Managing Human Resources

Alan Cowling, Chloe Mailer, Alan Cowling, Chloe Mailer

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781136384219
• Edition: 3
• Topic: Business
• Subtopic: Business generale
• Index: Business

This is the third edition of a book which has gained wide acceptance in universities and colleges for use on advanced courses in human resource management. Written by a team of recognized experts in thier field, it combines a high academic standard with an applied approach to the challenges facing managers today, which will appeal to both line mangers and human resource managers.

1 Developing a strategy for human resources

Alan Cowling

One issue dominates the subconscious thinking of both individuals and organisations — survival. And for organisations to survive in today’s environment they must be successful. Survival and success dominate the thinking of chief executives, top management, and strategic planners. ‘Strategy’ is a concept borrowed from the military, where it denotes the art of war, and hence military survival. In business it denotes the art of economic survival.

When developing their strategies, companies in the private sector normally place their emphasis on financial, marketing, and operational considerations. In the public sector strategies have additionally had to take account of political matters. Until recently it was rarely thought necessary to consider human resource when strategies were developed. While the need for a productive and cooperative workforce was generally acknowledged, it was assumed that this could be comfortably achieved subsequent to the development of corporate strategy.

As indicated in the introduction to this book, the strategic significance of human resources has been increasingly recognised by Western corporations over the last decade. Factors that have contributed to this recognition have included the manifest success of Japanese industry that has paid great attention to people, their values and their skills, technological change which has increased the need for a well-educated and highly skilled workforce, and the positive example provided by a number of world-class Western organisations that have a coherent strategy for human resources.

1.1 The nature of corporate strategy

Faulkner and Johnson see corporate strategy as being concerned with the long-term direction and scope of an organisation.¹ It is crucially concerned with how an organisation positions itself in its environment and in relation to its competitors. By taking a long-term perspective in preference to a short-term tactical manoeuvre, competitive advantage is promoted.

The application of strategy to the public sector and ‘not for profit’ organisations maintains this long-term perspective, but has to be framed in different terms: the emphasis is not on achieving competitive advantage but on providing a public service of appropriate quality within budgeted cost restraints (although the distinction between public and private organisations has been blurred in recent years by government pressures for ‘internal markets’ and competitive tendering). The Local Government Board recommended in their 1991 report that ‘Authorities adopt a strategic approach … traditional structures, practices and procedures are being re-examined to find new ways of improving service to their communities.’²

The best manner in which to formulate and execute strategy has been the subject of considerable debate. Whittington found 37 books in print bearing the title Strategic Management³. Until recently a rational planned approach has been the norm, with an emphasis on ‘aims’ and ‘missions’, and a systematic evaluation of alternative ways of achieving these. This has then been followed by selection and statement of the best way forward, and detailed plans extending several years into the future. Once approved by the chief executive these plans are ‘cascaded’ down through the organisation in hierarchical fashion.

In what has become a classic definition, Chandler in 1962 defined strategy as ‘the determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources of action and the allocation of the resources necessary to carry out these goals’.⁴ Popular approaches in the 1970s and 1980s placed emphasis on an appraisal of strengths, weaknesses, opportunities, and threats (as typified by SWOT analysis and the Boston Consulting Group’s portfolio) as an aid to determining strategy. Both approaches appealed to top management in Western organisations, convinced that they held a monopoly of intelligence and wisdom.

Research has challenged both the validity and practicality of this approach.⁵,⁶ All too frequently, decision-making in boardrooms has been found to reflect power structures and group dynamics rather than rational analysis. The ability to predict events several years into the future has also been questioned, given the rapidity of change in the contemporary business environment. In consequence, authorities such as Mintzberg advocate an incremental approach which treats strategy formulation and implementation as a ‘craft’, and he comments that ‘formulation and implementation merge into a fluid process of learning through which creative strategies emerge’. In his view, effective strategies combine deliberation and control with flexibility and organisational learning. Ansoff, however, considers this ‘emergent’ approach as unsuited to a turbulent environment, as strategies are produced that are out of date before they can be implemented.⁷ Johnson and Scholes⁸ see corporate strategy as ‘the matching of the activities of the organisation’s activities to its resource capability’, as shown in Figure 1.1.

Figure 1.1 The elements of strategic management

Source: Johnson, Scholes, Exploring corporate strategy

1.2 Corporate strategy and human resource strategy

A human resource strategy can likewise be developed as a matching process, concerned with the manner and extent to which the stock of manpower should be varied to match predicted changes in the environment, and integrated continuously into corporate plans.

The model in Figure 1.1 highlights five areas where the analysis and planning of human resources are significant in the strategic management process, namely, ‘environment’, ‘organisation structure’, ‘people and systems’, ‘resources’, and ‘resource planning’. The relevant aspect of the environment in this context is the labour market, which determines the supply of labour and impact on wage costs and employee attitudes. A good organisation structure is a strategic imperative, because without it the organisation will lack synergy. The right people and systems will deliver high productivity and quality, building on the human resources put in place by careful human resource planning. These factors will be considered in some detail later in this book.

While conventional wisdom now supports the integration of human resource strategy and corporate strategy, the evidence unfortunately is that only limited progress has so far been achieved. In a study of European companies Chris Brewster found the highest degree of integration among firms in Sweden, Norway, and France, and the lowest degree of integration in Germany and Italy.⁹ The UK lagged behind Switzerland, Spain, Finland and the Netherlands in this respect. In a study in the USA, Paul Butler found variable degrees of integration in a sample of large corporations, and commented that

In companies with two-way linkage, top management and corporate planners recognise that business plans affect — and are affected by — human resources … in these firms, consequently line managers, business planners, and human resources staff members relate to one another as strategic partners.¹⁰

Corporate strategy can also be envisaged as taking place at lower levels in the organisation. John Purcell has identified three levels of strategic decision-making.¹¹ At the top of the organisation ‘first-order’ strategies consist of decisions on long-term goals and the scope of activities, ‘second-order’ strategies lead to decisions on the way the enterprise is structured to achieve its goals, and human resource management decisions are included in ‘third-order’ strategies tied to annual budgets, where mechanisms for making things happen are put into place. Research by Shaun Tyson using this taxonomy and based on a sample of 30 large British companies found ‘strong’ evidence that divisional management creates detailed strategies, and in many cases the role of main boards was to coordinate and shape these strategies in support of the published vision and values.¹² HR directors were found to play an important role at divisional level, even though main boards frequently did not include an HR director, and Tyson concludes that HR divisional directors play an important role in the development of second- and third-order strategies. It is interesting to compare this apparent subordination of HR strategy to second- or third-level decision-making with the Japanese approach as expounded by Kenichi Ohmea that ‘The Japanese company starts with people, trusting their capabilities and potential.’¹³

A comprehensive model of strategic human resource management has been developed by Olive Lundy, as illustrated in Figure 1.2.¹⁴

This model indicates progressive stages in developing a human resource strategy that is integrated with corporate strategy, and subsequently finds expression in third-order strategies, processes, and actions in key HRM areas such as selection, performance assessment, training and development, rewards and employee relations.

Figure 1.2 Strategic human resource management: a comprehensive model

Source: Lundy, Cowling, Strategic Human Resource Management

1.3 Structure and strategy

Designing and revising the structure of an organisation are key aspects of first-order strategy. Decisions on structure are normally taken at the highest level, usually by the ...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• Biographical notes
• Prcfiice
• Prrfcice to first edition
• Prrfuce to second edition
• List of abbreviations
• Introduction
• 1 Developing a strategy for human resources
• SECTION I Managing Employment
• 2 Recruitment and retention
• 3 Selection methods
• SECTION II Training and Employment
• 4 Training The essential ingredient
• 5 Culture, organisation development and change
• 6 From personal to professional development Creating space for growth
• SECTION III Employee Relations: The Legal Framework of Employment and Equal Opportunities
• 7 Employee relations
• 8 The legal framework of employment
• 9 Equal opportunities
• SECTION IV Reward Management and the Management of Performance
• 10 Motivation and rewards
• 11 Pay policy, pay processes, and the management of rewards
• 12 Appraising and rewarding performance
• SECTION V International Human Resource Management
• 13 International human resource management
• Index