John Storey defined human resource management (HRM) as “…a distinctive approach to employment management which seeks to achieve competitive advantage through a strategic deployment of a highly committed capable workforce, using an integrated array of cultural, structural and personnel techniques” (Storey 1995, citied in Billsberry et al 2005). Using Storey’s definition as a starting point this essay will break down the way in which HRM has developed to become a part of business strategy. To assess the role of HRM professionals within a company this essay will look at the relationship between the use of human resources (HR) and the performance and success of an organisation. Focusing on popular models of HRM that are widely used, and seeing how HR policies are connected to performance.
Though there are no definitive studies to show that there is a direct link between HRM and performance in a company, this essay will use examples and theories to show that there is a strong link between them. Human resource specialists are no longer just seen as personnel managers looking after solely administrative tasks, their role in and understanding of organisational strategies has allowed the profession to excel and become an integral part of the business structure.
HRM professionals now work with managers to plan and control strategy implementation within a workforce. This shift in the role of HR professionals has occurred over the last twenty years or so where there has been a shift to focus more on recruitment, selection and training of staff to increase performance and effectively increase the profitability of a company. This can be summarised by Guest et al, “greater use of HRM is associated with lower labour turnover and higher profit per employee but not higher productivity” (Guest et al 2003, pg. 291).
The remit of HRM is yet to be specifically defined however using the soft and hard models of HRM it can be seen the two main areas of HRM, a combination of both approaches are usually used within a business. Soft HRM is model in which an individual’s skills and talent is utilised and motivational theory Y is mostly applied in this situation, this follows a ‘high commitment work system’ (Walton, 1985). This model aims to have a level of commitment from employees which will bring out self-management traits, giving the employee a level of trust. This in turn means that the employee has a strong communication pathway with his or her manager and they have an element of flexibility within their roles (Storey et al 1993). The soft approach will use more lucrative recruitment and selection processes.
Hard HRM focuses on “the quantitative, calculative and business-strategic aspects of managing the ‘headcount resource’ in as ‘rational’ a way as for any other factor of production” (Storey 1992 p.29 cited in Truss et al 1997 pg. 55). This approach is believed to be the most cost effective way of HRM, using elements of theory X, resources are acquired at a very low cost and used to their maximum, almost seeing employees as machines with goals to meet, the recruitment and selection process here would be more skill application based that skill development based. The structure of an organisation and the HR arrangement are both highly dependent on the organisation/business strategy. This model then has a top down system of HR management and includes little employee engagement, which does not promote citizenship or motivation. To an extent organisations use a combination of these two models to help achieve their strategic goals depending on the type of company, so suggesting that a company uses one or another is a limitation of this approach.
HRM is now considered to be a major contributing factor to the strategic goals of a company according to Ulrich’s model the role of a HR manager encapsulates four key areas which are all eventually linked to the main business goals, these are strategic partner, administrative expert, employee champion and change agent. “HR professionals play a strategic partner role when they have the ability to translate business strategy into action” (Ulrich 1997 cited in Stone 2008). Further views on HRM come from universalistic, contingency and configurational perspectives which all argue ways in which businesses can use HR within strategy (Katou and Budhwar 2007, 2007 cited in Budhwar and Aryee ACHR 2008). The universalistic perspective puts forward the notion that there is a ‘best practice’ method to strategic human resource management (SHRM) with particular policies which are put forward through HR procedures such as the sharing of tacit knowledge.
The contingency perspective suggests that HR polices should be created to work around and tie into the other organisational goals, here it is believed that when HR and the business strategy are in sync business performance will be increase. Finally the configurational perspective argues that there are many different variables that equate to the business strategy and that it is not all necessarily connected to HR policies but more recruitment and selection. This perspective focuses on “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” (Wright and McMahan 1992 cited in Michie and Sheehan 2003). These views are very broad and many more in depth studies need to be carried out to categorically show how each one works, these cannot be used as an accurate measure of HR practices. Wall and Wood (2005) believe that to prove the strong relationship between HRM practices and performance there need to be a long and in depth study across many sectors to establish the link between HRM and business strategy.
However there are some studies that exist that have shown a strong link between the two. A study conducted by Michie and Sheehan (2003) showed that “Investing in progressing HR practices can clearly pay dividends in terms of corporate performance” (Wall and Wood 2003 cited in Michie and Sheehan 2003), however, the significance of the success depends on the strategy that is undertaken by the organisation be that hard HR (leading to greater motivation and employee commitment) or soft HR (low cost and short term achievement) approaches. The latter approach will not, in the long run, be beneficial to the performance or business strategy of the company or organisation. Wall and Wood’s (2003) study highlights the fact that there needs to be a combination of HR ‘packages’ being used within an organisation to maximise the quality of performance and the investment in these HR packages is financially returned and more.
This study further highlights the role of HR teams within an organisational setting; the remit that they cover is broad and needs to be tailored to each individual company and furthermore to each department and individual. Developing strategic HR plans for every individual in a company requires HR mangers to cover policies in recruitment and selection to training and motivation. The remit goes above and beyond the original need for social reformers and personnel managers, as the field has progressed and has become more recognised there is heavy reliance on HR. Everything from employee support and development to rewards and benefits come under HRM. Tasks that would have been considered to be traditionally HR’s role in the past, administrative tasks, such as pay role and contracts are now more commonly outsourced, though in smaller companies this is still done by HR. This shift in requirements from HR teams shows the connection between organisational strategy and performance.
Taking Google and EBay as examples of “best HR practice”, these companies use high work performance practices (HWPP) such as employee flexibility and skills training, these companies have very open relationships between senior managers, line managers, teams and individual employees, what is known as an ‘open door policy’. This example of HPWP in HR works within creative and innovative companies. The employees of these kinds of companies have a sense of belonging and effectively enjoy being at work, promoting citizenship and staff retention.Looking back at Storey’s definition whereby a company is seeking to gain competitive advantage through HR implementation, we can look at Boxall and Purcell (2003) and the theory of Human Resource Advantage where practices and policies are implemented side by side to add to the success and ‘advantage’ of the company.
This theory is made up of two parts; firstly Human Capital Advantage (HCA), where individual skills and knowledge (including tacit knowledge) is developed and grown, using training and line management to maximise an individual’s knowledge base. Secondly Organisational Process Advantage (OPA) where the working environment is developed to create a sense of belonging (citizenship) for the employee and ensuring that there are rewards and acknowledgment for each employee’s work which in turn means that staff retention is high. OPA also looks at team work and development so that an advantage can be gained. When both HCA and OPA are used in conjunction with each-other this theory suggests that this is when a competitive advantage is gained (Boxall and Purcell 2003).
This model can be most related to reality in terms of what occurs within contemporary organisations.This essay does not categorically show a link with performance and the role of a HR profession there is a definitive link between the two which can be seen within the smaller scale studies like Wall and Wood (2005). The fact that HR is being used by companies to gain competitive advantage shows that the role of a human resource professional has grown and developed. The way in which employees are treated and the level of input they have from HR practices is reflected in the success of a company. Looking at companies such as Apple, John Lewis and Google where they are undoubtedly known for being ‘best practice’ employers. HR is now encapsulated within a business and HR professionals can now be considered to be business partners.
Courtney from Study Moose
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