BASIC TRUTH

By the soul and Him Who perfected it and inspired it with conscience of what is wrong for it and what is right for it. He is indeed successful who causes it to grow and he is indeed a failure who stunts it
Al Quran [91:7-10]

Strategic Human Resource Management A Guide to Action

Michael Armstrong 3rd Edition Chapter # 01

Learning Objectives:
The Concept of Human Resource Management (HRM)

Various Models of HRM

Aims and Characteristics of HRM Reservations about HRM and The Relationship between HRM and Personnel Management.

Definition of Human Resource Management (HRM)

A strategic and coherent approach to the management of an organizations most valued assets the people working there who individually and collectively contribute to the achievement of its objectives. John Storey (1989) believes that HRM can be regarded as A set of interrelated policies with an ideological and philosophical underpinning. He suggests four aspects that constitute the meaningful version of HRM: A particular constellation of beliefs and assumptions; A strategic thrust informing decisions about people management; The central involvement of line managers; Reliance upon a set of levers to shape the employment relationship.

HR Management HR Management Activities Activities

Figure 12
16

Models of HRM:
1. The Matching Model of HRM 2. The Harvard Framework

Models of HRM Matching Model of HRM

First explicit statements of the HRM concept was made by the Michigan School (Fombrun et al, 1984)

This model was developed by Fombrun, Tichy & Devanna

HR systems and the organization structure should be managed in a way that is congruent with organizational strategy.

Emphasizes the interrelatedness and the coherence of HRM activities

Prescriptive Ignores stakeholder interests, situational factors and notion of strategic choice Expresses the coherence of internal HR policies and the importance of matching them to external business strategy

Models of HRM Matching Model of HRM

Explained the HR cycle (an adaptation of which is illustrated in Figure) which consists of four generic processes or functions that are performed in all organizations. These are:
Selection matching available human resources to jobs; Appraisal (performance management); Rewards the reward system is one of the most under-utilized and mishandled managerial tools for driving organizational performance; it must reward short- as well as long-term achievements, bearing in mind that business must perform in the present to succeed in the future; Development developing high-quality employees.

Models of HRM The Harvard Framework

The other founding fathers of HRM were the Harvard school of Beer et al (1984) who developed what Boxall (1992) calls the Harvard framework. Beer and his colleagues believed that today, many pressures are demanding a broader, more comprehensive and more strategic perspective with regard to the organizations human resources. These pressures have created a need for:
A longer-term perspective in managing people and consideration of people as potential assets rather than merely a variable cost. They were the first to underline the HRM tenet that it belongs to line managers.

Models of HRM The Harvard Framework (cont.)

They also stated that: HRM involves all management decisions and action that affect the nature of the relationship between the organization and its employees its human resources. Following factors include in this framework
Situational factors Stakeholder interests HRM policy choices HR outcomes Long-term consequences

Models of HRM The Harvard Framework (cont.)

Classifies inputs and outcomes at both organizational and societal level.

Absence of a coherent theoretical basis for measuring the relationship between HR inputs, outcomes and performance
The Harvard school suggested that HRM had two characteristic features: 1. Line managers accept more responsibility for ensuring the alignment of competitive strategy and personnel policies 2. Personnel has the mission of setting policies that govern how personnel activities are developed and implemented in ways that make them more mutually rein-forcing

Models of HRM The Harvard Framework (cont.)

According to Boxall (1992) the advantages of this model are that it: Incorporates recognition of a range of stakeholder interests; Recognizes the importance of trade-offs, either explicitly or implicitly, between the interests of owners and those of employees as well as between various interest groups;

Widens the context of HRM to include employee influence, the organization of work and the associated question of supervisory style;
Acknowledges a broad range of contextual influences on managements choice of strategy, suggesting a meshing of both product market and socio-cultural logics; Emphasizes strategic choice it is not driven by situational or environmental determinism.

Aim of HRM
The overall purpose of HRM is to ensure that the organization is able to achieve success through people.

As Ulrich and Lake (1990) remark: HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities.
Specifically, HRM is concerned with achieving objectives in the areas summarized below:
1. Organizational Effectiveness 2. Human Capital 3. Knowledge Management 4. Reward Management 5. Employee Relations 6. Meet Diverse Needs

Aim of HRM (cont.)

1.

Organizational Effectiveness
Distinctive HR practices shape the core competencies that determine how firms compete (Cappelli and Crocker-Hefter, 1996).

Extensive research has shown that such practices can make a significant impact on firm performance.
HRM strategies aim to support programs for improving organizational effectiveness by developing policies in such areas as knowledge management, talent management and creating a great place to work. This is the big idea as described by Purcell et al (2003), which consists of a clear vision and a set of integrated values. More specifically, HR strategies can be concerned with the development of continuous improvement and customer relations policies.

Aim of HRM (cont.)

2.

Human Capital
Human capital has been defined by Bontis (1999) as follows: Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization. Human capital can be regarded as the prime asset of an organization, and businesses need to invest in that asset to ensure their survival and growth. HRM aims to ensure that the organization obtains and retains the skilled, committed and well-motivated workforce it needs.

Aim of HRM (cont.)

2.

Human Capital
This means taking steps to assess and satisfy future people needs and to enhance and develop the inherent capacities of people their contributions, potential and employability by providing learning and continuous development opportunities. It involves the operation of rigorous recruitment and selection procedures, performance-contingent incentive compensation systems, and management development and training activities linked to the needs of the business (Becker 1997). It also means engaging in talent management the process of acquiring and nurturing talent, wherever it is and wherever it is needed, by using a number of interdependent HRM policies and practices in the fields of resourcing, learning and development, performance management and succession planning.

Aim of HRM (cont.)

3.

Knowledge Management
Knowledge management is any process or practice of creating, acquiring, capturing, sharing and using knowledge, wherever it resides, to enhance learning and performance in organizations (Scarborough et al 1999).
HRM aims to support the development of firm-specific knowledge and skills that are the result of organizational learning processes.

Aim of HRM (cont.)

4.

Reward Management
HRM aims to:
Enhance motivation Job engagement & Commitment By introducing policies and processes that ensure that people are valued and rewarded for what they do and achieve, and for the levels of skill and competence they reach.

Aim of HRM (cont.)

5.

Employees Relations
The aim is to create a climate in which productive and harmonious relationships can be maintained through partnerships between management and employees and their trade unions.

Aim of HRM (cont.)

6.

Meet Diverse Needs

HRM aims to develop and implement policies that balance and adapt to the needs of its stakeholders and provide for the management of a diverse workforce, taking into account individual and group differences in employment, personal needs, work style and aspirations, and the provision of equal opportunities for all.

Aim of HRM (cont.)

7.

Rhetoric & Reality

The research conducted by Gratton (1999) found that there was generally a wide gap between the sort of rhetoric expressed above and reality. Managements may start with good intentions to do some or all of these things, but the realization of them theory in use is often very difficult. This arises because of contextual and process problems: other business priorities, short-termism, lack of support from line managers, an inadequate infrastructure of supporting processes, lack of resources, resistance to change and lack of trust.

Characteristics of HRM
The characteristics of the HRM concept as they emerged from the writings of the pioneers and later commentators are that it is:
Diverse Strategic, with an Emphasis on Integration Commitment - Orientated Based on the Belief that People should be Treated as Human Capital Unitary rather than Pluralist, individual rather than collective, with regard to employee relations A management - driven activity the delivery of HRM is a line management responsibility Focused on business values

Characteristics of HRM Diversity

The characteristic of HRM are by no means universal.

There are many models, and practices within different organizations are diverse.
Hendry and Pettigrew (1990) play down the prescriptive element of the HRM model and extend the analytical elements. As pointed out by Boxall (1992), such an approach rightly avoids labeling HRM as a single form and advances more slowly by proceeding more analytically.

Characteristics of HRM Diversity (cont.)

It is argued by Hendry and Pettigrew that better descriptions of structures and strategy-making in complex organizations, and of frameworks for understanding them, are an essential underpinning for HRM. Storey (1989) made distinction between The hard versions of HRM The soft versions of HRM

Characteristics of HRM Diversity (cont.)

Hard Version of HRM: The hard version of HRM emphasizes that people are important resources through which organizations achieve competitive advantage. These resources have therefore to be acquired, developed and deployed in ways that will benefit the organization. The focus is on the quantitative, calculative and businessstrategic aspects of managing human resources in as rational a way as for any other economic factor. As Guest (1999) comments: the drive to adopt HRM is based on the business case of a need to respond to an external threat from increasing competition.

Characteristics of HRM Diversity (cont.)

Hard Version of HRM: HRM reflects a long-standing capitalist tradition in which the worker is regarded as a commodity. The emphasis is therefore on the
Interests of Management Integration with Business Strategy Obtaining Added Value from People by the Processes of Human Resource Development Performance Management & the Need for a Strong Corporate Culture Expressed in Mission and Value Statements and Reinforced by Communications Training & Performance Management Processes

Characteristics of HRM Diversity (cont.)

Soft Version of HRM:
The soft version of HRM traces its roots to the human-relations school. It emphasizes communication, motivation and leadership. Storey (1989) it involves treating employees as valued assets, a source of competitive advantage through their commitment, adaptability and high quality of skills, performance and so on The soft approach to HRM stresses the need to gain the commitment the hearts and minds of employees through involvement, communications and other methods of developing a highcommitment, high-trust organization.
Attention

is also drawn to the key role of organizational culture.

Characteristics of HRM Diversity (cont.)

Hard vs. Soft Version of HRM:
In 1998, Karen Legge defined the hard model of HRM as a process emphasizing the close integration of human resource policies with business strategy which regards employees as a resource to be managed in the same rational way as any other resource being exploited for maximum return. In contrast, the soft version of HRM sees employees as valued assets and as a source of competitive advantage through their commitment, adaptability and high level of skills and performance.

Characteristics of HRM Diversity (cont.)

Hard vs. Soft Version of HRM:
It has been observed by Truss (1999) that, even if the rhetoric of HRM is soft, the reality is often hard, with the interests of the organization prevailing over those of the individual. A research carried out by Gratton et al (1999) found that, in the eight organizations they studied, a mixture of hard and soft HRM approaches was identified. This suggested to the researchers that the distinction between hard and soft HRM was not as precise as some commentators have implied.

Characteristics of HRM Strategic Nature

Perhaps the most significant feature of HRM is the importance attached to strategic integration, which flows from top managements vision and leadership, and which requires the full commitment of people to it.

David Guest (1987, 1989a, 1989b, 1991) believes that a key policy goal for HRM is strategic integration, by which he means the ability of the organization to integrate HRM issues into its strategic plans, to ensure that the various aspects of HRM cohere, and to provide for line managers to incorporate an HRM perspective into their decision making.

Characteristics of HRM Strategic Nature (cont.)

Karen Legge (1989) considers that one of the common themes of the typical definitions of HRM is that human resource policies should be integrated with strategic business planning. Keith Sisson (1990) suggests that a feature increasingly associated with HRM is a stress on the integration of HR policies both with one another and with business planning more generally. John Storey (1989) suggests that: the concept locates HRM policy formulation firmly at the strategic level and insists that a characteristic of HRM is its internally coherent approach

Characteristics of HRM: Commitment Orientated Nature

The importance of commitment and mutuality was emphasized by Walton (1985) as follows:
The new HRM model is composed of policies that promote
Mutuality Mutual Goals Mutual Influence Mutual Respect Mutual Rewards Mutual Responsibility.

Characteristics of HRM: Commitment Orientated Nature (cont.)

David Guest (1987) wrote that one of the HRM policy goals was the achievement of high commitment behavioral commitment to pursue agreed goals, and attitudinal commitment reflected in a strong identification with the enterprise. It was noted by Karen Legge (1995) that human resources may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act flexibly in the interests of the adaptive organizations pursuit of excellence.

Characteristics of HRM People as Human Capital

The notion that people should be regarded as assets rather than variable costs, in other words treated as human capital, was originally advanced by Beer et al (1984). HRM philosophy, as mentioned by Karen Legge (1995), holds that human resources are valuable and a source of competitive advantage. Armstrong and Baron (2002) stated that: People and their collective skills, abilities and experience, coupled with their ability to deploy these in the interests of the employing organization, are now recognized as making a significant contribution to organizational success and as constituting a significant source of competitive advantage.

Characteristics of HRM Unitarist Philosophy

The HRM approach to employee relations is unitarist not pluralist it is believed that employees share the same interests as employers. Gennard and Judge (1997), organizations are assumed to be harmonious and integrated, all employees sharing the organizational goals and working as members of one team. Guest (1987, 1989a, 1989b, 1991) considers that HRM values are: unitarist to the extent that they assume no underlying and inevitable differences of interest between management and workers; and individualistic in that they emphasize the individualorganization linkage in preference to operating through group and representative systems.

Characteristics of HRM Focus on Business Values

The concept of HRM is largely based on a management and business orientated philosophy. It is concerned with the total interests of the organization the interests of the members of the organization are recognized but subordinated to those of the enterprise. Hence the importance attached to strategic integration and strong cultures, which flow from top managements vision and leadership, and which require people who will be committed to the strategy, who will be adaptable to change and who will fit the culture.

Characteristics of HRM Focus on Business Values (cont.)

By implication, as Guest (1991) says: HRM is too important to be left to personnel managers. In 1995 Karen Legge noted that HRM policies are adapted to drive business values and are modified in the light of changing business objectives and conditions. She describes this process as thinking pragmatism and suggests that evidence indicates more support for the hard versions of HRM than the soft version.

HRM & Personnel Management

A debate about the differences, between HRM and personnel management went on for some time. The terms HRM and HR are now in general use both in their own right and as synonyms for personnel management, but understanding of the concept of HRM is enhanced by analyzing what the differences are and how traditional approaches to personnel management have evolved to become the present-day practices of HRM.

HRM & Personnel Management (cont.)

Some commentators (Legge, 1989, 1995; Keenoy, 1990b; Sisson, 1990; Storey, 1993; Hope-Hailey et al, 1998) have highlighted the revolutionary nature of HRM. Others have denied that there is any significant difference in the concepts of personnel management and HRM. Torrington (1989) suggested that: Personnel management has grown through assimilating a number of additional emphases to produce an even richer combination of experience HRM is no revolution but a further dimension to a multi-faceted role.

HRM & Personnel Management (cont.)

According to Armstrong
HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel management, but as usually perceived, at least it has the virtue of emphasizing the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufficient attention has been paid to it in many organizations.