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This assessment consists of two parts. Part A will illustrate what is Human Resource Management, its current models used along with the theories that underpin the practice. It will then further explain what does Human Resource Management consists of and how different it is from Personnel Management.
Part B will discuss on how managers can account for the growth of interest in Human Resource Management within organisations today and what factors are central to its continued appeal within such organisations and why?
The aim of this research is to:-
Understand what is HRM, and what does it consists of.
Identify the current models used in HRM and the theory that underpins the practice
Understand the difference between HRM and personnel management.
Determine the factors that promote the growth of HRM in an organization.
Part A: Human Resource Management
Definition of Human Resource Management
Human Resource Management (HRM) is an approach to manage the most valuable asset of the company which is the human workforce that individually or collaboratively contributes their ideas and physical efforts to an organization (Armstrong, 2008). Storey (1995) described HRM as 'a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques.' Beer et al, (1984) states that 'all management decisions and actions that affect the nature of the relationship between the organization and its employees - its human resources.'
Models of Human Resource Management
2.2.1 The matching model of HRM
The matching model of HRM which was one of the first explicit statements of HRM made by the Michigan School, Fombrun, Tichy & Devanna (1984). They held that HR systems and an organization structure should be managed in a way that is corresponding with organizational strategy. They further explained that there is a human resource cycle, which consist of four generic processes or functions that are performed in all organisations. These are:
Selection - matching available HR to jobs
Appraisal - performance management
Rewards - reward short as well as long-term achievements
Development - developing high-quality employees.
Figure 2.1 The human resource cycle
Source: Fombrun, Tichy and Devanna, 1984
2.2.2 The Harvard framework
The pioneers of this model were the Harvard School of Business. Beer et al (1984) developed that what Boxall (1992) 'Harvard framework'. This framework is based on their belief that the problems of historical personnel management can only be solved when general managers develop a viewpoint of how they wish to see employees involved in and developed by the enterprise, and of what HRM policies and practices may achieve those goals. Without either a central philosophy or a strategic vision, this can be provided only by general managers. HRM is likely to remain a set of independent activities, each guided by its own practice tradition.
The Harvard school suggested that HRM had two characteristic features:
Line managers accept more responsibility for ensuring the alignment of competitive strategy and personnel policies;
Personnel has the mission of setting policies that govern how personnel activities are developed and implemented in ways that make them more mutually reinforcing.
Figure 2.2 The Harvard framework of human resource management
Source: Beer et al, 1984
According to Boxall (1992) the advantages of this model are that it:
Incorporates recognition of a range of stakeholder interests;
Recognizes the importance of 'trade-offs', either explicitly or implicitly, between the interests of owners and those of employees as well as between various interest groups;
Widens the context of HRM to include 'employee influence', the organization of work and the associated question of supervisory style;
Acknowledges a broad range of contextual influences on management's choice of strategy, suggesting a meshing of both product-market and socio-cultural logics;
Emphasizes strategic choice - it is not driven by situational or environmental determinism.
Walton (1985) expanded the concept by emphasizing the importance of commitment and mutuality as 'the new HRM model is composed of policies that promote mutuality in terms of goals, influence, respect, rewards and responsibility. The theory is that policies of mutuality will produce commitment which in turn will yield both better economic performance and greater human development.'
The Hard and Soft Model
Another debate concerning HRM focused on the distinction between 'hard' and 'soft' models of HRM (Storey 1989; Legge 1995). The 'hard' approach is often associated with a particular formulation of the matching model, where employees are positioned as management dictates. In contrast with this, 'soft' models focus more on the management of resourceful humans (like the Harvard framework). The approach assumes that employees are valued assets and a major source of competitive advantage. Within this approach, managers need to stimulate commitment and loyalty in order to ensure high levels of performance. Whereas the 'hard' model allows for a range of ways to manage staff, the 'soft' approach argues that one style is superior to all others in achieving the levels of employee motivation, commitment, and satisfaction that are required for excellent performance. Storey's approach (2001) is often seen as an archetype of the 'soft' variant; defining HRM as 'a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques'. He defines four elements that distinguish HRM.
It the human resource that really makes the difference and whose capabilities and commitment distinguishes successful organization from the rest.
Because HRM is of strategic importance, it needs to have top management involvement and HRM policies should be integrated into the business strategy.
Because of the long-term implications of HRM, it needs to be of intimate concern to line managers, because they operate as deliverers and drivers of HR policies-HRM is, therefore, too important to be left to personnel specialists.
The key levers of HRM (selection, communication, training, reward, and development) should be used to gain employee commitment to the organization and its goals and not just compliance with them.
Theories that reinforce HRM practices
2.3.1 Human Capital theory
Human capital theory states that investment in people adds to their value to the firm. Individuals expect a return on their own investment and firms recognize that the increased value of their employees should be rewarded. Human capital theory encourages the use of skill-based or competence-related pay as a method of reward. It also underpins the concept of individual market worth which indicates that individuals have their own value in the marketplace, Armstrong, (2001). Human capital theory focuses attention on 3 main strategies which are:-
Resourcing strategies are concerned with matching human capital resources to the strategic and operational needs of the organization and ensuring the effective utilization of those resources.
Human resource development strategies address issues relating to the development of the capabilities of individuals and teams. It aims to attract and retain human capital as well as develop it.
Reward strategies: From a financial reward point of view, the implication of human capital theory is that investment in people adds to their value to the firm. Individuals expect a return on their own investment, and firms have to recognize that the increased value of their employees should be rewarded. Human capital theory encourages the use of skill-based or competence-based pay as a method of reward. It also underpins the concept of individual market worth.
2.3.2 Motivation theory
Approaches to motivation are underpinned by motivation theory. Armstrong, (2001) states that the most influential theories are classified as follows:
Instrumentality theory, which states that rewards or punishments (carrots or sticks) serve as the means of ensuring that people behave or act in desired ways.
Content theory, which focuses on the content of motivation. It states that motivation is essentially about taking action to satisfy needs, and identifies the main needs that influence behavior. Needs theory was originated by Maslow (1954), and in his two-factor model, Herzberg (1957) listed needs which he termed 'satisfiers'. Figure 2.3 and 2.4 respectively illustrates the Maslow's hierarchy of needs and Herzberg's two-factor model.
Figure 2.3 Maslow's hierarchy of needs
Figure 2.3 Herzberg's two-factor model
Process theory, which focuses on the psychological processes which affect motivation, by reference to the following theories:-
Expectancy theory which was formulated by Vroom (1964) as follows 'Where an individual chooses between alternatives which involves uncertain outcomes, it seems clear that his behavior is affected not only by his preferences among these outcomes but also by the degree to which he believes this outcomes to be possible. Expectancy is defined as a momentary belief concerning the likelihood that a particular act will be followed by a particular outcome.'
Goal theory as developed by Latham and Locke (1979) states that motivation and performance are higher when individuals are set specific goals, when goals are difficult but accepted, and when there is a feedback on performance.
Equity theory is concerned with the perceptions people have about how they are being treated as compared with others. Equity involves feelings and perceptions and is always a comparative process (Adams, 1965).
2.3.3 Theories about Work
The theories about work consist of the following theories:-
Labour process theory
Newton and Findlay (1996) believe that labour process theory explains how managements have at their disposal a range of mechanisms through which control is exercised: 'Job performance and its assessment is at the heart of the labour process.' Managements, according to Newton and Findlay, are constantly seeking ways to improve the effectiveness of control mechanisms to achieve compliances.
Agency theory indicates that owners and managers have to develop ways of monitoring and controlling the activities of their agents. It is necessary to clear up ambiguities by setting objectives and monitoring performance to ensure that objectives are achieved, Armstrong (1996).
Exchange theory expressed by Armstrong, (2001) explains organizational behavior in terms of the rewards and cost incurred in the interaction between employers and employees. There are four concepts:
Rewards - payoffs that satisfy needs emerging from the interactions between individuals and their organizations.
Costs - fatigue, stress, anxiety, punishments and the value of rewards that people have lost because of lack of opportunity
Outcomes - rewards minus costs: if positive, the interaction yields a 'profit' and this is satisfactory as long as it exceeds the minimum level of expectations.
Level of comparisons - people evaluate the outcome of an interaction against the profit they are foregoing elsewhere.
Human Resource Management vs. Personnel Management
2.4.1 Personnel Management
In the words of David Guest (1989), 'Personnel Management (PM) and HRM: can you tell the difference?' An earlier answer to this was given by Armstrong (1987) as follows 'HRM is regarded by some personnel managers as sets of initials. HRM could indeed be just another name for PM. PM emphasizes on the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise.'
Difference between PM and HRM
Personnel Management (PM)
Human Resource Management (HRM)
Predominantly deals with day-to-day issues
Ad hoc and reactive in nature a short-term perspective rather than strategic
Dealing with day-to-day issues; but proactive in nature and integrated with other management functions.
A long-term commitment, strategic view of human resources.
Based on compliance on the part of the employee
Based on seeking willing commitment of the employee
Tendency to vertical integration
Flexible with core of key employees surrounded by peripheral shells
High degree of outsourcing
Collective base rates
'Pay by position'
Any additional bonuses linked to Taylorist work systems
Individual & team performance
'Pay for contribution'
Sophisticated recruitment practices for senior staff only
Strong reliance on external local labour market for most recruitment.
Sophisticated recruitment for all employees
Strong internal labour market for core employees. Greater reliance on external labour market for non-core.
Training & development
Restricted to training non-managerial employees. Narrowly job-related. Management development limited to top executives and fast-track candidates
Transformed into a learning & development philosophy transcending job-related training. An ongoing developmental role for all core employees including non-management. Strong emphasis on management and leadership development
Employee relations perspective
Pluralist: collectivist; low trust
Unitarist: individualistic; high trust
Organization of the function
Bureaucratic & centralised
Largely integrated into line management for day-to-day HR issues
Specialist HR group to advise and create HR policy
Source: Armstrong, 2001.
British Airways: from Personnel Management to HRM
In 1980, British Airways (BA) was facing a loss in profits at the rate of £200 per minute due to the companies' weaknesses in customer service, primarily due to poor HRM in BA, and to related major behavioral and performance problems among staff. In 1983 Collin Marshall was appointed as Chief executive in BA, who viewed the personal aspects of the service as being the key to providing a competitive edge. Marshall basically restructured the company to provide the front-line employee with the information and authority needed to handle situations at the customer interface. He removed layers from the management structure and changed the emphasis from a divisional to a functional structure. Many managers were given front line duties to deal directly with the customer. Marshall had restructured the personnel function and created the HR department. The devolving of certain responsibilities forced managers into becoming accountable for staff performance and discipline. The results were visible by late 1980s as BA became a successful company (Lundy & Cowling, 1996).
Basically this case study proves that HRM is a restructured and enhanced version of the Personnel Management practice. Most companies like BA reorganized the personnel function to a HR function in the 1980's.
Part B: Growth of interest in HRM within organizations today.
Factors of growth in HRM within organizations today
Gilmore and Williams (2009) explained that HRM involves a wide range of activities and issues, with responsibility for their enactment lying with different people. Respective organizations will have a dedicated HRM function, which will work in conjunction with departmental and functional heads as well as with line managers. Where this function exists, HR often has responsibility for developing HRM policies and procedures, but the responsibility for enacting them often lies with others. In outlining some of the main HRM tasks, it might be helpful to see HR activity as being involved in a cycle of interrelated tasks starting with those actions concerned with assessing organizational needs for staff. Although all organisations engage in recruitment and selection of employees, the ways in which this will be carried out will be highly contingent and depend on the nature of the post, the size of the organization, and the company's business.
However some core factors required for the growth of HRM in organisations today are discussed in the subtopics below.
Recruiting & Selecting
Recruitment and selection is the base of a successful organization today. Successful organisations avoid poor and uncommitted employees to be hired and strive for the most productive employees.
Google: A Paradigm in the Recruitment Culture
Google was the first to redefine the "recruiting culture." Google proved that a "recruiting culture" is not just recruiting people but identifying the need for it in the entire organization hierarchy, from the key leaders to the entry-level employees. As a result of this culture, Google funds recruiting to the point where the function is in a league by itself and they have also gone to the extraordinary step of changing the way employees work in order to attract and retain the very best (2012, 01).
French and Bell (1990) explained development as "a planned systematic process in which applied behavioral science principles and practices are introduced into an ongoing organization towards the goal of effecting organizational improvement, competence and effectiveness. The orientation is on achieving desired results for planned activities.
Following are methods of developing HRM in a modern organization, Armstrong (2006):-
Team building aims to improve and develop the effectiveness of a group of people who work temporarily or permanently together. The activities in team-building programmes can:
Increase awareness of the social processes that take place within teams
Develop the interactive or interpersonal skills that enable individuals to function effectively as team members
Increase the overall effectiveness with which teams operate in the organization.
Total quality management is an intensive, long-term effort directed at the creation and maintenance of the high stands of product quality and services expected by customers. As such it can operate as a major influence in developing the culture and processes of the organization.
Continuous improvement is a management philosophy that contends that things can be done better. Bessant et al (1994) explained continuous improvement as a specific issue where the effectiveness of operations and processes needs to be improved. For example as time goes by policies and procedures of a certain way of doing things needs to be amended. If looked 10 years back many companies did not consider discriminations towards homosexuals in their company policies, but today it is essential. Companies need to keep their policies updated and improve them from time to time.
Performance management can be described as a continuous self-renewing cycle, which will be further explained as the next factor of HRM growth in 3.1.3.
18.104.22.168 British Airways HRM development
According to a case study by Lundy & Cowling (1996) mentioned that British Airways (BA) was dealing with massive losses and a very poor service reputation in 1980. However after developing a completely new HRM strategy when a new chairman, Colin Marshall was appointed, BA were transformed back into a successful company by the late 1980s.
Another factor of HR activity is achieving high performance by developing the skills and knowledge of staff and aligning staff development to the needs of the organization, Gilmore & Williams (2009).
Figure 3.2 Performance Management Cycle
Armstrong (2006) illustrates the 5 stages in the performance management cycle which are:-
Planning involves getting together with an employee and evaluating expectations for a set period of time. This is done by evaluating an employee's current role and performance; this will gain an initial idea about areas of improvement and realistic targets.
Managing provides support to an employee at all times and ensuring that the appropriate systems and tools are available to maximise performance expectations.
Review is making sure that the plan is being implemented. This is to ensure that barriers in the performance are identified and solved.
Rewards are given to the employees who contribute in meeting the organization objectives. Methods of rewards can vary from an annual bonus to share scheme options.
Renew involves analysing the previous objectives and looking at ways to improve on them and how to plan for the next cycle.
A case study by Armstrong, Brown & Reilly (2009) from the Institute of Employment Studies states that KPMG, one of the largest professional services companies in the world has a clear performance management strategy that has underpinned its growth in recent years, focused on two objectives of strongly rewarding performance and meeting the needs of a large, diverse workforce with a comparatively young average age profile through a sophisticated performance management cycle. The firm monitors 13 key performance indicators based on each of their reward strategy principles, using a traffic light system of assessment for each indicator. For each measure targets are set and results compared with previous year's performance.
Rewarding people at work
Reward management is concerned with the formulation and implementation of strategies and policies, the purposes of which are to reward people fairly in accordance with their value to the organization to achieve its strategic goals, Armstrong (2006).
A case study by Armstrong, Brown & Reilly (2009) from the Institute of Employment Studies shows that McDonalds is a good example on how a company with a strong culture of measurement has produced impressive evidence to demonstrate how rewards can enhance employee engagement and thereby business performance. The operational and cost focus in the business means that reward arrangements are reviewed regularly and changed if they are not found to be delivering. But subtler processes of consultation and change management are equally vital in maintaining and strengthening reward effectiveness.
Health & Safety
Health and safety policies and programmes are concerned with protecting employees and other people affected by the company procedures and does - against the hazards arising from their employment or their links with the company.
Occupational health programmes deal with the prevention of ill-health arising from working conditions
Safety programmes deal with the prevention of accidents and with minimizing the resulting loss and damage to persons and property.
Companies like Exxonmobil with high priority to health and safety procedure had only one recorded lost-time injury throughout the entire UK workforce of 7,600 employees and 1,600 contractors in 2009, Forecourt Trader (2009).
Armstrong (2006) employment relationship is concerned with fundamental aspects of an organisation's HR policies and procedures. They should take account of requirements of relevant legislation and case law according to the country respective employees' work in, however it is beyond the scope of this assessment to cover that in detail.
Equality & Diversity
Gandz (2001) stated that equality and diversity helps organisations to identify and capitalize on opportunities to improve products and services; attract, retain, motivate, and utilize HR effectively and being reap the benefits from being perceived as a socially conscious and progressive organization.
DuPont's diverse workforce
DuPont has benefited from the diversity of its workforce to the tune of at least $45 million. A multicultural team increased their business by that amount world-wide when they changed the way DuPont develops and markets decorating materials like Korean countertops. Another group of African-American workers recently opened up promising new markets for DuPont's agricultural products by focusing on an untapped market of black farmers (Fortune September 9, 1996).
Theatrically if all the factors mentioned in this assessment are applied carefully in an organisation's HRM practices it will account for the growth of interest in HRM today. The assessment has backed up all the factors with real life company examples which achieved success, however all the factors have not been practiced in every company. Therefore it can be assumed that a particular company that will practice all the factors above will redefine the HRM practice.