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Summary Strategic Human Resource Management - a Balanced Approach
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A summary of the book 'Strategic Human Resource Management - a Balanced Approach' by Boselie.
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Strategic Human Resource Management: a balancedapproach
Chapter 1 Introduction: Strategic Human Resource
Management in the Twenty-first Century
Introduction
The theory on HRM suggests that employees are generally considered ‘the organization’s most
valuable assets’. However, as soon as an organizational crisis emerges, the employee emphasis is
often downgraded through downsizing and mass layoffs.
SHRM is a relatively young discipline – approximately 25 years old – with a growing importance for
organizations operating in a dynamic and continuous changing environment. In times of major
change, management of employees is essential to achieve organizational goals. Successful change
highly depends on changing people’s behavior, attitude and cognition.
The new economy
The old economy: work in the old economy was characterized by physical tasks, job design and work
design based on mass production, many relatively low-skilled workers and high degree of
unionization.
The new economy is a new concept mainly focused on the shift from a manufacturing and production
economy into a service sector asset-based economy (1990). The new economy is dominated by
emerging branches of industry, including the IT sector, the telecommunications sector and the
financial institutions. The IT development facilitated the services industry. In the new economy assets
are less tangible and are embedded in reputation, brands and knowledge of employees and can be
characterized by high knowledge intensity, web-based organizing, outsourcing and offshoring and the
integration of work design, technology and services delivered. Organizational change has become
common practice in the new economy with major implications for employees.
Dot-com bubble: internet bubble or hype.
Organizational change and competitive advantage
Competitive advantage: represents an organization’s position in comparison to its direct competitors.
Competitive advantage is important for organizational survival and is at least partly manageable by
HRM. It can be reflected in financial performance and non-financial performance (reputation).
The changing role of work in modern organizations
Technology has created opportunities for alternative work design; enabling employees to work at
home and still have access to organizational resources and networks. Flexible work arrangements
characterize modern organizations with benefits for both the employer (improved personnel
planning) and the employee (better work-life balance).
The ageing population in many Western countries is also affecting work in modern organizations, with
the risk of potential loss of valuable knowledge, skills and abilities.
,MHRM, IHRM and SHRM
HRM: management decisions related to policies and practices that together shape the employment
relationship and are aimed at achieving individual, organizational and societal goals. Three major
subfields:
MHRM: Micro HRM. Covers the sub-functions of HR policy and practice, including
recruitment and selection, induction and socialization and training and development
(organizational behavior and occupational psychology) focus on the impact of single HR
practices on employee attitudes and behaviors.
IHRM: International HRM. HRM in MNC and HRM across borders.
SHRM: Strategic HRM. Focuses on the issues of linking HRM to the business strategy,
designing high-performance work systems and adding value through good people
management in an attempt to gain sustained competitive advantage. It pays special attention
to HRM and the fit between HR practices.
Legislation potentially affects people management and HRM through laws on labor flexibility, working
condition, collective bargaining agreements and unemployment regulations.
Stakeholders of an organization represent all groups inside and outside an organization that can affect
its strategy and goals.
Three perspectives
The multidimensional strategic HR model in this book includes the following key characteristics:
A multi-actor perspective multiple stakeholders;
A broad societal view institutional contexts (branches, regions and countries);
A multi-level perspective employee perspective vs. strategic organizational perspective.
The multidimensional strategic HRM model is reflected by the following:
Human resources are something more than just ‘resources’. Behavior of people is not solely
determined by economic rationality. Other factors can affect employee attitudes and
behavior. Therefore employees are more than just resources for creating organizational
success.
HRM is not concerned solely with financial performance. HRM also involves the
administration related to legislation and the relationship management with crucial social
partners (work councils and trade unions).
HRM focuses on the exchange relationship between employee and organizations. The
exchange relationship refers to the bargain between the employee, and the employer, with
regard to efforts of the worker and rewards given by the employer. The concept that best
captures the exchange relationship is the concept of the employment relationship (different
contract types).
1. Legal contract: rights and obligations of employer and employee
2. Economic or transactional contract: working days and pay
3. Psychological contract: not written down but expected from both actors (overtime)
4. Sociological contract: the social relationships employees have with each other.
Tensions
HRM operates in an area of continuous tension between added value (economic side/ hard side) and
moral values (employees are human beings/ soft side). Legge calls this the dominance of human
,resource management in contrast to the softer perspective that puts people first: human resource
management. Balancing between the approaches is one of the major challenges in the field of HRM.
Anglo-American models focus on creating shareholder value in terms of profits and market value
with little or no attention to other stakeholders including trade unions and work councils (USA/
unitarist) likely to result in bad people management.
In contrast, the Rhineland models acknowledge multiple stakeholders and their interests explicitly
taking into account employee interest in terms of well-being and societal interests (Western Europe).
Coercive mechanisms – legislation, trade unions, work councils and CBAs – are stronger and more
deeply embedded in Europe than in the USA.
The balanced approach
In times of globalization and increased competition, there is a growing awareness that sustained
competitive advantage depends on balancing market demands and institutional pressures. In the
strategic balance model, organizational success can only be achieved when financial performance and
societal performance of an organization are above average in the particular population in which the
organization is operating.
There is a tendency towards management reforms in public sectors in some countries that
traditionally have social legitimacy (hospitals, local governments), but are now under pressure to
become lean, provide high-quality services and meet customer needs.
Framing HRM
Four different frames for studying organizations:
1. Structural frame. Gaining an understanding of the various parts of an organization (rules,
roles, goals, policies, technology, environment);
2. HR frame. Focusses on the employment relationship (needs, skills, relationships);
3. Political frame. Emphasis on the different parties (power, conflict, competition);
4. Symbolic frame. Builds on meaning and identity (culture, meaning, ritual, ceremony, stories
and heroes).
SHRM is mainly studied from the structural frame (Mintzberg, Porter) and HR frame blending
organizational behavior insights with organization level HRM insights. A balanced approach in SHRM
implies the explicit inclusion of multiple frames. These frames are different lenses that can help to
define the multidimensional aspects taking into account all relevant stakeholders, contextual factors
and outcomes. A balanced approach blends economic and institutional interests in an attempt to
create sustained competitive advantage.
Chapter 2 Strategic Human Resource Management and
Context
Best practice versus best fit
Best-fit school: HRM is more effective when it is aligned with its internal and external context.
Best-practice school: all firms will be better off if they identify and adopt best practice in the way they
manage people (universalistic perspective). Pfeffer’s seven HR practices for building profits by putting
people first is representative of the best-practice school.
, Illustrations of Pfeffer’s seven best practices in practice
1. Selective recruitment and selection. A sophisticated way of trying to recruit and select the
best person for the job
2. Extensive training
3. Performance-related pay
4. Teamworking. Best way to break through the hierarchical model and decentralize
responsibility
5. Information sharing and communication.
6. Reduction of status differences. Through avoiding status symbols linked to hierarchical
positions
7. Employment security.
Pfeffer claims success for all companies that apply these seven practices in HRM. However, the best-
practice proposition is criticized for its lack of attention to contextual factors, including national
differences with regard to labor legislation, sector differences, the nature and size of businesses. The
strength of the best-practice model is its simplicity and clarity.
In contrast, according to the best-fit proposition success can only be achieved through the
appropriate fit between HRM and its context.
Context: the set of facts or circumstances that surrounds the organization. The internal context
represents the organization’s unique history, the administrative heritage and organization culture. The
external context reflects the outside mechanisms that affect the organization. There are two general
mechanisms: market mechanisms (competition) and institutional mechanisms (pressures from
legislation, protocols and procedures and social-cultural issues: SCL dimensions).
The business model and strategy
The business model is the way an organization manages it business to make money. An optimal fit
between HRM and the context can positively affect the business model and the organization’s
success. A better fit can be achieve through strategic design making. Strategy: an organization’s
intention to achieve certain goals through planned alignment between the organization and its
environment. The strategy contributes to the organization’s business model and its performance.
The Anglo-American approaches tend to use a narrow definitions of goals, while the continental
European approaches tend to apply a such broader definition including multiple stakeholders and
interests (organizational goals, societal goals, individual employee goals).
Business strategy, SHRM
SHRM: focused on the alignment between the overall strategy (business strategy) of an organization
and the HR strategy of that organization.
The business strategy is the system of the firm’s important choices, a system that could be well
integrated around common concerns (functional silos). The HR strategy is one of the functional silos.
Illustration of general and population environments in practice
General environment: all the market and institutional mechanisms that affect all organizations in a
country (macroeconomic situation of a country).
Population or organizational field: community of organizations that partakes of a common meaning
system and whose participants interact more frequently or fatefully with one another that with actors
outside the field (sector with its competitors or suppliers).
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