Strategy and Human Resource Management
Chapter 1 Human Resource Management: what and why?
Fundamental characteristics of HRM
What are human resources?
Human resources are the characteristics that are intrinsic to human resources, which people can
apply to the various tasks and challenges of their lives.
- Most obviously: It includes the knowledge, skills and energies that we can use in our daily roles,
also called ‘labour-power’ or ‘capacity for labour’ (Karl Marx).
- Less obviously: it includes our underpinning or dynamic characteristics, including physical and
emotional health, intellectual capabilities, and the personalities and motivations.
- We have strengths (assets) and weaknesses (liabilities)
- It is wrong to call people themselves ‘human resources’. People are not human resources, they
are independent agents who possess human resource, which are the talents they can deploy and
develop at work and which they take with them when they leave an organization.
- The key point: human resources belong to us as individuals and move around with us as our lived
unfold. In any society in which slavery has been eliminated, people posses their own human
resources and have rights over how they are used. So organizations are dependent on people
What is human resource management?
It is only people, working with physical, symbolic and financial resources, who can create a viable
business. Managers need to gain access to the human capital, or stock of human talents, that is
relevant to the organization’s survival.
- HRM is not simply about engaging the services of talented individuals.
- Working with the individuals they have recruited; managers are concerned with developing the
organisation’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; it is a driver of organisational growth.
In order to build he human/social capital the organization needs, managers adopt policies and
practices for organising work and employing people.
1. Policies and practices for work management:
The design of jobs (can range from low-discretion jobs to highly autonomous jobs)
the design of teamwork in team settings
organizational change
2. Policies and practices for people management
workforce planning, recruitment & selection, training & development, performance
management, compensation, incentives, retention
So, the management of work and people include both individual and collective dimensions
- Hr specialist are primarily people who use their knowledge/skills to support the line managers
who directly manage the workforce.
Role of HR specialist (Ulrich’s four-role model):
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,Strategic goals and tensions in HRM
The economic goals of HRM
1. Cost-effective labour
The primary problem is how to secure the economic viability of their firm in the markets in which it
competes
Economic viability = a firm generates a return on investment that is shareholders consider
acceptable or that meets the obligations it has to is bankers/other lenders.
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; in other
words, management needs to establish a cost-effective system for managing the people the business
requires.
- Cost-effectiveness is a dual concepts; (1) it incorporates the idea that a firm needs people who
are effective, who are skilled at what the firms wants them to do, (2) while also motivating them
to perform at a cost (wages, benefits, training etc) what the firm can afford to pay.
- A viable approach to HRM is one that delivers on the ground of effectiveness and cost
- The shape of a viable strategy of HRM, varies significantly across different kind of industries ad
markets in which the firm competes. See page 9 for examples.
- So, the fundamental economic motive that can be observed in HRM is concerned with making
the firm’s human capabilities productive at an affordable cost in the market concerned.
2. Organizational flexibility
While cost-effective labour is essential to economic viability, change is inevitable (onvermijdelijk) and
so an element of flexibility is also an issue for managers. Managers have an incentive to adopt some
HR practices that will enhance organisational flexibility or the capacity to change as its environment
changes.
- In the area of defining goals about organisational flexibility, it is useful to distinguish between
short-run responsiveness and long-run agility.
Short-run responsiveness: managerial attempts to bring about greater numerical flexibility,
that is, policies which make it easier to hire and shed labour. (1) In a variety of industries, the
drive to achieve numerical flexibility now induces ‘zero-hours contracts. This provides a very
high level of flexibility for employers by transferring the risk in the level of work demand onto
the employee. (2) Short-run flexibility also involves financial flexibility or attempts to bring
greater flexibility into the price of labour. (3) It also includes attempts to hire workers who are
cross-trained or ‘multiskilled’, combining roles that have historically been kept in separate job
description (functional flexibility).
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. Does the firm have the capacity to create
or cope with long-run changes in products, costs and technologies? Can it change as fast as, or
faster than its major rivals? A key challenge has come from the major cost differences
between companies with operation in the developed world and those with operations in
newly industrialising nations (see examples page 11).
3. Human resource advantage
Firms that survive are engaged in an ongoing process of trying to build and defend competitive
advantages, which can enhance their profitability. Human resource advantage can be broken down
into two dimensions:
- (1) human capital advantage – which a firm enjoys when it employs more talented individuals
that is rivals. In rests on the outstanding intellectual, emotional and physical performance of
individuals employed in the firm. Attracting better KSAs than its rivals
- (2) Social capital advantage (organisational process) – which occurs in those firms that have
developed superior ways of combining the talents (KSAs) of individuals in collaborative activities.
When you hire brilliant individuals, which can bring important breakthrough, it is possible that a
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, organization fail as a result of poor organisation processes in teamwork and cross-function
coordination.
- Thus, more powerful forms of human resource advantage occur when both human and social
capital of and organizations are superior to those of its rivals.
The socio-political goals of HRM
1. Social legitimacy
Economic motives are fundamental in HRM, however they do not fully account for the strategic
behavior of managers. Firms operate in societies, in which there are laws that aim to control how
managers employ people and in which there are customs, or widely shared expectations, for how
people should be treated in workplaces.
- The need for managers to adapt to the social environment in which their firms are operating is
strongly underlined by sociologist who bring an institutional perspective to the analysis of
organisation. It examined the ways in which they are influences by a range of forces in wider
society. Scott defined ‘three pillars of institutions’:
Regulative pressures; includes different codes of employment law. Organisations can be
coerced to comply with legal rule
Normative (moral) pressures: managers come under pressure to conform to prevailing social
values/norm around how to treat people in the workplace. Such as equal employment
opportunity, eliminate discrimination
Cultural (cognitive) pressures: include the ways in which people customarily think and behave
in society.
- Employers are concerned with ensuring their social legitimacy while simultaneously pursuing
their goals for economic performance.
- The quality of the firm’s reputation as an employer is only one aspect of its social legitimacy,
which also included such things as its impacts on the natural environment.
- The majority of employers comply with their responsibilities under employment law and under
government regulations of occupational safety and health. Their legitimacy goal is legal
compliance (nakoming); it is the baseline legitimacy goal for employers who wish to avoid
prosecution and bad publicity.
2. Managerial power
As with economic motived, it is also important to think about management’s socio-political motives
in a dynamic way. The evidence suggests that management exhibits a fundamental desire to enhance
its power as a stakeholder, a tendency that can have both positive and perverse consequences for
the organization.
- Management have a less openly acknowledged ‘security objective’ – a goal to maximise
managerial control over an uncertain environment including threats to its power base from work
groups and trade union.
- An appropriate level of management power is positive. It is needed so that management can
coordinate the interests of the diverse stakeholder on whom the organization depend.
- It is unhelpful to firm if managers are hopelessly checked at every point when they need to make
important decision for the sake of the organization. Managers need some degrees of freedom or
the job is impossible.
- There is potential for power-seeking behavior to become perverse (onredelijk), leading to
consequences that are counterproductive for organization well-being.
- While managers need to generate an acceptable level of profit, their motives also include
enlarging their salaries, enhancing their security, and increasing their status, power and prestige.
Managers can use their power to pursue their own interest, including their personal rewards.
- The tendency of management is to act, over time, to enhance its power base, something which
can have both positive and negative consequences for organisations, for workers and for society
at large.
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, Strategic tensions and problems in HRM
1. The problem of labour scarcity
Most fundamental tension stems from the fact that firms need to compete in labour markets for the
individuals they need. Managers must compete with others to attract and retain appropriately skilled
staff.
- When unemployment levels are high; organizations are often inundated (overstroomd) with job
applicants and have less difficulty with recruiting. However, the challenge of recruiting the
quality of labour they need tens to remain an issue.
- At the firm level, the labour market tends to be dominated by large, well-recognised and well-
resources organisations, which can pay higher salaries and offer individuals greater avenues for
career development.
- Small firms often struggle to compete with such firms and can remain fragile, tenuous
organisations.
- Labour scarcity can afflict entire industries, in which working conditions are seen as less
attractive; in the British trucking industry, there are often shortages of drivers because of
unattractive conditions.
- As recruiters in rich countries comb the globe for scarce labour, this creates problems for poorer
countries; health services in third-world countries can be denuded of expensively trained health
professional by first-world ‘poaching’
- Small countries can find that capable managers are constantly being recruited to more
challenging and better paid jobs in larger countries where the big companies offer extensive
career opportunities. Labour scarcity is therefore a problem; it can cause severe problems at
organisational, industry, and societal levels.
2. The problem of employee motivation
The law of employment (employment contract between employee-employer) gives employers the
right to issue what are commonly known as ‘lawful and reasonable order’.
- The employer, like the employee, must exercise some trust, relying on workers to use their
judgement in productive ways. Despite of how much ‘scripting’ there is how to deal with
customers, the individual employee still decides whether to be helpful to customers or not.
- Despite of the fact that employees are passive or lack power resources, all employees have some
power over their own actions, and those with know-how and who are not easily replaced, have
greater power.
- There are fundamental conflicts of interest in the workplace. An important perspective is the
‘labour process’ theory (LPT), which analyses the tensions between employer strategies of
control and worker strategies of resistance.
Conflicts over income and over the control of work are seen to affect the basis for workplace
cooperation. Many scholars note the role of institutions for employee voice in improving the
balance of interests.
Management should work with worker representatives in processes of collective bargaining,
information sharing and consultation to enhance fairness and build a trust- and respectful
work climate.
- There is also an impact of fairness or equity concerns on employee motivation, including
employee concerns with the justice of their rewards and workplace decision-making processes.
The process of building trust is seen to depend on the employer, creating fairness in HR
decisions. The notion that individuals have a ‘psychological contract’ with their employees has
become increasingly important.
- A major gap between what management promises and what management delivers affects an
individual’s perception of their psychological contrast and thus their level of trust + commitment.
- An overall sense of fairness and trust can develop a work site or workforce, creating a
collective/social climate that is more or less positive for cooperation
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