Module: Managing the Human Resource Unit: Concept and Context of HRM Lesson: The Concept of HRM © 2012 Resource Development International Ltd. All rights reserved. Resource Development International Limited reserves all rights of copyright and all other intellectual property rights in these learning materials. No part of any learning materials may be reproduced, stored in a retrieval system or transmitted in any form or by any means, including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Resource Development International Limited.The Concept of HRM The Concept of HRM In this lesson we will look at the distinction between HRM and Personnel Management, including the nature of each and their development. The recorded lecture introduces you to some of the reasons why an organisation can benefit from having a dedicated HR function, given that the business environment is changing more rapidly today than it ever has previously, and also introduces you to some of the ways in which the HR function can assist with ensuring the organisation’s continuing success, especially as organisations become increasingly international, if not in how and where they operate, but in who they recruit and employ. The Powerpoint slides at the end of the lesson provide a summary of the lesson’s key points and useful diagrams. The further and wider reading indicated at the end of each lesson will enable you to think critically about the concepts and ideas that have been introduced to you in the lesson notes and recorded lecture. Lecture Unit 1 Lesson 1 Introduction Most organisations employ people, and therefore Human Resource Management (HRM) is of interest to them, with Beer et al. (1984, cited by Armstrong, 2012, p4) suggesting that ‘Human Resource Management (HRM) involves all management decisions and actions that affect the nature of the relationship between the organisation and employees – its human resources’. This lesson will look at what HRM is, how it differs from Personnel Management, and how it has developed as a concept. Personnel Management = Human Resource Management? If HRM is concerned with the relationship between the organisation and the employee, how is that different from Personnel Management? Indeed, there is discussion as to whether there actually is a distinction between Personnel Management and HRM or whether it is a new name for an existing department (Armstrong, 2012; Redman & Wilkinson, 2009). Some of the key differences are highlighted in the following short video on YouTube: The distinction is discussed further at Management Study Guide.com at: http://www.managementstudyguide.com/personnel-management-vs-hrm.htm Generally, then, whilst Personnel Managers are concerned with record-keeping and © 2014 Resource Development International Ltd. ALl rights reservedadministration of employees, HRM is more concerned with being involved with linking HR to the organisation’s business decisions, with Storey advising that it is ‘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’ (Storey, 2007, p7) Figure 1.03 – Storeys Hard Soft Strong Weak whilst Watson (2010, cited by Armstrong, 2012, p4) suggests that it is the ‘managerial utilisation of the efforts, knowledge, capabilities and committed behaviours which people contribute to an authoritatively coordinated human enterprise as part of an employment exchange (or more temporary contractual arrangement) to carry out work tasks in a way which enables the enterprise to continue into the future’. HRM Objectives The objectives of HRM have been summarised by Armstrong (2012, p5) as being to © 2014 Resource Development International Ltd. ALl rights reserved‘support the organization in achieving its objectives by developing and implementing human resource (HR) strategies that are integrated with the business strategy (strategic HRM); contribute to the development of a high-performance culture; ensure that the organization has the talented, skilled and engaged people it needs; create a positive employment relationship between management and employees and a climate of mutual trust; encourage the application of an ethical approach to people management’. Figure 2.04 – Core Human Resource Functions The reality is that individual organisations will have their own ideas as to what they expect from Personnel / HRM departments and how important the human resource is to their business, both now and in the future. It is for this reason as to why there are many definitions and considerations with regard to what exactly constitutes HRM, with a broader definition being offered by Boxall & Purcell (2000, p184). ‘HRM includes anything and everything associated with the management of employment relationships in the firm. We do not associate HRM solely with a high-commitment model of labour management or with any particular ideology or style of management’. If you consider it as being a continuum, at one end of the scale you have those who argue that HRM is a strategic function with an emphasis on employee commitment, trust and cooperation (Pfeffer, 1998, cited by Beardwell & Claydon, 2010) whilst others believe that it is concerned more about managing employees and creating policies that will enable organisations to achieve their goals (Boxall & Purcell, 2000), with early theorists drawing this distinction © 2014 Resource Development International Ltd. ALl rights reservedbetween soft and hard HRM. A distinction between high commitment versus high control. Why might that be? Take a look at the advertisements for HR Managers advertised in the UK in August / September 2012. Do organisations want a Personnel Manager or an HR Manager? Why might there be differences in the roles and objectives as advertised? What approach to HRM do you think the employers are taking? HR Vacancies Consider what David Ulrich and senior HR professionals advise the HR role to be: The concept of HRM is considered further by the HRM Guide (2012), available at: http://www.hrmguide.co.uk/introduction_to_hrm/concept-of-hrm.htm Chapter 1 of the book ‘HRM for MBA students’, written by Iain Henderson and published by the CIPD gives not only a good distinction between Personnel Management and Human Resource Management but an overview of the evolution of people management and the relationship between HRM and business strategy, and at the time of writing was available at the link below, but most HRM books will cover this aspect too. Also check out the wider reading at the end of the lesson. http://www.cipd.co.uk/NR/rdonlyres/29D9D26D-83CE-4E76-96C6-EB7AF02B109E/0/9781843 982... The Nature and Development of HRM Prior to the Industrial Revolution, many people were employed within the primary sector. Many were self-employed and perhaps had a small number of helpers. The Industrial Revolution and the concept of bringing people together to achieve efficiency introduced the concept of the organisation as we consider it today. I would suggest that the evolution of the management of employees has evolved naturally. If one were to undertake a PESTLE analysis since that point, it could be seen how the management of people has evolved due to social, technological and legislative influences in particular. Indeed, the Industrial Revolution itself was due to technological advances. The development of a true personnel function can be traced back to the 1930s. This is when the 'personnel' function and the 'personnel management' role were first used to describe the task of managing the people employed in business organisations. Could it be argued that the emergence of HRM and its increasing ‘importance’ to ensure that the human resource is recognised as being an organisation’s potential for competitive advantage, and the strategic © 2014 Resource Development International Ltd. ALl rights reservedrequirement to commit to and work towards achieving organisational objectives are a reflection of moving into the service and innovation sectors, where employee skills and abilities are more important than when employment was predominantly within the secondary sector? Historically, the management of the employee resource can be seen to have gone through four stages of development, with each stage delivering something for the next stage to build upon. The four stages can be identified as: The welfare tradition. The industrial relations tradition. The control of labour tradition. The professional tradition. History of People Management Gaining an insight into the earlier historical stages of people management will enable you to see how management of people has not always been the first priority of business organisations. It will also allow you to see how contexts and influences over time have led to this movement, towards what we now see as HRM today. The CIPD factsheet ‘History of HR and the CIPD’ describes the history of HRM, starting with Personnel Management and the welfare tradition in the early 20th century. http://www.cipd.co.uk/hr-resources/factsheets/history-hr-cipd.aspx A brief overview of the history appears on the pages which follow. The Welfare Tradition Quaker employers such as Cadbury and Rowntree were some of the first business organisations that set out to provide an example of how good working conditions and company profitability could be compatible. The ideology of these 'welfare-focused' organisations contrasted massively with other organisations in the latter half of the 19th century and resolved to offer welfare protection to their employees, whilst the Factories Act offered physical protection. Lord Lever was another such employer – read the history of Port Sunlight, a village built to house workers in his soap factory as part of his vision for a healthy and efficient workforce in the 1880s. http://www.portsunlight.org.uk/history/index.htm The approach taken to managing the welfare of employees as developed by the forwardlooking companies of the time actually had a profound effect on what has followed since. © 2014 Resource Development International Ltd. ALl rights reservedThe First World War saw the first attempt at state-based welfare, when welfare officers were introduced to many of the factories that were engaged in 'war work'. State regulation was then initiated through the Munitions of War Act 1915. This Act – with subsequent amendments – was designed to control the supply of labour to war factories, and made welfare services obligatory in these places of work. In spite of the Act, welfare work was still organised on a largely impersonal and bureaucratic basis. There was also no obligation placed on all business organisations to comply with the terms laid down by the early legislation on welfare at work. The reluctance of some employers to deliver certain levels of expected welfare to people in work led to the growth in the trade union movement in the UK. Personnel management at this stage took a new turn and a different stance. The Industrial Relations Tradition The First World War employment of women in what had traditionally been jobs that were only carried out by men led to increased dialogue between the state and the trade union movement. An agreement was struck between these two parties in terms of 'dilution' – where unskilled women were accepted to do 'craftsmen's' work. This early dialogue led to more joint consultation between unions and the state after the cessation of the war, and the early 1920s saw recognisable policies on industrial relations for the first time. The role of the trade unions at this time was largely based on ensuring that employees were treated 'fairly' in their place of employment. Welfare needs for such things as the provision of adequate toilet and rest facilities were taken up by the trade unions, alongside the agreement by employers to pay a reasonable wage and to provide employees with continuing employment. The growth in union representation of employees could – if gone unchecked – have meant many employers being disadvantaged in terms of the treatment of employees. It was largely as a requirement to manage the relationship with the trade unions that many employers at this time developed what was termed 'employment management'. This in turn led to the third stage of people resource management – the control of labour tradition. The Control of Labour Tradition Employment management was developed as a way to control labour, as well as to manage recruitment and the discharge of labour. The earlier welfare officers had not covered these roles. Labour Control Managers started in the engineering industry and in large factories throughout the UK. In many cases the job of Labour Manager came from a more routine role, such as 'timekeeper' or record-keeping assistant. These positions generally reported directly to the 'Works Office Manager'. Other labour control positions emanated from other areas of the workforce. Wages clerks, for example, tended to be the people who dealt with applicants for job vacancies. They also dealt with other aspects of control, such as queries over absences, and the payment of bonuses and © 2014 Resource Development International Ltd. ALl rights reservedrates for piecework. Control of labour also meant the management of industrial relations. To manage this aspect of the employer–employee relationship, many employers joined together to effectively manage and control this growing area of potential conflict. The Professional Tradition Between the two world wars, a change in the approach adopted for management of employees became evident. A number of major employers – ICI, Pilkington, Marks and Spencer and London Transport – developed what amounted to the first specialist personnel departments. This change of approach was partly due to employers wanting to follow an independent route, and partly due to the realisation that their particular businesses were growing in complexity. These new personnel departments also extended their remit to embrace the industrial relations policies for each particular business. The late 1930s saw the combining of the personnel and welfare functions, and forward-thinking retail companies introducing staff associations. Real professionalism continued to develop from these early personnel management approaches, and between 1945–1979 personnel continued to grow as a professional and departmental function within business organisations. In the late 1960s and the 1970s there was an emphasis on closer collaboration between personnel departments and the unions – although the outcomes were not always as they might have been. There was also significant personnel legislation to manage the employer–employee relationship. It is evident that the professional Personnel Manager began to emerge after 1945. It is further evident that this professionalism emerged from extensive changes within organisations, the environment faced by business, and the objectives of businesses going forward. Early welfare approaches could not cope with these changes, and the more professional and structured approach to managing employees in work was definitely needed. This advanced professionalism helped to deliver the personnel approaches that companies have used since the 1980s. From Personnel to HRM The Western world in particular has continued to evolve since the 1970s, and the 1980s saw the service sector increase in importance to the economy. For some organisations, this marked a distinct change in how personnel needed to be managed. No longer was it a case of larger numbers of staff, all undertaking repetitive roles in a mass-manufacturing organisation, but increasingly staff were required who had ‘soft skills’. Employees who could liaise directly with customers; interpret customer requirements; take decisions in line with organisational policies. Some organisations decided that the personnel department, which ensured staff were paid and that the organisation met a range of employment legislation and regulations, needed to change to meet the new requirements of the organisation with regard to its personnel. The service sector increasingly relied upon the human resource rather than the physical resource to be successful, yet people are not as predictable as machines. To perform effectively and © 2014 Resource Development International Ltd. ALl rights reservedefficiently, more than routine maintenance is required. They need to be motivated; understand and align with organisational objectives; ensure that their knowledge and skills are maintained in line with changing technologies; products and services, etc. In addition to calculating how much money and what physical resources would be required for an organisation to undertake a new venture, increasingly, human skills, knowledge and ability also needed to be considered. Instead of looking after the administrative side of ‘people’, there was now a need for the Human Resource Manager to be involved in strategic discussions, alongside the Finance, Sales and Technical Managers, when planning for the future. This is discussed further in Boudreau’s (1996) working paper. http://digitalcommons.ilr.cornell.edu/cahrswp/174/ The following video explains how the role has evolved from Personnel Management to Business Partner: Should all organisations have an HR department? Not all organisations consider the human resource to be ‘valuable’. Some organisations have administrative departments that can be called Personnel or HR but undertake the ‘traditional role’ of the personnel department. What about smaller organisations? Organisations that do not operate within the service or innovation sectors? Think about the different objectives that an organisation might have with regard to its human resource and the difference in approaches to achieving this by Personnel and HR Managers. Not all organisations require strategic HR input, often due to either their size or the industry sector that they operate within. Sometimes, it is due to the owner’s own beliefs and values towards employees. Consider – Why is the management of people more important today than it perhaps was in the 1960s and 1970s, when the personnel department was prominent? Why is people management considered to be a strategic function for many organisations? We need to look at the business environment of today, and, in particular, at its fast pace of change. © 2014 Resource Development International Ltd. ALl rights reservedThe Western world is predominantly operating within the tertiary (service) and innovation sectors, where there is a greater reliance on people skills and specialist knowledge. Can you imagine people working within the service sector who do not have strong interpersonal skills and are unable to use their initiative to help you? How frustrating would that be? The innovative sector increasingly relies upon highly-skilled staff to design and develop technologies of tomorrow. Something which a machine could not replicate, unlike a repetitive process on a factory production line (secondary sector). Also, there is a plethora of changes which confront organisations today. Changes arising from globalisation, emerging technologies, climate change, emerging economic powers, strategic outsourcing, offshoring and a focus on customer intimacy and relationship selling. This calls for a different type of organisation – an organisation that has an agile workforce and one that is able to innovate and exploit changes to its advantage. We also need to consider sustainable competitive advantage. The introduction of these new technologies, either in terms of what is being delivered to the customer or used within the process, only creates what is considered will become a ‘threshold competence’. It can easily be copied or imitated by competitors and therefore is unlikely to deliver a long-term strategic advantage for the organisation. People, on the other hand, are difficult to imitate. Equally, the culture that is encouraged through the strategic approach to staff management, job design, development, etc. is not only difficult to imitate, but if there is an attempt to undergo culture change, it is difficult and takes time. Hard and Soft Approaches to HRM The approaches that organisations can take towards HRM therefore are diverse, leading to two broad models being developed; the hard and soft approaches to HRM. Storey (1989, cited by Armstrong, 2012, p5) advised that ‘The hard [approach] emphasizes the quantitative, calculative and business-strategic aspects of managing human resources in as ‘rational’ a way as any other economic factor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communication, motivation and leadership’. © 2014 Resource Development International Ltd. ALl rights reservedFigure 3.13 – Storeys Hard Soft Strong Weak Rollinson and Dundon (2007, adapted from Stewart, 1993 and reproduced by Beardwell & Claydon, 2010) shows this as a continuum of management control strategies. Management Control Strategies How realistic is it that an organisation would adopt either a hard or soft approach to HRM? It could be argued that both hard and soft play a part within HRM. Even if an organisation emphasises communication and leadership, it will still be concerned with how many staff of different skills that it will need to achieve organisational objectives. As Truss et al. (cited by Armstrong, 2012, p5) suggest: ‘Even if the rhetoric of HRM is ‘soft’, the reality is almost always ‘hard’ with the interests of the organisation prevailing over those of the individual. In all organisations, we found a mixture of both hard and soft approaches. The precise ingredients of this mixture were unique to each organisation which implies that factors such as the external and internal environment of the organisation, its strategy, culture and structure all have a vital role to play in the way in which HRM operates’. © 2014 Resource Development International Ltd. ALl rights reservedTake a look at the following HRM policy and practice examples within the Powerpoint presentation: Hard and Soft HRM Policy and Practice Leaning heavily on organisational behaviour, HRM is underpinned by a range of theories (Armstrong, 2012): Commitment – how much an individual identifies with and becomes involved with the organisation Organisational behaviour – how organisations operate and the influences of culture, structure and processes Motivation theory – how to encourage people to meet organisational objectives, willingly Human capital theory – how people are organised and their skills, knowledge and understanding that can enhance the organisation’s strategic competencies Resource dependence theory – the control of resources through power distribution Resource-based theory – humans are a resource that are valuable and play a key part in ensuring an organisation’s success Institutional theory – firms respond to the environment Transaction costs theory – organisations structure themselves and develop systems which will be most efficient for the organisation Agency theory – managers act on behalf of the owners of the organisation. To ensure managers act in a manner that the owners wish, there needs to be a system of incentives to encourage acceptable behaviour Contingency theory – HRM practices are dependent on the organisation’s environment and circumstances – they fit with what the organisation needs. As such, there are many HRM models and practices and it is rare to find an organisation whose HRM practice will ‘fit’ with any of the conceptual models exactly. The Founders of Hard and Soft HRM Hard HRM is based upon the Michigan Business School and considers numbers of people required and that HR strategy should follow business strategy, hence why it is often aligned with ‘best-fit’ approaches to Human Resource Management (HRM Guide). © 2014 Resource Development International Ltd. ALl rights reservedFigure 4.15 – Hard HRM See here: http://www.hrmguide.co.uk/introduction_to_hrm/hard-hrm.htm The Harvard School takes a softer approach and considers the 4 Cs of Commitment, Congruence of Goals, Competence and Cost-Effectiveness, believing that the human resource is a significant stakeholder in the organisation and can help to secure strategic capability (Armstrong 2012, HRM Guide, 2012). Figure 5.15 – Harvard Model The Harvard map of HRM: http://www.hrmguide.co.uk/introduction_to_hrm/harvard-map.htm Again, Chapter 1 of Henderson’s ‘HRM for MBA Students’ (p13) and all good HRM textbooks will give further explanation about hard and soft HRM. The hard and soft approaches, whilst aligning with leadership theory and the two extremes between autocratic and laissez-faire leaders, are also congruent with motivational theory and especially McGregor’s Theory X and Theory Y (Mullins, 2010). As with leadership and motivational theory, where there are contingency and situational models to take into account different environmental and individual influences to the context within which individuals are being led or motivated, it could be argued that the ‘best-fit’ model, which enables the © 2014 Resource Development International Ltd. ALl rights reservedorganisation to vary its practices to suit the context, would naturally be the model of choice, despite failing to provide a prescriptive solution to a holistic approach to HR management similar to that of best practice, which sits towards the edge of the soft approach to HRM. Consider several different organisations that you are aware of. Think about their approach to HRM. Are they more inclined towards HRM being a development of best practice policy approach to enable the organisation to meet its objectives’ type (hard HRM) or are they more concerned about developing employee commitment and trust (soft HRM)? Would you consider their approach to be in line with the organisation’s mission and objectives? How important are their staff to the organisation? HRM is often defined as 'the management of various activities designed to enhance the effectiveness of an organisation's workforce in achieving organisational goals'. HRM is the management of people resources, but the management of people is unlike the management of other resources in at least two ways: People are very distinctive People think and have feelings The HRM process covers broadly five main areas: Planning Staffing Development and evaluation Compensation © 2014 Resource Development International Ltd. ALl rights reservedMaintaining effective workforce relations Organisations who take a totally ‘hard’ approach to HRM will only be concerned about how many staff they need and of which skills. Organisations that take a ‘soft’ approach to HRM will be more concerned with Gaining commitment from staff to organisational objectives; Encouraging congruence between employees’ goals and the organisations; Ensuring that they are competent through appropriate training and development to work on their own initiative, work as part of a team, use creativity within their work, etc.; Being cost-effective. Approaches to Implementing HRM The chances are that you will see a mixture of both hard and soft approaches within your organisation and, perhaps, different approaches taken towards people undertaking different roles. This is called taking a ‘best-fit’ approach. There are several models: Lifecycle model – HR practices and procedures will change to meet organisational needs through its lifecycle Competitive strategies – match role characteristics with preferred strategy Strategic configuration – match HR strategy to a type dependent upon contextual factors Prospectors – unpredictable environment, low formalisation and specialisation, high levels of decentralisation Defenders – more stable environment and longer-term planning; more bureaucratic structure Analysers – combination of the above – stable environments with fast-moving product ranges Reactors – believe they are in an unstable environment, do not plan, do not have a strategy The level of competition and the nature of the product / service will help to determine which © 2014 Resource Development International Ltd. ALl rights reservedstrategic configuration and, therefore, HR approach, an organisation should be taking. How closely does this match the organisations that you were using as examples? We shall explore these models further in Lesson 4. Further and Wider Reading In addition to the reading recommended within the lesson: Essential Reading Armstrong M, 2012, Armstrong’s Handbook of Human Resource Management Practice, Kogan Page Part 1 Chapters 1; 8 Wider Reading Armstrong M, 2010, Essential Human Resource Management Practice, Kogan Page Chapter 1 pp 8–14; Chapter 2 pp 35–40 Beardwell J & Claydon T, 2010, Human Resource Management: A Contemporary Approach, 6th ed, Prentice Hall Chapter 1 Henderson, I, 2011, Human Resource Management for MBA Students, 2nd ed, CIPD Chapter 1 Lawlor E, 2003, Creating a Strategic Human Resources Organization, Stanford University Press Chapter 1 pp 21–26 Mahapatro B, 2010, Human Resource Management, New Age International Chapters 1 and 2 Redman T & Wilkinson A, 2009, Contemporary Human Resource Management: Text and Cases, 3rd ed, Prentice Hall Chapter 1 pp 2–6; 13–16 Summary Lesson 1 Unit 1 Summary References Armstrong, 2012, Armstrong’s Handbook of Human Resource Management Practice, 2012, © 2014 Resource Development International Ltd. ALl rights reserved12th ed, Kogan Page, London Banfield & Kay, 2008, Introduction to HRM, Oxford University Press, Oxford Boxall & Purcell, 2000, Strategy and Human Resource Management, Palgrave, London Boudreau, 1996, Human Resources and Organization Success, CAHRS Working Paper Series, Cornell University ILR School CIPD, 2012, History of HR and the CIPD, CIPD factsheet, available online at: http://www.cipd.co.uk/hr-resources/factsheets/history-hr-cipd.aspx accessed 19/08/12 Gilmore & Williams, 2009, Human Resource Management, Oxford University Press, Oxford Henderson, 2011, Human Resource Management for MBA Students, 2nd ed, CIPD HRM Guide, 2012, The Concept of HRM, HRM Guide, available online at: http://www.hrmguide.co.uk/introduction_to_hrm/concept-of-hrm.htm accessed 19/08/12 Management Study Guide, 2012, Difference between Personnel Management and HRM, Management Study Guide, available online at: http://www.managementstudyguide.com/personnel-management-vs-hrm.htm accessed 19/08/12 Mullins, 2012, Management & Organisational Behaviour, 9th ed, Prentice Hall, Harlow Redman & Wilkinson, 2009, Contemporary Human Resource Management: Where have we come from and where should we be going? International Journal of Management Reviews, Vol 2, No 2, pp 183–203 Storey, 2007, Human Resource Management, 4th ed, Palgrave, London Powered by TCPDF (www.tcpdf.org) © 2014 Resource Development International Ltd. ALl rights reserved