Strategisch Human Resource Management FSWBM-6060 (FSWBM6060)
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Erasmus Universiteit Rotterdam (EUR)
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Strategy and Human Resource Management
Summary of chapters 1 through 4, 7, 9 and 12 of Strategy and Human Resource Management fifth edition. These are also the chapters that are mandatory in academic year according to the subject guide.
Strategisch Human Resource Management FSWBM-6060 (FSWBM6060)
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Samenvatting SHRM Boxall & Purcell
Chapter 1: Human Resource management: what and
why?
Aim of this chapter, address the following questions:
What is HRM and why is it a pervasive activity in organizations?
What are managers trying to achieve through engaging in HRM and what kinds of challenges
does it pose for them?
First we’ll define the fundamental characteristics of HRM. We then consider in greater depth the
principal goals that characterize management’s behaviour in HRM. Finally, we provide some
guidance on how to discern a firm’s HRM strategy. This chapter will introduce a range of concepts
that will be developed further throughout the book.
Fundamental characteristics of HRM
What are human resources?
In this book we define human resources as the characteristics that are intrinsic to human beings,
which people can apply to the various tasks and challenges of their lives. Most obviously, human
resources include the knowledge, skills and energies that we can use in our daily roles. Less
obviously, human resources include our underpinning or dynamic characteristics, including our
physical and emotional health, our intellectual capabilities and our personalities and motivations.
People are not human resources. People are independent agents who possess human resources,
which are the talents they can deploy and develop and which they take with them when they leave
an organization.
Individuals face a challenge of self-management. They need to make choices about how to deploy
and develop their human resources, not only at work.
The styles we adopt to make these choices are very variable:
Some individuals are driven by the expectations of others
Some develop a highly specific set of goals for their working lives
Many of us do not plan these choices in any formal way, but we learn from our experience as it
accumulates. The key point, however, is that human resources belong to us as individuals and move
around with us as our lives unfold.
What is human resource management?
What management wants with human resources: organizations are dependent on people who have
the kind of human resources that will make them successful in their environment.
But HRM is not simply about engaging the services of talented individuals. Working with the
individuals they have recruited, managers are concerned with developing the organization’s social
capital and fostering the overall performance that it needs. HRM is an inevitable process that
accompanies their efforts in combining a group of individuals into a functioning organization.
Instruments of HRM:
Work policies and practices:
o Policies and practices for organizing work and employing people
o Structure of work (low-discretion jobs where individuals have limited control vs
highly autonomous jobs)
o Building teams
, Employment policies and practices:
o How managers hire and manage the people they need to do the organization’s work
o Recruiting, selecting, deploying
o Motivating, appraising
o Training, developing
o Retaining
o Informing, consulting and negotiating with individuals and groups (e.g. trade unions)
Given this wide remit, it should be obvious that HRM is never the exclusive property of HR
specialists. All HR specialists, however, are engaged in ‘selling’ their services to other managers, in
working together with other members of the management team to achieve the overall results. HR
specialists are primarily people who use their knowledge and skills to support the line managers who
directly manage the workforce.
In this book, the acronym ‘HRM’ is therefore used to refer to the totality of the firm’s management
of work and people and not simply to those aspects where HR specialists are involved.
Goals, tensions and trade-offs in HRM
HRM, then, is the process through which management builds the workforce and tries to create the
human performances that the organization needs.
When asking about management’s goals for HRM, we face the problem that these goals are often
implicit or left unsaid. Even if they are formulated, we need to be careful in taking them at face
value.
To understand management’s purposes, it is better to look at patterns of managerial behaviour in
HRM, which tend to be laid down at critical moments in an organization’s history. Goals may not be
seriously questioned unless some kind of crisis emerges.
Our task, then, is better understood as trying to infer the general intentions or motives underpinning
HRM, recognizing that we are studying a complex, collective process that is built up historically and
is inevitably subject to a degree of interpretation, politicking and inconsistent practise. It helps if we
start by dividing the goals of HRM into two broad categories:
The economic goals are about the way in which HRM contributes to the financial
performance of the firm
The socio-political goals relate to the role of HRM in the internal and external social context
of the firm and to the political strategies of management in this terrain
The economic goals of HRM
Cost-effective labour
HRM is always located in an economic context. The primary problem facing managers is how
to secure the economic viability of their firm in the markets in which it competes. The profit
motivation is fundamental to understanding how the firm works, including how managers
choose their level of investment in HRM.
For the HRM process to contribute to economic viability, managers need to ensure that the
firm has access to the people it needs and that they can be employed in a way that is
affordable. Cost-effectiveness is a dual concept:
a) It incorporates the idea that a firm needs people who are effective and skilled at what
the firm wants them to do,
b) While also motivating them to perform at a cost (wages, benefits, training, etc.) that the
firm can afford to pay
A viable approach to HRM is one that delivers on the grounds of both effectiveness and cost.
Organizational flexibility
, Change is inevitable and so an element of flexibility is also an issue for managers. In thinking
about the goals that managers pursue in the area of organizational flexibility, it’s useful to
distinguish:
a) Short-run responsiveness
a. includes managerial attempts to bring about greater numerical flexibility (easy
to hire and shed labour).
b. It also involves financial flexibility or attempts to bring greater flexibility into the
price of labour (bonuses).
c. It includes attempts to hire workers who are cross-trained or ‘multiskilled’. Such
‘functional flexibility’ helps the firm to maintain a lower headcount but cope
better with marginal improvements in product/service design or production
processes.
b) Long-run agility is concerned with the question of whether a firm can show the ability to
survive in an environment that can change radically. This is very hard to achieve because
core features of organizations are hard to change once laid down in the early stages of
establishment and growth.
Human resource advantage
Firms that survived are engages in an ongoing process of trying to build and defend
competitive advantages, which can enhance their profitability. Such advantages may be
temporary or more sustained.
Human resource advantage can be broken down into two dimensions:
a) Human capital advantage, which a firm enjoys when it employs more talented individual
than its rivals.
b) Organizational process or social capital advantage, which occurs in those firms that have
developed superior ways of combining the talents of individuals in collaborative
activities.
Thus, more powerful forms of human resource advantage occur when both the human and
social capital of an organization are superior to those of its rivals.
In summary, the purposes of management in HRM must be understood as fundamentally economic.
The socio-political goals of HRM
While economic motives are fundamental in HRM, they do not fully account for the strategic
behaviour of managers. This is because firms are not unrestricted economic actors but operate in
societies.
Social legitimacy
The need for managers to adapt to the social environment in which their firms are operating
is strongly underlined by sociologists who bring an ‘institutional perspective’ to the analysis
of organizations examining the ways in which they are influenced by a range of forces in
wider society.
Scott defines ‘three pillars of institutions’:
a) Regulative pressures, which include different codes of employment law are most
obvious
b) Normative or moral pressures are also fairly apparent, evidenced in the way that
managers come under pressure to conform to prevailing social values and norms around
how to treat people in the workplace
c) Cultural-cognitive pressures include the ways in which people customarily think and
behave in a society (e.g. 6 dimensions of Hofstede)
The key implication is that prevailing notions of legitimate or appropriate behaviour in how
people are employed affect the standing of organizations. In general, employers are
, concerned with ensuring their social legitimacy while simultaneously pursuing their goals for
economic performance.
Management power
It’s important to also think about management’s socio-political motives in a dynamic way. All
firms can be seen as political systems in which management holds legitimate authority but
one in which management decisions are nonetheless subject to legal and moral challenges.
Power, of course, has negative connotations, but we should not rush to such a judgement.
An appropriate level of management power is positive. Managers also need some degrees of
power and freedom, or the job is impossible.
However, there is always the potential for power-seeking behaviour to become perverse. In
agency theory, managers are seen as agents whose interests overlap with, but also diverge
from, those of the firm’s principals or owners. Managers, like other stakeholders in
organizations, can use their power to pursue their own interests.
Tensions and trade-offs in HRM
We have identified, then, some fundamental or strategic goals underpinning management’s
activities in HRM. This implies some thinking about ‘human resource advantage’, not necessarily for
the entire workforce but at least for elite elements in it.
The pursuit of these goals is not straightforward. The strategic management of work and people in
the firm inevitably involves management wrestling with tensions among goals. Experience teaches
us that tensions often lead to trade-offs. As a fundamental principle, it is important to recognize that
firms and workers have interests or concerns that are partly overlapping and partly conflicting. This
is what known as a ‘pluralist’ rather than an ‘unitarist’ assumption in the theory of employment
relations.
We now turn to a discussion of these tensions and trade-offs.
Labour market competitiveness
The most fundamental tension associated with HRM stems from the fact that firms need to compete
in labour markets for the workforce they need. The general severity of labour-supply problems
waxes and wanes with the level of economic activity. However, the challenge of recruiting the
quality of labour they need tends to remain an issue.
There are, in fact, winners and losers in the labour market at firm, industry and societal levels.
At firm level, the labour market tends to be dominated by large, well-organized and well-
resourced organizations. Small firms struggle to compete.
At industry level scarcity can afflict entire industries, in which working conditions are seen as
less attractive.
At societal level his problem also plays, with rich and poorer countries fighting over
employees.
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