Managing Human Resources

Human Resource Management in Transition

Stephen Bach, Martin Edwards, Stephen Bach, Martin Edwards

• Publisher: Wiley
• Year: 2012
• ISBN:
  9781118509982
• Edition: 5
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

This revised editionis a comprehensive, authoritative set of essays. It is more detailed and analytical than the mainstream treatments of HRM.

As in previous editions, Managing Human Resources analyses HRM, the study of work and employment, using an integrated multi-disciplinary approach. The starting point is a recognition that HRM practice and firm performance are influenced by a variety of institutional arrangements that extend beyond the firm. The consequences of HRM need to incorporate analysis of employees and other stakeholders as well as the implications for organizational performance.

Part I

Introduction

Chapter One

Human Resource Management in Transition

Martin R. Edwards and Stephen Bach

Human Resource Management in Transition

The previous version of the book was entitled ‘The Management of Human Resources: Personnel Management in Transition’, but the idea that personnel management was in transition now seems old hat and this transition seems fully complete. It is now very rare that organisations have a personnel department rather than an HR (Human Resource) department; if a transition is occurring, it is Human Resource Management (HRM) to something else, rather than from Personnel Management (PM) to HRM. The content and breadth of topics included in this book indicate how sophisticated concerns around managing human resources have become. It also highlights that the HR sphere is a fundamentally different and more complex field than the early representations of PM and subsequently HRM were.

Arguments that indicate why the management of human resources and HRM (as a model) is in a state of transition are set out below. Prior to these points, however, it is important to set the scene and reflect upon where HR as a field is now and track its development. An important distinction needs to be made between the general idea of managing human resources, and HRM as a particular people management model. Human resources is fundamentally a term used to describe people in a workplace – managing human resources means the management of people at work. However, the ‘human resource’ terminology triggers an association with HRM as a particular approach to people management. Loosely defined, HRM can be considered to be a particular model of employment relations that revolves around the management of people, following a particular ideological position; the central principle takes a particular stance on how to get the most out of workers whilst fostering an employment experience that is positive for employees. The Human Resource Management model has certain key assumptions, which include (at its core) what is referred to as a unitarist perspective; that it is possible to sustain an organisation in which all stakeholders share the same set of interests and goals. Indeed this is something which is prevalent in the discourse around HRM. Linked to this assumption is an idea that is central to HRM; work can be organised and employment conditions established that enable employees to achieve the maximum (potential) productive output, whilst ensuring the fulfilment of a range of employee needs. The organisation of work and related working conditions involve a sophisticated coordination of administrative, managerial and strategic activities that require a considerable degree of expertise. People management experts tend to be found in the HR department. Importantly, although these experts are often found within that function, the importance of line management involvement in helping achieve the HRM goals is key (Purcell and Hutchinson 2007). HRM is not just reserved for HR professionals, it is increasingly viewed as a responsibility for all those who manage staff.

Development of HR Theory

The concepts and theories underlying Human Resource Management have developed and matured substantially; the literature discussing HRM as a model is now 30 years old. Frequently cited early US contributions have been associated with the influential Harvard model of HRM (Beer et al. 1984; see also Walton 1985). One of the early contributions that defined HRM (based on UK experience) and identified how it was distinct from personnel management, was developed by Guest (1987). In this 1987 paper, Guest attempted to draw some boundaries around what is HRM and how it differs, at least in normative terms, from Personnel Management. As a summary of what Guest set out as a definition of HRM, the model can be distinguished by the following four main aims. Firstly, HRM is a model of employment relations that aims to encourage employee commitment. Secondly, central to its purpose is the achievement of a number of different types of integration (vertical and horizontal). This integration takes two forms: the first being the incorporation of the management of human resources into the strategic planning process to ensure that HR policies and practices cohere internally as a system; and the second, externally (i.e. external to the function) with wider business objectives, ensuring that line managers ‘buy-in’ to HRM initiatives and that employees’ interests are aligned with those of the organisation. The third key aim or goal of HRM is to enable the provision of a flexible workforce; enabling functional and employee flexibility. Fourthly, HRM as a model aims to ensure the recruitment and retention of high quality employees who produce quality performance. To achieve these aims, various HR practices and policies need to be put in place. These include setting up clearly defined career development schemes and fostering an internal labour market, organising regular performance appraisal, job design activities that ensure autonomy where possible and voice opportunities, amongst others. From the outset, Guest’s definition of HRM was challenged as commentators exposed additional complexity in the people management arena and questioned the assumptions of the model (Legge 1995). An illustration of how analysis evolved was the distinction made between soft and hard HRM (Storey 1989; Legge 1995, see also Chapter 17). The so-called ‘hard’ version was underpinned by ideological assumptions that employees are resources to be moulded and controlled and that various control strategies are required. The philosophy underpinning the ‘soft’ version, however, was different; the soft version could be considered to involve a philosophy (and rhetoric) that employees’ motivation and participation are important and central concerns of HR. Employee well-being is something that management should strive to enhance, resulting in improved individual and organisational performance.

The soft and hard distinction tends not to be discussed in contemporary literature and this distinction has not been drawn on as a way of framing the HR sphere for some time. The reasons for this may be because contemporary models tend to be more sophisticated and a straightforward division between hard and soft approaches is too simplistic; in addition, many HR models mix hard and soft elements. Further refinements and theoretical development of HRM continued into the 1990s and beyond. Often when theoretical developments and models are discussed, the key debate framing the discussion relates to in which way and why do particular models of HR lead to successful organisational performance. This is not surprising as a central assumption of HRM models is that appropriate HR practices will lead to better performance.

In 1996, Delery and Doty presented a paper that aimed to clarify and define three different theoretical models that set out why and how human resource practices result in successful organisational performance. These three models consisted of the universalistic, contingency and configurational approaches. It is worth summarising these here, as these approaches have been presented as different HR models for a number of years and have only recently begun to be examined with any real scrutiny. The first of these models (the universalistic perspective) involves the idea that a particular set of HR practices (so-called ‘high performance’ or ‘strategic’ HR practices) will always lead to improved organisational performance. The argument is presented that certain practices will have a universal and positive impact on organisational performance regardless of context. Practices frequently mentioned include: setting up an internal labour market; providing formal training/development opportunities; the use of performance appraisal linked to specific goals; the provision of structured voice mechanisms; and some degree of employment security. The general proposition with this perspective is that the presence of these practices will provide a set of conditions where employees will perform at their best and consequently the organisation will produce higher levels of performance.

In contrast to the universalistic perspective, is an alternative model with different sets of assumptions; this is the contingency perspective. The argument is that a key set of conditions exist that determine whether strategic HR practices and policies (as set out with the universalistic perspective) are likely to lead to higher employee and organisational performance. The main contingency is the nature of the firm’s strategy, and Delery and Doty (1996) argue that the level of innovation involved in the strategic orientation will be the key factor that determines whether the strategic HRM practices lead to organisational performance; in a high innovation context, strategic HRM practices will show a greater positive relationship with organisational performance than in low innovation contexts. Finally, Delery and Doty outlined a third HRM-performance model, the configurational perspective as an alternative. The theoretical assumptions linked to this approach revolve around the idea that different HR practices should be put in place (and will be successful), depending upon the nature of the organisation’s strategic orientation. This approach is linked to Miles and Snow’s (1978) strategic types of ‘Prospector’, ‘Analyser’ and ‘Defender’. The argument proffered with this approach is that management will need to align and introduce particular employment systems that fit with the firm’s strategic configuration. For example, ‘Defenders’ require long term employment and firm specific knowledge which will require commitment oriented practices; ‘Prospectors’, however, are constantly changing and, faced with different demands, they rely more on buying in skills and talent from the outside rather than making them. The strategic imperative of the organisation would therefore require different types of employment systems and different ideal sets of strategic HR practices to lead to higher performance. So, unlike the contingency perspective which implies that the strategy will determine whether the universalistic SHRM practices lead to performance, this model suggests that the strategy will require different HR practices to reach full performance potential. These ‘models’ of HR set the scene of debate around what HRM is and what it should look like for some years, and the arguments presented are still relevant today. This is especially true as the academic and scientific community tries to test a core assumption of HRM: that HR practices, policies and systems can be introduced that foster higher organisational performance. This key assumption explains why most discussion of HRM approaches tends to be linked to debates around HRM and organisational performance. Very rarely, however, are discussions around what HRM should look like, linked to the well-being side of the ideological principles (mentioned above) that form the foundations of HRM (see Peccei 2004 and Chapter 17).

HRM and Performance

In reflecting where the HR field stands at the moment, it is clear that HR researchers have struggled to support the predicted HR-performance relationship to a convincing degree, even though, as Guest argues (2011) ‘over the past 20 years there has been a considerable expansion in theory and research about human resource management and performance’ (p. 3). The degree to which HR policies and practices have been found to be associated with organisational performance has not necessarily been convincing to critics (or supporters) of the HRM model. A recent theoretical development in the area of HRM and performance is the work by Bowen and Ostroff (2004). These authors explain that organisations are unlikely to have high levels of performance just because HR practices are in place – the degree to which these are enacted and the commitment to ensuring that HR systems are implemented fully across the organisation, will determine whether HR systems lead to enhanced performance. They argue that HR systems need to be ‘strong’ for increases in performance to be achieved; HR policies need to be visible, distinctive, consistently applied and employees need to have a shared understanding of what they are. Bowen and Ostroff’s work is an interesting addition to the theorising in the area of HRM. Central to their argument is the idea that employee perceptions of an HR system will determine whether these systems are likely to have an impact on organisational performance. This adds a considerable degree of complexity to theorising around the expected HRM-performance relationship.

Linked to these debates are broader developments associated with the so-called ‘Resource Based View of the Firm’ (see Chapter 2). In brief, the core idea is that the key differentiator of successful organisations is the degree to which their human resources are unique and valuable; enabling the organisation to compete successfully. These arguments are used by a number of authors who suggest that the human resources identified as really making a strategic difference should be invested in to a greater extent than other employees. This theory has led to the development of general HR related models, for example Lepak and Snell’s ‘HR Architecture’ model (Lepak and Snell 1999). This trend, a focus on separating employees into groups that receive different treatment, is discussed in more detail below.

All of these approaches and models make their own assumptions as to why, whether and how human resource practices and systems will lead to organisational performance. Despite Guest (2011) arguing that there has been considerable development in the field of HRM, he also concludes that ‘after over two decades of extensive research, we are still unable to answer core questions about the relationship between human resource management and performance’ (p. 3). This leaves the field in an interesting place at the moment; whilst there is some evidence linking HR practices and positive organisational outcomes (see Chapter 2), the core assumption of traditional models of HRM is yet to be convincingly supported. Examples of existing research examining the relationship between HR and performance are discussed further in Chapter 2 and an important issue in this discussion relates to context. In reflecting on where HR as a field stands at the moment, therefore, we need to consider the wider economic and political context in which it is currently operating.

Current HR Context

There are a number of features of the current global context that cannot be ignored in an introduction to a contemporary edited text that explores employment relationships and human resource management. The main contextual feature is the ongoing global financial crisis (GFC). With its roots in an asset bubble, overheated Western property markets and ‘innovative’ investment banking practices, the GFC has cast a long shadow over HR practice. The implications of the GFC for HR practice are wide ranging. The economic crisis is making it more difficult to justify practices traditionally associated with effective HR practice, such as the provision of pensions and other rewards, including, more controversially, bonuses for high performers (see Chapter 12). In many sectors, especially more recently in the public sector, the workforce has been faced with a combination of pay freezes and pay cuts. However, this has frequently not been sufficient to prevent staff reductions in local government, the civil service and the NHS, with profound implications for job security, employee involvement and collective voice (see Chapters 13 and 14). In such a context the function will find it much harder to justify sophisticated or even basic investment in people for central HR activities such as training and development. In such a context it is much harder to motivate and engage staff (Roche et al. 2011).

As part of the fallout from the GFC, many, if not most, Western economies have experienced a sustained period of deep recession. As the people usually responsible for managing redundancies, a large portion of HR functions would have been involved in managing this ‘downsizing’, only to then be required to downsize their own function. At a more macro level, the so-called ‘age of austerity’ (e.g. as referred to by the UK’s Prime Minister, David Cameron) has l...