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01
The essence of
human resource
management (HRM)
K e y co n c e p t s a n d t e r m s
Added value Humanism
Agency theory Institutional theory
AMO theory Matching model of HRM
Commitment Motivation
Contextual model of HRM Organizational behaviour theory
Contingency theory Organizational capability
European model of HRM Resource-based theory
5-P model of HRM Resource dependence theory
Hard HRM Soft HRM
Harvard framework Strategic alignment
HR philosophy Strategic human resource management
Human capital theory (SHRM)
Human relations Transaction costs theory
Human resource management (HRM) Unitarist

L e a r n i n g o u tcom e s

On completing this chapter you should be able to define these key concepts. You should
also know about:
●● The fundamental concept of HRM and ●● The underpinning theories
how it developed ●● The reservations made about HRM
●● The meaning of HRM ●● Models of HRM
●● The goals of HRM ●● The position of HRM today
●● The philosophy of HRM
4 Part 1  The Practice of Human Resource Management

that human factors are paramount in the study of


Introduction – the HRM organ­izational behaviour and that people should be
concept treated as responsible and progressive beings.
An early reference to human resources was
made by Bakke (1966). Later, Armstrong (1977: 13)
Human resource management (HRM) is concerned
observed that in an enterprise ‘the key resource
with all aspects of how people are employed and
is people’. But HRM did not emerge in a fully
managed in organizations. It covers the activities of
fledged form until the 1980s through what might
strategic HRM, human capital management, know­
be called its founding fathers. These were the US
ledge management, corporate social responsibility,
academics Charles Fombrun and his colleagues
organization development, resourcing (workforce
in the ‘matching model’, and Michael Beer and his
planning, recruitment and selection and talent manage­
colleagues in the ‘Harvard framework’ as described
ment), learning and development, performance and
on page 9.
reward management, employee relations, employee
In the UK they were followed by a number of com-
well-being and the provision of employee services.
mentators who developed, explained and frequently
It also has an international dimension. As described
criticized the concept of human resource manage-
in Chapter 3, HRM is delivered through the HR
ment. Legge (2005: 101) commented that: ‘The term
architecture of systems and structures, the HR func-
[HRM] was taken up by both UK managers (for
tion and, importantly, line management.
example, Armstrong, 1987; Fowler, 1987) and UK
The practice of referring to people as resources
academics’. Hendry and Pettigrew (1990: 18) stated
as if they were any other factor of production is often
that HRM was ‘heavily normative from the start:
criticised. Osterby and Coster (1992: 31) argued that:
it provided a diagnosis and proposed solutions’.
‘The term “human resources” reduces people to the
They also mentioned that: ‘What HRM did at this
same category of value as materials, money and tech-
point was to provide a label to wrap around some
nology – all resources, and resources are only valu-
of the observable changes, while providing a focus
able to the extent they can be exploited or leveraged
for challenging deficiencies – in attitudes, scope,
into economic value.’ People management is some-
coherence, and direction – of existing personnel
times preferred as an alternative, but in spite of its
management’ (ibid: 20). Armstrong (1987: 31) argued
connotations, HRM is most commonly used.
that:

HRM is regarded by some personnel managers


The development of the HRM as just a set of initials or old wine in new bottles.
It could indeed be no more and no less than
concept another name for personnel management, but as
usually perceived, at least it has the virtue of
The term HRM has largely taken over that of
emphasising the virtue of treating people as
‘personnel management’, which took over that
a key resource, the management of which is the
of ‘labour management’ in the 1940s, which took
direct concern of top management as part of the
over that of ‘welfare’ in the 1920s (the latter process strategic planning processes of the enterprise.
emerged in the munitions factories of the First Although there is nothing new in the idea,
World War). HRM largely replaced the human insufficient attention has been paid to it in
relations approach to managing people founded many organizations.
by Elton Mayo (1933) who based his beliefs on the
outcome of the research project conducted in the However, commentators such as Guest (1987) and
1920s known as the Hawthorne studies. Members Storey (1995) regarded HRM as a substantially dif-
of this school believed that productivity was directly ferent model built on unitarism (employees share
related to job satisfaction and that the output of the same interests as employers), individualism, high
people would be high if someone they respected commitment and strategic alignment (integrating
took an interest in them. HRM also shifted the HR strategy with the business strategy). It was also
emphasis away from humanism – the belief held by claimed that HRM was more holistic than tradi-
writers such as Likert (1961) and McGregor (1960) tional personnel management and that, importantly,
Chapter 1  The Essence of HRM 5

it emphasized the notion that people should be original concept can lead us to believe. This is
regarded as assets rather than variable costs. illustrated by the various models summarized in
this section which provide further insights into the
nature of HRM. The chapter ends with an assess-
The conceptual framework of HRM ment of where the concept of HRM has got to
now. Following this analysis the next two chapters
HRM as conceived in the 1980s had a conceptual explain how in general terms HRM is planned
framework consisting of a philosophy underpinned through the processes of strategic HRM and deliv-
by a number of theories drawn from the behavioural ered through the HR architecture and system, the
sciences and from the fields of strategic manage- HR function and its members, and, importantly,
ment, human capital and industrial relations. The line managers.
HRM philosophy has been heavily criticized by
academics as being managerialist and manipulative
but this criticism has subsided, perhaps because it
became increasingly evident that the term HRM HRM defined
had been adopted as a synonym for what used to be
called personnel management. As noted by Storey Human resource management can be defined as
(2007: 6): ‘In its generic broad and popular sense a strategic, integrated and coherent approach to
it [HRM] simply refers to any system of people the employment, development and well-being of the
management.’ people working in organizations. It was defined by
Boxall and Purcell (2003: 1) as ‘all those activities
associated with the management of employment
HRM practice today relationships in the firm’. A later comprehensive
definition was offered by Watson (2010: 919):
HRM practice is no longer governed by the original
philosophy – if it ever was. It is simply what HR HRM is the managerial utilisation of the efforts,
people and line managers do. Few references are knowledge, capabilities and committed behaviours
made to the HRM conceptual framework. This is which people contribute to an authoritatively
a pity – an appreciation of the goals, philosophy co-ordinated human enterprise as part of an
and underpinning theories of HRM and the various employment exchange (or more temporary
HRM models provides a sound basis for under- contractual arrangement) to carry out work tasks
standing and developing HR practice. But account in a way which enables the enterprise to continue
needs to be taken of the limitations of that philo­ into the future.
sophy as expressed by the critics of HRM set out
later in this chapter.
The goals of HRM
The goals of HRM are to:
Aim of this chapter
●● support the organization in achieving its
The aim of this chapter is to remedy this situation. objectives by developing and implementing
It starts with a selection of definitions (there have human resource (HR) strategies that are
been many) and elaborates on these by examining integrated with the business strategy
HRM goals. Because the original concept of HRM (strategic HRM);
is best understood in terms of its philosophy and
●● contribute to the development of
underpinning theories these are dealt with in the
a high-performance culture;
next two sections. Reference is then made to the
reservations made about HRM but it is noted that ●● ensure that the organization has the talented,
while these need to be understood, much of what skilled and engaged people it needs;
HRM originally set out to do is still valid. However, ●● create a positive employment relationship
as explained in the next section of the chapter, between management and employees and
HRM is more diverse than interpretations of the a climate of mutual trust;
6 Part 1  The Practice of Human Resource Management

●● encourage the application of an ethical therefore HR policies should be integrated into the
approach to people management. business strategy.
An earlier list of HR goals was made by Dyer and
Holder (1988: 22–28) who analysed them under
the headings of contribution (what kind of em-
ployee behaviour is expected?), composition (what
Underpinning theories of
headcount, staffing ratio and skill mix?), com­ HRM
petence (what general level of ability is desired?) and
commitment (what level of employee attachment The original notion of HRM had a strong theore­
and identification?). Guest (1987) suggested that tical base. Guest (1987: 505) commented that:
the four goals of HRM were strategic integration, ‘Human resource management appears to lean
high commitment, high quality and flexibility. heavily on theories of commitment and motivation
And Boxall (2007: 63) proposed that ‘the mission of and other ideas derived from the field of organ­
HRM is to support the viability of the firm through izational behaviour.’ A number of other theories,
stabilizing a cost-effective and socially legitimate especially the resource-based view, have contributed
system of labour management’. to the understanding of purpose and meaning of
HRM. These theories are summarized below.

The philosophy of human Commitment


resource management The significance in HRM theory of organizational
commitment (the strength of an individual’s identi-
Doubts were expressed by Noon (1992) as to fication with, and involvement in, a particular organ­
whether HRM was a map, a model or a theory. ization) was highlighted in a seminal Harvard Business
But it is evident that the original concept could Review article by Richard Walton (1985).
be interpreted as a philosophy for managing people
in that it contained a number of general principles
and beliefs as to how that should be done. The
Source review
following explanation of HRM philosophy was
made by Legge (1989: 25) whose analysis of a
number of HRM models identified the following From control to commitment –
common themes: Walton (1985: 77)
That human resource policies should be Workers respond best – and most creatively – not
integrated with strategic business planning when they are tightly controlled by management,
and used to reinforce an appropriate (or change placed in narrowly defined jobs and treated as
an inappropriate) organizational culture, that
an unwelcome necessity, but, instead, when they
human resources are valuable and a source of
are given broader responsibilities, encouraged to
competitive advantage, that they may be tapped
most effectively by mutually consistent policies contribute and helped to take satisfaction in their
that promote commitment and which, as a work. It should come as no surprise that eliciting
consequence, foster a willingness in employees commitment – and providing the environment in
to act flexibly in the interests of the ‘adaptive which it can flourish – pays tangible dividends for
organization’s’ pursuit of excellence. the individual and for the company.
Storey (2001: 7) noted that the beliefs of HRM
included the assumptions that it is the human
resource that gives competitive edge, that the aim The traditional concept of organizational commit-
should be to enhance employee commitment, that ment resembles the more recent notion of organiza-
HR decisions are of strategic importance and that tional engagement (see Chapter 15).
Chapter 1  The Essence of HRM 7

Motivation Institutional theory


Motivation theory explains the factors that affect Organizations conform to internal and external
goal-directed behaviour and therefore influences environmental pressures in order to gain legitimacy
the approaches used in HRM to enhance engage- and acceptance.
ment (the situation in which people are committed
to their work and the organization and are moti-
vated to achieve high levels of performance). Human capital theory
Human capital theory is concerned with how people
The resource-based view in an organization contribute their knowledge, skills
and abilities to enhancing organizational capability
Resource-based theory expressed as ‘the resource- and the significance of that contribution.
based view’ states that competitive advantage is
achieved if a firm’s resources are valuable, rare and
costly to imitate. It is claimed that HRM can play Resource dependence theory
a major part in ensuring that the firm’s human
resources meet these criteria. Resource dependence theory states that groups
and organizations gain power over each other by
controlling valued resources. HRM activities are
Organizational behaviour theory assumed to reflect the distribution of power in the
system.
Organizational behaviour theory describes how
people within their organizations act individually
or in groups and how organizations function in AMO theory
terms of their structure, processes and culture. It
therefore influences HRM approaches to organiza- The ‘AMO’ formula as set out by Boxall and Purcell
tion design and development and enhancing organ­ (2003) states that performance is a function of
izational capability (the capacity of an organization Ability + Motivation + Opportunity to Participate.
to function effectively in order to achieve desired HRM practices therefore impact on individual
results). performance if they encourage discretionary effort,
develop skills and provide people with the oppor­
tunity to perform. The formula provides the basis
Contingency theory for developing HR systems that attend to employees’
interests, namely their skill requirements, motiva-
Contingency theory states that HRM practices are tions and the quality of their job.
dependent on the organization’s environment and
circumstances. This means that, as Paauwe (2004:
36) explained: ‘The relationship between the rele- Social exchange theory
vant independent variables (eg HRM policies and
practices) and the dependent variable (perform- Employees will reciprocate their contribution to
ance) will vary according to the influences such as the organization if they perceive that the organ­
company size, age and technology, capital intensity, ization has treated them well.
degree of unionization, industry/sector ownership
and location.’
Contingency theory is associated with the notion Transaction costs theory
of fit – the need to achieve congruence between an Transaction costs economics assumes that businesses
organization’s HR strategies, policies and practices develop organizational structures and systems that
and its business strategies within the context of its economize the costs of the transactions (interrelated
external and internal environment. This is a key exchange activities) that take place during the course
concept in strategic HRM. of their operations.
8 Part 1  The Practice of Human Resource Management

Agency theory together) is questionable. Fowler (1987: 3)


commented that: ‘At the heart of the concept
Agency theory states that the role of the managers is the complete identification of employees
of a business is to act on behalf of the owners of the with the aims and values of the business –
business as their agents. But there is a separation employee involvement but on the company’s
between the owners (the principals) and the agents terms. Power in the HRM system remains
(the managers) and the principals may not have very firmly in the hands of the employer. Is it
complete control over their agents. The latter may really possible to claim full mutuality when
therefore act in ways that are against the interests of at the end of the day the employer can decide
those principals. Agency theory indicates that it is unilaterally to close the company or sell it to
desirable to operate a system of incentives for someone else?’ Later, Ramsey et al (2000:
agents, ie directors or managers, to motivate and 521) questioned the unitarist assumption
reward acceptable behaviour. underlying much mainstream management
theory that claims that everyone benefits
from managerial innovation.

Reservations about the ●● HRM is ‘macho-management dressed up as


benevolent paternalism’ Legge (1998: 42).
original concept of HRM ●● HRM is manipulative. Willmott (1993: 534)
asserted that: ‘any (corporate) practice/value
On the face of it, the original concept of HRM as is as good as any other so long as it secures
described above had much to offer, at least to man- the compliance of employees’. HRM was
agement. But for some time, HRM was a controver- dubbed by the Labour Research Department
sial topic, especially in academic circles. The main (1989: 8) as ‘human resource manipulation’.
reservations as set out below have been that HRM John Storey (2007: 4) referred to ‘the
promises more than it delivers and that its morality potential manipulative nature of seeking
is suspect: to shape human behaviour at work’.
●● Guest (1991: 149) referred to the ‘optimistic ●● HRM is managerialist. ‘The analysis of
but ambiguous label of human resource employment management has become
management’. increasingly myopic and progressively more
irrelevant to the daily experience of being
●● HRM ‘remains an uncertain and imprecise
employed. While the reasons for this
notion’ Noon (1992: 16).
development are immensely complex... it is
●● ‘The HRM rhetoric presents it as an all or primarily a consequence of the adoption of
nothing process which is ideal for any the managerialist conception of the discourse
organization, despite the evidence that different of HRM’ (Delbridge and Keenoy, 2010: 813).
business environments require different
●● HRM overemphasizes business needs.
approaches’. (Armstrong, 2000: 577)
Keegan and Francis (2010) have rightly
●● HRM is simplistic – as Fowler (1987: 3) wrote: criticized the increasing focus on the business
‘The HRM message to top management tends partnership role of HR at the expense of its
to be beguilingly simple. Don’t bother too function as an employee champion. An
much about the content or techniques of illustration of this is provided by the
personnel management, it says. Just manage Professional Map produced by the British
the context. Get out from behind your desk, Chartered Institute of Personnel and
bypass the hierarchy, and go and talk to Development (CIPD), which as stated by the
people. That way you will unlock an enormous CIPD (2013: 2): ‘Sets out standards for HR
potential for improved performance.’ professionals around the world: the
●● The unitarist approach to industrial relations activities, knowledge and behaviours needed
implicit in HRM (the belief that management for success.’ The map refers to ‘business’ 82
and employees share the same concerns and times but to ‘ethics’ only once and ‘ethical’
it is therefore in both their interests to work only twice.
Chapter 1  The Essence of HRM 9

These concerns merit attention, but the more im- proposition that: ‘Human resource management
portant messages conveyed by the original notion (HRM) involves all management decisions and
of HRM such as the need for strategic integration, actions that affect the nature of the relationship be-
the treatment of employees as assets rather than tween the organization and employees – its human
costs, the desirability of gaining commitment, the resources’ (ibid: 1). They believed that: ‘Today... many
virtues of partnership and participation and the key pressures are demanding a broader, more compre-
role of line managers are still valid and are now hensive and more strategic perspective with regard
generally accepted, and the underpinning theories to the organization’s human resources’ (ibid: 4). They
are as relevant today as they ever were. also stressed that it was necessary to adopt ‘a longer-
And it should be remembered that these objec- term perspective in managing people and consider­
tions, with the exception of the last one, mainly ation of people as a potential asset rather than merely
apply to the original concept of HRM. But today, as a variable cost’ (ibid: 6). Beer and his colleagues were
explained in the final section of this chapter, HRM the first to underline the HRM tenet that it belongs
in action does not necessarily conform to this con- to line managers. They suggested that HRM had
cept as a whole. The practice of HRM is diverse. two characteristic features: 1) line managers accept
Dyer and Holder (1988) pointed out that HRM more responsibility for ensuring the alignment of
goals vary according to competitive choices, tech- competitive strategy and HR policies; 2) HR has
nologies, characteristics of employees (eg could be the mission of setting policies that govern how HR
different for managers) and the state of the labour activities are developed and implemented in ways
market. Boxall (2007: 48) referred to ‘the profound that make them more mutually reinforcing.
diversity’ of HRM and observed that: ‘Human re-
source management covers a vast array of activities
and shows a huge range of variations across occu- Contextual model of HRM
pations, organizational levels, business units, firms,
industries and societies.’ There are in fact a number The contextual model of HRM emphasizes the
of different models of HRM as described below. importance of environmental factors by including
variables such as the influence of social, institu-
tional and political forces that have been under­
estimated in other models. The latter, at best,
Models of HRM consider the context as a contingency variable.
The contextual approach is broader, integrating
The most familiar models defining what HRM is the human resource management system in the
and how it operates are as follows. environment in which it is developed. According to
Martin-Alcázar et al (2005: 638): ‘Context both
conditions and is conditioned by the HRM strat-
The matching model of HRM egy.’ A broader set of stakeholders is involved in
Fombrun et al (1984) proposed the ‘matching the formulation and implementation of human
model’, which indicated that HR systems and the resource strategies that is referred to by Schuler
organization structure should be managed in a way and Jackson (2000: 229) as a ‘multiple stakeholder
that is congruent with organizational strategy. This framework’. These stakeholders may be external
point was made in their classic statement that: ‘The as well as internal and both influence and are influ-
critical management task is to align the formal enced by strategic decisions
structure and human resource systems so that they
drive the strategic objectives of the organization’
(ibid: 37). Thus they took the first steps towards the The 5-P model of HRM
concept of strategic HRM.
As formulated by Schuler (1992) the 5-P model of
HRM describes how HRM operates under the five
The Harvard model of HRM headings of:
Beer et al (1984) produced what has become known 1 HR philosophy – a statement of how the
as the ‘Harvard framework’. They started with the organization regards its human resources,
10 Part 1  The Practice of Human Resource Management

the role they play in the overall success of ●● multicultural organizations;


the business, and how they should be treated ●● participation in decision-making;
and managed.
●● continuous learning.
2 HR policies – these provide guidelines for
action on people-related business issues and
for the development of HR programmes and The hard and soft HRM models
practices based on strategic needs.
Storey (1989: 8) distinguished between the ‘hard’
3 HR programmes – these are shaped by HR
and ‘soft’ versions of HRM. He wrote that: ‘The
policies and consist of coordinated HR
hard one emphasises the quantitative, calculative
efforts intended to initiate and manage
and business-strategic aspects of managing human
organizational change efforts prompted by
resources in as “rational” a way as for any other
strategic business needs.
economic factor. By contrast, the soft version traces
4 HR practices – these are the activities its roots to the human-relations school; it empha-
carried out in implementing HR policies sizes communication, motivation and leadership.’
and programmes. They include resourcing, However, it was pointed out by Keenoy (1997:
learning and development, performance and 838) that ‘hard and soft HRM are complementary
reward management, employee relations and rather than mutually exclusive practices’. Research
administration. in eight UK organizations by Truss et al (1997) indi-
5 HR processes – these are the formal cated that the distinction between hard and soft
procedures and methods used to put HR HRM was not as precise as some commentators
strategic plans and policies into effect. have implied. Their conclusions were as follows.

European model of HRM


Brewster (1993) described a European model of
HRM as follows:
Source review
●● environment – established legal framework; Conclusions on hard and soft models of
●● objectives – organizational objectives and HRM – Truss et al (1997: 70)
social concern – people as a key resource;
●● focus – cost/benefits analysis, also Even if the rhetoric of HRM is ‘soft’, the reality is
environment; almost always ‘hard’, with the interests of the
organization prevailing over those of the individual.
●● relationship with employees – union and
In all the organizations, we found a mixture of both
non-union;
hard and soft approaches. The precise ingredients
●● relationship with line managers – specialist/ of this mixture were unique to each organization,
line liaison;
which implies that factors such as the external and
●● role of HR specialist – specialist managers – internal environment of the organization, its
ambiguity, tolerance, flexibility. strategy, culture and structure all have a vital role
The main distinction between this model and what to play in the way in which HRM operates.
Brewster referred to as ‘the prescribed model’ was
that the latter involves deregulation (no legal frame-
work), no trade unions and a focus on organizational
objectives but not on social concern.
As set out by Mabey et al (1998: 107) the char-
acteristics of the European model are: HRM today
●● dialogue between social partners; As a description of people management activities
●● emphasis on social responsibility; in organizations the term HRM is here to stay,
Chapter 1  The Essence of HRM 11

even if it is applied diversely or only used as a label


to describe traditional personnel management Source review
practices. Emphasis is now placed on the need for
HR to be strategic and businesslike and to add
value, ie to generate extra value (benefit to the busi- The meaning of HRM – Boxall et al
ness) by the expenditure of effort, time and money (2007: 1)
on HRM activities. There have been plenty of new
Human resource management (HRM), the
interests, concepts and developments, including
management of work and people towards desired
human capital management, engagement, talent
ends, is a fundamental activity in any organization
management, competency-based HRM, e-HRM,
high performance work systems, and performance in which human beings are employed. It is not
and reward management. But these have not been something whose existence needs to be radically
introduced under the banner of the HRM concept justified: HRM is an inevitable consequence of
as originally defined. starting and growing an organization. While there
HRM has largely become something that organ­ are a myriad of variations in the ideologies, styles,
izations do rather than an aspiration or a philoso- and managerial resources engaged, HRM happens
phy and the term is generally in use as a way of in some form or other. It is one thing to question the
describing the process of managing people. A con- relative performance of particular models of HRM
vincing summary of what HRM means today, which in particular contexts... It is quite another thing to
focuses on what HRM is rather than on its philoso- question the necessity of the HRM process itself,
phy, was provided by Peter Boxall, John Purcell and as if organizations cannot survive or grow without
Patrick Wright (2007), representing the new genera- making a reasonable attempt at organizing work
tion of commentators. and managing people.

Key learning points: The essence of human resource management

HRM defined management and employees and a climate of


mutual trust;
Human resource management (HRM) is concerned
with all aspects of how people are employed and ●● encourage the application of an ethical approach
managed in organizations. to people management.

Goals of HRM Philosophy of HRM


The goals of HRM are to: The beliefs of HRM included the assumptions that
it is the human resource that gives competitive
●● support the organization in achieving its edge, that the aim should be to enhance employee
objectives by developing and implementing commitment, that HR decisions are of strategic
human resource (HR) strategies that are importance and that therefore HR policies should be
integrated with the business strategy integrated into the business strategy (Storey, 2001: 7).
(strategic HRM);
●● contribute to the development of a high- Underpinning theories
performance culture;
‘Human resource management appears to lean
●● ensure that the organization has the talented, heavily on theories of commitment and motivation
skilled and engaged people it needs; create and other ideas derived from the field of
a positive employment relationship between organizational behaviour’ (Guest, 1987: 505).
12 Part 1  The Practice of Human Resource Management

The diversity of HRM been expressed about it. There may be something in
these criticisms, but the fact remains that as a
Many HRM models exist, and practices within different description of people management activities in
organizations are diverse, often only corresponding organizations HRM is here to stay, even if it is applied
to the conceptual version of HRM in a few respects. diversely or only used as a label to describe
traditional personnel management practices.
Reservations about HRM
On the face of it, the concept of HRM has much to
offer, at least to management. But reservations have

Questions
1 What is HRM?   6 What is the essence of the philosophy of
2 What was the main message of the Harvard HRM?
framework?   7 What is resource-based theory?
3 What was the main message of the matching   8 What is the significance of contingency theory?
model?   9 What are the key reservations made by
4 What are the goals of HRM? commentators about the early version of
5 What is the difference between hard and soft HRM?
HRM? 10 What is the position of HRM today?

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