In 21st century, the organization which considers its employees as an asset rather than cost has competitive advantage. The term suggested for employees is human capital. It refers to productive potential of one’s knowledge and actions. In today’s knowledge economy, efficient management of human capital ensures success for the organization. This tells the importance of human resource management. It is about managing human capital in the same way as asset management or financial management.
Actually human resource management acts as a medium of exchange between employees and organization. Employees offer knowledge, abilities, skills, efforts, time, motivation, commitment and performance to the organization in return for job security, empowerment, generous pay for performance, training, promotion and trustful relationship. Thus human resource management is considered as a matching process that is matching organizational goals with employees’ needs in order to satisfy both optimally.
The more formal definition of human resource management is the activities undertaken by the organization to attract, develop and maintain an effective workforce within an organization. (Daft, 1982) Thus attracting an effective workforce for an organization, developing it to its potential and finally maintaining it are the three main goals of the human resource management. And all the strategies are developed by the human resource department for attaining these three goals and these strategies tend to be organizational wide in order to support the overall corporate strategy.
The skills required for attracting the workforce includes human resource planning, job analysis, forecasting, recruiting and selecting; skills for developing the workforce includes training and performance appraisal; and skills for maintaining the workforce includes wages, salaries, benefits and termination. Organizations especially perform human resource management in order to tackle the issues related to human resource proactively rather than reactively. ( Price , 2007). Having developed the concept of human resource management, we will now talk about the different approaches taken by the organization for pursing HRM.
The first approach is hard HRM developed by Michigan business school and the second one is soft HRM developed by Harvard business school. (Fombrun, Tichy and Devanna, 1984) Both approaches are opposite as they are based on different sets of assumptions. (Storey 1992) Soft HRM has humanistic edge in managing employees while hard HRM considers employees as resources which have to be managed in the same way as capital equipments and raw materials. That is hard HRM is bit more technical and mechanical in its approach which involves in obtaining as cheap labor as possible that should be fully exploited.
Soft HRM advocates unitary perspective which means employees and organization needs and interest are coherent which leads to mutual goals, influence, respect, rewards and responsibility. The outcome is therefore employee commitment and organizational success (Walton 1985). On contrary, pluralist perspective sees differences in employee and organization goals as a cause for conflicts and problems. Management’s task is to induce the appropriate behavior in workers so that their actions accomplish the company’s goals, not their own. This paves the way for showing direction and coercion by management.
This perspective underlies hard HRM. .( Price , 2007) Mc Gregor in 1960 gave Theory X and Theory Y about the nature of employees. Theory X depicted employees who dislike work and try to avoid it when they can. People have to be coerced to work and have to be closely directed and regulated thus leading to tight managerial control. On the other hand theory Y depicted employees who like to work and exercise self direction and self control if they are committed to the goals and objectives. In this case there is loose managerial control and management’s function is to foster individual growth and development.
Apparently soft HRM is associated with theory Y which emphasizes employees’ commitment through trust, open communication, training and development and autonomous work environment. This will produce employee behavior which is self directed and this is the main reason for organization’s competitive advantage. Whereas hard HRM contingent to theory X, focuses on quantitative, calculative and strategic aspects of managing HR as for any other factor of production. The practices of hard HRM consist of strict performance appraisal, supervision and external control over individual’s activities.
Now we will examine how soft and hard HRM approaches lead to different kinds of activities and outcomes at different stages of human resource lifecycle. The first stage is of attracting the potential employees. This requires human resource planning by forecasting HR needs and matching the individuals with expected job vacancies. The soft HRM will seek to forecast needed employees in order to complete a work unit or finding the best mix of employees for the team in order to elicit commitment from team members by setting of good team norms and strong cohesiveness.
Whereas hard HRM will look to minimize the need for additional employees and will try to reduce the head count. This will lead to incomplete work unit. The job vacancies will not be fully matched with potential employees, which will lead to incomplete work outcomes or delays in achieving goals deadlines. However hard HRM is best suited in condition of financial crisis and economic recession. In these conditions companies are incurring losses and they cannot afford hiring of new employees. Hard HRM is helpful in minimizing external hiring and shifting and relocating existing employees within organization.
This will make existing employees loyal because they were not laid off by the organization when downsizing is the only option that remains during financial crisis. (Fombrun, 1984). The recruitment and selection is the most important process in hiring of employees. It requires analysis of both job applicants and job itself. We have to look for desired characteristics in applicants so that he must make a good match with particular job requirements. If his skills, education and experience are not adequate for the specific job then it will lead to frustration and confusion.
The result will be poor performance, job dissatisfaction and high turnover. Both soft and hard HRM approach will provide realistic job preview and job description so that employees can judge their potential for a specific job. However soft HRM approach will be more insightful as it will look into the hidden personality traits, attitudes and beliefs of the applicants so that they can be better integrated into overall corporate culture, norms and values. Whereas hard HRM will only look to match the applicant’s skills with the technical specification of the job.
Soft HRM give more attention to the human processes such as communication, sharing of knowledge, cohesiveness and trust among employees. Interviews, paper pencil test etc are the most common selection devices and are used by both approaches. However soft HRM approach has additional selection devices such as personality test, psychological test, case studies and different types of surveys. The second stage in HR lifecycle is development of effective workforce which includes training and performance appraisal as the two most important activities.
Soft HRM approach will be more inclined towards training for individual advancement and career development. Soft HRM will go for various types of training techniques such as on the job training, class room training, computer assisted instructions, conferences and case discussion groups. Employees will be made to learn multiple skills so that they can be rotated among various jobs in order to reduce monotony and introduce variety. Hard HRM will see training as an expense. It will usually design job which leaves little room for showing discretion and creativity.
The job is monotonous and set rules and procedures are there to perform the job. So training is limited to learning those specific job procedures which limits career advancement. This reduces employee motivation and cause job dissatisfaction and high turnover rate because of increase in monotony. The practice of hard HRM is most suitable in assembly line work. However it will fail in work demanding creativity and originality and whose environment is more unstable and uncertain, for example, film industry.
While considering the activity of performance appraisal, hard HRM is more stringent in its appraisal process. The poor performance is mostly attributed to individual’s lack of ability and no consideration is given to various external factors influencing the individual’s performance. External factors are outside individual control and includes pathetic work environment, work place conflicts, distrust, no sharing of information and resources, bad relations and poor communication with top management. (Drucker , 1954 ) On the other hand soft HRM gives objective feedback on employees’ performance.
It also uses the technique of 360 degree feedback that uses multiple raters and self rating to enhance the reliability and credibility of feedback in the eyes of employees. Multiple raters can include customers, co workers, supervisors and subordinates. Employee is also given a chance to explain his point of view and give explanation if his performance is not up to the standard. At the end of the appraisal top performances are also rewarded with bonuses, recognition and promotion. The feedback style of soft HRM is such that employees are motivated to improve their performance further.
It enhances employees’ self efficacy by making clear role expectations and removing role conflicts and role ambiguity. This approach is therefore best suited for organizations whose culture encompasses total quality management. TQM stresses for customer satisfaction by providing better quality product or services through dedication to training, continuous improvement and teamwork. The third and last stage in HR life cycle is maintaining of workforce so that they continue to work for the organization over the long run.
This stage consists of four activities such as rewards management, industrial relation, occupational health and safety and termination. In soft HRM approach rewards are such that it recognizes individual’s accomplishment as well as teamwork. Rewards are administered in such a way that it promotes collaboration and cooperation among employees so that they work as a unit for the overall goals of the organization. The focus is on creating the synergy so that different department of organization works coherently and in alignment of corporate strategy.
Ivancevich, 2003). Soft HRM approach also gives rewards which increases intrinsic motivation of employees. Intrinsic motivation to work comes from the internal satisfaction and honor one feels when he completes some meaningful work which makes the difference for the organization. These types of rewards increase employees’ sense of meaningfulness, competence, progress and choice. Intrinsic rewards which increase intrinsic motivation are important for increasing employees’ commitment to organization’s goals and mission.
The hard HRM has tight control over rewards. Apart from basic salary, less effort is made to recognize individual performance. However calculated yearly bonuses are given when year end profit target is achieved. In other words no effort is made in hard HRM’s reward system to increase employees’ commitment to work. The main problem is that hard HRM follows corporate strategy in rewarding employees and no analysis is done about employee’s needs and desires. Soft HRM is good enough as its rewards system makes a best fit between employees’ needs and rewards.
Moreover the other organization dynamics which affects rewards system is employees’ perceived equity of rewards. If the distribution of rewards is not considered equitable by employees then motivating effects of rewards will vanish. There will be feeling of cognitive dissonance in employees and to remove this feeling, he will either alter his inputs to the work or will demand changes in rewards. The soft HRM approach dealing with human processes designs reward system to improve employees’ perceived equity while hard HRM fails to do so.
According to Herzberg, working conditions, pay, good company policy and interpersonal relationships are called hygiene factors and their presence removes job dissatisfaction. The hygiene factors are well cared by soft HRM approach. The hard one fails to provide hygiene factors because its main objective is to accomplish a task in most economical terms as possible. It is only the soft HRM approach that has clear and functional policies and procedures about occupational health and safety. (Noe, 2003). Soft HRM approach looks to build long term relationship with employees.
It opens all channels of communication such as upward, downward and lateral. Moreover grapevine and management by objective techniques are also used by managers to delve deeper into employees’ problems and requirements. Hard HRM only uses formal and hierarchical communication channel. This is also the cause for many communication breakdown and distortion. The most important feature of soft HRM is of mentoring and socialization which greatly helps in building cooperative and trustful corporate culture and environment.