The emergence of Human Resource Management

‘It is unlikely that Human Resource Management would have emerged had it not been for the unique political and economic context of the 1980s. Nevertheless, HRM is little more than a repackaging of personnel management’. Discuss.

Introduction

Over the last twenty years, there has been a huge rise in what has become known as Human Resource Management (HRM) (Hoque and Noon 2001, Guest 2011, Caldwell, and Storey 2007). But has this development represented a step change in the management of employees, or merely constituted a repackaging of the old functions of Personnel Management? The debate regarding this remains ongoing; and essentially involves two schools of thought. The first has it that there is a distinct difference, although the gap appears more blurred now than during the early 1980s (Caldwell, and Storey (2007), Hoque and Noon (2001)); but the second argues that the difference is really in name only, meaning HRM is merely indicative of a new discourse in employee management (Legge (2003), (2007), Keenoy (1999), Buchanan and Huckynski (2004: 679)).

At the crux of this debate are two key issues. First, the lack of a universal definition of the concept of HRM has led to rather chameleon-like definitions, in order to suit whoever happens to be using it at the time (Keenoy 1999); and moreover, as HRM has often been a term under which employee management has been analysed, this has just led to complete confusion over the whole issue (Beardwell & Claydon, 2007: 7). And second, as HRM is connected in the minds of many observers with the radical, neo-liberal ideology of the Thatcher government, it is the extent to which discourse arising from this ideology has given an exaggerated impression of the rise in HRM rather than there being a tangible distinct change in the management of employees..

The Context of the 1980s

By the commencement of the 1980s, there was a growing awareness that rich nations no longer enjoyed a share of the global marketplace by divine right. Increasing levels of competition were being felt from emerging countries, especially those in the Asia Pacific Rim such as Japan and Taiwan (Jones 2005). Moreover, in the UK’s specific case, it also had to deal with recession, high unemployment and ‘stagflation’; and during the preceding decade, had experienced financial crises resulting in a IMF bailout, and a series of strikes often referred to as the ‘winter of discontent’, which had a very severe impact on levels of productivity. (Harvey, 2005: 12).

In order to compete within an increasingly global marketplace, Western and capitalist leaders understood the need to improve employee productivity and levels of innovation. (Devanna et al., 1984: 33; Leys, 2003: 38). Accordingly, leaders such as Ronald Reagan in the US, Margaret Thatcher in the UK, and Deng Xiaoping of China (Harvey, 2005: 2), , took what had hitherto been a minority ideological argument, and made it central to their politics: leading to what many have depicted as the enduring, ‘age of neo-liberalism’ (Thorsen, 2009: 2, Leys, 2005: 29). In essence, neo-liberalism is based around the notion of self-identification, and a series of phenomena connected with liberalized trade and promotion of market forces (Thorsen, 2009: 2), which often results in deregulation, privatization and withdrawal of the state from many areas of social provision (Harvey 2005: 1). This ideology has been adopted so heavily that as David Harvey (2005: 1) has argued, it has ‘become hegemonic as a mode of discourse of our time’.

The Thatcher government combined this new ideology with previous Conservative political thinking, in order to form a cohesive political, economic and social strategy which would increase the UK’s global market share. This represented a growing ‘managerialization of society’ on the part of the government: indeed, politicians of the time referred to both ‘Britain PLC’, and, famously in Thatcher’s case, to the idea that there was ‘no such thing as society’ (Bach and Sisson, 2000: 14)

This unified strategy drove through policies leading to the privatization of public bodies, de-unionization, general moves encouraging employers to have direct contact with their employees, and mounting awareness of the need for better quality management of employees (Bach and Sisson 2000: 13). It resulted in the demise of the manufacturing sector, rise of smaller organisations, and a shift towards a workforce made up of management and non-managers (Guest (1987), Beardwell et al (2007)).

But political and economic factors do not operate in isolation from one another. For example, the 1980s were also a time of unprecedented levels of innovation in technology and transport, enabling organisations to move people, knowledge and goods across the world far more easily and cheaply than before (Jones 2005, Buchanan and Huckynski 2004: 679). Moreover, at the same time as cultural, gender, and class diversity became regarded as increasingly important, the continuing rise in education levels and growth in the numbers of women returning to the workplace resulted in more and more people working part time (Bach & Sisson 2000: 23).

During this time in order to survive, let alone thrive, employers had to find ways with which to improve the per capita performance of their employees. They could no longer compete in terms of pure cost, UK organizations had to look towards high tech or value added ways with which to differentiate themselves in the marketplace (Hoque 2011). With so much change occurring, shifts in how employees were managed were, surely, inevitable – but to what extent were these changes real, or instead, mere repackaging of an old, failed way of doing things?

What do we mean by Human Resource Management?

In 1992, the government white paper, ‘People, Jobs and Opportunity’ heavily promoted HRM activities, and emphasised the importance of the individual as a root to business success. Back and Sisson (2000: 14) interpreted this as a sign of the obsolescence of Personnel Management and the supersession of HRM. But this provided an inflated sense of what was really happening within the UK workplace. For example, by 1998, growth in the percentage of personnel specialists in the UK calling themselves ‘HR’ had only risen by 24% in workplaces with more than twenty-five employees (Hoque and Noon (2001), Caldwell (2002) citing Millward et al., 2000); and although at first glance, that 58% of CIPD members had HR in their job titles by 2002 seems impressive, this in fact represented a mere 4% increase from 1990 (Caldwell 2002). So whilst there was a rise in HRM (whatever it is taken to mean), uptake in the workplace was certainly not at the same rate as the discourse in the white paper might suggest.

Early proponents of HRM argued there to be a clear contrast between HRM and Personnel Management: in their view, the former involving activities focused on ‘integrating people management policies and practices into strategic decision making and business performance’, whereas the latter was regarded as reactive, fragmented, and bureaucratic (Caldell and Storey (1997: 21)) However, even though what has constituted HRM has varied over time, Caldell and Storey suggest that there was never such a clear distinction between HRM and Personnel Management. Indeed, Keenoy (1999, 2007) highlights this point when commenting that HRM is ‘remarkable as a phenomenon in term of its ambiguity, in that it means whatever you want it to mean’.

Buchanan and Huckynski (2004: 679) argue that HRM can be broadly considered to consist of two dominant themes: one focusing on tasks that improve both employee commitment and business performance; and the second, a more strategic approach to employee management, whereby policies and activities are coherent and integrated. Many agree that HRM can be thought in dichotomous terms: Storey, for example, coined the idea of ‘hard HRM’ and ‘soft’ HRM’. But similarly to Buchanan and Huckynski, Storey’s ‘hard’ HRM is in reality harsher than merely taking a coherent and integrated approach to employee management, where people are viewed as a resource to be utilized, in order to achieve business objectives. On the other hand, his ‘soft’ HRM, often referred to as ‘high commitment HRM’, is more focused on the individual’s performance in terms of quality, flexibility and commitment (Guest 1997; Storey 1992).

HRM Theory

From a theoretical perspective, and perhaps unsurprisingly, HRM also lacks a sense of unity. Guest and Boxall offer us two similar, yet nonetheless different, overviews of HRM theory (cited in Beardwell and Claydon). Guest (1997) suggests there to be three broad strands of HRM theories: a) strategic theory, deriving from contingency theory; b) descriptive theories, deriving from systems theory; and c) normative theories, deriving from motivation theory. But Boxall’s (1993: 646) literature review advocates two broad themes: namely a) HRM as theoretical development, focused on the relationship between employee relations and strategic management within organisations; and b) HRM as new practitioner or manager of activities, resulting in strategies in terms of employment relations which emphasise employee commitment and union substitution.

Models of HRM tend to be either bipolar, positioning it diametrically against Personnel Management, or multi-conceptual (Bratton, J. & Gold, J., 2007). There are three key models for us to consider: the first two are bipolar. In his comparison between the stereotypes of HRM and Project management, Guest (1987), argues that there are four distinct differences between HRM and Personnel Management: first, HRM integrates HR into strategic management; second, it adopts a unitary perspective and individualistic focus; third, HRM organisations tend to be organic in structure, and fourth, HRM emphasises full and positive utilization of HR (Bratton, J. & Gold, J. 2007: 24). Storey’s 1992 model, meanwhile, marks out twenty-seven points of difference between Personnel Management and HRM (though this was later refined down to 25) (Back and Sisson (2000: 14). His model consisted of four elements: beliefs and assumptions; strategic aspect; the role of line managers; and key levers (Bratton, J. & Gold, J., 2007). Yet the earlier Harvard model (Beer et al., 1984) has six components: including organizational context, stakeholder interests; policy choices; HR outcomes; long-term consequences; and a feedback loop. It is more pluralistic and prescriptive than other models of HRM, and consequently shares some elements with Personnel Management (Back and Sisson 2000: 14).

Overall, a review of the models suggests at least some distinction between HRM and Personnel Management. Bratton & Gold’s (2007) review suggests that: a) HRM is integrated into strategic planning; b) the psychological contract is emphasised over legally constructed exchange; c) the importance of learning is highlighted in HRM; d), the focus is on the individual to find ways that they can be motivated, in order to achieve organisational goals; e) HRM encourages proactive rather than passive activity; and f) three of the models explicitly make reference to performance outcomes which are thought to improve profit.

However, Hoque and Noon (2001), and Legge (1989, 1995), argue that Guest and Storey use stereotypes that are misleading and do not offer like for like comparisons. According to this view, Guest and Storey are guilty of contrasting normative ‘ideal’ models – that HRM is strategic, long term and proactive – with empirical descriptions of Personnel Management: namely, that it is short-termist, and reactive. Legge (1995) argues a fairer comparison, involving text book definitions of HRM (Beer and Spector, 1985, Guest,1987, H &P, 1986), and those of Personnel Management (Curving, 1975; Institute of Personnel Management, 1963), where there are in fact only three main differences. First, HRM places more focus on the management and development of managers than on workers; second, HRM focuses on the importance of organisational culture; and third, the role of supervisors is concentrated on profit margins.

Does HRM involve more than re-packaging?

So far we have seen that HRM has not seen a dramatic take-up since the 1980s, there is no unified definition for the HRM concept and there also is only a small distinct difference theoretically between HRM and Personnel Management. This surely leads us to believe HRM is mearly a re-packaging of Personnel Managment? Cully et al (2000) agree, they point out that the profession of employee management has had four major changes in name over the last eighty years (Cully et al., 1998:12), and infer that what has occurred since the 1980s merely constitutes an evolution of personnel management.

However, empirically, there does appear to be more evidence of distinct difference between HRM and Personnel Management. Bach & Sisson (2000: 19) argue that there has been a real paradigm shift in management thinking. Twenty years after the debate began in earnest, they made the point that there had been a restructuring of employment relations, most notably in terms of joint regulation through collective bargaining, which had dropped by 25%. Moreover, organisations with union representation saw a rise of 16% by 1990, and 27% by 1998, of non-standard forms of employment – be they temporary, part-time or contractor based – which were thought to now represent 25% of the workforce (Cully et al., 1998:6).

Hooque & Noon (2001) also support the view that there is empirical evidence of HRM in the workplace. Their analysis of WERS (1998) data compared different employee management activities, noting several differences between Personnel Managers, Financial Managers (those with no employee management qualification), and Human Resource Managers: a) HRM specialists tended to be better qualified than the other two groups; b) were regarded as more strategic planners; c) HRM workplaces had greater evidence of having devolved HR practice to line managers; and d) were more likely to adopt ‘high commitment management practices’. Overall, HRM specialists were perceived as more sophisticated than Personnel Managers, who in turn are viewed as more sophisticated than Financial Managers.

This range in sophistication levels suggests that HRM is a distinct ‘product’ – but is it distinct enough? Analysis of the latest WERS (2004) data largely supports the argument of Hoque and Noon (2001): ‘HR managers’ professional profile differed significantly from that of personnel managers and general managers’ (Caldwell and Story, 2007: 35, citing Kersley, 2006). But the decline of HRM specialists being involved in business planning (Caldwell and Story, 2007: 36); and Hammond’s powerful argument in ‘Why we hate HR’ (2005, cited in Price, 2007: 22) that, after ’20 years and hopeful rhetoric’, HRM professionals are neither strategic, nor leaders, has to suggest that HRM is not a different notion to Personnel Management; but rather, one that is closely related.

Three key studies are often employed within this debate. Gennard and Kelly’s (1994: 27) empirical study involved interviewing twenty-eight personnel directors, to ascertain whether the adoption of the HRM title over the Personnel Management one was about power politics (Hooque & Noon, 2001). They rejected the idea that HRM was something distinct to Personnel Management, and sided with Hall and Torrington’s (1989) argument that it is merely the next stage of the evolution of Personnel Management. They also ‘suggested that the delivery of the personnel function has always been flexible adjusting historically and altering its dominant values, as macro circumstances change’ (Beardwell and Claydon, 2007: 11). In contrast, Grant and Oswick (1998) surveyed 203 practitioners, finding that 50% of respondents felt that HRM was something very different to Personnel Management (Hoque & Noon, 2001).

Finally, Caldwell (2002) carried out a survey of 350 organisations: the results suggesting that Personnel Management and HRM specialists see themselves as distinctively different. These fall into four groups: a) HRM specialists are more likely to see their role as more strategic than administrative; b) both agree that employee involvement and commitment are important, whilst HRM specialists are likely to focus on types of commitment that link to performance targets; c) HRM specialists are more likely to link cultural change with competitive success; and d) there was no significant difference in how these two groups saw themselves in terms of change management effectiveness. But it should be pointed out that any study of perceptions is bound to be open to possible bias: for example, HRM scores might be influenced by HRM specialists making more of their role; whereas Personnel Managers might be more realistic, or even overly humble.

One possible explanation of the difference between these results is that it is likely that HRM was not defined the same way in all three studies. We might also expect directors of organisations to be more political than practitioners, which might in turn have led to bias in Gennard and Kelly’s study. But through adopting a more normative approach, we can detect a distinct difference between HRM and Personnel Management, although the former seems to constitute more of what we might term a new product release than a completely new product.

Is HRM mere rhetoric – or even smoke and mirrors?

Legge (2003, 2007) argues that the apparent overshadowing of Personnel Management by HRM is mainly a result of politicking, and really just an opportunity for employers to gain a competitive advantage. She argues that it is usually the friendly face, or ‘soft’ HRM version that is presented: which masks behaviour focusing more on ‘hard’ HRM activities, which treat employees as variable costs. Hoque and Noon’s (2001) study supports this notion: non-compulsory redundancy policies were less likely to be found in HRM workplaces, thought to be more likely to be aligned with ‘hard’ or high performance practices.

Secondly, Legge (2003, 2007) suggests that it is not the ‘message that has changed, but the messenger’, arguing that, ‘HRM represents the discovery of human capital as an asset by chief executives, and is therefore taken more seriously’. Price (2007: 22, citing Folwer, 1987) concurs that many businesses have adopted some form of HRM in recognition of the need for rhetoric stating that people are its greatest resource: an idea famously captured by Folwer: ‘HRM represents the discovery of personnel management by chief executives’.

Conclusion

There is strong evidence to suggest that HRM would not have emerged had it not been for the unique political and economic context of the 1980s. Critical to its rise was the Thatcher government’s embracement of neo-liberalism: a discourse which can be seen throughout HRM’s various forms, creating an impression (if not always the reality) that it is a product of its time (Bach & Sisson, 2000: 14).

Moreover, the obvious, continued difficulties of clearly defining what HRM actually is helps explain why it appears to some to represent a ‘fundamental step change in people management’; but to others, merely ‘an evolutionary phase in employee management’. (Beer & Spector, in Beardwell et al., 2007: 11). Indeed, as Legge (1995) concluded, at a theoretical level, there is only a small difference. Legge and others argue that the rise in the term, HRM, merely reflects the desire of employers to put a positive gloss on its many harsher aspects, such as longer working hours and more flexible markets.

But if we open up the debate to encompass empirical evidence, it is at this point that a wider gap between the two concepts begins to emerge. Bach & Sission (2000: 19), Caldwell and Storey (2007: 36), and Hoque and Noon (2001) suggest that a real paradigm shift has indeed occurred in the workplace.

This leads us to the conclusion that any analysis of the difference between HRM and Personnel Management depends on the definition of HRM used in the first place. In its absence, very different perspectives are bound to be held; but, in product terms, the difference is probably tantamount to new wrapping around a new version release of the same product, as opposed to a completely new product in different wrapping.