Strategic human resource management

Contents
Preface ix
PART 1 THE FRAMEWORK OF STRATEGIC HUMAN RESOURCE
MANAGEMENT
1 Human resource management 3
Human resource management defined 3; Models of HRM 4;
Aims of HRM 6; Characteristics of HRM 8; Reservations about
HRM 13; HRM and personnel management 16
2 Strategy: concept and process 19
Strategy defined 19; The concept of strategy 20; The
fundamentals of strategy 22; The formulation of strategy 24
3 Strategic human resource management: concept and process 29
Strategic HRM defined 29; The meaning of strategic HRM 30;
Aims of strategic HRM 30; Approaches to strategic HRM 31;
Limitations to the concept of strategic HRM 35; Conclusion 35
4 HR strategies 37
HR strategies defined 37; Types of HR strategies 38; Criteria for
an effective HR strategy 42
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PART 2 STRATEGIC HUMAN RESOURCE MANAGEMENT IN
ACTION
5 Formulating and implementing HR strategies 47
Fundamental process considerations 48; Characteristics of the
process 49; Developing HR strategies 52; Setting out the
strategy 64; Conducting a strategic review 65; Implementing HR
strategies 69
6 Improving business performance through strategic HRM 71
How HR impacts on organizational performance 72; How HRM
strategies make an impact 75; How strategic HRM concepts
impact on practice 77
7 Roles in strategic HRM 79
The strategic role of top management 79; The strategic role of
front-line management 79; The strategic role of the HR director 81;
The strategic role of HR specialists 81
PART 3 HR STRATEGIES
8 Strategies for improving organizational effectiveness 89
Strategies for improving organizational effectiveness 90;
Strategies for organizational development 91; Strategies for
organizational transformation 95; Strategies for culture
management 99; Strategies for knowledge management 106;
Commitment strategy 110; Strategies for developing a climate
of trust 112; Quality management strategies 114; Continuous
improvement strategies 115; Customer service strategy 115
9 Resourcing strategy 117
Resourcing strategy defined 117; The objective of resourcing
strategy 117; The strategic HRM approach to resourcing 118;
Integrating business and resourcing strategies 118; Bundling
resourcing strategies and activities 119; The components of
employee resourcing strategy 120; Human resource
planning 120; Resourcing plans 123; Retention strategy 126;
Flexibility strategy 130; Talent management strategy 130
10 Learning and development strategy 133
Strategic HRD 133; Strategies for creating a learning
culture 136; Organizational learning strategies 137;
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Learning organization strategy 138; Individual learning
strategies 139
11 Strategies for managing performance 141
Performance management 142; Performance management
defined 142; Purpose of performance management 143;
Performance management concerns 143; The scope of
performance management strategy 144; The process of
performance management 145; Conclusion 147
12 Reward strategy 149
Reward strategy defined 149; Why have a reward strategy? 149;
Characteristics of reward strategy 150; The structure of reward
strategy 150; The content of reward strategy 151; Guiding
principles 154; Developing reward strategy 155; Effective
reward strategies 157; Reward strategy and line management
capability 158
13 Employee relations strategy 159
Employee relations strategy defined 159; Concerns of employee
relations strategy 160; Strategic directions 160; The background
to employee relations strategies 161; The HRM approach to
employee relations 161; Policy options 163; Formulating
employee relations strategies 163; Partnership agreements 164;
Employee voice strategies 166
References 169
Further reading 179
Author index 185
Subject index 189
Contents
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Preface
This third edition of Strategic Human Resource Management has been substan-
tially revised to incorporate the latest research and thinking. A number of
chapters such as those concerned with strategic HRM in general in Parts 1
and 2 have been almost completely rewritten, as has Chapter 12 on reward
strategies. A new chapter on enhancing organizational effectiveness has
been included and revisions made to all the other chapters.
The book is set out under the following headings:
•
Part 1: The framework of strategic human resource management. This
provides an introduction to HRM, the general concept of strategy and
the process of strategic HRM.
•
Part 2: Strategic human resource management in action. This describes the
formulation and implementation of HRM strategies, the impact of
strategic human resource management, the strategic contribution of the
HR function, and roles in strategic HRM.
•
Part 3: HR strategies. This covers each of the main areas in which HR
strategies are developed, namely: enhancing organizational effectiveness,
resourcing, learning and development, managing performance, reward
and employee relations.
ix
Part 1
The framework of strategic
human resource
management
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1
Human resource
management
In this chapter, the concept of human resource management (HRM) is
defined initially and the various models of HRM are described.
Consideration is then given to its aims and characteristics. The chapter
concludes with a review of reservations about HRM and the relationship
between HRM and personnel management.
HUMAN RESOURCE MANAGEMENT DEFINED
Human resource management is defined as a strategic and coherent
approach to the management of an organization’s 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 inter-
related policies with an ideological and philosophical underpinning’. He
suggests four aspects that constitute the meaningful version of HRM:
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a particular constellation of beliefs and assumptions;
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a strategic thrust informing decisions about people management;
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the central involvement of line managers;
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reliance upon a set of ‘levers’ to shape the employment relationship.
MODELS OF HRM
The matching model of HRM
One of the first explicit statements of the HRM concept was made by the
Michigan School (Fombrun et al, 1984). They held that HR systems and the
organization structure should be managed in a way that is congruent with
organizational strategy (hence the name ‘matching model’). They further
explained that there is a human resource cycle (an adaptation of which is
illustrated in Figure 1.1), which consists of four generic processes or func-
tions that are performed in all organizations. These are:
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selection – matching available human resources to jobs;
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appraisal (performance management);
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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’;
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development – developing high-quality employees.
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The framework of strategic HRM

Selection

Rewards
Development
Performance

management

Performance
Figure 1.1 The human resource cycle (adapted from Fombrun et al, 1984)
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’.
This framework is based on the belief that the problems of historical
personnel management can only be solved:
when general managers develop a viewpoint of how they wish to see
employees involved in and developed by the enterprise, and of what HRM
policies and practices may achieve those goals. Without either a central
philosophy or a strategic vision – which can be provided only by general
managers – HRM is likely to remain a set of independent activities, each
guided by its own practice tradition.
Beer and his colleagues believed that ‘today, many pressures are demanding
a broader, more comprehensive and more strategic perspective with regard
to the organization’s 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. They also
stated that: ‘human resource management involves all management deci-
sions and action that affect the nature of the relationship between the organ-
ization and its employees – its human resources’.
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. The Harvard framework as modelled by Beer et al is shown in
Figure 1.2.
According to Boxall (1992) the advantages of this model are that it:
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incorporates recognition of a range of stakeholder interests;
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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;
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widens the context of HRM to include ‘employee influence’, the organi-
zation of work and the associated question of supervisory style;
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acknowledges a broad range of contextual influences on management’s
choice of strategy, suggesting a meshing of both product market and socio-
cultural logics;
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emphasizes strategic choice – it is not driven by situational or environ-
mental determinism.
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The Harvard model has exerted considerable influence over the theory and
practice of HRM, particularly in its emphasis on the fact that HRM is the
concern of management in general rather than the personnel function in
particular.
AIMS OF HRM
The overall purpose of human resource management 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 capabil-
ities that allow firms to learn and capitalize on new opportunities.’
Specifically, HRM is concerned with achieving objectives in the areas
summarized below.
Organizational effectiveness
‘Distinctive human resource practices shape the core competencies that
determine how firms compete’ (Cappelli and Crocker-Hefter, 1996).
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The framework of strategic HRM









Stakeholder
interests:

•
shareholders
•
management
•
employees
•
government
•
unions


Situational factors:

•

work force
characteristics

•

business strategy
and conditions

•

management
philosophy

•

labour market

•
unions

•
task technology


laws and social
values



HRM policy
choices:
•

employee
influence

•

human
resource flow
•

reward
systems
•
work systems
HR outcomes:


•

commitment


•

congruence


•

cost
effectiveness

Long-term
consequences:

•
individual
well-being

•

organizational
effectiveness

•

societal
well-being

•
Figure 1.2 The Harvard model of HRM (from Beer et al, 1984)
Extensive research (see Chapter 4) has shown that such practices can make a
significant impact on firm performance. HRM strategies aim to support
programmes for improving organizational effectiveness by developing
policies in such areas as knowledge management, talent management and
generally 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 devel-
opment of continuous improvement and customer relations policies.
Human capital
The human capital of an organization consists of the people who work
there and on whom the success of the business depends. Human capital
has been defined by Bontis et al (1999) as follows: ‘Human capital repre-
sents 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. 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 employ-
ability – 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 et al, 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.
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.
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