chapter 1 Human resource management introduction Good managers are not ony effective in their use of economic and technica resources, but when they manage peope they remember that these particuar resources are specia, and are utimatey the most important assets of the organisation. Indeed, they are the ony rea source of continuing competitive advantage and the best managers never forget that these assets are human beings. earning outcomes On competion of this chapter you shoud: have a good appreciation of what the human resource management (HRM) function in contemporary organisations comprises have some appreciation of the deveopment of HRM have an appreciation of the practica appication of HRM understand the reationship between HRM and strategy appreciate best-practice and best-fit modes of HRM and strategy recognise some of the key themes of HRM in the twenty-first century understand the importance of new forms of empoyment for HRM. The precise meaning of the term human resource management (HRM) is often a source of particuar confusion to non-speciaists. Oder terms for the peope management function of an organisation such as personne management or personne administration are sti sometimes used and it is often assumed that HRM is just a fancy new tite for the same thing. One of the main objectives of this first chapter is to show this is not the case. An additiona source of confusion is that the term HRM is used in two senses: (1) to mean various peope management activities such as hiring, firing, rewarding, and so on, and (2) a particuar approach to the whoe question of managing peope. The first sense (1) might be described as operationa and the second (2) as strategic. These senses are not aways ceary distinguished in discussions and debates on HRM. Of course in practice operationa and strategic approaches are necessariy connected in that particuar operationa HRM poicies and practices are determined by decisions taken at the strategic eve, but nonetheess it is an important distinction to make and we shoud aways be cear about whether we mean the operationa or strategic sense, or both, when we say HRM. We wi try to carify these meanings and definitions in this text. We can say that, broady, the peope management function within an organisation may be described as:
2 Human Resource Management for MBA and Business Masters A the management decisions and actions that directy affect or infuence peope as members of the organisation rather than as specific job-hoders; and that HRM is currenty the principa mode or paradigm for the peope management function. HRM is not directy concerned with executive or ine management of individuas and their jobs. Management of specific tasks and responsibiities is the concern of the empoyee s immediate supervisor or manager that is, the person to whom their performance is accountabe (sometimes this might be the person s team). So HRM managers do not have ine authority over empoyees (other than over their own staff in HRM sections or departments). The term human resource management was being used by Peter Drucker and others in North America as eary as the 1950s without any specia meaning, and usuay simpy as another abe for personne management or personne administration. It was viewed as a bunde of operationa techniques, not a distinct manageria discipine or function. By the 1980s, however, HRM in the strategic sense had come to mean a radicay different phiosophy and approach to the management of peope at work (Storey 1989, pp4 5) with an emphasis on performance, workers commitment, and rewards based on individua or team contribution. One of the main characteristics of HRM is the devoution of many operationa aspects of peope management from speciaists directy to ine managers. HRM itsef has been caed the discovery of personne management by chief executives. Line managers are thus frequenty confronted with HRM operationa decisions and activities in their day-today business in a way that was not the case previousy. This process has been acceerated by other deveopments which add to the burden of the ine manager whie increasing the effectiveness of the organisation as a whoe. Outsourcing of arge areas of the traditiona personne management department s routine functions has happened on a massive scae in the ast three decades. Outsourcing of noncore functions, aowing the organisation to concentrate on its core competencies, has been one of the singe most important recent organisationa factors in both business and the pubic sector. It is extremey unikey that this wi be set in reverse in the foreseeabe future. In the case of HR services, the dis-integrating effects of outsourcing have been ampified by such reated deveopments as e-hr, in which the use of new technoogies aows the provision of sef-service HR to empoyees and managers, and HR business partnering, in which arge organisations disperse HR partners to constituent businesses (Cadwe and Storey 2007). New forms of empoyment particuary those such as crowdworking which expoit information and communications technoogy (ICT), incuding socia media are acceerating the divide in organisations between a core of high-vaue, permanent empoyees and others who enjoy significanty poorer empoyment rights and protection. Indeed, in some of these new working reationships the status of the worker can be that of a sef-empoyed contractor rather than an empoyee as such. Some of these deveopments are outined ater in this chapter and a fuer account is given in Chapter 9. These deveopments in HRM, in outsourcing and in new forms of empoyment have not removed the need for HR speciaists, but these peope are just that technica experts who act as interna consutants and to whom ine managers can refer as required. This means that it wi be more important than ever for ine managers to communicate effectivey with HR speciaists and be abe to weigh up their advice in an inteigent and knowedgeabe manner and to do that they have to speak the anguage and understand the concepts of the expert.
Human resource management 3 refective activity 1.1 Write down what you think human resource managers are actuay supposed to do. refective activity 1.1 answer guidance See section 1.1. 1.1 what do hr managers actuay do? Torrington et a (2014) an authoritative text widey used in teaching managers who are studying for the professiona exams of the Chartered Institute of Personne and Deveopment (CIPD) describe the roe of HR management as comprising specific objectives under four headings: staffing, performance, change management and administration. Staffing objectives are firsty concerned with getting the right peope in the right jobs at the right times that is, the recruitment and seection of staff but increasingy these days aso advising on subcontracting and outsourcing of staff. Staffing aso concerns managing the reease of empoyees from the organisation by resignation, retirement, dismissa or redundancy. Performance objectives: peope managers have a part to pay in assisting the organisation to motivate its empoyees and ensure that they perform we. Training and deveopment, reward and performance management systems are a important here. Grievance and discipinary procedures are aso necessary, as are wefare support and empoyee invovement initiatives. Change management objectives incude empoyee reations/invovement, the recruitment and deveopment of peope with the necessary eadership and change management skis, and the construction of reward systems to underpin the change. Administrative objectives incude: the maintenance of accurate empoyee data on, for exampe, recruitment, contracts and conditions of service, performance, attendance and training; ensuring organisationa compiance with ega requirements, for exampe in empoyment aw and empoyee reations; and heath and safety. Genera managers are increasingy invoved directy in a of the first three types of objectives. Administrative objectives tend to remain the preserve of dedicated HR support staff. The above cosey refects the arguments in David Urich s highy infuentia Harvard Business Review artice of 1998, A new mandate for human resources, which heped to shape HRM in the twenty-first century. After acknowedging that some commentators had been caing for the aboition of HR on the grounds of serious doubts about its contribution to organisationa performance, Urich agreed that: there is good reason for HR s beeaguered reputation. It is often ineffective, incompetent and costy (Urich 1998, p124). His soution was for HR to be reconfigured to focus on outcomes rather than on traditiona processes such as staffing or compensation: HR shoud not be defined by what it does but by what it deivers resuts that enrich the organisation s vaue to customers, investors and empoyees. His recommendations were that: First, HR shoud become a partner with senior and ine managers in strategy execution.
4 Human Resource Management for MBA and Business Masters Second, it shoud become an expert in the way work is organised and executed, deivering administrative efficiency to ensure that costs are reduced whie quaity is maintained. Third, it shoud become a champion for empoyees, vigorousy representing their concerns to senior managers and at the same time working to increase empoyees contribution that is, empoyees commitment to the organisation and their abiity to deiver resuts. Finay, HR shoud become an agent of continuous transformation, shaping processes and a cuture that together improve an organisation s capacity for change. Urich and Brockbank (2005) increased the number of roes to five, with distinct responsibiities for human capita deveoper and eader, as foows: strategic partner aigning HR with business strategy as before but with new emphasis on transformation and cutura change functiona expert both for those operationa poicies and practices that are the direct responsibiity of HR and wider aspects for which HR has indirect responsibiity, such as communication empoyee advocate corresponding to the earier empoyee champion human capita deveoper with emphasis on coaching behaviours and attitudes eader primariy of the HR function, but aso contributing to the eadership function of the organisation as a whoe. The structure of the present text refects Urich and Brockbank s roes as foows: The strategic partner roe is examined under the topic of strategic human resource management in this chapter (section 1.8); that of functiona expert in Chapter 2; empoyee advocate in Chapter 4; human capita deveoper in Chapter 3; and eader in Chapter 9. Urich s, and ater Urich and Brockbank s, view of the HR roe has set the agenda for peope management in the twenty-first century as being essentiay about its contribution to organisationa performance. Linda Hobeche, the then Director of Research and Poicy for the UK professiona body for HR managers, the CIPD, wrote that buiding organisationa capabiity is HR s heartand, and she added that HR managers can hep make capitaism human (Hobeche 2007, pp10 11). These two statements more or ess sum it a up. 1.2 cipd profession for the future With the mission of championing better work and better working ives, the CIPD has deveoped a new professiona framework for HR professionas in the UK. The CIPD recognised that more fexibe and innovative ways of working were evoving in the twenty-first century. These are driven by continuing gobaisation and changes in technoogy, workforce demographics and by new expectations of both empoyees and empoyers. Concerned that best practices are often quicky made obsoete by these changes, the CIPD now recommends that professionas foow a set of principes which are refected in a framework of professiona standards ( best practice in the context of HRM is defined in section 1.10). This framework is intended to: deveop a fit-for-purpose body of professiona knowedge benchmark organisationa HR standards against professiona standards support judgements of ethica and professiona practice support the acknowedgement of professiona membership designations. The framework is shown in Tabe 1.1, which articuates five key standards.
Human resource management 5 Tabe 1.1 CIPD five key standards Standard Knowedge and skis Socia and ethica responsibiity Situationa judgement Professiona deveopment Behaviours Statement Draws together peope expertise, knowedge and skis with business and commercia acumen to practise professionay Champions ethica and fair practice Appies a combination of professiona principes, knowedge and practised judgement to make informed decisions Commits to continuay acquire professiona knowedge and expertise Exercises professiona behaviours in a range of contexts The standards impy a number of themes for HR professionas: a greater awareness and understanding of the nature and speed of change in the word of work and its impact on the empoyment reationship greater emphasis on situationa judgement, moving away from simpy benchmarking best practices to focusing of the principes that underie HR practices a greater emphasis on ethica practice, which shoud consider the impact, both short and ong term, of HR poicies and practices on a stakehoder groups an openness to a broader knowedge base drawn from the discipines of the socia sciences and humanities (cipd.co.uk/pff). 1.3 the evoution of hrm But what exacty does this rather sef-important-sounding phrase human resource management actuay mean? To many peope it is seen as just a fancy or pretentious reabeing of what used to be caed personne management. But to many managers and management theorists it is vita to the surviva and success of organisations in the twentyfirst century. Why they think so reay derives from one singe, simpe idea: that peope their skis, knowedge and creativity are the key resource for economic and organisationa success in what Peter Drucker (1993) caed the knowedge-based economy. Another way of putting this is to say that peope are an asset not a cost (Beer et a 1984). By the 1970s a setted idea of peope management in arge organisations had evoved in deveoped free market economies, and this was typicay termed personne management (PM), or sometimes personne administration (PA). It refected the predominanty Tayorist organisation of work, which had deveoped to expoit the technoogy avaiabe for the mass production of industria goods. It acknowedged and incorporated the institutions of coective industria reations, recognising the roe and power of trade unions. The extraordinary economic (if not human) success of Tayorist industria practices ensured that this became the standard mode for a arge organisations, even those in service industries and in the pubic sector, and PM techniques used in industry for exampe in recruitment and seection were usuay assumed to be best management practice. A revoution in peope management occurred in the 1980s that overturned the estabished paradigm of personne management in favour of human resource
6 Human Resource Management for MBA and Business Masters management (HRM). If today, 30 years ater, one surveys the academic and professiona management iterature on peope management, whether aimed at speciaists or at genera managers, one woud think the revoution had been tota. Normative modes of HRM and exampes of HRM best practice abound, with itte or no apparent trace of traditiona personne management. However, if in fact we ook at the empirica evidence, we are forced to concude that indeed there has been a revoution, but that it is not compete in terms of either organisationa cuture or management practice. Few, if any, new operationa techniques of peope management have been deveoped within HRM: it is often the scope and manner of their use, and the intent behind their empoyment in a word, the strategy, or at east strategic intent that is different. For exampe, psychometric testing and personaity profiing have been avaiabe for decades, but in personne management- these were used ony for executive and other highy paid appointments. Many firms now routiney appy such techniques to a appointments (at east core ones), the intention being not to predict whether one high-cost appointment wi be successfu in a particuar roe but rather to ensure that a empoyees can accept a strong common cuture. Peope management, as a distinct concern of management which was separate from the day-to-day supervision of empoyees, originated in the UK in the nineteenth century amidst the factory conditions of the first Industria Revoution. The unrestricted capitaism of the initia industriaisation of the UK was restrained, to an extent, by the Factory Acts of the 1840s, which compeed factory owners to consider the we-being of their workforces, at east to some degree. Enightened capitaists such as Rowntree and Cadbury, who were often motivated by reigious convictions, appointed wefare officers to monitor and improve the conditions and ives of workers. Their actions woud often seem intrusive and paternaistic today for exampe, they discouraged drinking out of work hours as we as during. Caring for the wefare of empoyees was thus the first true peope management roe in the sense of organisationa responsibiity beyond that of specific job performance. With the rise of industria trade unionism in the twentieth century, another roe evoved in peope management that of negotiating and communicating with the coective representatives of the workforce (the workpace shop stewards and the fu-time paid trade union officias) on behaf of the organisation. The rise of scientific management and the organisation of industria work aong Tayorist ines aso ed to increased interest in more rigorous seection of personne administered by management, instead of the haphazard traditiona methods which often reied on the foremen or gangmasters to pick men and women for work. It aso ed to management taking an interest in organising and providing skis training. Foowing the Second Word War, socia science particuary as empoyed in the Human Reations Schoo started to exert a direct infuence on work in the areas of job design, attempting to ameiorate the worst side effects of scientific management whie sti achieving its productive and economic benefits. Athough such deveopments might not affect peope management directy, they shaped the cuture in which it was operating and evoving. The conscious appication of socia science aso encouraged the use of more sophisticated techniques in recruitment and seection, which did have an impact on peope management poicies and practice. By the 1970s a fairy consistent set of activities and roes had deveoped for peope management, which in most arge organisations was perceived as a speciaist management function, usuay termed personne management and comprising the areas of recruitment and seection, pay and conditions of service, empoyee wefare, industria reations, training and deveopment, and empoyee exit (retrenchment, redundancy or retirement). Most day-to-day peope management, especiay in the area of empoyee reations, was handed by personne speciaists and not by ine managers. In the UK the professiona
Human resource management 7 status of personne managers was supported by the formation of the Institute of Personne Management (IPM), which was ater to evove and become the present-day CIPD. Of course personne management was not without its critics. Peter Drucker (1955) thought that personne administration, as he caed it, was just a set of unreated, abeit individuay important, activities. The Drucker critique can be read now as an eary pea for peope management to be returned to ine managers, as ater advocated by HRM modes. The ambiguity of traditiona personne management was noted with apparent confict between the wefare roe expected by empoyees and the efficiency and cost contro increasingy demanded of it by management (see Legge 1995). Radica critics disiked it on principe (see beow). The approach to peope management which is now usuay termed HRM originated in manufacturing industry in the USA during the ate 1970s and eary 1980s and represented a significant break with the personne management paradigm. A number of factors ed to this new management thinking, principay oss of faith in the traditiona approach to mass production, the exampe of Japanese work organisation and manufacturing processes, and the reaisation of the impact of new technoogy on work practices (Gaie et a 1998). The remarkabe success of Japanese manufacturers in the 1970s and 1980s in capturing Western markets for sophisticated products, such as eectronics and cars, brought to a head ong-standing concerns about traditiona Tayorist/Fordist modes of work organisation. These modes were characterised by ow- or semi-skied work, cose supervision, pay being inked to quantity of output, and at east in mass production industries assemby-ine technoogies in which the pace of work was controed by machine. Academic studies had shown concern about some of the human effects of Tayorism and Fordism for decades, and this ed to the rise of the Human Reations Schoo, but by the 1980s it was recognised by business and managers as we that the costs of such systems were becoming unacceptabe in terms of ow eves of job invovement and weak commitment to the empoying organisation. There was an increasing wiingness on the part of empoyees to disrupt production to achieve higher financia or other rewards despite the damage such action coud have on the ong-term heath of the organisation. Cruciay, it had aso become recognised that these traditiona systems of work organisation were intrinsicay unabe to produce the quaity output now required to compete in a goba marketpace (Beer et a 1984, pviii). The perceived superiority of the Japanese mode was confirmed for many Western managers and academics by an infuentia MIT study in the 1980s which concuded that Fordist methods woud inevitaby be repaced in the car industry by the ean production mode of work organisation typified by Toyota s work methods. This approach to work organisation was seen to combine the best features of both craft production and mass production (Kenney and Forida 1993) and to achieve very high eves of empoyee commitment with resuting benefits in quaity and fexibiity. Technoogy aso payed a part in shifting manageria concern towards human resources. Managers had become aware that the rapid deveopment of new technoogies in competitive markets meant that organisations faced continua technoogica change, which in turn impied the need for continuous earning by empoyees. Empoyers woud have to be abe to assess individua empoyees training needs and provide the necessary investment in changing and upgrading skis. A this impied the deveopment of a much coser reationship between managers and empoyees, and therefore aso changes in the work of managers as we as that of workers. In particuar, it meant that the traditiona approach of managing peope personne management or personne administration, which had evoved to hep manage Tayorist/ Fordist organisations more effectivey was no onger viabe. In an increasingy competitive goba economy, with advancing technoogy and better-educated workforces, it was not enough to manage peope reactivey or passivey. In the industries that
8 Human Resource Management for MBA and Business Masters mattered, competitive advantage now utimatey came not from capita investment but from human resources, and these had to be managed proactivey and strategicay if an organisation was to be successfu. The coectivised empoyment reationship, in which trade unions represented the workforce and bargained with empoyers on its behaf for wages and conditions of empoyment (often on an industry-wide basis), had come to be seen as a hindrance to the adoption of the new technoogies and work practices which were necessary to compete with the Japanese. In fact, most Japanese workers in the major exporting industries were unionised, but the Japanese trade unions did not share the puraist cuture of their counterparts in the West (see section 1.4). Initiay, the new human resource poicies were inked to non-unionised and greenfied sites. Typicay, these were in arge-scae manufacturing, where the Tayorist/Fordist pattern of work organisation had been most dominant, but the new approach soon exerted infuence in a sorts of organisations and in every part of the economy, incuding services and the pubic sector. Theoretica and academic modes of HRM signaed from the outset the importance of strategy in normative modes of HRM. HRM was regarded as superior to personne management or personne administration party because it was supposed to be strategic in two senses: (1) the function itsef was conceived of in strategic rather than reactive ways; and (2) the HRM strategy woud be intimatey inked to, and consciousy supportive of, overa business and corporate strategies. 1.4 perspectives in the management of peope Manageria perceptions of how peope view reationships within their organisations are important in our anaysis of human resource management. Our frame of reference wi infuence how we expect peope to behave, how we think they ought to behave, and how we react to the behaviour of others. We are concerned here with three major perspectives: the puraist, the unitarist and the radica or critica (Fox 1966). 1.4.1 the puraist perspective The puraist perspective refected the cuture of the typica Western industria workpace from the Second Word War unti the 1980s. It rests on the assumption that society consists of various groups which wi each have their own interests and beiefs. It is naive to pretend that the interests of workers and managers/owners can be fuy reconcied, and so institutions such as trade unions and arrangements such as coective bargaining are needed to achieve workabe compromises between these differing interests. In the puraist view, confict at work is seen as inevitabe, because management and workers wi not have identica interests, but confict is not in itsef wrong. The issue is not to try to eiminate it, which woud be impossibe, but rather how it shoud be handed. In cases where conficts seem to be insoube at the workpace or industry eve, third-party intervention often through state agencies (for exampe, the Advisory, Conciiation and Arbitration Service (Acas), in the UK) can provide soutions. 1.4.2 the unitarist perspective From the unitarist perspective, a work organisation has a purpose (or set of purposes) common to a members of it owners, managers and workers. So there shoud be no rea confict of interest between these groups. Everyone has the same utimate interest in high eves of efficiency which wi generate high profits and add to sharehoder vaue and aow the payment of high wages. It is a win/win situation for a concerned. Managers and those they manage are reay a members of the same team. Management has specia eadership responsibiities and shoud pursue poicies which aow the organisation to
Human resource management 9 achieve its goas and satisfy sharehoders (and other stakehoders), but which are aso fair to empoyees. On this view, confict within the organisation between management and the workforce is perceived as being the resut of some sort of faiure; it is not regarded as necessary or inevitabe in principe, at east, it coud be eiminated. From this perspective trade unions are often seen as competing for the oyaty of the empoyees, and coective bargaining may be regarded as unnecessary. The unitarist perspective in its purest form was traditionay found in private, typicay famiy-owned empoyers, but HRM is usuay associated with unitarism (sometimes termed neo-unitarism to distinguish it from the earier, more paternaistic, famiy-firm version). 1.4.3 the radica/critica perspective Quite different from both puraism and unitarism, the radica/critica perspective derived originay from the Marxist view of society and industria capitaism. In essence, this saw a work as inevitaby being expoitative of workers. Confict between management and abour was unavoidabe as part of wider cass confict in society. Management aways, and inevitaby, represented the interests of capita. There may be few unreconstructed Marxists in the twenty-first century, but shades of post-marxist thought persist, and there are cutura and socia radicas of various types who reject the mainstream, free-market cuture in which most organisations now operate. To such radicas, as to nineteenth- and twentieth-century Marxists, work organisations refect the inherenty unfair or oppressive structures of society (for exampe, to radica feminists they refect the patriarcha nature of society) and hep to buttress these same structures. Postmodern inteectuas often share this view (see McKinay and Starkey 1998), and many writers on HRM and management within the Critica Management Schoo hod a radica perspective in this sense (see, for exampe, Legge 1995, Thompson and McHugh 2002). From the radica perspective even enightened management practices and phiosophies such as the Human Reations Schoo, or empoyee empowerment, or profit-sharing are reay either hopeessy naive and doomed attempts to overcome the inevitabe expoitative nature of capitaism/existing society, or are conscious and cynica strategies to foo the empoyees. Even puraistic industria reations structures can be seen in this ight. refective activity 1.2 In terms of the perspectives examined above, how woud you describe: your persona perspective? the manageria cuture of your own organisation? 1.5 the theory of human resource management We noted above the practica considerations such as quaity, competition and technoogy which ed to questioning the traditiona forms of peope management. Management theorists were as concerned as practising managers and governments were about the evident faiure of the Tayorist/Fordist approach and produced a number of academic modes of HRM.
10 Human Resource Management for MBA and Business Masters The theoretica heritage of HRM incudes the manageria writings of Peter Drucker, the Human Reations Schoo, human capita theory, and organisationa deveopment. Interest in HRM proceeded aongside other deveopments in economics, business strategy and organisationa change. Many of these ideas revoved around the notion of the resourcebased theory of the firm (Barney 1991) and core competencies (Prahaad and Hame 1990), which argued that sustained competitive advantage utimatey derives from a firm s interna resources provided that these (1) can add vaue, (2) are unique or rare, (3) are difficut for competitors to imitate, and (4) are non-substitutabe. Of course, human resources fit such a ist of criteria we (Storey 2001). The term human capita originated in the study of economics to mean the stock of skis that the abour force possesses and can be traced back to Adam Smith s Weath of Nations. The concept aso impies that there can be investments in peope such as education, training and improvement to heath which increase an individua s productivity. This human capita is an asset to the individua, increasing their market vaue as an empoyee, as we as to the organisation and indeed the wider society. The CIPD defines human capita as peope at work and their coective knowedge, skis abiities and capacities to deveop and innovate (CIPD 2016e). We can easiy see that the idea of human capita must be of centra interest to HRM. As we said in the introduction to this chapter, we think that utimatey peope are the ony source of sustainabe competitive advantage. So human capita is an aspect of many HR strategic and operationa activities, incuding the composition of the workforce, recruitment and retention, performance management, earning and deveopment, and taent management. One of the chaenges in managing human capita is measuring it. This eads to the topic of HR anaytics, which is discussed in Chapter 9. A British Standard (BS76000) has been a deveoped to provide a common framework for organisations to assess their human capita. The CIPD Human Capita bog can be found at: cipd.co.uk/community/bogs/b/human_capita_bog One of the first, and most important, inteectua proponents of HRM was the Harvard Business Schoo (HBS). The facuty and aumni of the schoo agreed in the eary 1980s that a new course in HRM was required to equip genera managers to dea with the changes that were occurring both in society and in the competitive environment in which business had to operate. Accordingy, in 1981, HBS introduced a course in HRM in its core MBA curricuum, the first new required course since Manageria Economics 20 years before (Beer et a 1984, pix). The primary intention of Beer et a was to deveop a framework for genera managers to understand and appy HRM in their organisations. The Harvard mode inked choices on HR poicies to stakehoder interests, situationa factors and short- and ong-term consequences. Of course, there have been significant deveopments in management practice and theory since the 1980s when the Harvard mode was first conceived for exampe, in areas such as knowedge management, taent management, ethics and corporate governance, the detais of which often transcend the imits of the Harvard mode. Technoogica advances aso have had an obvious major impact on work, incuding HRM (for exampe the use of socia media for recruitment, teeworking, the use of virtua teams). Nonetheess, the mode proved to be remarkaby durabe because it was the first rea attempt to provide a comprehensive map of the HRM territory which refected the emerging view that peope are an asset and not a cost (Beer et a 1984, p292) and that the HR function shoud be invoved in a strategic and business decisions. The Harvard mode is iustrated in Figure 1.1.
Human resource management 11 Figure 1.1 The Harvard mode Stakehoder interests Sharehoders Management Empoyee groups Government Community Unions HRM poicy choices Empoyee infuence Human resources fow Reward systems Work systems HR outcomes Commitment Competence Congruence Cost effectiveness Long-term Consequences Individua we-being Organisationa effectiveness Societa we-being Situationa factors Workforce characteristics Business strategy and conditions Management phiosophy Labour market Unions Task technoogy Laws and societa vaues Source: Beer et a (1984, p16: Map of the HRM territory ) Two main variants of HRM were identified eary in academic discussions of HRM: hard HRM, with an emphasis on the strategic, quantitative aspects of managing human resources as an economic factor in production, and soft HRM, rooted in the Human Reations Schoo and emphasising communication, motivation and eadership (Storey 1989). A modes of HRM are concerned with strategic issues, but hard modes typicay have a stronger focus on ensuring that the HRM strategy fits and is driven by the overa corporate strategy. This is a matter of degree, however, since a HRM modes stress the importance of taking a strategic view of the human resource. Critica and postmodernist interest has aways been high in academic treatments of HRM, especiay in the UK for exampe Legge (1995). As might be expected, such commentators tended to be hostie to the HRM mode and were, and are, often opposed to its adoption, fearing that it represents continuing or even enhanced expoitation of ordinary empoyees. But even non-radica critics have pointed out that the specific practices associated with HRM are actuay rather varied in nature, even in the theoretica modes, and some have questioned whether they reay can be regarded as making up a coherent approach to the management of peope. For exampe, performance-reated payment systems on the one hand seem to represent an individuaisation of the empoyment reationship, whereas the promotion of team invovement for exampe quaity circes and tota quaity management (TQM) represent the opposite (Gaie et a 1998, pp6 7). 1.6 summing up theoretica hrm We can consider the key characteristics of HRM and how these contrast with earier approaches to peope management (Tabe 1.2). Strategic nature: traditionay, personne management or personne administration usuay worked on a short timescae fire-fighting (that is, deaing with immediate probems such as oca industria reations issues, or urgent staff shortages) rather than taking a ong-term, strategic view of peope management issues. Manpower panning might have been an exception to this genera rue and, occasionay, management deveopment.
12 Human Resource Management for MBA and Business Masters Tabe 1.2 Idea characteristics of human resource management Characteristics Human resource management (HRM) Strategic nature Deaing with day-to-day issues, but aso proactive in nature and integrated with other management functions A deiberatey ong-term, strategic view of human resources, contrasting with earier approaches characterised by an ad hoc, reactive mindset Psychoogica contract Based on seeking wiing commitment of the empoyee rather than compiance Job design Typicay team-based, not Tayorist/Fordist Organisationa Fexibe with core of key empoyees surrounded by structure periphera shes High degree of outsourcing Remuneration Market-based Individua and/or team performance Pay for contribution rather than pay by position Recruitment Sophisticated recruitment for a empoyees, not just senior staff Strong interna abour market for core empoyees; greater reiance on externa abour market for non-core Training/deveopment A earning and deveopment phiosophy transcending job-reated training; an ongoing deveopmenta roe for a core empoyees incuding non-management; strong emphasis on management and eadership deveopment a earning organisation cuture Empoyee reations Unitarist and individuaistic with high trust; as perspective opposed to puraist, coectivist and ow trust Organisation of the Largey integrated into ine management for day-to-day function HR issues Speciaist HR group to advise and create HR poicy Wefare roe No expicit wefare roe Criteria for success of Contro of HR costs, but aso maximum utiisation of the function human resources over the ong term; rather than a simpe focus on minimising abour costs Source: adapted and deveoped from Guest (1987) Note the impications for this onger-term perspective for a HR issues, and the necessity for an articuated strategy for HRM, which shoud not ony be coherent in itsef but shoud be informed by, and support, the business strategy of the organisation. The psychoogica contract: this is not to be confused with the ega contract of empoyment, or any written statement of terms and conditions of empoyment. As the term impies, it exists purey in the mind of the empoyee and their managers, and so is unwritten and never ceary articuated. It has been described by Armstrong (2014, p419) as: the psychoogica contract is a set of unwritten expectations that exist between individua empoyees and their empoyers. There wi aways be some sort of psychoogica contract between the empoyee and the organisation, but David Guest concuded that: a positive psychoogica contract is worth taking seriousy because it is strongy inked to higher commitment to the organisation, higher empoyee satisfaction and better empoyee reations (Guest 1996).
Human resource management 13 Earier modes of peope management assumed that the basis of the psychoogica contract was compiance the empoyee woud do as they were tod and the empoyer in turn expected this. Management shoud be abe to determine exacty what is required of the empoyee and enforce at east minima compiance. The HRM mode, on the other hand, assumes that the empoyee shows positive, wiing commitment. Because more is expected from empoyees, management cannot aways specify exacty what is required, and so empoyees must use their own judgement and initiative to a much greater extent than in the past. They must aso extend and upgrade their skis and knowedge bases. Job design: the search for greater commitment in the HRM approach impies that empoyees shoud be aowed and encouraged to use sef-contro in matters of work and organisationa discipine, rather than be driven by a system of compiance and direction imposed upon them by management. Teamworking and simiar initiatives shoud be common under HRM. Organisationa structure: refecting the higher-commitment working associated with HRM, we woud expect to find ess hierarchica and more fexibe organisationa structures, with the team as the organisationa buiding bock and with fewer management eves. Organisations foowing an HRM approach wi typicay be fexibe with a core of key empoyees surrounded by periphera shes of other workers, rather than the traditiona hierarchica, pyramid-shaped bureaucratic structure. Note that the core empoyees are not a senior executives the core is defined as comprising those members of the organisation who possess the skis, knowedge and competence necessary for the organisation s success. Core workers wi possess considerabe market attractiveness and wi consequenty enjoy better remuneration and terms of empoyment than others. In return, they wi be expected to provide high eves of performance and fexibiity in working, and accept the need for continuous earning and re-skiing to support incessant technoogica and process improvement. The periphera shes of empoyees act as buffers against short-term market fuctuations and can be reativey easiy shed or reinforced. Thus empoyees in those parts of the organisation wi tend to be empoyed on short-term or temporary contracts. HRM organisations aso tend to feature considerabe outsourcing of non-core work. Remuneration: traditiona approaches to remuneration featured ong pay scaes characterising the hierarchica organisationa structure mentioned above, and refecting ength of service rather than current contribution. Pay structures in such approaches woud be usuay agreed via coective bargaining, at east for non-manageria empoyees. The HRM approach to remuneration is more focused on rewarding contribution and is ikey to be individuay or team-based. This impies both the use of performance management and appraisa and the setting of base rates from the market rather than by means of coective agreements. Recruitment: sophisticated techniques such as the use of psychometric testing, psychoogica profiing and assessment centres have often been used for recruitment and seection into senior executive posts, whie much simper and ess costy methods usuay sufficed for non-manageria empoyment. With HRM, these sophisticated toos are much more ikey to be used for a empoyees, or at east core ones, with a view to seecting staff amenabe to the organisation s cuture and vaues. Training and deveopment: when empoyees are viewed mainy as a cost which shoud be minimised, commitment to training is usuay negigibe since empoyers typicay fear that empoyees wi be poached by free-oading competitors who do no training themseves. An exception was often made, however, in industries with coective agreements on apprentice training. In HRM there is a cuture of continuous deveopment of a core empoyees who are seen as the originators and possessors of the organisation s strategic competencies necessary for sustainabe competitive advantage. Senior managers are not exempt, the
14 Human Resource Management for MBA and Business Masters directors and CEO receiving executive deveopment. This commitment woud not be expected in the periphera shes surrounding the core. Empoyee reations perspective that is, the dominant manageria perspective within the organisation. In the HRM mode the empoyment reationship is much more individuaised than when deaing with the workforce coectivey. This is refected in, for exampe, the absence of trade unions and the introduction of performance-reated reward systems. The unitarist nature of HRM woud seem to discourage the formation of a puraist organisationa cuture, but in practice there have been exampes where HRM has been successfuy adopted within a previousy puraist cuture whie maintaining the puraist stye of coective bargaining in empoyee reations. See for exampe Tayeb s account of the Scottish division of the American firm NCR (Tayeb 1998). But see aso the empirica evidence from the Workpace Industria/Empoyment Reations surveys in the UK (referred to in section 1.7) on the ong-term decine of trade unionism in the UK. The organisation of the function: traditionay personne management was seen as a speciaist function which, in many important respects such as deaing with empoyee reations issues, was separate from ine management. This often ed to the creation and maintenance of arge, bureaucratic, personne departments. The HRM mode instead stresses that most peope management, even empoyee reations, is actuay just part of norma management, at east in its day-to-day aspects. Accordingy in the HRM mode, where there are speciaist HR departments, they wi be sma and highy speciaised and their function is (1) to formuate HR poicies and (2) to act as interna consutants to ine managers. The ine managers wi impement most HR poicy, ony seeking the invovement of HR in particuary difficut issues. Wefare roe: in earier approaches, such as personne management, there were at east residua expectations of a wefare roe, the personne officer being the member of the management team who coud be approached with persona probems (at east if these impacted on work). This aways ed to ambiguous perceptions of personne management. There was no doubt that it was a management function with the primary objective of reducing and controing abour costs (see Criteria for success beow), but many empoyees expected a fuer wefare aspect than was often given, and this was a principa reason for the ambiguity with which personne management has often been viewed. Personne managers often fet themseves to be the meat in the sandwich caught between dissatisfied empoyees and unsympathetic management coeagues, neither of whom reay understood what they were supposed to be doing. Marxist critics aways saw personne management as in any case refecting the perceived contradictions of capitaism (Legge 1989), but even dyed-in-the-woo free-marketers coud see the possibiity of perceived inconsistencies in the roe of PM and danger of conficting expectations. There is no expicit wefare roe in the HRM mode, athough proponents might argue that with its unitarist cuture it is no onger necessary. Critics woud not agree. To the extent that individua empoyees sti expect some sort of wefare roe from HRM, despite academic prescriptions to the contrary, the function wi be subject to the same perceptions of ambiguity as was personne management. HRM is hed to a very different criteria for success of the function that is, how the organisation judges the performance of the peope management function. In the personne management mode, the organisation woud judge the effectiveness of the function by how we it minimised unit abour costs; in HRM, effectiveness is judged by how we it maximises the use of the organisation s human resources (whie sti maintaining proper contro of costs).
Human resource management 15 1.7 hrm in practice There is substantia empirica evidence that that significant changes in the practice of managing peope in modern organisations have occurred over recent decades and that the HRM mode as described above is the predominant paradigm, athough few if any workpaces fufi a aspects of the idea mode shown in Tabe 1.2. Evidence of the adoption of key HRM practices in the UK has been authoritativey estabished by the series of Workpace Industria Reations/Workpace Empoyment Reations Study (WERS) surveys. These surveys provide a nationay representative account of the state of empoyment reations, working ife and the management of peope inside British workpaces, and of how these have a been changing over a quarter of a century. The surveys were jointy sponsored by the Department of Trade and Industry (DTI), Acas, the Economic and Socia Research Counci (ESRC) and the Poicy Studies Institute (PSI), and were conducted in 1980, 1984, 1990, 1998, 2004 and 2011. These were a arge-scae, representative surveys. The WERS surveys confirmed this shift from coectivism to individuaism, with a marked decine in trade unionism, and a significant increase in the sort of approaches to participation and communication that are embraced by HRM, and are argey dependent on management initiatives such as team briefings, quaity circes and newsetters. There was aso evidence of organisationa changes such as the increasing invovement of ine managers in personne activities; human resource matters were often incorporated in wider business pans. By the end of the twentieth century, Cuy et a (1999) coud concude that (peope management) practices consistent with an HRM approach were we entrenched in many British workpaces (Cuy et a 1999). Later WERS surveys confirmed a continuing trend in this. Many organisations operated a fexibe organisation with a core of key empoyees and a periphera workforce of other workers who typicay enjoyed ess secure and ess attractive terms and conditions of empoyment. Seection processes for core empoyees increasingy suppemented the we-estabished techniques of interviews, appication forms and references with personaity, competency and performance tests, and used these over a wider range of empoyees. The use of performance appraisas greaty increased, as did offthe-job training. New methods of work organisation were widey adopted, often described as high-performance, high-commitment or high-invovement work practices. These were intended to enhance empoyee commitment and invovement, often by increasing empoyees participation in the design of work processes and the sharing of task-specific knowedge. Most commony these entaied teamworking, cross-training (or mutiskiing ) and the use of probem-soving groups. Additionay, the WERS surveys estabished that the UK trend for work cuture to become more unitarist and ess puraistic was unremitting. The 2011 WERS confirmed that organisationa interest in empoyee engagement and high-invovement management had steadiy increased as had empoyee commitment as measured by oyaty towards, and pride in, one s empoying organisation and the sharing of its vaues (Van Wanrooy et a 2013). So the empirica evidence seems cear. In most UK workpaces the management of peope has been progressivey moving coser to the idea HRM mode (see Tabe 1.2) over the ast 30 years, and the most recent evidence suggests strongy that this is continuing. The UK is not unique in this, and giving due weight to oca cutura and contextua factors, simiar changes in the management of peope have been happening wordwide in deveoped and deveoping economies.