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Strategic Human ResourceManagement – A Balanced Approach
CH1 Introduction: SHRM in the 21st century
Downsizing means that employees will lose their job.
Employees are generally considered the organization's most valuable assets. You can create
higher productivity levels, improve service quality towards customers, expand sales and
make more profits when you manage your workers according to HRM principles. Nowadays
the majority of CEOs underline the strategic importance of their human resources. However,
as soon as an organizational crisis emerges, the employee emphasis is often downgraded
through downsizing and mass layoffs. It is in times of major change that the management of
employees is essential not only to achieve organisational goals but also to pay attention to
individual employees well-being as well.
Overall it is concluded in both theory and practise that employees matter and that the
management of employees – HRM - is a potential source for achieving organisational goals.
Organisational change is inevitable for most organisations. Organisational change almost
automatically affects one of the organisations most valuable assets: the employees.
Successful change highly depends on changing people in their attitudes behaviour and
cognition this also flexibility and good people management.
The new economy
The old economy goes back to traditional industries such as steel, construction and motor
industries. Working in the old economy is characterised by physical tasks, job design and
word design based on mass production, many relatively low skilled workers and high
degrees of unionisation. The new economy is dominated by emerging branch of the industry
including information technology sector, the telecommunications sector and financial
institutions. In the new economy assets are less tangible and are embedded in reputation,
brands and knowledge of employees. Working in the new economy can be characterized by
high knowledge intensity, web-based organizing, contracts though internet connections,
centres on the other side of the world and the integration of work design, technology and
services delivered. Outsourcing and offshoring business activities to developing countries are
another characteristic of the new economy. Organizational change is a common practice in
the new economy with major implications for employees.
Organizational change and competitive advantage
The relevance of optimal coping with changes is embedded in the concept of competitive
advantage. It is important to understand competitive advantage is important for
organisational survival and is at least partly manageable by HRM. Competitive advantage
represents an organization's position in comparison to its direct competitors. Competitive
advantages tells us something about how well the organisation is doing in comparison to
others in the same branch of industry or in the same region. Competitive advantage might be
reflected in better financial performance and non-financial performance including the
organization's reputation in relation to customers and potential employees. Relative outcome;
firm can have losses but still be doing better than competitors.
The changing role of work in modern organizations
The new economy had a major impact on the nature of jobs in western societies. The
computer has become an essential tool and medium for many workers requiring different
knowledge, skills and competence from individuals. Technology has also created
opportunities for alternative work design. New flexible work arrangements (like work at home)
,characterize modern organizations with benefits for both the employer and the employee
(better work-life balance).
The ageing population is also affecting work in modern organizations. In some organisations
the average employee age has gone up substantially because of a lack of inflow of young
employees causing personal planning issues in future and the risk of ever increasing labour
costs related to older workers in terms of higher salaries.
MHRM, IHRM and SHRM
SHRM can be a key to success in the process of organizational change. HRM involves
management decisions related to policies and practises that together shape the employment
relationship and are aimed at achieving individual, organisational and societal goals. SHRM
builds on this definition and in addition pays extra attention to the organizational context,
reflected in special attention to potential alignment of the business strategy and HRM, the
alignment of the institutional context and HRM, the linkage between business systems and
HRM and the fit between HR practices.
1. MHRM covers the sub function of human resource policy and practice including
recruitment and selection induction and socialisation and training and development.
MHRM is a subfield of HRM aimed at studying the shaping of the employment
relationship at the individual employee level.
2. IHRM is concerned with HRM in multinationals and across borders. It focuses on
issues such as transferability of HR practices across business units in different
countries, the optimal management of expatriates and the impact of different
institutional country contexts on HRM. IHRM is this subfield of HRM aimed at studying
the shaping of the employment relationship in an international context with special
attention to HRM for expatriates, HRM in large multinationals and HRM in
international government organisations.
3. SHRM focuses on issues of linking HRM to the business strategy, designing high-
performance work systems (HPWSs) and adding value through good people
management in attempt to gain sustained competitive advantage. The concept of fit
plays a central role within SHRM. SHRM is the subfield of HRM aimed at studying the
shaping of the employment relationship taking into account internal and external
organisation context.
There are major differences between countries, for example, as a result of differences in
legislation. Think about the ease of firing an employee.
Stakeholders of an organisation represents all groups inside and outside the organisation
that can affect its strategy and goals. Internal stakeholders include employees, line
managers, top management and employee representatives. External stakeholders include
shareholders, financers, trade unions, national government, local government and other
interest groups (Greenpeace).
Three perspectives
The book uses a normative perspective, a multidimensional strategic HR model including the
following key characteristics:
- A multi actor perspective
- a broad societal view with an emphasis on different institutional contexts (industry,
region, country)
- a multi-level perspective including the individual employee perspective and the
strategic organizational perspective
Paauwe argues that:
- human resources are something more than just resources
- HRM is not concerned solely with financial performance
- HRM focuses on the exchange relationship between employee and organisation
, - the shaping of the employment relationship takes place in an era of continuous
tension between the added value and moral values
Human resources are people with feelings, emotions, interests, norms and values. Their
behaviour inside and outside the organisation is not solely determined by economic
rationality. Other factors can affect and influence employee attitudes and behaviour including
sympathy towards others, willingness to put extra effort into the job because of professional
norms or feelings of moral obligation and personal norms of values for action. Therefore
employees are more than just resources for creating organisational success.
HRM can contribute to the organization’s success in terms of increased financial
performance, but the HR function has a much broader responsibility, including stakeholder
management and relating (labour) legislation to the employment relationship within the
organization.
HRM focuses on the exchange relationship between the employee and the organization. The
exchange relationship refers to the bargain between the employee, on the one hand, and the
employer on the other, particularly with regard to efforts of the worker and rewards given by
the employer. The employment relationship contains different contract types:
- legal contract: determines the rights and obligations of both the employee and the
organization
- economic or transactional contract: how much effort the employee puts into the job
reflected in the number of working days and how much the employer will pay.
- Psychological contract: concerning all things that are not written down but are
expected from both actors
- Sociological contract: the social relationships employees have with each other, like
team commitment. Intangible.
Tensions
HRM operates in an area of continuous tension between added value and moral values. The
added value represents the economic side of organising work and mainly represents role of
HRM in creating economic value and increasing financial performance of an organisation.
The moral values reflect the notion of employees as human beings with feelings, emotions,
opinions norms and values. Hard HRM mainly focuses on the economics and the soft HRM
mainly focuses on the human side of organizing.
Boxall and Purcell:
- HRM covers all workforce groups, including core employees, peripheral employees
and contingent workers
- HRM involves line and specialist managers, and is not solely aimed at employees
- HRM is all about managing work and people, collectively and individually
- HRM is embedded in industries and societies
HRM is not just focused on the typical HR practices (recruitment, selection, training and
development, appraisal, rewards, promotion and participation) but also includes work design
reflected in choices with regard to job autonomy, whether or not using teams to do the job,
the degree of job rotation and the job design with regard to the number of tasks for individual
employees (job enlargement) and their responsibilities (job enrichment).
Anglo-Saxon or Anglo-American model: focuses on creating shareholder value in terms of
profits and market value with little or no attention to other stakeholders including trade unions
and works councils.
Rhineland model: acknowledges multiple stakeholders and their interests explicitly in taking
into account employee interests in terms of well-being and societal interests.
Coercive mechanisms – legislation, formal position of the trade unions, formal position of
works councils and CBAs – are stronger and more deeply embedded in EU than in the USA.
The balanced approach
, In times of globalization and increased competition there is growing awareness that
sustained competitive advantage depends on balancing market demands and institutional
pressures. In a strategic balance model organisational success can only be achieved when
financial performance and societal performance of an organisation are above average in the
particular population in which the organisation is operating. In this view exclusive high scores
on either financial or societal performance are bad for the long-term survival of an
organization. Pure high financial outcomes might lead to serious social legitimacy issues.
Different views on HRM:
- Human resources are more than just resources
- HRM is not concerned solely with financial performance
- HRM focuses on the exchange relationship between the employee and the
organization
- The shaping of the employment relationship takes place in an era of continuous
tension between the added value and moral values
- HRM covers all workforce groups
- HRM involves line and specialist managers, and is not solely aimed at employees
- HRM is focused on managing work and people collectively and individually
- HRM is embedded in industries and societies
The definition of good and bad people management can be linked to the balanced
approach. Taking into account multiple stakeholder interests and a broader societal view in
the design of the employment relationship in a firm is likely to result in good management.
Balanced approach blends the insights from an economic perspective with the insights from
an institutional perspective in order to create a balanced and sustainable position within the
organization.
Framing HRM
Frames can be considered as mental models, maps, mind-sets, schemes and cognitive
lenses that people apply consciously but mostly unconsciously. Applying different frames
(perspectives) can contribute to a better territory understanding and rapid cognition of
organization and HRM realities.
- Structural frame: seeks to gain understanding of the various parts of an organization,
this is a very technical and functionalistic way of looking at organizational life. Rules,
roles, goals, policies, technology and environment.
- HR frame: focus on the employment relationship, represents a specific way of looking
at organizations mainly focused on concepts such as needs, skills and relationships
of those involved.
- Political frame: examines issues of power. Heavy emphasis on different parties
(actors, partners and/or stakeholders) in this perspective.
- Symbolic frame: builds on meaning and identity. Central concepts are culture,
meaning, metaphor, ritual, ceremony, stories and heroes.
Mainstream SHRM is mostly studied from the structural frame.
A balanced approach in strategic HRM implies the explicit inclusion of multiple frames. These
frames are different lenses that can help to define the multidimensional aspects of HRM
taking into account all relevant stakeholders, contextual factors and outcomes.
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