrew Graves

Through-life Management: The Provision of Integrated Customer Solutions By Aerospace Manufacturers

2005.15 Mark Ginnever, Andy McKechnie & Niki Panteli

A Model for Sustaining Relationships in IT Outsourcing with Small IT Vendors

2005.16 John Purcell Business strategies and human resource management: uneasy bedfellows or strategic partners?

1

Business strategies and human resource management: uneasy

bedfellows or strategic partners?

John Purcell

University of Bath

Bath BA2 7AY

01225 386567

J.Purcell@bath.ac.uk

2

Business strategies and human resource management: uneasy bedfellows or strategic

partners?

One of the assignment questions for this year’s class studying ‘Strategy and Human Resource

Management’ (a very popular course) was:

Does, and should, competitive strategy determine the design of a firm’s HR system?

Give illustrations to support your answer.

One of the great advantages in working in a university which has top students is that you can

ask them questions you are not quite sure how to answer yourself! The best students gave

clear examples of such a link and then got stuck in to the ‘should’ part of the question often

noting the critical difference between competitive strategy and business strategy. Some even

went further into corporate strategy, the resource based, and knowledge based view as well as

ethics, culture and institutional setting. Surprisingly none of them questioned what was

meant by a firm’s HR system.

I will follow the same line of argument in this paper with thanks to the students, very few of

whom have any intention of becoming HR professionals. We start with some of the classics

in strategy and HRM, go on to look briefly at some major studies, or the ones that have

influenced my thinking. Thereafter the paper notes the problems with the assumed link with

competitive strategy as a dominant, or the dominant, force in determining an HR system.

Once the focus is widened to cover business strategy two very interesting, and linked,

phenomena can be observed. First, what we thought strategy was all about has changed

hugely. Second, our definition of what constitutes HRM (or the management of employment

relations) has broadened beyond recognition. This is where the definition of an HR system

3

becomes important. The paper will conclude with some observations on the problems and

benefits of such a broad scope to our subject – but is it our subject any more?

Competitive strategy and HRM

It was Miles and Snow (1984) with their distinction between ‘defenders’, ‘prospectors’ and

‘analysers’ and associated types of HR policies on staffing and development, performance

appraisal and pay policies, who set the benchmark. Oddly, their work was more influential in

strategic management than among HR researchers. Schuler and Jackson (1987) had much

greater impact in part, I suspect, because they used the dominant strategy paradigm

developed by Porter (1985) which is intuitively appealing. Schuler and Jackson were able to

argue that different competitive strategies imply the need for different kinds of employee

behaviour, especially between ‘differentiators’ and ‘cost leaders’, and thus different types of

HRM. Later this triggered the long running, but ultimately unsatisfactory, debate between

best fit and best practice, but I will not get diverted to this ‘cul-de-sac’ and ‘chimera’ again

(Purcell 1999). The conclusion of Schuler and Jackson’s model were obvious:

If management chooses a competitive strategy of differentiation through product

innovation, this would call for high levels of creative, risk-orientated and cooperative

behaviour. The company’s HR practices would therefore need to emphasise …

“selecting highly skilled individuals, giving employees more discretion, using

minimal controls, making greater investment in human resources, providing more

resources for experimentation, allowing and even rewarding failure and appraising

performance for its long run implications” – on the other hand if management wants

to pursue cost leadership … (the model) suggests designing jobs which are fairly

repetitive, training workers as little as is practical, cutting staff numbers to the

4

minimum and rewarding high output and predictable behaviour. (Boxall and Purcell

2003: 53-4)

Critics of HRM from within the employment and industrial relations field note, with some

justification, that HRM is much more interested in the ‘developmental humanism’ (Storey

1992) implicit in the first set of practices linked to differentiation, than with the ‘bleak house’

(Sisson 1993) or the ‘bad and the ugly’ (Guest and Hoque 1994) type of HRM of cost

minimisation. If we really are interested in HRM and competitive strategy why don’t we

study these ‘right bastards’ – right because they link HRM to their competitive strategy,

bastards because … well HRM is also about ethics.

One of my favourite examples of competitive strategy and HRM is the clothing (or in the US

the apparel) industry. Here there is a seemingly clear divide between two strategies and their

implications for HRM, and for ethics. It is really only through sector level research that we

can get to grips with competitive strategy and HRM. The work by Bailey (1993) and

subsequently by Appelbaum, Bailey, Berg and Kalleberg (2000) is an exemplar. Here, in the

clothing industry, the distinction is between the progressive bundle system, essentially a

traditional Tayloristic assembly line type of production system, and the modular system, a

type of cellular manufacturing, TQM and work transformation. The latter produces higher

quality, faster turnaround and in some cases lower cost. Why do so few manufacturers adopt

it? Without getting distracted by the diffusion debate the focus here is on competitive

strategy. In essence, early implementers of the modular system were often unsuccessful.

Later, strategic coalitions between HRM, operations management, information systems and

supply chain management came together (with appropriate levels of finance) to link modular

production to ‘lean retailing’ pushed by major customers, like Wal Mart. The essential

5

requirement was for a three day turnaround, compared with around three weeks under the

progressive bundle system.

The critical point, however, is what particular markets are being served by the clothing

manufacturers? The highly successful Spanish ladies fashion retailer, Zara, is a good

example. Here rapid changes in fashion, often with unpredictable demand (thus ruling out

warehousing and extended shelf life) requires fast response from manufacturers located near

retailers’ distribution depots, with integrated IT systems (the EPOS system of bar codes)

providing rapid response on data on demand linked to supply. Meanwhile, the closure of

clothing plants in Europe and North America is indicative of another trend.1 In commodity,

non fashion clothing, there is little need for a fast turnaround. Cost pressures are paramount

and low wage countries in the developing world become increasingly attractive. Clothing is a

labour intensive industry. The progressive bundle system is more appropriate where cost

minimisation is essential for viability and survival, let alone achieving competitive

advantage.

I do not know of studies of HRM in the clothing industry in developing countries but work by

Wilkinson and his colleagues (2001) in the Japan and Malaysia electronics industry is

instructive, noting the strict Tayloristic, short job cycle time, work in the latter country with

its concomitant control based HR systems. If we are serious about studying the links between

strategy and HRM we really ought to be doing much more comparative research across the

range of competitive conditions in a sector globally. This would also have to include studies

along the supply chain as well as end markets (Kinnie and Swart 2003)

6

Another example of the link between HRM and competitive strategy can, I think, be usefully

taken from call centres, which continue to grow rapidly, again in developing countries like

India with a ready supply of well educated, cheap labour. The growth continues in developed

nations, too, as technology, consumer preferences and the opportunity to reduce costs

coincide. One of the interesting features of call centres, for our purposes, is how early

studies tended to lump all such centres together under the rubric of ‘the dark satanic mills of

the late 20th century’ and Panoptican controls (Fernie and Metcalf 1998; Bain and Taylor

2000). Reviewing data drawn from Batt and Moynihan’s (2002) study of 354 call centres in

the USA, the dominant impression is the variety of HR systems. They do not explicitly link

this to competitive strategy but I have tried to do so, following a line recently developed by

Kinnie et al (2000). Here, markets, seen in the relationship with customers (from

transactional to relational) is matched with HRM practices from cost minimisation to high

commitment management. We could use the same terms ‘transactional’ and ‘relational’ in

HR, too, since they are commonly referred to in studies of the psychological contract.

Figure 1 summarises my interpretation of Batt and Moynihan’s data. To do this I have

excluded some of their data. Production characteristics are shown to the left of the diagonal

line, HR system data to the right.

7

Figure 1: Best Fit in Call Centres

Relational Customer Markets

Transactional HR Relational HR

Large Business with High HCM % change sales 39.76 Call length 12.17 mins Customers per day 42 Surveillance 7.66% Software progs used 8.17

Small business with low HCM % change sales 25.79 Call length 4.88 mins Customers per day 88 Surveillance 44.19% Software progs used 3.09

Quit rate 16.36 Education 13.07 years Induction proficient 12.33 weeks Training day 1.39 pa Pay (total) $27,953 Involvement score 36.51% Variable pay 14.74% Operators – control

Surveillance 75% Call length 0.52 mins Customers per day 460 Software progs 1.13

Quit rate 20.3% Education 12.2 years Induction proficient 11.15 weeks Training days 0.67 pa Pay (total) $19,061 Involvement score 27.53% Variable pay 11.67%

Adapted from Batt, R. and Moynihan, L. (2002) ‘The Viability of alternative call centre production models’ in HRMJ Vol 12. No.4

Quit rate 11.79 Education 15.91 years Induction proficient 35.187 weeks Training days 2.52 Pay (total) $76,258 Involvement score 72.29% Variable pay 38.83 %

Transactional Customer Market

8

What is evident is the marked differences between transactional call centres and large

business to business centres in terms of such things as number of software programs used,

percentage of the day electronically monitored, average call-handling time and the average

number of customers per employee per day. The work organisation is markedly different.

This, then, is reflected in the HR system seen in variations in skill requirements, training,

work design, compensation etc. Not surprisingly both the production system and

concommitant HR system are reflected in quit rates. It is tempting to suggest, then, that the

competitive strategy or competitive position of the firm in particular product markets is a

dominant influence on types of HR systems.

Look more closely at the data and another important conclusion can be drawn. Batt and

Moynihan use a ‘high involvement index score’ to summarise their HR data. Focussing on

residential call centres, where a mass production model is often found (typical in retail

finance, for example) big differences are observed between high and low involvement centres

in terms of all of the measures, apart from unionisation (table 1).

9

Table 1: Best Practice or Best Fit Residential Call Centres?

Low involvement score (32.68) High Involvement score (53.12) Quit rate 20.98% 9.20% Call length (mins) .47 6.43 Customers per employee per day 127 72 % change sales 16.05 36.78 Education – school grade exit 12.52 13.52 Proficient weeks induction period 13.71 20.32 Training days per year 1.41 2.67 Software used: no. of programmes 3.06 4.22 Surveillance day % 59.64 38.63 Workforce in problem solving teams % 27.96 61.61 Self directed teams % 2.16 28.43 % full time 80.02 91.81 Total pay $24,372 $33,465 Variable pay % 10.61 16.84

Source: Bath. R. and Moynihan, L. (2002) HRMJ Vol.12 No.4 extracted from table 1, p.24

10

These data are a good example of the limits to the argument that competitive strategy

determines, or strongly influences, the design of HR systems. We need to use other

explanatory tools here like strategic choice, management cognition and leadership values, for

example the belief (or not) among senior managers that employees are a strategic resource

(Bennett et al 1998; Sheppeck and Militello 2000). This is not surprising and it is with relief

that we can downplay the dominant role of competitive strategy. Within firm studies, like

these of Wright et al (2003) and Bartel (2004), show variety in HRM and outcomes when

competitive strategy is held constant. We are back on familiar territory.

There are other reasons why competitive strategy can never be taken as the dominant force

determining HRM (the ‘should’ part of my students’ question). These relate, firstly, to the

static nature of the models used. The point made by Wright and Snell (1998) on an

integration of ‘fit’ and ‘flexibility’ is well made. Markets, technology and supply lines

change as Marks and Spencer have found to their cost. Then too is the problem that firms

rarely face a single ‘pure’ market with various degrees of diversification, as means of risk

reduction, expected. Which competitive market should dominate and how should market

variety, and differences in market conditions and market share, be reflected in HRM? Can a

firm have different HR systems each linked to competitive strategy? How much flexibility

and knowledge sharing across markets is optimum? This is especially important for large

multi-divisional companies. Too prominent a position given to competitive strategy also

relegates ‘labour’ to a subservient position after market, technology, operational and

distribution choices have been made. Under this logic a failure to take account of employee

interests, reflected perhaps in collective and individual conflict expressions, would cause

competitive disadvantage but getting a fit between HR and competitive strategy is a taken-

for-granted requirement of good management but which would not lead to competitive

11

advantage. Thus we find our strategy giants of yesterday talking of ‘operational effectiveness

as given’ (Porter 1996: 74), ‘sub-activities which are primarily administrative’ (Andrews

1968, quoted in Hoskisson et al 1999: 422), and ‘strategic decisions are primarily concerned

with external rather than internal problems’ (Ansoff 1985: 18).

From competitive strategy to business strategy

The ‘positioning’ school of strategy exemplified by Porter (1985) and Ansoff (1985) has long

been challenged by the ‘design’ school seen most obviously in the work of Mintzberg (1990).

HR scholars, for whom the study of behaviour rather than rational choice is a central interest,

tend to gravitate to the Mintzberg camp. But, in fact, the whole strategy world, as taught and

researched, has opened up in recent years with competitive strategy seen as just one part of a

bigger picture. Quite how big this picture is, under the generic title ‘business strategy’ is

shown by Grant (2002)2 in his textbook on Contemporary Strategy Analysis:

The task of business strategy … is to determine how the firm will deploy its

resources within its environment and so satisfy its long-term goals, and how to

organise itself to implement that strategy (Grant 2002: 13)

We find other clues to the breadth of strategic analysis later in the book. ‘Failure to match

strategy to the resources and capabilities of the organisation can be … disastrous’ (p.16).

‘Strategy is (now) a quest for performance focussed …. on sources of profitability’ (p.20).

‘Increasingly, strategic planning processes are becoming part of companies knowledge

management systems …’ (p.29). And finally ‘one of the most pernicious misconceptions in

the history of strategic management is the idea that the formulation of strategy can be

separated from its implementation’ (p.188). So much for Porter’s ‘operational effectiveness

as given’!

12

Figure 2: The Evolution of Strategic Management

PERIOD 1950s 1980s EARLY-MID 1970s

LATE 1970s AND EARLY 1980s

LATE 1980s and EARLY 1990s

LATE 1990s AND EARLY 2000s

Dominant theme

Budgetary planning and control

Corporate Planning

Corporate strategy Analysis of industry and competition

The quest for competitive advantage

Strategic innovation and the new economy

Main Issues Financial control through operational and capital budgeting

Planning growth

Diversification and portfolio planning

Choice of industries, markets and segments, and positioning within them

Sources of competititive advantage within the firm

Competitive advantage through strategic innovation Competing on knowledge Adapting to the new digital, networked economy

Principal Concepts and Techniques

Financial budgeting investment planning Project appraisal

Business forecasting Investment planning models

Synergy Strategic business units Portfolio planning matrices

Experience curve and returns to market share Analysis of industry structure Competitor analysis PIMS analysis

Resource analysis Analysis of core competencies

Organizational flexibility and speed of response Knowledge management and organizational learning Competing for standards Early-mover advantage

Organizational Implications

Financial management the key

Rise of corporate planning departments and medium-term formal planning

Diversification Multidivisional structures Quest for global market share

Greater industry and market selectivity Industry restructuring Active asset management

Corporate restructuring and business process reengineering Refocusing and outsourcing

The virtual organization The knowledge-based firm Alliances and networks The quest for critical mass

Grant (2002 Table 1.2, p.22)

13

This broadening of the scope of strategic analysis, and thus its increasing resonance with

those concered with strategic, or macro, human resource management, is tabulated by Grant

and shown above in Figure 2.

It is not until the penultimate column – late 1980s and early 1990s that the convergence

between HRM and strategy becomes visible, but by the early 2000s it is startlingly obvious

with words like ‘innovation’, ‘knowledge’, ‘networked’, ‘organisational flexibility’,

‘organisational learning’, ‘the virtual organisation’, ‘the knowledge-based firm’. The

problem now, it seems is that business strategy covers everything and sub-disciplines have

proliferated out of mathematics, economics, sociology, psychology, ecology, organisation

behaviour and, of course, HRM. To put some boundary around this, once the subject or

object of business strategy covers both internal and external resources, resource allocations

and implementation and strategic intentions, it is necessary to return to determining the

differences between strategic and operational decisions. Grant (2002:17) suggests strategic

decisions:

- are important

- involve a significant commitment of resources

- are not easily reversible

Johnson (1987: 4-6) addds that:

- they involve a high degree of uncertainty (ie risk)

- demand an integrated approach to management ‘involving managers crossing

boundaries within the firm’

- they are likely to be concerned with change … ‘involving the persuasion and

organisation of people to change from what they are doing’

14

This should help us to deliniate strategic HRM from operational decisions.

An interesting area for analysis, not yet much developed in HRM, where strategic decisions

are much in evidence, is the dynamics of industry based competition from birth and early

establishment, to maturity and renewal crises (Boxall 1998). This has a special flavour

within diversified companies (still) following the dictates of the Boston Consulting Group

analysis of cash cows, stars, dogs and wildcats (Purcell 1989).

The shift in focus to business strategy makes long standing topic areas within HRM yet more

relevant especially once implementation is seen as a central concern of strategy. To give

three examples, among many – the formation, cognition and ‘leadership’ of top teams, the

people who make strategic decisions is important. Workforce alignment, compliance and

motivation, can never be taken for granted, and line managers as the enactors of strategy have

always been problematic and not just because of the principal – agent problem loved by

economists. We have much to say about each one of these.

The Resource-based view and the HRM supernova

The biggest influence the changing forms of strategy analysis have had on HRM are those

relating to the resource based, and knowledge based view of strategy and the preoccupation

with performance rather than planning. The latter I will not discuss since it is a separate

topic. RBV, however, deserves serious consideration here. There is no need to repeat more

than the basics of the theory before looking at the implications for HRM. The 15 years or so

since it came to prominance in strategic analysis have seen substantial innovations in HRM’s

link and contribution to RBV. At its heart, RBV seeks to explain the sources of sustained

competitive advantage (and perhaps, too, to viability) in turbulent conditions where external

15

positioning is uncertain. Looking at internal sources of viability and advantage, emphasis is

placed on resources which are critical to organisational success yet are rare, or not commonly

available, are not substitutable (people by technology for example) and are combined

together to form organisational capabilities or processes which are imperfectly imitable, or

hard for others to copy. It is interesting how many of these attributes are similar to those

used by the Aston School (Hickson et al 1971) way back in 1971 to look at the intra

organisational power of different occupational or hierarchical groups, and used so effectively

by Legge (1978) in her analysis of power in personnel management.

The central argument in RBV is that while tangible resources have often declined in their

strategic value, intangible and human resources have increased as a source of value. Grant

sees intangible resources as technology (which means more about how it is used rather than

what it is), reputation and culture. Human resources he describes as specialised skills and

knowledge, communcative and interactive abilities, and motivation. This is the bread and

butter of HRM. Our central concerns are ability, motivation and opportunity to participate

and practice or AMO for short (Boxall and Purcell 2003, chapter one). The successful firm

not only has to have better than average human capital, through recruitment (where firm

reputation is important), selection and development and then appropriate job design,

motivation, communication and involvement systems, but also better processes or

capabilities. These combine human and non-human resources together in ways highly

appropriate for end users and markets and in ways which other firms find hard to copy.

This has been described by Boxall (1996) as Human Resource Advantage which is the sum

of human capital advantage (HCA) and organisational process advantage (OPA). The

former, HCA, is familiar territory but OPA takes in a much wider area of interest, and has

16

implications for the boundaries of our subject and our magpie habit of taking useful theories

from cognate subjects. In trying to explain OPA we find crucial ideas of path dependency

(Leonard 1998: 35) or unique historical conditions, (Barney 1991: 107), social complexity

(Wright, McMahan and McWilliams 1994) and causal ambiguity (Barney 1991). We could

add more recent interest in social capital (Nahapiet and Goshal 1998) and organisational

learning. The better the firm is in these mirky areas of organisational behaviour, the greater

the barriers to imitation.

Two other areas of intereset have developed linked to RBV. If critical resources are scarce

how does the firm erect ‘resource mobility barriers’ (Mueller 1996)? And if people with such

rare skills or human capital are powerful (following the Hickson model) how does the firm

manage appropriation (Kamoche 1996, Kamoche and Mueller 1998)? This is particulary

pertinent to knowledge intensive firms where knowledge is the traded commodity. In such

organisations, for example in software engineering or legal practice and consulting, there are

at times, ‘talent wars’. Resource mobility barriers beyond financial reward (which is rarely a

rare attribute) focus on factors which embed these resources (people) in such a way that their

value inside is greater than outside (firm specific knowledge), or the cost of leaving is greater

than the predicted gain of joining another firm (organisation and team based commmitment).

Here organisation culture and climate may play a role not just as a mobility barrier but as a

source of inimitability. Indeed Barney saw culture as critical:

Firms with sustained superior … performances typically are characterised by a strong

set of core managerial values that define the ways they conduct business (Barney

1986:656)

17

At the same time the appropriation problem can be acute. As well as the need to manage

knowledge workers the firm must manage knowledge through knowledge sharing along the

various tacit-explicit dimensions. The HRM implications of this (Swart and Kinnie 2003) are

fascinating, but not often found in HRM textbooks. It would seem that HRM has to

understand the organisation as a dynamic organism. Partial, functional vision is no longer

enough. Indeed it has been noted (Wright et al 1994) that HR policies are very unlikely to be

a source of sustained competitive advantage as they are easily copied, or are institutionally

embedded in societies via legislation and social practice (Paauwe and Boselie 2003). The

HRM we have to be interested in, then, is not policy development along the life cycle of the

employees, but enactment as revealed in human behaviour in organisational settings. This is

a very wide scope of analysis. Maybe my students were right to avoid defining ‘the firm’s

HR system’ since it has become a near meaningless concept.

RBV has big implications for HR architecture (Lepak and Snell 1999), and these can be

disturbing to those who have a universalistic view of best practice. The logic that rare human

capital is only likely to apply to a segment of an organisation’s work force is inescapable.

Even if we could argue, or demonstrate, that all workers in the firm have such rare skills and

develop sophisticated organisational processes, we would need to go beyond the boundaries

of the firm into sub-contracting or externalisation. For example ‘the HP way’ (if it still

exists) may apply to all workers but only because Hewlett Packard has outsourced much of

routine, as opposed to developmental, manufacturing to lower labour cost areas. This is what

Wilkinson et all (2001) noted in their study of Japanese and Malaysian electronics

manufacturing. At the same time workers with high levels of generic, technical or

professional skills who do not require unique, firm specific knowledge to practice (as is true

of many knowledge workers) have more boundaryless identities requiring more market based

18

as opposed to commitment based HR (Lepak and Snell 1999, Boxall and Purcell 2003). The

logic of the core-periphery model of diverse HR systems within, and beyond, the firm to the

supply chain, thus applies. This has ethical consequences of course, but is it more ethical to

have ‘bad’ jobs placed in developing economies and among the disadvantaged in our

societies, or no jobs at all? The answer is different for the employment strategy of the firm

than for the workforce strategy of the nation. Is the firm as the unit of analysis our sole

consideration?

RBV (and KBV) are particularly pertinent to large, multi-divisional and multi-national

companies. It was in such settings that Prahalad and Hamel (1990) developed their analysis

of ‘the core competence of the corporation’. This takes us into corporate, as opposed to

business, strategy with its problems of internal capital markets, integration or separation of

business units and resource allocation and development. There is some HR analysis here

(Purcell and Ahlstrand 1994) and comparative and international human resource management

is showing more interest beyond the perennial issue of managing ex-pats. Meanwhile, within

the strategy domain we find a similar convergence between ‘then’ and ‘us’ as in the realm of

business strategy. Whittington and Mayor (2000), for example, trace the evolvement of

strategy thinking and practice within the multi divisional (m-form) company. Toward the

latter half of the twentieth century they suggest that the key resource was scale and scope (as

in markets and operations), the key technique was planning and the key function was

corporate planning. By the end of the century, they suggest the key resource was knowledge,

the technique was exchange and the key function human resources. At the same time it

became more accepted to refer to the successful MNC as an N-form where N = networks

(Hedlund 1994) while the M-form is now an ‘organisational fossil’ (Bettis 1991). In the M-

form Chandler’s famous dictum was that ‘structure follows strategy’. In the N form with its

19

post modern emphasis on social and organisational processes, structure is strategy. To some

strategy writers ‘the human resource function has become central to making the new forms of

organisation work’ (Whittington, Pettigrew, Peck, Fenton and Conyoin 1999: 587). This is a

challenge which I do not think HR scholars have reallly grasped yet. When will the HRM

supernova disintegrate as it expands more and more into the strategy universe?

Conclusion

If Whittington et al see human resource as the key function in MNCs, and recent work in

macro HR has become nearly boundaryless we need to recognise that this view is not

universally shared. Grant, for one, who at least gives some recognition to HRM in strategy

analysis, unlike strategy writers in the past, has a narrow, economist view of our subject.

The central role for HRM is establishing an incentive system that supports the

implementation of strategic plans and performance targets through aligning employee

and company goals (Grant 2002: 219).

Even if we accept that ‘the problem of aligning employee goals with those of the firm is a

central problem’ (ibid) (sometimes, for example, in more regulated economic and political

systems, or where labour supply is restricted, it may be that the goals of the firm need to be

adapted to those of employees), we know of many other, more powerful means of achieving

alignment than incentive systems, and we, unlike him, do not see ‘shirking’ as a major

problem

But maybe he is right to have a narrow view of HRM since this is ‘our’ area in and around

AMO. At least here there is a reasonable body of knowledge and theory. As we push the

20

boundaries of our subject are we in danger of losing the nucleus, of becoming ‘all things to

all men (and women)’. But why should this matter?

After all, says Grant (2002:31) ‘strategic management lacks an agreed, internally consistent,

empirically validated body of theory’. For as long as we link much of our work to business

strategies then, if strategic analysis has a problem with scope and theory, so will we. We are

both strategic partners and uneasy bedfellows with our strategy and OB colleagues. We can

keep asking our students to answer questions we don’t quite know the answers to in the hope

that, some day, we will find a truth. Meanwhile I, for one, seek to avoid some of the

disfunctional definitional disputes by referring to ‘people management’ rather than to HRM

since it allows us to look at every aspect of how the organisation, and the wider society,

manages people and copes with the inevitable tensions, contradictions and ethical dilemmas.

21

Endnotes

1 It was announced on 4 June 2004 that the clothing manufacturer, Desmods, was to close with the loss of 300 jobs following the loss of their supply contract to Marks and Spencers, the UK’s largest clothes retailer. They made underwear, rarely a fashion item! Marks and Spencer, which itself has failed to respond to changing competitive conditions and is now the subject of a hostile takeover, supplied 80% of its clothing from the UK five years ago. Now the figure is 10% (Guardian 4 June 2004, p.17). Underwear is now supplied from Turkey and Bangladesh. 2 I use Robert Grant’s well known, and excellent , textbook to represent the contemporary field of strategy analysis.

22

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University of Bath School of Management Working Paper Series

Past Papers

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Bath BA2 7AY

United Kingdom Tel: +44 1225 826742 Fax: +44 1225 826473

http://www.bath.ac.uk/management/research/papers.htm

2004

2004.01 Stephan C. M. Henneberg

Political Marketing Theory: Hendiadyoin or Oxymoron

2004.02 Yi-Ling Chen & Stephan C. Henneberg

Political Pulling Power. Celebrity Political Endorsement and Campaign Management for the Taipei City Councillor Election

2002

2004.03 Stephan C. Henneberg , Stefanos Mouzas & Pete

Naudé

Network Pictures – A Concept of Managers’ Cognitive Maps in Networks

2004.04 Peter Reason Education for Ecology: Science, Aesthetics, Spirit and Ceremony

2004.05 Yvonne Ward & Andrew Graves

A New Cost Management & Accounting Approach For Lean Enterprises

2004.06 Jing Lin Duanmu & Felicia Fai

Assessing the context, nature, and extent of MNEs’ Backward knowledge transfer to Chinese suppliers

2004.07 Richard Fairchild The effect of product differentiation on strategic financing decisions.

2004.08 Richard Fairchild Behavioral Finance in a Principal-agent Model of Capital Budgeting

2004.09 Patrick Stacey & Joe Nandhakumar

Managing the Development Process in a Games Factory: A Temporal Perspective

2004.10 Stephan C. M. Henneberg

Operationalising a Multi-faceted Concept of Strategic Postures of Political Marketing

2004.11 Felicia Fai Technological Diversification, its Relation to Product Diversification and the Organisation of the Firm.

2004.12 Richard Fairchild and Ganggang Zhang

Investor Irrationality and Optimal Open-market Share Repurchasing

2004.13 Bruce A. Rayton and Suwina Cheng

Corporate governance in the United Kingdom: changes to the regulatory template and company practice from 1998-2002

2004.14 Bruce A. Rayton Examining the interconnection of job satisfaction and organizational commitment: An application of the bivariate probit

model