Aligning Human Resources and Business Strategy

Linda Holbeche

• Publisher: Routledge
• Year: 2022
• Print ISBN: 9781032114576
• eBook ISBN: 9781000463422
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

What difference can the aspiring HR strategist really make to business value?

In the new and extensively updated edition of her ground-breaking book, Linda Holbeche answers this question and provides the tools and insights to help HR managers and directors add value to the organization by implementing effective HR initiatives that are aligned to core business strategies.

This edition includes new chapters, fresh case questions, specific sector 'twists' like healthcare, the university sector, travel and tourism, alongside a greater mix of international case studies. Taking a more analytical approach than previous works, Holbeche discusses and explores a number of contemporary academic debates.

Learn how you can strengthen and prove the relationship between people strategy and business success through your approach to performance and development and impress at the highest levels with this new edition of an HR classic.

Part I The need for strategic human resources

1 Strategic HRM theory

DOI: 10.4324/9781003219996-2

Chapter overview

Learning objectives

Introduction: defining HRM

From personnel to human resource management

Managerialism

Micro practice areas

People as resources or ‘human capital’ assets

Strategic human resource management theory

Perspectives on alignment

Control or commitment

Maximising the human asset

Critical HRM

Unitarism and the ‘HRM project’

Social and ethical dimensions of HR practice

Integration of people management with business strategy and context

Challenges to the notion of ‘fit’

International and comparative HRM

Conclusion

Since it emerged in the 1980s, Human Resource Management (HRM) theory and practice has been a pervasive theme in the mainstream literatures of organisational behaviour, strategic management, business policy, international and intercultural management. Indeed, HRM has become a recognised semiotic for ‘modern people management’ (Paauwe 2007: 9).

As an applied discipline, therefore, HRM is still relatively ‘young’ and the field continues to evolve. While still predominantly a US and UK theory phenomenon, in recent years, there has been a growing contribution to HRM theory development from various European and international centres of scholarship, especially in Australia and India. Critical scholar Keenoy (2009: 466) argues that HRM, which began as a local US cultural artefact, has emerged as a global naturalised discourse which informs the social practice of international corporations.

Chapter overview

In this chapter, I shall explore some of the debates regarding HRM, and Strategic Human Resource (SHRM) theory and practice. The intention is to respond to Janssens and Steyaert’s plea for reflexivity in HRM, ‘to make the plurality of HRM visible by pointing out various paradigmatic, theoretical and empirical communities of practice that partly are connected, partly overlap and partly avoid each other’ (2009: 152). We shall cover:

• Defining HRM and SHRM
• From Personnel to Human Resource management
• People as resources or human capital assets
• Perspectives on alignment
• International and comparative IHRM

Learning objectives

• Outline the evolution of HRM and SHRM theory
• Discuss human resource (HR) practices, HR outcomes and performance (the HR value chain)
• Identify the challenges in assessing the potential impact of human resource management (HRM) on performance
• Review the concept of competitive advantage and sustained competitive advantage of an organisation
• Identify how mainstream and critical theorist perspectives on HRM differ.

Introduction: defining HRM

The notion that human beings are one of several ‘resources’ that are valuable, rare, inimitable and non-substitutable that an organisation can use to achieve competitive advantage stems from Resource-based theory (Barney 1997), now a major theme in strategic thinking. The term ‘human resources’ came to describe a specific type of strategic resource (increasingly referred to as ‘human capital’); ‘human resource management’, as the way in which this could be acquired, developed and maintained; and the ‘human resources function’ (or ‘HR’) as the entity responsible for these activities.

As yet the nature and impact of HRM remain contested, with various traditions, multiple perspectives and no overall theory of HRM which has variously been defined as:

• All management decisions and action that affect the nature of the relationship between the organisation and its employees – ‘its human resources’ (Beer et al. 1984).
• HRM focuses on the exchange relationship between the organisation and the employee – both the legal contract of employment and the ‘psychological contract’ and the social contract which relates to the relationships and networks employees have within the company (Sonnenberg et al. 2011).
• The management of work and people towards desired ends (Boxall et al. 2007).
• Management decisions related to policies and practices that together shape the employment relationship and are aimed at achieving certain goals. These goals concern performance goals which have been defined and measured in multiple ways (Boselie 2014).
• A comprehensive and coherent approach to the employment and development of people (Armstrong and Taylor 2014).

There is, however, some consensus that HRM is a business concept reflecting a mainly managerial view of the employment relationship, with theory, policies and practices geared to enabling organisations to achieve flexibility, competitive advantage and high performance through people.

Moreover, almost since HRM first came to prominence as the preferred international discourse to frame employment management issues and as a field of practice within organisations, ‘it is nearly unanimous that HR can and should add more value to corporations’ (Lawler et al. 2005: 165); this adding value to be achieved by aligning people and organisational strategies to business strategies. Ulrich (1997), and Ulrich and Brockbank (2005, 2015), for instance, emphasise the role of the HR function in creating ‘value’ for business and its stakeholders, advocating an ‘investor-literate’ approach to HR strategy and practice.

Reflective activity

• What do you consider to be the primary role of the HR function?
• Think of an organisation with which you are familiar. To what extent is the HR function perceived as a strategic asset?

From personnel to human resource management

Though HRM emerged as a discipline in the 1980s, Kaufman (2001) argues that its intellectual roots can be traced back to the 1920s in the United States. Jacques (1999) suggests the origins of HRM can be found in ideas which emerged between 1900 and 1920 from the historical conjunction of scientific management, the employment managers’ movement and industrial psychology.

Similarly, most theorists would agree that the field of human resource practice, and the HR function itself, came into prominence in the 1980s, replacing earlier conceptions of personnel management. Personnel had been seen mainly as a service deliverer to management, and as a bridge between management and the workforce, rather than as a strategic contributor. While managing people was ‘line’ management’s responsibility, the work of Personnel centred around the administration of people and employee relations, providing specialist support on a range of issues such as pay and conditions, employee welfare, disciplinaries, recruitment and selection etc. The nature of Personnel roles and contribution often reflected the ‘welfare’ (after Tyson and Fell 1986) and ‘clerk of works’ models through which the status quo was enshrined in personnel policies and procedures. Personnel was also expected to act as ‘company policeman’, ensuring compliance with set procedures and employment regulations.

The emergence of HR at the expense of Personnel was due to a combination of economic and political context factors. The 1970s had been a prolonged period of industrial unrest, economic stagnation and crisis, and an era of adversarial industrial relations in the United States and the United Kingdom. Industrial Relations specialists played a key role in negotiating with (often militant) trade unions, especially in traditional industries, to break the perceived union stranglehold over production.

As the United Kingdom and the United States emerged from the prolonged period of industrial unrest, the Thatcher and Reagan governments were determined to advance economic growth by freeing up market competition through deregulation and reducing union power which was seen as a barrier to economic success. The new and invigorated neo-liberal form of global capitalism that was actively promoted (often referred to as ‘Thatcherism’ or ‘Reaganomics’) was underpinned by a political commitment to new forms of market, in particular to knowledge and service-based industries such as the financial services industry (Marquand 2008; Gamble 2009).

The acceleration of globalisation was reflected in the competitive restructurings of the 1980s and 1990s in which a new breed of ‘hard’ personnel disciplines came to the fore, such as organisation design, manpower planning and pay negotiations and the Personnel function started to attract men in large numbers for the first time. As ‘fixers’ of companies’ ‘difficult’ people issues, such as major restructurings, redundancy programs and industrial disputes, some HR professionals claimed and won the right to be taken seriously as members of management. This period coincided with the relative decline of trade union power in the United Kingdom and the United States and in many workplaces the loss of collective workforce representation, especially in ‘new’ industries such as financial services. HR was to forge a new relationship with employees that would enable greater organisational flexibility.

As the power of the trade unions waned in the United Kingdom, and as new (deliberately non-unionised) sectors emerged, conversely, perhaps as a result of the significant part played by Personnel in employee relations during the period of industrial unrest, the power of the role grew beyond the original confines of the job. In large organisations specialist functions such as Compensation and Benefits were created. The more Personnel became the specialist repository of information about employees, including senior management, the more it needed to be consulted about any and every issue related to employees. Personnel began to be seen as a power in the land, even if, in most cases, the Personnel director was not a member of the board. Over time, in some cases, responsibility for managing people appeared to slip away from line managers who would refer to Personnel for everything from a minor disciplinary offence to recruitment.

By the mid-1990s some of the HR skills relating to collective bargaining and organisation design fell into decline. The skills void was filled to large extent by major consultancies who helped design and implement many of the large-scale reengineering projects and corporate downsizings of the 1990s. Industrial relations was superseded by the broader all-encompassing discipline of employee relations.

The Personnel function gradually came to be rebranded as ‘Human Resources’ and in large complex organisations came to be seen more as a specialist and quite powerful management function (Guest 1989). However, in other international contexts and in many Small- and Medium-sized Enterprises (SMEs) the earlier models of Personnel continued much as before. We shall return to these topics in later chapters.

Managerialism

Mainstream management theory since the 1980s has sought to advance business practice. The desire of the UK and US governments, and company owners for new forms of management and for less adversarial industrial relations, preferably on an individual rather than collective basis, led to the development of business schools and the emergence of managerialism as a philosophy and practice. This subsequently spread to all sectors, including charities, reflecting the perceived political need to expose all parts of the UK and US economies to the values of business.

By the 1990s company policies on employment, pensions, etc. became increasingly market-driven, reflecting neo-liberal economic policies. The emphasis in many organisations was on downsizing and change. The pursuit of competitive advantage on a global basis required strong international value chains and flexible workforces who could provide efficient services at a cost saving to business. Outsourcing and offshoring of ‘non-core’ activities to developing economies began, made possible by the development of call centre technology. Long-term employees, traditional career routes and pension obligations came to be viewed as expensive overheads – an obstacle to the flexibility and efficiency that many employers craved. The individualism implicit in HRM assisted the development of labour flexibility from the employer perspective by removing collective protections for employees.

The development and expansion of HRM since the late 1980s as an offshoot of managerialism, at the expense of personnel management and industrial relations, emphasised the requirement for the HR function to achieve a closer functional relationship (‘alignment’) between the needs of business and ‘human resource’ practices. HR’s main purpose was conceived as alignment with business strategy – to realign people management to the new strategic realities of the organisation – in order to make cost-effective and efficient use of ‘human resources’ and ensure that the organisation was able to achieve success through people. Therefore HR functions were to secure and develop the flexible, compliant and productive workforces required by business.

HRM was supposed to be implemented via a division of responsibility between line managers who were responsible for the day-to-day utilisation, development and retention of people, while the HR function, representing the employer, was responsible for legal compliance and policies and delivering people-related administration and specialist services such as advising line managers, and designing and implementing development programmes.

Micro practice areas

To achieve such aims, the HR function’s many specialist areas of practice, wh...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• Preface to the Third Edition
• Acknowledgements
• Part I The need for strategic human resources
• Part II Strategies for talent
• Part III Building strategic change capability
• Index