2. Objectives
• To define strategy and strategic HRM
• To investigate various perspectives on strategy
making
• To critically evaluate the main models of strategic
HRM
• To distinguish between ‘best fit’ and ‘best practice’
HRM
• To consider the relationship between HRM and
business performance
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4. What is ‘strategic HRM’?
‘…the application of the adjective strategic
implies a concern with the ways in which HRM is
critical to the firm’s survival and its relative
success…As a field of study, then, strategic HRM
is concerned with the strategic choices
associated with the use of (people) and in
explaining why some (organisations) manage
them more effectively than others’
(Boxall and Purcell, 2011)
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5. What is strategy?
5
'Strategy is the direction and scope of an
organisation over the long-term, which achieves
advantage in a changing environment through its
configuration of resources and competences
within a changing environment, with the aim of
fulfilling stakeholder expectations.'
(Johnson et al., 2008)
6. What is strategic management about?
• The present and future direction of the organisation
• It includes:
• Assessing the organisation’s internal competencies and capabilities
• Assessing environmental threats and opportunities
• Deciding the scope of organisational activities
• Creating and communicating a strategic vision
• Managing the process of change in an organisation
Miller (1993) cited in Legge (2005)
8. Perspectives on strategy
Classical
Rational, top-down planning to achieve profitability/competitive
advantage
Strategy emerges from a conscious, rationalistic decision-making
process
Separation of strategy formulation from implementation
Evolutionary
Competitive process of natural selection in the market dictates
strategies
Deliberate strategising is ineffective
Rather than long-term planning managers are advised to
experiment with many small initiatives, chose the winning ones
and abandon the failing ones
9. Perspectives on strategy
Processual
Organisations are complex phenomena
Range of different stakeholders’ interests
Cognitive limitations affects consideration of alternatives and
consequences
Strategies emerge with much confusion in small steps, often
discovered or recognised in action
Result: ‘satisficing’ behaviours acceptable to the dominant coalitions
Inverts many assumptions of the classical perspective
Systemic
Strategic goals and processes are shaped by the social system in
which they are embedded
Reflect the values and institutions of the society
Challenges the universality of any single model of strategy
11. Feasibility of integrating HRM with
business strategy?
• Which perspective on strategy-making are we adopting?
• Consciously matching HRM policy to business strategy
only viable if one adopts the rationalistic, ‘classical’
perspective
• Approaches in a classical perspective:
• Business life cycles
• Strategic orientations
12. Organisational life cycle and HRM
• Start-up
• Growth
• Maturity
• Decline
• Configurations of HRM practices appropriate in relation to
each stage of development
13. Models of strategic HRM, best practice and
best fit
MANAGING HUMAN
RESOURCES WEEK 2:
PART 2
14. Strategic orientation and HRM
• Business strategies (Porter 1985):
• Innovation
• Quality enhancement
• Cost reduction
• Match between strategic orientation and HRM policies
• (Schuler & Jackson 1987)
15. Competitive strategies and associated HR
policies
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Strategy How competitive advantage is gained HR Policies
Cost reduction Goods and services produced cheaper than the
competition, with an emphasis on
minimizing costs at all stages in the
process (including people management)
Low-discretion jobs
Ad hoc recruitment
Minimal training and development
Little employee involvement
Low levels of pay
Non-unionism
HR function insubstantial, with little influence
Quality enhancement Goods and services are produced at the highest
quality possible to differentiate the
employer form the rest of the market.
Relatively fixed and explicit job descriptions
Highly controlled recruitment and selection
Extensive induction programmes
High discretion jobs
‘Empowerment’
High levels of employee involvement
Extensive training and development
Harmonization
Competitive pay and benefits
Performance appraisal plays a key role
Well-developed, proactive HR function
Close co-operation between HR and line managers
Innovation Highly-trained specialists work closely together to
produce complex and adaptable products
and services.
Commitment to broad goals
Problem-solving groups
Learning and development a personal responsibility
Performance appraisals to reflect long-term achievement
Jobs that allow employees to develop skills across other
positions (flexibility)
Lower pay rates but employee shareholding and some choice
of pay and benefits
Broad career paths to develop broad range of skills
Emphasis on individualism, rather than collectivism, in
employee relations.
Based on Schuler and Jackson (2000)
16. Critical evaluation of the ‘matching’
approach
How far are assumptions of classical perspective
realistic?
Assumes simplistic, top-down, unitaristic planning
process
Critique can be also levied against the particular
approaches e.g.
Life cycle concept – are organisations moving sequentially from
one predictable stage to another?
Porter’s assumption that firms must make clear choice between
competitive approaches
Mainly normative, not extensively empirically tested
17. Components of ‘best practice’ or ‘high
commitment’ HRM
• Employment security and internal promotion
• Selective hiring and sophisticated selection
• Extensive training, learning and development
• Employee involvement and voice
• Self-managed teams and team working
• High compensation contingent on organisational
performance
• Reduction of status differentials/harmonisation
• Performance review, appraisal and career development
• Work-life balance
Adapted from Pfeffer 1998 (cited in Marchington and
Wilkinson, 2012)
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18. Bundles of HR practices
• Proposes that HR practices should be more effective
when combined together
• It is possible to specify ‘powerful connections’ (Kepes
and Delery, 2007) between different HR practices
There are different perspectives on HR bundles:
• There are a number of ‘best practices’ and the closer
organisations get to adopting them, the better their
performance will be (e.g. Pfeffer 1998, cited in
Marchington and Wilkinson, 2012)
• Synergies are possible only with the adoption of all the
practices
• Bundles are ‘additive’ and the more practices that are in
place the better, as long as a distinctive core exists.
19. Best practice HRM
• Different BP models include different ‘bundles’ of HR
practices
• They ignore national, sectoral and organisational contexts
• They are unitarist and do not take into account the
employee perspective
• The direction of causality is unclear
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20. Best fit HRM
• Contingency approach
• Contextual factors
• Associated with hard HRM
• Appealing to line managers
• Business focus
• But short term?
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22. The Resource-based View
• VIRUs (or VRIN) Criteria for Strategic
Resources:
• Valuable
• Rare
• Inimitable
• Un-substitutable*
• (Non-substitutable for VRIN)
23. The Resource-based View
“The resource based view of the firm is concerned with
the relationships between internal resources (of which
human resources is one), strategy and the firm’s
performance. It focuses on the promotion of sustained
competitive advantage through the development of
human capital rather than aligning human resources to
current strategic goals. Human resources can provide
competitive advantage for the business, as long as they
are unique and cannot be copied or substituted by
competing organisations.”
Torrington et al. (2011)
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24. The Resource-based View (RBV)
• The RBV has particular relevance for HR as it
sees resources and capabilities as the key source
of competitive advantage
• The management of organisational learning and
knowledge is a core competence (Hamel and
Prahalad 1994)
• According to the RBV) it is a firm’s ability to learn
faster than its rivals…that gives it competitive
advantage (Boxall and Purcell, 2011)
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25. 25
The link between best practice HRM and
performance – the research
- Early studies such as Huselid (1995) and Delery and Doty
(1996) were positive about the link between HRM and
organisational performance
- These studies have been criticised on methodological
grounds (Wall & Wood, 2005)
- Most studies have not offered an explanation as to why
certain HR practices are particularly effective, the notable
exception being Purcell (2003) - the ‘People and
Performance Model’ (‘black box’ research)
- As research has become more complex and
sophisticated, its relevance for practitioners has been
questioned (Guest, 2011).
28. References
• Boxall, P. and Purcell, J. (2011). Strategy and Human Resource Management.
Palgrave Macmillan
• Delery, J.E. and Doty, D.H. (1996). ‘Modes of theorizing in strategic human resource
management: Tests of universalistic, contingency, and configurational performance
predictions’, Academy of management Journal, 39(4), pp.802-835.
• Guest, D. E. (2011). Human Resource Management and performance: still searching
for some answers, Human Resource Management Journal, 21, pp.3-13.
• Hamel, G. and Prahalad, C. K. (1994) Competing for the Future. Harvard Business
School Press.
• Huselid, M.A. (1995). ‘The Impact of Human Resource Management Practices on
Turnover, Productivity, and Corporate Financial Performance’, Academy of
Management Journal, 38(3), pp. 635-672.
• Johnson, G. ,Scholes, K. and Whittington, R (2008). Exploring Corporate Strategy.
Prentice Hall.
• Kepes, S. and Delery, J.E. (2007). HRM systems and the problem of internal fit. The
Oxford Handbook of Human Resource Management. OUP.
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29. References
• Legge, (2005). Human Resource Management: Rhetorics and Realities, Macmillan
Business.
• Marchington, M. and Wilkinson, A. (2012). Human Resource Management at Work,
CIPD
• Porter, M.E (1985). Competitive Advantage of Nations: Creating and Sustaining
Superior Performance. Simon and Schuster.
• Purcell, J., 2003. Understanding the People and Performance Link: Unlocking the Black
Box. CIPD Publishing.
• Schuler, R.S. and Jackson, S.E., 1987. Linking competitive strategies with human
resource management practices. Academy of Management Perspectives, 1(3), pp.207-
219.
• Schuler, R.S. and Jackson, S.E. (2000) Managing Human Resources, A Partner
Perspective. Thomson Learning.
• Torrington, D., Hall, L. and Taylor, S. (2011). Human Resource Management. Prentice
Hall.
• Wall, T. and Wood, S. (2005). ‘The Romance of Human Resource Management and
Business Performance’, Human Relations, 58 (4), pp. 429-462.
• Whittington, R. (2001). What is Strategy - and does it matter? Cengage Learning.
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