Human resource management Chapter 17

1. Human resource management Chapter 17

2. Introduction In this lecture we will: Introduce and explain the concepts and practices of Human Resource Management (HRM) Summarise key HR functions Discuss theoretical issues surrounding the HRM debate Explain the meaning and conceptual basis of International HRM Explain how developments in global capitalism affect corporate and HR strategies in large firms

3. HRM Overview HRM has theoretical roots in the US Business Schools. Historically: A first wave arose with Storey’s New Perspectives on HRM (1989) The second wave arose in consideration of: Social and economic context of HR functions HR and organizational performance New organizational forms and HR HR and knowledge management (1990s) The third wave (current) looks at the strategic implications of HRM, known as Strategic Human Resource Management (SHRM) Other debates exist around: The differences between HRM and personnel management Employee manipulation

4. What is HRM? (1) HRM is linked to the management of human capital: It is linked to a view of the employee as an economic asset Itcan be described as a strategic approach to managing employment relations that emphasizes human core competences to create competitive advantage This is achieved by distinctive employment practices It draws on organizational psychology (areas of motivation, role perception etc) It is linked with employment relations and problematic issues connected with this, and forms part of sociological studies

5. What is HRM? (2) HRM relates to a workforce that embodies a mix of skills and capabilities Commitment and learning are emphasized HRM links HR functions to OB problems HRM entails: An economic contractual relationship (pay/effort bargain) A legal and social relationship A psychological contract HRM is built on the premise that the human capital of the employee can have strategic importance and value Hence employment policy is coherent when integrated with strategic policy Some element of conflict of interest between workers and employers nevertheless remains, and the management of this is down to HR

6. Table 17.1 - OB Theories and HRM Practices

7. The Psychological Contract The psychological contract relates to the two-way exchange between employee and employer Rousseau (1995) defines it as: ‘Individual beliefs, shaped by the organization, regarding terms of an exchange agreement between individuals and their organization...’ It is viewed as a lever for individual commitment, motivation and task performance beyond expected outcomes...

8. HRM Functions Millward et al (2000) and Ulrich (1997) identify eight key HRM functions: Strategic planning – the organization’s HR needs/forecasts Staffing Training and development Motivation - requires a rewards system Maintenance - includes health and safety Managing relationships - participation schemes/collective agreements Managing change in the workplace Evaluation – procedures to institute and communicate HR Policy

9. Table 17.2 - Work Responsibilities of HR managers HR managers can be specialists or generalists and their exact remit of duties will vary depending on their role and company

10. Theoretical Models of HRM The following models provide an analytical framework for studying HRM and a means of linking OB theories to HR They thereby serves as an heuristic devicerelating to HR policies The Fombrun, Tichy and Devanna model (1984) An early model emphasising the interrelatedness of HR activities The Harvard mode An heuristic devicefor explaining HR practices Has an analytical base (factors/stakeholders/choices) but links with attitudinal features (commitment/competence) The Warwick model Extends the Harvard framework The five elements of the model are: outer context; inner context, business strategy content, HRM context and HRM content Shows links between HR end environmental factors

11. Figure 17.1 - The Fombrun, Tichy and Devanna Model

12. Figure 17.2 - The Harvard Model of HRM

13. Figure 17.3 - The Warwick Model of HRM

14. Strategic HRM (1) The call for HRM to link with corporate strategy was strong by the late 1980s Strategyisa pattern of decisions/actions undertaken by management hierarchy to accomplish corporate goals. It can be conducted at The corporate level The strategic business unit level The functional ‘grass roots level’ (Porter, 1980) Strategic HRM (SHRM) has roots in manpower planning but it is unclear whether it is an outcome or a process

15. Strategic HRM (2) • A distinction is possible between upstream and downstream strategic decisions (Purcell) and this has informed the SHRM debate • Three orders of decisions can be identified • Upstream or high level corporate decisions are first order • Downstream or structural matters are second order • HR matters are third order • However, strategy in HR decisions can be determined in the context of the first order decisions (Purcell, 1989)

16. The Matching Model Another area of debate relates to the fit of HR and business strategies This is called the concept of integration, which has three aspects: Linking HR policies and practices with strategic management Internalizing the significance of HR with HR managers Fostering organizational commitment to strategic goals This is known as the matching model

17. Figure 17.4 - A Matching Model of Strategic HRM

18. The Resource Based Model An alternative theory is the resource based model, which links resource aspects with strategic policy This is connected with the view of the employee as an asset to be cultivated, a feature of human capital Barney (1991) argues that four characteristics of human capital are important: Sustaining competitive advantage Inimitability (of product or service) Rarity (of core competence) Non-substitutable product or service

19. Figure 17.5 - The Resource Based View of the Firm The relationship among resource endowments and sustained competitive advantage

20. SHRM: Does it work? SHRM theories work on the premise that a link between business and HR strategies will lead to high performance – the HRM–performance link SHRM is a genre of academic research Overall, only a minority of workplaces have followed the premises set out by proponents of SHRM Some studies have found positive correlations between bundles of SHRM practices and superior organizational performance However, evidence is not conclusive

21. Figure 17.6 - A Model of the HRM--Performance Linkage

22. International HRM (1) A central concern is the transferability of HRM models at a global level, because organizations seek to leverage resources at an international level in the teeth of fierce competition This affects patterns of national employment relations. HR practicesaffect: Global recruitment and selection Training and reward management at an international level Recruitment of expatriates It is necessary to consider aspects of the host country, as the employment relationship is affected by factors such as: Cultural/legislative context National regulatory framework

23. International HRM (2) A debate has occurred about the distinction between International HRM (IHRM) and Strategic International HRM (SIHRM): IHRM is viewed as ‘pro-Western’ in ethos SIHRM is viewed as attached to MNCs, connecting IHRM to strategy SIHRM contains a tension between global competitiveness or centralization and issues of local specification of strategy and adjustment to cultural sensitivities TNCs/MNCs need to achieve a balance between these conflicting forces

24. International HRM (3) Tensions between SIHRM and IHRM can also be felt in the following areas: Recruitment and selection practices and employment regimes Reward apportionment Performance appraisal (arguably best performed in the host country) Transfer of distinctive competences from head office to local level The International HRM cycle tabulates these kinds of issues (see the next slide)

25. Figure 17.7 - The International HRM Cycle

26. International HRM (4) Does SIHRM reflect the convergence of HR practices and the interests of US capitalism? Answers to this question form part of the convergence-divergence debate It is argued that TNCs contribute to a homogenous or universalist HRM ethos (ie convergence) On the other hand, there are local practices or ‘rationalities’ of HRM in varying countries (ie divergence) It is argued that universalist/individualist Anglo-Saxon HRM cannot easily locate in the same manner across diverse geographical contexts of TNCs This said, the idea of an Asian HRM is problematic; but much diversity of practice does exist across the world Overall, some degree of convergence does exist but it is not absolute

27. Figure 17.8 - Diagram reflecting the Convergence/Divergence Debate on IHRM

28. Paradoxes in HRM A paradox occurs when managers try to accomplish a goal in a manner contradictory to the very goals the organization seeks to attain… Critics have drawn on the idea of a paradox of consequences deriving from a tension between HRMpolicies and practices For example, tension between a psychological contract and formal practices or procedures etc The ‘soft’ versus ‘hard’ aspects of HR might be said to express some degree of ambiguity about the aims of HRM Karen Legge (2005) has exposed the rhetoric of soft or caring HRM as being a foil for a managerial agenda This can be seen at a practical level – for instance the tension between short term goals (accounting/financial) and longer term investment - for instance in staff training