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PRAISE FOR ARMSTRONG’S HANDBOOK OF HUMAN RESOURCE MANAGEMENT PRACTICE Armstrong and Taylor’s text provides comprehensive and user-friendly coverage of key concepts and models of HRM, HRM processes and applications together with related delivery strategies. This edition extends and updates earlier versions, and is testimony to its enduring relevance and appeal. John Simmons, Lecturer, University of Liverpool Management School (about a previous edition) There is a reason why Michael Armstrong’s HR books represent a gold standard: they are both thorough and academically rigorous but benefit from real-world experience and an informed perspective on practice. Robert Jeffrey, Editor-in-Chief, People Management (about a previous edition) Armstrong’s authoritative handbook continues to be a paragon of HR texts. The new edition of this indubitably vital HR resource for students, tutors and practitioners alike, follows a tried and trusted, coherent format. Lezlee-Jayne Stones, Associate Professor, Academic Lead, Workforce Planning and Resources, University of Lincoln (about a previous edition) This comprehensive book is a major resource and gives the reader both an in-depth and detailed view of all major assignments that the HR Manager will encounter in the work setting. It is also a valuable asset for the student of HR Management. Thordur S Oskarsson PhD, retired Adjunct Professor, School of Business, University of Iceland (about a previous edition) A detailed, yet accessible text suitable for all levels. This latest edition further establishes its position as the ‘go to’ text for HR students, academics and practitioners alike. I highly recommend it. Dr Edward O’Connor, Assistant Professor, Maynooth University, School of Business (about a previous edition) Michael Armstrong could well be offering the definitive text in the field… an excellent book. The Times Higher Education Supplement (about a previous edition) Topical, comprehensive, well-informed and student-friendly. Dr Izabela Robinson, Associate Lecturer, Northampton Business School (about a previous edition) The gold standard when it comes to HRM texts. Connie Nolan, former Senior Lecturer, Canterbury Christ Church University (about a previous edition) If any book is a contender for one of the standard references of the HR profession, this is it… it covers just about everything that might be considered broadly relevant to practising HR. Personnel Today (about a previous edition) Armstrong’s approach to HRM is sufficiently academic but tempered with good practice and common sense. Dr Janet Astley, Senior Lecturer, York St John Business School (about a previous edition) This book [is] a must-read for everyone who has a strong interest in the management of human resources. Niki Kyriakidou, Leeds Business School, on behalf of the International Journal of Training and Development (about a previous edition) i
ALSO AVAILABLE BY MICHAEL ARMSTRONG Armstrong on Reinventing Performance Management Armstrong’s Essential Human Resource Management Practice Armstrong’s Handbook of Learning and Development Armstrong’s Handbook of Management and Leadership for HR Armstrong’s Handbook of Performance Management Armstrong’s Handbook of Reward Management Practice (with Duncan Brown) Armstrong’s Handbook of Strategic Human Resource Management Armstrong’s Job Evaluation Handbook Evidence-Based Reward Management (with Duncan Brown and Peter Reilly) How to Be an Even Better Manager How to Manage People Human Capital Management (with Angela Baron) The Reward Management Toolkit (with Ann Cummins) ii
ARMSTRONG’S HANDBOOK OF HUMAN RESOURCE MANAGEMENT PRACTICE MICHAEL ARMSTRONG WITH STEPHEN TAYLOR 16TH EDITION A guide to the theory and practice of people management iii
Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or the author. First edition published in 1977 as A Handbook of Personnel Management Practice by Kogan Page Seventh edition published in 1999 as A Handbook of Human Resource Management Practice Eleventh edition published in 2009 as Armstrong’s Handbook of Human Resource Management Practice Sixteenth edition 2023 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 2nd Floor, 45 Gee Street London EC1V 3RS United Kingdom www.koganpage.com 8 W 38th Street, Suite 902 New York, NY 10018 USA 4737/23 Ansari Road Daryaganj New Delhi 110002 India © Michael Armstrong, 1977 , 1984, 1988, 1991, 1995, 1996, 1999, 2001, 2003, 2006, 2009, 2012, 2014, 2017 , 2020, 2023 The right of Michael Armstrong to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBNs Hardback 978 1 3986 0665 4 Paperback 978 1 3986 0663 0 Ebook 978 1 3986 0664 7 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Armstrong, Michael, 1928- author. | Taylor, Stephen, 1965- author. Title: Armstrong’s handbook of human resource management practice / Michael Armstrong, with Stephen Taylor. Description: 16th edition. | London; New York, NY: Kogan Page, 2023. | Includes bibliographical references and index. Identifiers: LCCN 2022049912 (print) | LCCN 2022049913 (ebook) | ISBN 9781398606630 (paperback) | ISBN 9781398606654 (hardback) | ISBN 9781398606647 (ebook) Subjects: LCSH: Personnel management–Handbooks, manuals, etc. Classification: LCC HF5549.17 .A76 2023 (print) | LCC HF5549.17 (ebook) | DDC 658.3–dc23/eng/20221019 LC record available at https://lccn.loc.gov/2022049912 LC ebook record available at https://lccn.loc.gov/2022049913 Typeset by Integra Software Services, Pondicherry Print production managed by Jellyfish Printed and bound by CPI Group (UK) Ltd, Croydon CR0 4YY iv
CONTENTS IN BRIEF List of figures xxxi List of tables xxxiii Preface xxxv PART I Fundamentals of human resource management 1 01 The essence of HRM 3 02 Human capital management 17 03 The context of HRM 24 04 The future of work 27 05 HRM and organizational performance 35 06 The ethical dimension of HRM 47 07 Corporate social responsibility 57 PART II The strategic approach to HRM 63 08 Strategic HRM 65 09 HR strategy 74 PART III Delivering HR 85 10 The role of HR 87 11 The HRM role of line managers 100 PART IV Human resource management processes 107 12 Evidence-based HRM 109 13 HR analytics 113 14 Digital HRM 119 v
vi Contents in Brief 15 Knowledge management 127 16 Competency-based HRM 131 PART V Organization 137 17 Organizational behaviour 139 18 Organization design 158 19 Work design 164 20 Job design 171 21 Organization development 179 PART VI Factors affecting the behaviour of people at work 193 22 Motivation 195 23 Commitment 210 24 Employee engagement 218 PART VII People resourcing 231 25 Resourcing strategy 233 26 Workforce planning 235 27 Recruitment and selection 245 28 Talent management 265 PART VIII Employment practices 275 29 The employee experience 277 30 Managing employment 281 31 Managing diversity and inclusion 298
vii Contents in Brief 32 Managing flexibility 303 33 Managing home and hybrid working 309 PART IX Learning and development 317 34 The basis of learning and development 319 35 Strategic learning and development 325 36 Organizational learning and the learning organization 329 37 Individual learning 334 38 The process of learning and development 344 39 The practice of learning and development 353 40 Leadership and management development 366 PART X Performance management 375 41 The basis of performance management 377 42 Performance management systems 383 43 Performance leadership 393 PART XI Reward management 401 44 The basis of reward management 403 45 Reward strategy 415 46 The practice of reward management 420 47 Managing reward for special groups 435 48 Reducing the gender pay gap 445 PART XII Employment relations 453 49 The basis of employment relations 455 50 Employment relations strategy 459
viii Contents in Brief 51 The employment relationship 464 52 The psychological contract 469 53 The practice of industrial relations 473 54 Employee voice 479 55 Employee communications 486 PART XIII Employee wellbeing 491 56 Principles and practice of employee wellbeing 493 57 Health and safety 501 PART XIV HR practices 513 58 HR policies 515 59 HR procedures 522 60 Dealing with the legal aspects of employment 528 PART XV International HRM 543 61 The basis of international HRM 545 62 The practice of international HRM 551 63 Managing expatriates 559 PART XVI People management skills and competencies 569 64 Strategic people management skills 571 65 Business skills 573 66 Dealing with business issues from an HR perspective 581 67 Problem-solving and decision-making skills 586 68 Analytical and critical skills 591 69 Research skills 596
ix Contents in Brief 70 Statistical skills 608 71 Selection interviewing skills 613 72 Job, role and skills analysis and competency modelling 623 73 Learning and development skills 638 74 Negotiating skills 643 75 Change management 649 76 Influencing skills 659 77 Leadership 663 78 Handling people problems 671 79 Handling challenging conversations 678 80 Managing conflict 679 81 Political skills 683 82 Project management 687 PART XVII Conclusion 689 83 Trends in HRM 691 CIPD Profession Map: Cross-references to text 696 Author index 700 Subject index 705
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CONTENTS List of figures xxxi List of tables xxxiii Preface xxxv PART I Fundamentals of human resource management 1 01 The essence of HRM 3 Introduction 3 The practice of HRM 3 The HR architecture 3 The HR system 4 The philosophy of people management 11 People practices 12 References 15 02 Human capital management 17 Introduction 17 Human capital management defined 17 The concept of human capital 17 The constituents of human capital 18 Measuring human capital 19 Approaches to HRM raised by human capital theory 20 HCM and investment decisions 20 References 22 03 The context of HRM 24 Introduction 24 Environmental factors 24 The labour market 25 References 26 04 The future of work 27 Introduction 27 The nature of work 27 Theories explaining the meaning of work 27 What is happening to work? 29 The factors affecting work 29 xi
xii Contents What is happening to work now? 30 What is going to happen to work? 32 References 33 05 HRM and organizational performance 35 Introduction 35 Measuring organizational performance 35 The impact of HR 36 How HRM makes an impact 38 The development of high-performance working 42 High-performance work systems 42 References 45 06 The ethical dimension of HRM 47 Introduction 47 The meaning and concerns of ethics 47 The nature of ethical decisions and judgements 47 Fairness 48 Equity theory 49 Justice 49 HRM ethical guidelines 50 Ethical dilemmas 52 The ethical role of HR 53 References 55 07 Corporate social responsibility 57 Introduction 57 Corporate social responsibility defined 57 Strategic CSR defined 58 CSR activities 58 The rationale for CSR 59 The opposing view 59 Social responsibility investment criteria 60 Benefits of CSR 60 The basis for developing a CSR strategy 60 The role of HR 61 References 62 PART II The strategic approach to HRM 63 08 Strategic HRM 65 Introduction 65 The nature of strategic human resource management 65 The resource-based view of SHRM 66 Strategic fit 67
xiii Contents Critical evaluation of the concept of SHRM 70 References 72 09 HR strategy 74 Introduction 74 The nature of HR strategy 74 Approaches to HR strategy 75 Developing HR strategy 78 Implementing HR strategy 81 References 82 PART III Delivering HR 85 10 The role of HR 87 Introduction 87 The HR function 87 The role of the HR professional 92 References 98 11 The HRM role of line managers 100 Introduction 100 The people management role of line managers 100 How well does devolution to line managers of HR responsibilities work? 101 Factors affecting the quality of the implementation of HRM by line managers 102 Dealing with the factors 103 References 105 PART IV Human resource management processes 107 12 Evidence-based HRM 109 Introduction 109 Evidence-based HRM defined 109 Evidence-based management 109 The approach to evidence-based HRM 110 References 112 13 HR analytics 113 Introduction 113 HR analytics defined 113 The purpose of HR analytics 113 The content of HR analytics 114 The process of HR analytics 114
xiv Contents Types of HR analytics 114 Keeping people informed 118 References 118 14 Digital HRM 119 Introduction 119 Digital HRM defined 119 The purpose of digital HRM 119 The uses of digital HRM 120 Digital transformation 121 Human resource information system (HRIS) 121 Cloud computing 121 Artificial intelligence 122 Managing digital HRM 123 References 126 15 Knowledge management 127 Introduction 127 Knowledge management defined 127 The meaning of knowledge 127 Approaches to knowledge management 128 Knowledge management issues 129 Implementing knowledge management 129 References 130 16 Competency-based HRM 131 Introduction 131 Competency defined 131 Knowledge, skills and abilities (KSAs) 132 Competency frameworks 132 Developing a competency framework 133 Approaches to using competencies 133 Applications of competency-based HRM 134 Keys to success in using competencies 134 References 135 PART V Organization 137 17 Organizational behaviour 139 Introduction 139 Organizational behaviour defined 139 The sources and applications of organizational behaviour theory 140 How organizations function 141 Organizational culture 144
xv Contents Organizational climate 147 Organizational processes 148 Characteristics of people 150 Implications for HR specialists 153 References 156 18 Organization design 158 Introduction 158 Organization design theories 158 Organization design guidelines 159 Organizational choice 160 The approach to organization design 161 Successful organization design 162 References 163 19 Work design 164 Introduction 164 Work design – a short history 164 Work system design 164 Approaches to work design 165 The role of HR in work design 168 References 169 20 Job design 171 Introduction 171 Job quality 171 What is a good job? 172 The practice of job design 173 Principles of job design 175 Approaches to job design 176 Responsibility for job design 176 Job crafting 176 References 178 21 Organization development 179 Introduction 179 Organization development defined 179 The nature of organization development 179 The story of organization development 180 Organization development strategy 183 Organization development programmes 184 Organizational diagnosis 184 Conclusions on organization development 189 References 190
xvi Contents PART VI Factors affecting the behaviour of people at work 193 22 Motivation 195 Introduction 195 The meaning of motivation 195 Reinforcement theory 196 Content theory 196 Process theory 199 Intrinsic and extrinsic motivation 201 Motivation and job satisfaction 202 Motivation and financial incentives 205 Conclusions on motivation theory 205 Motivation strategies 205 References 207 23 Commitment 210 Introduction 210 The meaning of organizational commitment 210 Mutuality and commitment 210 Commitment and performance 211 The mutual gains perspective 211 Commitment and engagement 212 Factors affecting commitment 212 Critical evaluation of the concept of commitment 213 Developing a commitment strategy 214 References 216 24 Employee engagement 218 Introduction 218 The meaning of employee engagement 218 The theory of engagement 219 The components of employee engagement 219 Drivers of employee engagement 221 Outcomes of engagement 221 Engagement strategy 222 Enhancing job engagement 222 Enhancing organizational engagement 225 Burnout 225 Measuring engagement 226 Critical evaluation of the concept of employee engagement 227 References 229
xvii Contents PART VII People resourcing 231 25 Resourcing strategy 233 Introduction 233 Strategic resourcing 233 The nature of resourcing strategies 233 Reference 234 26 Workforce planning 235 Introduction 235 Workforce planning defined 235 The link between workforce and business/corporate planning 236 Incidence of workforce planning 236 Workforce planning issues 236 Systematic workforce planning 237 Approach to workforce planning 241 References 243 27 Recruitment and selection 245 Introduction 245 The recruitment and selection process 245 Defining requirements 246 Attracting candidates 247 Sourcing candidates 248 Screening applications 253 Selection methods 253 Selection interviews 255 Selection testing 257 Assessment centres 260 Making the decision 260 Provisional offers and obtaining references 261 Offering employment 262 Following up 262 Dealing with recruitment problems 262 References 263 28 Talent management 265 Introduction 265 Talent management defined 265 Talent management policy 266 Talent management strategy 267 The process of talent management 268 The talent pool 268 Talent planning 269
xviii Contents Resourcing 269 Identifying talent 269 Talent development 271 References 274 PART VIII Employment practices 275 29 The employee experience 277 Introduction 277 The concept of the employee experience 277 References 280 30 Managing employment 281 Introduction 281 Introduction to the organization 281 Managing employee retention 283 Employee turnover 285 Redundancy 289 Fire and rehire 289 Dismissal 290 Absence management 290 Presenteeism 293 References 296 31 Managing diversity and inclusion 298 Introduction 298 The meaning and significance of managing diversity and inclusion 298 The rationale for managing diversity and inclusion 299 How to manage diversity and inclusion 299 References 302 32 Managing flexibility 303 Introduction 303 Forms of flexibility 303 Flexible working 305 Zero-hours contracts 306 The role of HR 307 References 308 33 Managing home and hybrid working 309 Introduction 309 Incidence of home and hybrid working 309 Working from home: general considerations 310
xix Contents Employers 310 Line managers 311 Individual employees 312 Managing home and hybrid working processes 313 References 315 PART IX Learning and development 317 34 The basis of learning and development 319 Introduction 319 Learning and development defined 319 The basis of learning 319 The elements of learning and development 319 Formal and informal learning 320 Connected learning 322 The components of learning and development 322 Relationships between L&D and other people management activities 322 The ethical dimension 322 The state of L&D 322 References 324 35 Strategic learning and development 325 Introduction 325 Strategic learning and development 325 Learning and development strategies 325 Formulating and implementing L&D strategies 327 Reference 328 36 Organizational learning and the learning organization 329 Introduction 329 Organizational learning 329 The learning organization 331 Comparison of the organizational learning and learning organization concepts 332 References 333 37 Individual learning 334 Introduction 334 The characteristics of individual learning 334 How people learn 335 The 70:20:10 model 337 Self-directed learning 337 Learning to learn 340 Personal development planning 341
xx Contents Continuing professional development 341 References 342 38 The process of learning and development 344 Introduction 344 Identify learning needs 344 Planning learning and development 347 Implement 347 Evaluate learning 347 References 352 39 The practice of learning and development 353 Introduction 353 Workplace learning 353 Social learning 356 Digital learning 357 Training 361 Apprenticeships 364 References 365 40 Leadership and management development 366 Introduction 366 Leadership and management development defined 366 The nature of leadership and management 366 Leadership development 368 Management development 370 Criteria for leadership and management development 373 References 374 PART X Performance management 375 41 The basis of performance management 377 Introduction 377 Performance management defined 377 The purpose and aims of performance management 378 The nature of performance management 378 The impact of performance management 379 Performance management – the ethical dimension 379 Factors affecting the approach to managing performance 380 Choice of approach to managing performance 380 How managers can manage performance 380 References 382
xxi Contents 42 Performance management systems 383 Introduction 383 Features of a performance management system 383 Performance and development planning 383 Monitoring 385 Reviewing 385 360-degree feedback 386 The reality of performance management 387 Performance management issues 388 References 391 43 Performance leadership 393 Introduction 393 What ‘engaging managers’ do 393 The concept of performance leadership 394 Performance leadership skills 395 Performance conversations 395 Conclusion 398 References 399 PART XI Reward management 401 44 The basis of reward management 403 Introduction 403 Reward management defined 403 The reward system 404 Aims of reward management 404 Reward drivers 405 Values and beliefs 405 Reward policy 406 Financial rewards 410 Non-financial rewards 411 Total reward 411 References 414 45 Reward strategy 415 Introduction 415 The content of reward strategy 415 Formulating reward strategy 416 Critical evaluation of the concept of reward strategy 418 References 419
xxii Contents 46 The practice of reward management 420 Introduction 420 Market pricing 420 Job evaluation 421 Base pay management 422 Contingent pay 426 Recognition schemes 429 Employee benefits 429 Administering reward management 430 References 434 47 Managing reward for special groups 435 Introduction 435 Executive remuneration 435 Reward management for sales and customer service staff 438 Paying manual workers 440 References 444 48 Reducing the gender pay gap 445 Introduction 445 Reasons for the gender pay gap 445 Actions to reduce gender pay gaps 446 Narrowing the gap at organizational level 448 References 451 PART XII Employment relations 453 49 The basis of employment relations 455 Introduction 455 The meaning of employment relations 455 Approaches to employment relations 456 Management style in employment relations 456 Employment relations policies 457 References 458 50 Employment relations strategy 459 Introduction 459 The nature of employment relations strategy 459 Strategy for creating a constructive and positive employment relations climate 460 Strategy for achieving mutual gains 460 Partnership agreement strategy 461 Strategy for building trust 461 Employee voice strategy 461
xxiii Contents Trade union recognition strategy 462 References 463 51 The employment relationship 464 Introduction 464 The nature of the employment relationship 464 The basis of the employment relationship 464 Labour process theory and the employment relationship 465 Employment relationship contracts 466 Managing the employment relationship 466 Developing a climate of trust 467 References 468 52 The psychological contract 469 Introduction 469 The psychological contract defined 469 The significance of the psychological contract 470 The psychological contract and the employment relationship 470 How psychological contracts develop 470 The problem with psychological contracts 470 Developing and maintaining a positive psychological contract 471 References 472 53 The practice of industrial relations 473 Introduction 473 Trade union membership 473 Union recognition 473 Collective bargaining 474 Collective agreements 475 Dispute resolution 476 Informal employee relations processes 477 References 478 54 Employee voice 479 Introduction 479 The need for employee voice 479 Degrees of employee voice 479 Direct voice 480 Indirect voice 482 Employees’ experience of voice 483 References 484
xxiv Contents 55 Employee communications 486 Introduction 486 The importance of communications 486 What should be communicated 486 Approach to communications 487 Communication channels 487 Employee communication strategy 488 References 489 PART XIII Employee wellbeing 491 56 Principles and practice of employee wellbeing 493 Introduction 493 The basis of wellbeing 493 The case for caring about wellbeing 494 Factors affecting wellbeing 495 Employee wellbeing strategy 495 References 499 57 Health and safety 501 Introduction 501 Managing health and safety at work 501 Health and safety policies 501 Conducting risk assessments 502 Health and safety audits 504 Health and safety inspections 505 Accident prevention 505 Occupational health programmes 506 Managing stress 506 Measuring health and safety performance 507 Communicating the need for better health and safety practices 508 Health and safety training 508 Organizing health and safety 509 References 511 PART XIV HR practices 513 58 HR policies 515 Introduction 515 Why have HR policies? 515 Overall HR policy 515 Specific HR policies 516 Developing HR policies 520 Implementing HR policies 520
xxv Contents 59 HR procedures 522 Introduction 522 Capability procedure 522 Disciplinary procedure 523 Grievance procedure 524 Redundancy procedure 525 60 Dealing with the legal aspects of employment 528 Introduction 528 Employment law provisions 528 How is employment law enforced? 536 HRM and employment law 537 Dealing with Employment Tribunal claims and cases 539 References 542 PART XV International HRM 543 61 The basis of international HRM 545 Introduction 545 The international scene 545 International HRM strategies 546 Contextual factors 546 Convergence and divergence 548 References 549 62 The practice of international HRM 551 Introduction 551 HR in international subsidiaries 551 Differences between international and domestic HRM 552 Workforce planning 552 Resourcing 552 International talent management 554 International performance management 554 International reward management 555 Multicultural working 556 Role of the international HR function 556 References 558 63 Managing expatriates 559 Introduction 559 Why use expatriates? 559 The process of managing expatriates 559 Resourcing policies 560
xxvi Contents Recruitment and selection policies 561 Preparation policy 562 Assimilation and support 562 Career management 563 Performance management 563 Re-entry policies 564 Pay and allowances policies 564 References 566 PART XVI People management skills and competencies 569 64 Strategic people management skills 571 Introduction 571 The strategic role of the HR professional 571 The strategic business partner model 571 The strategic skills required 571 Reference 572 65 Business skills 573 Introduction 573 Business skills 573 Financial skills 574 Business models 577 Business model innovation 577 References 580 66 Dealing with business issues from an HR perspective 581 Introduction 581 Identify business issues 581 Establish people factors 582 Critically analyse relevant HR policy and practice 582 Conduct or participate in research 583 Analyse quantitative and qualitative information 583 Draw conclusions 584 Prepare and make the business case 584 Reference 585 67 Problem-solving and decision-making skills 586 Introduction 586 Problem solving 586 Decision making 588 References 590
xxvii Contents 68 Analytical and critical skills 591 Introduction 591 Analytical skills 591 Diagnostic skills 592 Logical reasoning 592 Critical thinking 593 Critical evaluation 593 Developing and justifying arguments 594 A final word 594 References 595 69 Research skills 596 Introduction 596 The nature of research 596 Planning and conducting research programmes 597 Research methodology 598 Methods of collecting data 599 Processes involved in research 602 References 607 70 Statistical skills 608 Introduction 608 Frequency 608 Measures of central tendency 608 Measures of dispersion 608 Correlation 609 Regression 609 Causality 610 Tests of significance 610 Testing hypotheses 611 References 612 71 Selection interviewing skills 613 Introduction 613 Preparing for the interview 613 Conducting a selection interview 614 Types of interviews 615 Selection interview questions 617 Common interviewing mistakes 619 Coming to a conclusion 620 References 622
xxviii Contents 72 Job, role and skills analysis and competency modelling 623 Introduction 623 Definitions 623 Job analysis 624 Job descriptions 626 Role analysis and role profiles 628 Skills analysis 628 Competency modelling 632 References 637 73 Learning and development skills 638 Introduction 638 Coaching 638 Mentoring 639 Facilitating 639 Job instruction 640 References 642 74 Negotiating skills 643 Introduction 643 The process of negotiation 643 Stages of negotiation 643 Negotiating and bargaining skills 647 Reference 648 75 Change management 649 Introduction 649 Change 649 The process of change management 650 The responsibility for change 655 Guidelines for change management 656 References 657 76 Influencing skills 659 Introduction 659 Persuading people 659 Case presentation 660 Making a business case 660 Facilitating 661 Coordinating discussions 661 77 Leadership 663 Introduction 663 The meaning of leadership 663
xxix Contents Leadership theories 663 What leaders do 664 Leadership styles 664 Types of leaders 665 The qualities of a good leader 667 Effective leadership 668 References 669 78 Handling people problems 671 Introduction 671 Approach 671 Disciplinary issues 671 Absenteeism 672 Handling poor timekeeping 673 Handling negative behaviour 674 Dealing with under-performance 676 79 Handling challenging conversations 678 80 Managing conflict 679 Introduction 679 Handling inter-group conflict 679 Handling interpersonal conflict 680 Resolving conflict between team members 681 Reference 682 81 Political skills 683 Introduction 683 Typical political approaches 683 Using political means to get things done 684 Political sensitivity 684 Dangers of politics 684 Dealing with organizational politics 685 Reference 686 82 Project management 687 Introduction 687 Project planning 687 Setting up the project 688 Controlling the project 688
xxx Contents PART XVII Conclusion 689 83 Trends in HRM 691 Introduction 691 Overall trends 691 Specific trends 693 References 695 CIPD profession map: Cross-references to text 696 Author index 700 Subject index 705
LIST OF FIGURES FIGURE 0.1 Handbook route map xxxvii FIGURE 1.1 An HR system 5 FIGURE 2.1 Human capital evaluation – Civil Aviation Authority 21 FIGURE 5.1 The black box phenomenon 39 FIGURE 5.2 Impact of HRM on organizational performance 40 FIGURE 5.3 The AMO model as a framework for performance-enhancing HRM practices 41 FIGURE 9.1 The different strategy domains 75 FIGURE 9.2 The Five Strategic Pillars at MHCLG 77 FIGURE 9.3 HR effectiveness checklist 79 FIGURE 9.4 Stakeholder analysis matrix 80 FIGURE 9.5 The Selfridge stakeholder value model 80 FIGURE 12.1 Interrelationships between the components of evidence-based management 111 FIGURE 17.1 Sources and applications of organization behaviour theory 140 FIGURE 20.1 Model of job quality 172 FIGURE 22.1 The process of motivation according to content theory 197 FIGURE 22.2 Motivation model (Porter and Lawler) 199 FIGURE 24.1 IES model of employee engagement 220 FIGURE 24.2 How reward policies influence performance through engagement 224 FIGURE 26.1 Workforce planning flow chart 238 FIGURE 27.1 Example of a person specification 247 FIGURE 27.2 Example of an application form 252 FIGURE 27.3 Use of different types of selection methods 254 FIGURE 27.4 A normal curve 258 FIGURE 28.1 The process of talent management 268 FIGURE 28.2 A nine-point performance/potential assessment grid 270 FIGURE 28.3 The CEMEX model of talent management 272 FIGURE 30.1 A survival curve 287 FIGURE 33.1 Guidelines for managing home and hybrid workers 312 FIGURE 34.1 Formal and informal learning 320 FIGURE 34.2 The components of learning and development 321 FIGURE 36.1 Single- and double-loop learning 330 FIGURE 37.1 The Kolb learning cycle 335 FIGURE 38.1 Learning needs analysis – areas and methods 345 FIGURE 38.2 The learning gap 345 FIGURE 38.3 A learning specification 346 FIGURE 39.1 Systematic training model 361 xxxi
xxxii List of Figures FIGURE 41.1 Lloyds Banking Group: Definition of the purpose of the performance management system 378 FIGURE 42.1 The performance management cycle 384 FIGURE 42.2 Model of the performance management system in Astra-Zeneca 384 FIGURE 42.3 Model of the performance management system in Halifax Bank 385 FIGURE 42.4 Model of the performance management system in Pfizer Inc 385 FIGURE 42.5 Performance management form (part 1) 386 FIGURE 42.6 Performance management form (part 2) 387 FIGURE 43.1 Example of competency profile for a performance leader with positive and negative indicators 396 FIGURE 43.2 Features of effective performance and development conversations 397 FIGURE 44.1 The reward system 404 FIGURE 44.2 Reward drivers 405 FIGURE 44.3 Total reward model 411 FIGURE 45.1 A model of the reward strategy development process 417 FIGURE 46.1 Typical grade and pay structures 423 FIGURE 46.2 A direct link between ratings and pay increases 432 FIGURE 46.3 A pay matrix 432 FIGURE 51.1 Dimensions of the employment relationship 465 FIGURE 54.1 Stages of employee voice 480 FIGURE 70.1 Examples of charts 609 FIGURE 70.2 A scattergram with regression (trend) line 610 FIGURE 71.1 Telephone interview assessment form 616 FIGURE 71.2 Example of an interview rating form 621 FIGURE 72.1 Example of a job description 627 FIGURE 72.2 Example of a role profile 629 FIGURE 72.3 Example of a generic role profile 630 FIGURE 74.1 Negotiating range with a settlement zone 646 FIGURE 74.2 Negotiating range without a settlement zone 646 FIGURE 77.1 John Adair’s model of leadership 664
LIST OF TABLES TABLE 1.1 Comparison between HRM and people management 13 TABLE 5.1 Research on the link between HRM and organizational performance 37 TABLE 5.2 Components of an HPWS 43 TABLE 10.1 Key HR specialist competency areas 95 TABLE 13.1 HR data and their possible uses 115 TABLE 16.1 Example of a basic competency framework 132 TABLE 16.2 Example of competency framework definition with positive and negative indicators 133 TABLE 17.1 Schools of organization theory 142 TABLE 18.1 Mechanistic and organic design 161 TABLE 21.1 Organization development activities 187 TABLE 22.1 Summary of motivation theories 203 TABLE 22.2 Motivation strategies 206 TABLE 24.1 Employee engagement management competency framework 223 TABLE 27.1 Validity of different selection methods 254 TABLE 30.1 A survival rate analysis 287 TABLE 30.2 Leavers’ length of service analysis 288 TABLE 37.1 The practical implications of learning theory 338 TABLE 37.2 The staged self-directed learning model 340 TABLE 44.1 Theories explaining pay levels 407 TABLE 46.1 Summary description of different formal grade and pay structures 424 TABLE 46.2 Summary of individual contingent pay schemes 427 TABLE 47.1 Summary of payment and incentive arrangements for sales staff 438 TABLE 47.2 Comparison of shop floor payment-by-result schemes 441 TABLE 48.1 Actions that can be taken by organizations to reduce a gender pay gap 448 TABLE 56.1 Wellbeing factors and actions 495 TABLE 62.1 Advantages and disadvantages of using PCNs or HCNs 553 TABLE 69.1 Analysis of basic data collection methods 604 TABLE 71.1 Dos and don’ts of selection interviewing 620 TABLE 72.1 Criteria for a fully rigorous competency definition (Shippman et al, 2000) 633 TABLE 74.1 Commercial and industrial relations negotiations compared 644 xxxiii
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PREFACE TO THE 16TH EDITION This 16th edition of the Handbook of Human Resource Management Practice includes new chapters on the future of work, digital HRM, the employee experience, managing home and hybrid working, performance leader- ship and trends in HRM. Other chapters have been extensively revised and the handbook has been brought up to date by reference to the findings of a number of significant research pro- jects and other investigations of how HRM op- erates in practice. The plan of the book is illustrated in the ‘route map’ shown in Figure 0.1. The logic of the sequence of 16 parts is as follows. ● ● Part I provides a conceptual framework for the rest of the handbook. It consists of a general introduction to human resource management (HRM) and human capital management HCM), a description of the context within which HRM operates, analyses of the future of work and the contribution HRM makes to performance and, finally, two chapters covering respectively the important subjects of HRM ethics and corporate social responsibility. ● ● Part II extends the descriptions of the fundamental features of HRM covered in Part I to examine the more dynamic aspects of HRM – generally in the process of strategic HRM, and specifically in the formulation and implementation of specific HRM. ● ● Part III describes how HRM is delivered through the HR function and line managers. ● ● Part IV deals with the HRM processes that affect the whole organization, namely evidence-based HRM, HR analytics, digital HRM, the growing use of artificial intelligence (AI), knowledge management, competency-based HRM, the ethical dimension of HRM and corporate social responsibility. ● ● Parts V and VI cover the general considerations relating to organizational and individual behaviour that need to be taken into account in planning and managing the specific HRM practices dealt with in subsequent parts of the book. ● ● Parts VII to XIII contain descriptions of the main HRM activities, namely resourcing, employment, learning and development, performance management, reward management, employment relations and employee wellbeing. ● ● Part XIV describes the HR practices concerned with HR policies, HR procedures and dealing with employment legislation. ● ● Part XV is concerned with international HRM. It covers the special considerations that affect how organizations manage the people working in other countries, including local inhabitants and expatriates. These considerations include how the HRM practices described in earlier parts may need to be adapted to suit international requirements. ● ● Part XVI is devoted to describing the considerable range of skills and competencies needed by HR professionals. ● ● Part XVII presents conclusions on trends in HRM. The appendix provides cross-references from the core and specialist knowledge requirements set out in the current version of the CIPD Profession Map to the text. The companion website at www.koganpage. com/Armstrong/HRMPresources provides extensive additional resources for lecturers and students. These comprise: ● ● A lecturer’s manual containing notes on how teaching could be organized by xxxv
xxxvi Preface reference to the chapters in the main text and the supplementary material in the manual. Suggestions are made on various kinds of semesters and guidance is provided on the links between the handbook text and CIPD core and specialist knowledge requirements.The manual includes sections for each chapter containing a summary of the main learning points, an outline of the subject matter, discussion points and questions with comments on the points to be considered. In many chapters there are multiple- choice questions, case studies and role-playing exercises. Most of the chapters contain supplementary abstracts from relevant HRM publications. ● ● Additional material is provided for lecturers in the shape of PowerPoint slides with notes covering all the chapters. ● ● A student’s manual consisting of material that can be used to reinforce the contents of the main book. Summaries of each chapter are provided and in addition most of the chapters include supplementary abstracts from relevant HRM literature. To assist in revision, the extra material includes multiple- choice questions and ‘flash’ cards containing questions and answers about key aspects of the subject matter. There are also: ● ● A number of case studies ● ● A glossary of HRM terms ● ● An HRM bibliography
xxxvii Preface FIGURE 0.1 Handbook route map 7 People resourcing 25 Resourcing strategy 26 Workforce planning 27 Recruitment and selection 28 Talent management 8 Employment practices 29 The employee experience 30 Managing employment 31 Managing diversity and inclusion 32 Managing flexibility. 33 Managing home and hybrid working 9 Learning and development (L&D) 11 Reward management (RM) 56 The practice of employee wellbeing 57 Health and safety 15 International HRM 10 Performance management 1 Fundamentals of human resource management (HRM) 1 Human resource management (HRM) 2 Human capital management 3 The context of HRM 4 The future of work 5 HRM and performance 6 The ethical dimension of HRM 7 Corporate social responsibility 5 Organization 17 Organizational behaviour 18 Organization design 19 Work design 20 Job design 21 Organization development 22 Motivation 23 Commitment 24 Employee engagement 6 Factors affecting the behaviour of people at work 2 The strategic approach to HRM 8 Strategic HRM 9 HR strategy 3 Delivering HR 10 Role of HR 11 The HRM role of line managers 4 HRM processes 12 Evidence-based HRM 13 HR analytics 14 Digital HRM 15 Knowledge management 16 Competency-based HRM 16 HR skills and competencies 17 Conclusion: Trends in HRM 64 Strategic skills 65 Business skills 66 Dealing with business issues 67 Problem-solving and decision-making skills 68 Analytical and critical skille 69 Research skills 70 Statistical skills 71 Selection interviewing 72 Job, role and competency analysis 73 L&D skills 74 Negotiating skills 75 Change management 76 Influencing skills 77 Leadership 78 Handling people problems 79 Handling challenging conversations 80 Managing conflict 81 Political skills 82 Project management 58 HRM policies 59 HRM procedures 60 Dealing with the legal aspects of employment 44 The basis of RM 45 Reward strategy 46 The practice of RM 47 Managing reward for special groups 48 Reducing the gender pay gap 34 The basis of L&D 35 Strategic L&D 36 Organizational learning 37 Individual learning 38 The process of L&D 39 The practice of L&D 40 Leadership and management development 41 The basic of performance management 42 Performance management systems 43 Performance leadership 13 Employee wellbeing 49 The basis of employment relations 50 Employment relations strategy 51 The employment relationship 52 The psychological contract 53 The practice of industrial relations 54 Employee voice 55 Employee communications 12 Employment relations 14 HR practices 61 The basis of international HRM 62 The practice of international HRM 63 Managing expatriates
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PART I Fundamentals of human resource management PART I CONTENTS 01 The essence of HRM 02 Human capital management 03 The context of HRM 04 The future of work 05 HRM and organizational performance 06 The ethical dimension of HRM 07 Corporate social responsibility Introduction Human resource management (HRM) is about the management of people in order to achieve desired results. The aim of this part is to look at HRM in general and review a number of the factors that affect it in order to provide a backcloth to the detailed consid- eration given to the practice of HRM elsewhere in the handbook. The term HRM generally refers to the overall concept and practice of human resource manage- ment, while the term HR often refers specifically to the function responsible for HRM or HRM practi- tioners. However, HR is frequently used as a syn- onymous term for HRM. Chapter 1 covers the conceptual basis of human resource management and the characteristics of an HR system. Chapter 2 examines the associated concept of humancapitalmanagement(HCM).Thisis­concerned with a basic tenet of human resource management – that people should be valued as assets. It is therefore important to measure the value of that human capital and make good use of the information gained from the measurements. The practice of HRM is affected by the context in which it takes place and this is covered in Chapter 3. A separate chapter (4) is devoted to an important aspect of the context – the future of work as affected by developments in new technology and events such as the Covid-19 pandemic. 1
2 Part 1 | Fundamentals of Human Resource Management A theme running through most of the chapters in this book is the impact of different aspects of HRM on performance. Chapter 5 provides a background for these discussions by considering how HRM makes an impact. Another theme throughout the handbook is the need for organizations to take full account of their social responsibilities. This includes acting ethically in accordance with articulated values when dealing with any matters concerning employees and other stakeholders and exercising concern over social and environmental issues. These issues are dealt with in Chapters 6 and 7 respectively.
01 The essence of HRM This is explained by contingency theory which states that HRM practices must fit the organization’s envi- ronment and circumstances. This is the notion of ‘best fit’ which contrasts with that of ‘best practice’. The latter makes the dubious assumption that there is a set of best HRM practices that are universal in the sense that they are best in any situation. The sig- nificance of contingency theory is that it draws at- tention to the needs, first to be clear about how any proposed or existing HR practice will fit the particu- lar needs and characteristics of the organization, and second to avoid simply reproducing what is regarded as best practice irrespective of its relevance. The process of managing people is carried out through the HR system within the framework of what is termed the HR architecture. The HR architecture The HR architecture is a comprehensive representa- tion of all that is involved in HRM. It incorporates the HR system of policies and practices, the roles and be- haviour of managers and employees generally and the contribution made by members of the HR function. The term ‘HR architecture’ was first used by Becker and Gerhart (1996: 786) in an article exam- ining the strategic impact of HR on key perfor- mance outcomes. They wrote that ‘There may be a best HR system but whatever the bundles or con- figurations of policies implemented, the individual policies must be aligned with one another and be consistent with the HR architecture if they are ulti- mately to have an effect on firm performance.’ The concept was developed by Lepak and Snell (1999), who stated that the HR architecture in an organiza- tion consists of its different employment modes, employment relationships and HR configurations. They suggested that it draws attention to HRM as a Introduction Organizations depend on people.They have to obtain and develop the capable, skilled, and engaged em- ployees they need, manage their performance, reward them in accordance with their contribution, create and maintain positive employment relationships and provide for their wellbeing. In essence, this is what human resource management (HRM) is about. The ultimate responsibility for how an organiza- tion manages people rests with senior managers. They are responsible for good governance – provid- ing leadership to ensure that the organization func- tions effectively. They set the tone and make policy decisions on key matters affecting the employment, development and wellbeing of employees. Line managers bring these polices to life. HR or people management professionals are there to provide both senior management and line managers with the advice, support and services they need. The practice of managing people as described in the first section of this chapter is commonly referred to as HRM (human resource management) or HR (human resources). This does not necessarily mean that it is deliberately based on the philosophy of HRM as developed in the 1980s. It is often no more than a convenient label. As Storey (2007: 6) pointed out: ‘In its generic broad and popular sense it [HRM] simply refers to any system of people man- agement.’ The term people management is being increasingly used as an alternative to HRM, espe- cially by the Chartered Institute of Personnel and Development (the CIPD). The practice of HRM How HRM is practised will vary according to the type of organization, the kind of people employed and the context in which the organization operates. 3
4 Part 1 | Fundamentals of Human Resource Management strategic asset, enables the study of the alternative employment arrangements used by firms and helps those concerned to understand which forms of human capital have the potential to be a source of competitive advantage. As explained by Becker et al (2001:12): ‘We use the term HR architecture to broadly describe the continuum from the HR pro- fessionals within the HR function, to the system of HR-related policies and practices, through the com- petencies, motivation and associated behaviours of the firm’s employees.’ The concept of HR architecture highlights the fact that managing people is a complex process af- fected by a number of interconnected factors. As Lepak and Snell (1999: 32) emphasized: It may be inappropriate to simplify the nature of human capital investments and suggest that there exists a single “optimal” HR architecture for managing all employees. Rather, we believe that the most appropriate mode of investment in human capital will vary for different types of human capital. The HR system The HR system provides the basis for managing peo- ple in an organization in order to achieve the results required. The core of the system consists of a set of interrelated and jointly supportive HRM practices or activities. The range and nature of these activities is governed by the organization’s context (its inter- nal and external environments) and by its people management philosophy, strategies and policies. The HR system is a key component of the HR architec- ture, which is in turn affected by the behaviours of employees and the contribution of the HR function. A strong HR system Bowen and Ostroff (2004) advocated a ‘strong’ HR system to ensure the more effective implementation of HRM practices. They developed a model of HRM in which HR practices can be viewed as com- munications from the employer to employee. They suggested that ‘when the HRM system is perceived as high in distinctiveness, consistency, and consen- sus, it will create a strong situation’ (2004: 208). They argued that a strong HRM system can signifi- cantly affect firm performance by creating power- ful, focused organizational cultures that help to structure and direct employee behaviour and effort towards desired organizational goals. They also em- phasized the important role of implementation in translating the intended HRM system into action. This point was later reinforced by Nishii and Wright (2008) who observed that there are gaps between intended and implemented HR systems and be- tween implemented and perceived HR systems. The components of an HR system An HR system as illustrated in Figure 1.1 incorpo- rates: ● ● HR strategies, which define the direction in which it is intended that HRM should go in each of its main areas of activity. The concept of strategic human resource emphasizes the importance of integrating HR strategies with corporate strategies to ensure that the former support the achievement of organizational goals. It also stresses the need to integrate strategies covering different aspects of HR with one another. ● ● HR policies, which set out what HR does and provide guidelines defining how specific aspects of HR should be applied and implemented. ● ● HR practices, which consist of the HR activities involved in managing and developing people and in managing the employment relationship. These are part of the HR architecture and provide the core of the system. They are affected by the considerations of stakeholder interests, corporate social responsibility and HR values. The CIPD Profession map describes these as ‘people activities’. The system will be aligned to the interests of stake- holders. It will take account of the need to exercise social responsibility and to be value-driven. Stakeholder interests The system needs to satisfy the interests of stakehold- ers. A stakeholder (a term introduced by Freeman, 1984) is a person or a body that has a legitimate in- terest in an organization. Internal ­ stakeholders can
5 Chapter 1 | The Essence of HRM FIGURE 1.1 An HR system Resourcing Organization Learning and development Reward management Employment relations Employee wellbeing HR processes Stakeholder interests HR strategies HR policies and procedures practices Context – internal and external environment Context – internal and external environment Human capital management Organization design Performance management Wellbeing policy and practice Employment relationship Organization development Workforce planning Managing diversity and inclusion Knowledge management Industrial relations Recruitment and selection Organizational learning Job evaluation and pay surveys Work design Talent management Individual learning Base pay management and contingent pay Employee voice Health and safety Digital HRM Job design Employment practices Leadership and management development Employee benefits Employee communi- cations Employment law compliance HR analytics HR practices HR architecture Employee behaviours HR function Strategic HRM International HRM The employee experience HR values
6 Part 1 | Fundamentals of Human Resource Management include the owners of a company (shareholders or the authorities or trustees in charge of an organiza- tion), senior management and employees generally. External stakeholders consist of customers, clients, suppliers and the community or public at large. In a business, its owners and its senior management as principal agents of those owners are two of the key stakeholders. They will aim to achieve competitive advantage (the ability to outperform competitors) and financial success (maximize shareholder value) as a necessary requirement for the survival of the business. In a not-for-profit organization the aim of those in charge will be to achieve its purpose effec- tively and efficiently. In both cases, these aims will be expressed as strategic goals. Employees are the other key stakeholders in an organization. Their interests will be to be treated fairly and justly, to be given opportunities and a rea- sonable degree of security, and to be provided with a working environment in which their wellbeing is properly looked after. The interests of the external stakeholders are addressed through corporate ­ social responsibility policies and practices. Corporate social responsibility Corporate social responsibility (CSR) is exercised by organizations when they conduct their business in an ethical way, taking account of the social, environ- mental and economic impact of how they operate, and going beyond compliance. A socially responsi- ble approach to running an organization will ­directly affect its HR philosophy and, therefore, its HR strategies and policies. Values for managing people Organizations and the HR function within them should be value-driven. The values should be based on the belief that people are valuable in themselves as well as sources of value. Values may not be ar- ticulated although they can be an important albeit implicit aspect of the corporate culture: ‘the way things are done around here’. But there is much to be said for expressing them formally as a value statement so that they function as a set of guiding principles – setting out what is believed to be ­ appropriate behaviour and action. The nature of these will be affected by the culture and context of the organization. But guidance on what might be covered in a value statement is provided by the following British Standards Institution (2015) standards: ● ● People working on behalf of the organization have intrinsic value, in addition to their protections under the law or in regulation, which needs to be respected. ● ● Stakeholders and their interests are integral to the best interests of the organization. ● ● Every organization is part of wider society and has a responsibility to respect its social contract as a corporate citizen and operate in a manner that is sustainable. ● ● A commitment to valuing people who work on behalf of the organization and to meeting the requirements of the standard is made and supported at the highest level. An example of a ten-point value statement is given below: 1 People should be treated with dignity and respect. 2 Just treatment is the absolute right of all employees. 3 The organization has a duty of care for those who work there and should promote their wellbeing in the broadest sense. 4 People have the moral right to be dealt with properly above and beyond their legal rights. 5 Everyone should be given the scope to use and develop their talents effectively. 6 People should have equal access to opportunities at work in line with their capabilities. 7 People should be able to influence the decisions that affect them. 8 The environment should enable different kinds of people to thrive and succeed. 9 The organization is committed to dealing with diversity and inclusion on the basis that everyone should be valued as an individual and treated fairly irrespective of their race, gender, level of disability, religion, sexual orientation or age. 10 The organization has to exercise social responsibility by being concerned with the interests of all its stakeholders.
7 Chapter 1 | The Essence of HRM Values such as these form the basis of good people practice. They will be influenced by the philosophies attached to the concepts of HRM and people man- agement as examined later in this chapter. However, while it is not too difficult to devise and publish a set of values, it is much more difficult to put them into practice, to make them ‘values in use’. It is helpful if they are articulated but they are more likely to influ- ence behaviour when employees have participated in developing them and if they are explicitly supported by people management policies and practice and by the example and leadership of senior management. The main components of the model illustrated in Figure 1.1 in terms of processes, practices and the employee experience are described below. HR processes Strategic human resource management (SHRM) – an approach to managing people that is concerned with ensuring that key issues of human resource management are dealt with strategically in order to support the achievement of organizational goals. Dealing with HR issues strategically means decid- ing what needs to be done now and in the longer term through the integration of HR strategies with business strategy and with one another, and then ensuring that what needs to be done is done. SHRM can be regarded as an attitude of mind rather than a set of prescribed techniques. Human capital management (HCM) – treating peo- ple as assets and achieving competitive advantage by strategic investments in those assets. It involves measuring the value of human capital in order to represent the value of people and making good use of the information gained from measurements gen- erated by HR analytics. Knowledge management – storing, sharing and making good use of the wisdom, understanding and expertise accumulated in an organization about its processes, techniques and operations. HR analytics – the application of mathematical, sta- tistical and data collection techniques to obtain data on and therefore insight into HR matters con- cerned with the application and impact of HR em- ployment, learning and development and reward strategies, policies and practices, and to inform ­ evidence-based HR decisions. Digital HRM – the use of digital technologies in the form of web-based applications involving analytics, artificial intelligence (AI), cloud technologies, com- puter hardware and software, smart phones and social media to help deliver HRM services. HR procedures – these set out the ways in which certain actions concerning people should be carried out by the management or individual managers. In effect, they constitute a formalized approach to dealing with specific matters of policy and practice such as handling disciplinary issues, redundancies or poor performance (capability). Employment law compliance – ensuring that em- ployment law requirements are met by the organi- zation and its individual managers and employees and dealing with employment law issues if they arise. HR practices Organization – designing organization structures, work systems and jobs and developing organiza- tions to ensure that they function effectively. Resourcing – the employment activities of: ● ● workforce planning – establishing an organization’s people requirements so that plans can be made to satisfy them; ● ● recruitment and selection – finding the people the organization needs and deciding which applicants or candidates should be appointed to fill vacancies. ● ● talent management – ensuring that the organization has the capable and well- qualified people it needs to attain its goals. It involves the systematic attraction, retention, identification and development of individuals who are of particular value to an organization. Employment – managing the employee experience (what happens to people at work and how they feel about it) and dealing with the following aspects of employment in an organization: induction (on- boarding), release and retention of employees, ab- sence management, fulfilling the obligations of the organization to promote inclusion and manage di- versity, seeking ways in which to increase flexible
8 Part 1 | Fundamentals of Human Resource Management working to benefit both individuals and the organi- zation and managing home and hybrid workers. Learning and development – ensuring that the or- ganization has the capable people it needs to achieve its goals. Learning and development takes place at organizational and individual levels. It involves ena- bling employees to acquire knowledge and skills and develop their potential through experience and social contacts, coaching, mentoring, guidance pro- vided by line managers, self-managed learning, digi- tal learning and formal training provided by the organization. It includes special arrangements for developing leadership and management capabilities. Performance management – the continuous process of agreeing objectives for individuals and teams, aligning those objectives with the strategic goals of the organization, planning performance to achieve the objectives, reviewing and assessing progress, taking steps to improve performance when neces- sary and developing the capabilities of people. Performance management is exercised by line man- agers acting as performance leaders. It provides a means of identifying learning and development needs and rewarding people through recognition and the provision of opportunities as well as in- forming performance pay decisions where these are required. Reward management – the development, implemen- tation and maintenance of a reward system that provides for contribution and merit to be recog- nized by financial and non-financial means. Financial reward management consists of processes for deciding the value of jobs (job evaluation and pay surveys), base pay management (administering pay structures), contingent (performance) pay and employee benefits such as pensions. Non-financial reward management means providing rewards by recognition or by giving people the scope for achievement, responsibility, autonomy, influence and personal growth. Employment relations (also known as employee re- lations) – managing the employment relationship and the psychological contract and relating to em- ployees either collectively through trade unions ­ (industrial relations) or individually. Employment relations also involve providing employees with a voice and developing communications between them and management. Employee wellbeing – improving the quality of working life of individuals in terms of their experi- ence of work – how satisfied they are with their job and how the organization treats them. This includes their work–life balance, flexible working, physical, mental and financial wellbeing, relationships with their line manager and colleagues and the extent to which they have a sense of purpose and feel in con- trol of what they do. International HRM – the process of managing peo- ple across international boundaries by multina- tional companies (MNCs).It involves the ­worldwide management of people, not just the management of expatriates. HR processes and procedures – implementing HRM through a variety of processes and procedures that affect the approach adopted in practice areas and support the implementation of HR strategies, poli- cies and activities. They interact with one another and other aspects of people management and there- fore play a key part in the operation of HRM as a system. The employee experience The employee experience is about what happens to people at work and how they feel about it. This is influenced by all the other HR activities in the HR system. The reactions of employees to these activi- ties and their views about them should be taken into account in deciding on the nature of the activities. HRM as a philosophy HRM as a philosophy presents a particular view of the ways in which people should be managed at work which may directly or indirectly affect an or- ganization’s people management philosophy. As originally conceived, HRM emphasizes the impor- tance of a strategic approach, proposes that people should be treated as assets rather than costs, and indicates that it is primarily the responsibility of senior management. Origins HRM emerged in the 1980s as a conceptual frame- work for the management of human resources
9 Chapter 1 | The Essence of HRM ­ underpinned by a number of theories drawn from the behavioural sciences and from the fields of stra- tegic management, human capital management and industrial relations. As Hendry and Pettigrew (1990: 18) observed: ‘HRM was heavily normative from the start: it provided a diagnosis and proposed solutions.’ They also stated that ‘What HRM did at this point was to wrap around some of the observ- able changes, while providing a focus for challeng- ing deficiencies – in attitudes, scope, coherence and direction – of existing personnel management’ (20). The ‘founding fathers’ of HRM were two teams of US academics. Beer et al (1984: 1) in their ‘Harvard framework’ proposed that ‘Human re- source management (HRM) involves all manage- ment decisions and actions that affect the nature of the relationship between the organization and em- ployees – its human resources.’ They argued that the three characteristic features of HRM were that (1) a strategic approach is adopted involving the align- ment of competitive strategy and HR policies, (2) employees are regarded as social capital (assets rather than costs) and (3) senior management, not the HR function, is responsible for HR policy deci- sions. In the ‘Michigan framework’ or ‘matching model’, Fombrun et al (1984: 37) recommended that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy: ‘The critical management task is to align the formal structure and human re- source systems so that they drive the strategic objec- tives of the organization.’ In the UK the founding fathers were followed by a number of commentators who developed, ex- plained and frequently criticized the concept. Guest (1987: 505) stated that ‘Human resource manage- ment appears to lean heavily on theories of commit- ment and motivation and other ideas derived from the field of organizational behaviour.’ And Karen Legge (2005: 101) commented that ‘The term [HRM] was taken up by both UK managers (for example, Armstrong, 1987; Fowler, 1987) and UK academics.’ Storey (1989: 8) distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that ‘The hard one emphasizes the quantitative, calculative and busi- ness-strategic aspects of managing human resources in as “rational” a way as for any other economic fac- tor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communica- tion, motivation and leadership.’ However, it was suggested by Keenoy (1997: 838) that ‘hard and soft HRM are complementary rather than mutually ex- clusive practices.’ Research in eight UK organizations by Truss et al (1997) indicated that the distinction between hard and soft HRM was not as precise as some commentators have implied. Themes An analysis of HRM philosophy was made by Karen Legge (1989: 25) who looked at a number of HRM models and suggested that their common themes were that … human resource policies should be integrated with strategic business planning and used to reinforce an appropriate (or change an inappropriate) organizational culture, that human resources are valuable and a source of competitive advantage, that they may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act flexibly in the interests of the ‘adaptive organization’s’ pursuit of excellence. This description of the HRM philosophy was rein- forced by John Storey (2001:7) who wrote that The beliefs of HRM include the assumptions that it is the human resource which gives competitive edge, that the aim should be to enhance employee commitment, that HR decisions are of strategic importance and that therefore HR policies should be integrated into the business strategy. Criticisms of HRM On the face of it, the original philosophy of HRM had much to offer, at least to management. But for some time HRM has been a controversial topic in academic circles. Peccei (2004) identified two main perspectives. The first ‘optimistic’ one is the idea that HRM can make a positive impact on the wellbeing of employees. In accordance with social exchange the- ory, when management adopts progressive HR poli- cies that provide a more interesting, supportive and rewarding work environment, workers will respond with enhanced levels of engagement with the organi- zation and their work and thus achieve higher levels of performance. Both the organization and its em-
10 Part 1 | Fundamentals of Human Resource Management ployees will therefore benefit – the concept of‘mutual gains’. In contrast, the second ‘pessimistic’ perspec- tive is that HRM is potentially harmful to employees and leads to the ­ intensification of work and their sys- tematic exploitation. It is employers rather than em- ployees who benefit from HRM – profits before people. An early criticism was made by a practitioner, Alan Fowler (1987: 3): At the heart of the concept is the complete identification of employees with the aims and values of the business – employee involvement but on the company’s terms. Power in the HRM system remains very firmly in the hands of the employer. Is it really possible to claim full mutuality when at the end of the day the employer can decide unilaterally to close the company or sell it to someone else? Keenoy (1990: 3) developed this notion and referred to HRM as a ‘wolf in sheep’s clothing’ – fundamen- tally exploitative (that’s what happens to resources) but presented under the guise of the contention that human factors were paramount (a ‘humanistic’ ap- proach). This view was reinforced by Legge (1998: 42) who asserted that HRM is ‘macho-management dressed up as benevolent paternalism’. Guest (1999: 6) referred to such comments as the ‘radical critique of HRM’ and summarized them as follows: This view of HRM, in which workers are viewed primarily as resources or objects, is attractive to some managers, if only to remind them of past neglect of a potentially untapped resource. But it is also an easy and familiar target for criticism. It reflects a long-standing capitalist tradition in which the worker is viewed as a commodity. The resultant exploitation may be paternalist and benevolent; but equally, it may operate against the interests of workers. Essentially, workers are simply resources to be squeezed and disposed of as business requirements dictate. More importantly, the interests of workers and their wellbeing are of no significance in themselves. Marchington (2015: 176) observed that HRM has always been located at the interface of potentially conflicting forces within organizations. However, in its quest for legitimacy, HRM has tended primarily to look up the hierarchy and focus on narrow performance goals, so neglecting other long-standing values and stakeholders. Unless HRM reasserts its independence, it is likely to wither both in academic and practitioner circles. Dundon et al (2017:19) referred to the‘inherent bias in managerial writings to treat workers as objects to be subservient to some employer-led mission.’ They also commented unfavourably on the unitarist fla- vour of mainstream HRM – the belief that manage- ment and employees share the same concerns. Guest (2017: 22) noted that, while what he called the mu- tual gains model suggests that HRM should benefit both individuals and organizations, ‘the dominant models within HRM theory and research continue to focus largely on ways to improve performance, with employee concerns very much a secondary con- sideration.’ Dundon and Rafferty (2018: 377) ar- gued that HRM as a form of professional practice ‘… is at risk of impoverishment. The main reason for this… is ideological individualism and marketi- sation with an attendant neglect of wider organiza- tional, employee and societal concerns.’ There is something in these criticisms although they tend to ignore the positive proposals of Michael Beer and his colleagues or fail to take account of the fact that managements can exploit employees and ignore their interests irrespective of the philosophy of HRM. Armstrong (2000) suggested that many of the practices associated with the concept of human re- source management were flourishing under different names before the notion of HRM emerged. There have been a number of developments in these prac- tices, for example HR analytics, performance man- agement, talent management, competency-based HR, the focus on experiential and self-managed learning, the attention paid to employee engagement and the concept of total reward, but they have not been driven by the theory and philosophy of HRM. The fact that the pace of change in people manage- ment is faster than before the 1980s is not attribut- able to the advent of HRM. It has been forced on organizations by the rapidly changing business, po- litical, economic and social environment. And the criticisms quoted above could equally apply to the approach of ‘profits before people’ as practiced by some businesses, which owes little to the HRM con- cept and a lot to a perspective on ­ capitalism in which, as Hyman (1987) observed, meant that em- ployers required employees to be both ­ dependable and disposable.
11 Chapter 1 | The Essence of HRM The philosophy of people management The term ‘human resources’ is controversial. Osterby and Coster (1992: 31) claimed that it ‘reduces people to the same category of value as materials, money and technology – all resources, and resources are only valuable to the extent they can be exploited or leveraged into economic value.’ This view has accel- erated the move to replace it with ‘people manage- ment’ and this is the term that is generally used by theCharteredInstituteofPersonnelandDevelopment (CIPD). However, it is not enough simply to replace HRM with a more acceptable name.A philosophy of people management needs to be developed to pro- vide guidance on how people should be treated. This should be based on two interrelated principles. The first is the use of a multi-stakeholder approach The second is that employees should be regarded as peo- ple rather than as exploitable resources. Treating employees as stakeholders Employees have a stake in their organization that is just as important as the stake held by owners and senior management. The attention given to the in- terests of employees has to equal the attention given to the interests of the business. In their seminal book on HRM, Beer et al (1984: 15) observed that HRM policies are and indeed should be influenced by the interests of various stakeholders: shareholders, management, employees, community and government. Unless these policies are influenced by all stakeholders, the enterprise will fail to meet the needs of these stakeholders in the long run and it will fail as an institution. In 2015 Michael Beer, Paul Boselie and Chris Brewster reviewed the state of this somewhat ­ neglected perspective after 30 years. They stated that ‘we need to take a wider, more contextual, more multi-layered approach founded on the long-term needs of all relevant stakeholders’ (2015: 427). They also argued that ‘Fundamental to a multi-stakeholder approach must be the crea- tion, maintenance, and development of a culture of trust among the different stakeholders. Consid­ ering HRM as a social system, in contrast to the dominant individual perspective, puts the rela- tionships between stakeholders at the centre of our studies’ (432). In a business, its owners and its senior manage- ment as principal agents of those owners are two of the key stakeholders. They will aim to achieve financial success as a necessary requirement for the survival of the business. So where does HRM stand? Boxall (2013: 59) noted that ‘HR strategy is part and parcel of a larger business model, and it fails if it does not serve the economic imperatives that are essential to that model.’ However, a funda- mental feature of people management is that ­ policies and practices should be looked at and de- veloped in accordance with the interests of the people affected by them, not just the economic needs of the business. Thompson and Harley (2007: 149) remarked that In an environment where employee skills and commitment are central to organizational success it is precisely by giving employees more that organizations will gain more… Successful strategies therefore rely on aligning employer and employee interests. A multi-stakeholder approach to managing the em- ployment relationship recognizes the need to sat- isfy the interests of the owners (the shareholders) of a business or achieve the purposes of a public or voluntary sector organization. It also recognizes the interests of the management of the organiza- tion and the organization’s responsibilities to its suppliers and the public at large (the community). Equally, however, it recognizes the interests of the people the organization employs and acts accord- ingly. People are not simply treated as resources – commodities or disposable factors of production who exist to be exploited at the behest of the own- ers and management. Essentially, people manage- ment aims to achieve a balance between the needs of employees and those of the other stakeholders, hard though that may be. It pursues employment policies that are socially legitimate and produce benefits for both employees and employers. It avoids the temptation to look upwards and focus on the strategic (business) aims of the organization at the expense of the wellbeing of the people in the organization.
12 Part 1 | Fundamentals of Human Resource Management Treating employees as people rather than as exploitable resources John Rawls (1973: 183) wrote that ‘We must treat persons solely as ends and not in any way as means.’ Schneider (1987: 450) argued that ‘Organizations are the people in them; that people make the place.’ Managing the employee experience is a ‘bottom up’ rather than a ‘top down’ process. To enhance the experience, the starting point is to gain understand- ing of how employees perceive what it is like to work in the organization and from that analysis ob- tain the evidence on what needs to be done to deal with any issues. Comparison between HRM and people management People management involves all aspects of manag- ing employees in accordance with the principles of adopting a multi-stakeholder approach and treating them as valued resources. A people management system will cover the same areas as an HRM sys- tem. People professionals will be responsible for the same things as HR professionals, but the ways in which they do them will differ. A comparison of the characteristics of HRM with those of people man- agement is given in the table below. People practices People practices are defined in the CIPD’s Profession Map (2021) as ‘the processes and approaches that we use across the employee life cycle: learning needs analysis, creating talent pools, developing people policies, analysing people data, managing griev- ances, recruiting people.’ The areas covered by peo- ple practices are similar to the HR system activities described earlier in this chapter but a philosophy of people management does or should guide their de- velopment and implementation. As the CIPD stated, people practices are applied in each stage of the employee life cycle.This ­ consists of the six stages of an employee’s involvement with an organization, namely: attraction, recruitment, onboarding, development, retention and ­separation. What good people practice looks like Good people practice is based on the evidence- based analysis of the circumstances of the organiza- tion, the challenges it has to meet, its people ­ requirements in terms of numbers and skills, and the levels of motivation, commitment and engage- ment employees need to play their part in achieving the organization’s strategic goals. The purpose and objectives of people practices will be clearly defined by reference to this analysis. Account will be taken of good practice elsewhere but care will be exer- cised to ensure that this practice fits the particular circumstances of the organization. Good people practice will be underpinned by the belief as expressed by the CIPD (2020: 21) that ‘Ultimately, all employees need to work in a sup- portive, engaging environment that welcomes indi- vidual perspectives.’ It will be strongly influenced by the views of line managers and employees generally on what is required. Good people practices are clear, easy to understand and readily administered by line managers with the help and guidance of peo- ple professionals as necessary. The impact of people practices People management practices impact on: ● ● performance – of individuals and the whole organization through resourcing and skills development; ● ● behaviour – influencing motivation, commitment and engagement; ● ● culture – through organizational development interventions; ● ● structures – by influencing organization design; ● ● systems – by influencing work and job design. Developing integrated people practices Complementary practices should be bundled into an integrated whole as described in Chapter 4. A strategic approach is required, necessitating the use
13 Chapter 1 | The Essence of HRM TABLE 1.1 Comparison between HRM and people management HRM (Traditional version) People management Concept/ philosophy Calvinism (focus on the values of order and regularity) Darwin (survival of the fittest) Quakerism (emphasis on non-authoritarian fellowship) Rawls (treat people as ends, not means) Ownership and priority Shareholder/senior management driven Employees regarded as factors of production Multi-stakeholder with employees as key Focus on employee wellbeing Approach Fads and flavours of the month Evidence-based Employment relationship Unitary perspective Legal employment contracts Compliance De-recognition Focus on managing diversity Formal joint consultation processes Pluralist perspective Psychological contracts Voluntarism Partnership/mutual gains Focus on both inclusion and diversity Importance attached to all forms of employee voice Work Work intensification Mechanistic Emphasis on job quality Flexible working Analytics Descriptive Annual engagement survey Predictive Pulse surveys Digital Human resource information systems Web-based applications: social media, cloud technologies, chatbots, smart phones Learning and development Systematic training Learning organization E-Learning Workplace/experiential/self-managed/social learning Organizational learning Blended learning Talent management Buy in the best talent and win the talent war Exclusive approach Elitist meritocracy Grow everyone’s talents Inclusive approach Grow your own (talent on demand) Performance emphasis Financial Individual Balanced scorecard Collective Rewards and incentives Financial emphasis Highly differentiated Individual performance pay and bonuses Total reward and recognition More widely shared – tackle low pay issues Profit sharing Performance management Formal system Results and pay focus Annual event Formal system Line managers as performance leaders Strengths-based and development focus Continuous dialogue and feedback SOURCE Adapted from an unpublished paper by Duncan Brown
14 Part 1 | Fundamentals of Human Resource Management of evidence-based HRM that involves line manag- ers and other employees (see Chapters 9 and 12). Testing new people practices New people management practices need to be tested to ensure that their objectives and perfor- mance criteria are being attained. These should have been defined when they were initiated in terms, for example, of return on investment. Reactions should be obtained from those responsi- ble for implementing and managing the practice and those affected by it on how well it is working and the extent to which it is meeting their needs. The costs and benefits of the practice should be as- sessed and an estimate of the added value it has produced. Any problems in implementing the pol- icy or practice should be identified and methods of solving them worked out. Managing people Organizations have to obtain and develop the talented, skilled and engaged people they need, manage their performance, reward them in accordance with their contribution, create and maintain positive employment relationships and provide for the wellbeing of their employees. The HR architecture The HR architecture is a comprehensive representation of all that is involved in HRM. It incorporates the HR system of policies and practices, the roles and behaviour of managers and employees generally and the contribution made by members of the HR function. The HR system The core of the HR system is a set of interrelated and jointly supportive people management practices or activities. The range and nature of these activities is governed by the organization’s context – its internal and external environments – and its HR philosophy, strategies and policies. The components of an HR system are: ● ● HR strategies, which define the direction in which it is intended that HRM should go in each of its main Key learning points areas of activity. The concept of strategic human resource emphasizes the importance of integrating HR strategies with corporate strategies to ensure that HR strategies support the achievement of organizational goals. ● ● HR policies, which set out what HR is there to do and provide guidelines defining how specific aspects of HR should be applied and implemented. ● ● HR practices, which consist of the HR activities involved in managing and developing people and in managing the employment relationship. HRM philosophy HRM philosophy emphasizes the importance of a strategic approach, proposes that people should be treated as assets rather than costs and indicates that it is primarily the responsibility of senior management. People management philosophy A philosophy of people management should be based on two interrelated principles: the first is the use of a multi-stakeholder approach; the second is that employees should be regarded as people rather than as exploitable resources.
15 Chapter 1 | The Essence of HRM References Armstrong, M (1987) Human resource management: a case of the emperor’s new clothes? Personnel Management, August, pp 30–35 Armstrong, M (2000) The name has changed but has the game remained the same? Employee Relations, 22 (6), pp 576–89 Becker, B E and Gerhart, S (1996) The impact of human resource management on organizational performance: progress and prospects, Academy of Management Journal, 39 (4), pp 779–801 Becker, B E, Huselid, M A and Ulrich, D (2001) The HR Score Card: Linking people, strategy, and performance, Boston, MA, Harvard Business School Press Beer, M, Boselie, P and Brewster, C (2015) Back to the future: implications for the field of HRM of the multi-stakeholder perspective proposed 30 years ago, Human Resource Management, 54 (3), pp 427–38 Beer, M, Spector, B, Lawrence, P, Quinn Mills, D and Walton, R (1984) Managing Human Assets, New York, The Free Press Bowen, D E and Ostroff, C (2004) Understanding HRM-firm performance linkages: the role of the ‘strength’ of the HRM system, Academy of Management Review, 29 (2), pp 202–21 Boxall, P F (2013) Mutuality in the management of human resources: assessing the quality of alignment in employment relationships, Human Resource Management Journal, 23 (1), pp 3–17 British Standards Institution (2015) BS 76000 Valuing people in organizations, https://shop.bsigroup. com/products/human-resource-valuing-people- management-system-requirements-and-guidance (archived at https://perma.cc/S3ZJ-KW4D) Chartered Institute of Personnel and Development (2020) People Profession 2030, London, CIPD Chartered Institute of Personnel and Development (2021) HR Profession Map, London, CIPD Dundon, T, Cullinane, N and Wilkinson, A (2017) A Very Short, Fairly Interesting and Reasonably Cheap Book About Employment Relations, London, Sage Dundon, T and Rafferty, A (2018) The (potential) demise of HRM? Human Resource Management Journal, 28 (3), pp 377–91 Fombrun, C J, Tichy, N M and Devanna, M A (1984) Strategic Human Resource Management, New York, Wiley Fowler, A (1987) When chief executives discover HRM, Personnel Management, January, p 3 Freeman, R E (1984) Strategic Management: A stakeholder perspective, Englewood Cliffs, NJ, Prentice Hall Guest, D E (1987) Human resource management and industrial relations, Journal of Management Studies, 24 (5), pp 503–21 Guest, D E (1999) Human resource management: the workers’ verdict, Human Resource Management Journal, 9 (2), pp 5–25 Guest, D E (2017) Human resource management and employee wellbeing: towards a new analytic framework, Human Resource Management Journal, 27 (1), pp 22–38 Hendry, C and Pettigrew, A (1990) Human resource management: an agenda for the 1990s, International Journal of Human Resource Management, 1 (1), pp 17–44 Hyman, R (1987) Strategy or structure? Capital, labour and control, Employment and Society, 1 (1), pp 25–55 Keenoy, T (1990) HRM: a case of the wolf in sheep’s clothing, Personnel Review, 19 (2), pp 3–9 Keenoy, T (1997) HRMism and the images of re-presentation, Journal of Management Studies, 34 (5), pp 825–41 Legge, K (1989) Human resource management: a critical analysis, in (ed) J Storey, New Perspectives in Human Resource Management, London, Routledge, pp 19–40 Legge, K (1998) The morality of HRM, in (eds) C Mabey, D Skinner and T Clark, Experiencing Human Resource Management, London, Sage, pp 14–32 Legge, K (2005) Human Resource Management: Rhetorics and Realities, 2nd edn, Basingstoke, Palgrave Macmillan Lepak, D P and Snell, S A (1999) The human resource architecture: toward a theory of human capital allocation and development, Academy of Management Review, 24 (1), pp 31–48 Marchington, M (2015) Human resource management (HRM): too busy looking up to see where it is going longer term? Human Resource Management Review, 25 (2), pp 176–87 Nishii, L H and Wright, P M (2008) Variability within organizations: implications for strategic human resource management, in (ed) D B Smith, The
16 Part 1 | Fundamentals of Human Resource Management People Make the Place, Mahwah, NJ, Lawrence Erlbaum Associates, pp 225–48 Osterby, B and Coster, C (1992) Human resource development – a sticky label, Training and Development, April, pp 31–32 Peccei, R (2004) Human Resource Management and the Search for a Happy Workplace, Rotterdam, Erasmus Research Institute of Management (ERIM) Rawls, J (1973) A Theory of Justice, Oxford, Oxford University Press Schneider, B (1987) The people make the place, Personnel Psychology, 40 (3), pp 437–53 Storey, J (1989) From personnel management to human resource management, in (ed) J Storey, New Perspectives on Human Resource Management, London, Routledge, pp 1–18 Storey, J (2001) Human resource management today: an assessment, in (ed) J Storey, Human Resource Management: A critical text, London, Thompson Learning, pp 3–20 Storey, J (2007) What is human resource management? in (ed) J Storey, Human Resource Management: A critical text, 2nd edn, London, Thompson Learning, pp 3–19 Thompson, P and Harley, B (2007) HRM and the worker: labour process perspectives, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford, Oxford University Press, pp 147–65 Truss, C, Gratton, L, Hope-Hailey, V, McGovern, P and Stiles, P (1997) Soft and hard models of human resource management: a re-appraisal, Journal of Management Studies, 34 (1), pp 53–73
02 Human capital management Introduction Human capital management (HCM) is an approach to managing people which recognizes their value and the importance of measuring that value. It re- gards people as assets and emphasizes that competi- tive advantage is achieved by strategic investments in those assets. As Hitt et al (2001) established through their research in professional service firms, leveraging human capital had a positive effect on firm performance. This chapter starts with a definition of the con- cept of human capital and continues with an analy- sis of its constituents and a discussion of how it can be measured. The chapter then describes the ap- proaches to people management raised by human capital theory, and concludes with a look at invest- ment decisions and HCM. Human capital management defined Human capital management (HCM) is concerned with the knowledge, skills, abilities and capacity to develop and innovate possessed by people in an or- ganization and the added value they therefore pro- vide. It treats them as assets to be invested in through resourcing, talent management and learn- ing and development policies and practices. The aim is to enhance the value of the organization’s human capital so that the business can perform successfully in the short and longer term and achieve competi- tive advantage. HCM also involves measuring the value of an organization’s human capital, assessing the contribution of people and measuring the effec- tiveness of the HR practices used to manage them. As pointed out by Delery and Roumpi (2017: 9), human capital in the shape of intellectual and social capital is different from other types of resources in that it is owned by employees and can be transferred to other firms if they leave. Therefore, it is critical for firms to use HRM systems to enhance existing levels of human capital, initially by attracting high- quality people and providing them with develop- ment opportunities, and then preventing the loss of their human capital investments to other firms by enhancing the commitment of employees to the firm and applying retention policies. As Wright et al (1994: 320) noted: ‘Sustained competitive advan- tage is achieved only by the interaction between the human capital pool and the HR practices.’ Skaggs and Youndt (2004) used a sample of 234 service organizations and found strong empirical sup- port to indicate that if fit is achieved between human capital and the organization's strategic positioning, the result is positive organizational ­ performance. The concept of human capital Human capital is the knowledge, skills and abilities of the people employed in an organization. Human capital theory regards people as assets and stresses that investment by organizations in people will gen- erate worthwhile returns. It was noted by Wong (2017: 2) that: The [human capital] journey starts with clarity on the value that the organisation and its activities 17
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Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
Armstrong's Handbook of Human Resource Management Practice (2023).pdf
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Armstrong's Handbook of Human Resource Management Practice (2023).pdf

  • 1.
  • 2. PRAISE FOR ARMSTRONG’S HANDBOOK OF HUMAN RESOURCE MANAGEMENT PRACTICE Armstrong and Taylor’s text provides comprehensive and user-friendly coverage of key concepts and models of HRM, HRM processes and applications together with related delivery strategies. This edition extends and updates earlier versions, and is testimony to its enduring relevance and appeal. John Simmons, Lecturer, University of Liverpool Management School (about a previous edition) There is a reason why Michael Armstrong’s HR books represent a gold standard: they are both thorough and academically rigorous but benefit from real-world experience and an informed perspective on practice. Robert Jeffrey, Editor-in-Chief, People Management (about a previous edition) Armstrong’s authoritative handbook continues to be a paragon of HR texts. The new edition of this indubitably vital HR resource for students, tutors and practitioners alike, follows a tried and trusted, coherent format. Lezlee-Jayne Stones, Associate Professor, Academic Lead, Workforce Planning and Resources, University of Lincoln (about a previous edition) This comprehensive book is a major resource and gives the reader both an in-depth and detailed view of all major assignments that the HR Manager will encounter in the work setting. It is also a valuable asset for the student of HR Management. Thordur S Oskarsson PhD, retired Adjunct Professor, School of Business, University of Iceland (about a previous edition) A detailed, yet accessible text suitable for all levels. This latest edition further establishes its position as the ‘go to’ text for HR students, academics and practitioners alike. I highly recommend it. Dr Edward O’Connor, Assistant Professor, Maynooth University, School of Business (about a previous edition) Michael Armstrong could well be offering the definitive text in the field… an excellent book. The Times Higher Education Supplement (about a previous edition) Topical, comprehensive, well-informed and student-friendly. Dr Izabela Robinson, Associate Lecturer, Northampton Business School (about a previous edition) The gold standard when it comes to HRM texts. Connie Nolan, former Senior Lecturer, Canterbury Christ Church University (about a previous edition) If any book is a contender for one of the standard references of the HR profession, this is it… it covers just about everything that might be considered broadly relevant to practising HR. Personnel Today (about a previous edition) Armstrong’s approach to HRM is sufficiently academic but tempered with good practice and common sense. Dr Janet Astley, Senior Lecturer, York St John Business School (about a previous edition) This book [is] a must-read for everyone who has a strong interest in the management of human resources. Niki Kyriakidou, Leeds Business School, on behalf of the International Journal of Training and Development (about a previous edition) i
  • 3. ALSO AVAILABLE BY MICHAEL ARMSTRONG Armstrong on Reinventing Performance Management Armstrong’s Essential Human Resource Management Practice Armstrong’s Handbook of Learning and Development Armstrong’s Handbook of Management and Leadership for HR Armstrong’s Handbook of Performance Management Armstrong’s Handbook of Reward Management Practice (with Duncan Brown) Armstrong’s Handbook of Strategic Human Resource Management Armstrong’s Job Evaluation Handbook Evidence-Based Reward Management (with Duncan Brown and Peter Reilly) How to Be an Even Better Manager How to Manage People Human Capital Management (with Angela Baron) The Reward Management Toolkit (with Ann Cummins) ii
  • 4. ARMSTRONG’S HANDBOOK OF HUMAN RESOURCE MANAGEMENT PRACTICE MICHAEL ARMSTRONG WITH STEPHEN TAYLOR 16TH EDITION A guide to the theory and practice of people management iii
  • 5. Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or the author. First edition published in 1977 as A Handbook of Personnel Management Practice by Kogan Page Seventh edition published in 1999 as A Handbook of Human Resource Management Practice Eleventh edition published in 2009 as Armstrong’s Handbook of Human Resource Management Practice Sixteenth edition 2023 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 2nd Floor, 45 Gee Street London EC1V 3RS United Kingdom www.koganpage.com 8 W 38th Street, Suite 902 New York, NY 10018 USA 4737/23 Ansari Road Daryaganj New Delhi 110002 India © Michael Armstrong, 1977 , 1984, 1988, 1991, 1995, 1996, 1999, 2001, 2003, 2006, 2009, 2012, 2014, 2017 , 2020, 2023 The right of Michael Armstrong to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBNs Hardback 978 1 3986 0665 4 Paperback 978 1 3986 0663 0 Ebook 978 1 3986 0664 7 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Armstrong, Michael, 1928- author. | Taylor, Stephen, 1965- author. Title: Armstrong’s handbook of human resource management practice / Michael Armstrong, with Stephen Taylor. Description: 16th edition. | London; New York, NY: Kogan Page, 2023. | Includes bibliographical references and index. Identifiers: LCCN 2022049912 (print) | LCCN 2022049913 (ebook) | ISBN 9781398606630 (paperback) | ISBN 9781398606654 (hardback) | ISBN 9781398606647 (ebook) Subjects: LCSH: Personnel management–Handbooks, manuals, etc. Classification: LCC HF5549.17 .A76 2023 (print) | LCC HF5549.17 (ebook) | DDC 658.3–dc23/eng/20221019 LC record available at https://lccn.loc.gov/2022049912 LC ebook record available at https://lccn.loc.gov/2022049913 Typeset by Integra Software Services, Pondicherry Print production managed by Jellyfish Printed and bound by CPI Group (UK) Ltd, Croydon CR0 4YY iv
  • 6. CONTENTS IN BRIEF List of figures xxxi List of tables xxxiii Preface xxxv PART I Fundamentals of human resource management 1 01 The essence of HRM 3 02 Human capital management 17 03 The context of HRM 24 04 The future of work 27 05 HRM and organizational performance 35 06 The ethical dimension of HRM 47 07 Corporate social responsibility 57 PART II The strategic approach to HRM 63 08 Strategic HRM 65 09 HR strategy 74 PART III Delivering HR 85 10 The role of HR 87 11 The HRM role of line managers 100 PART IV Human resource management processes 107 12 Evidence-based HRM 109 13 HR analytics 113 14 Digital HRM 119 v
  • 7. vi Contents in Brief 15 Knowledge management 127 16 Competency-based HRM 131 PART V Organization 137 17 Organizational behaviour 139 18 Organization design 158 19 Work design 164 20 Job design 171 21 Organization development 179 PART VI Factors affecting the behaviour of people at work 193 22 Motivation 195 23 Commitment 210 24 Employee engagement 218 PART VII People resourcing 231 25 Resourcing strategy 233 26 Workforce planning 235 27 Recruitment and selection 245 28 Talent management 265 PART VIII Employment practices 275 29 The employee experience 277 30 Managing employment 281 31 Managing diversity and inclusion 298
  • 8. vii Contents in Brief 32 Managing flexibility 303 33 Managing home and hybrid working 309 PART IX Learning and development 317 34 The basis of learning and development 319 35 Strategic learning and development 325 36 Organizational learning and the learning organization 329 37 Individual learning 334 38 The process of learning and development 344 39 The practice of learning and development 353 40 Leadership and management development 366 PART X Performance management 375 41 The basis of performance management 377 42 Performance management systems 383 43 Performance leadership 393 PART XI Reward management 401 44 The basis of reward management 403 45 Reward strategy 415 46 The practice of reward management 420 47 Managing reward for special groups 435 48 Reducing the gender pay gap 445 PART XII Employment relations 453 49 The basis of employment relations 455 50 Employment relations strategy 459
  • 9. viii Contents in Brief 51 The employment relationship 464 52 The psychological contract 469 53 The practice of industrial relations 473 54 Employee voice 479 55 Employee communications 486 PART XIII Employee wellbeing 491 56 Principles and practice of employee wellbeing 493 57 Health and safety 501 PART XIV HR practices 513 58 HR policies 515 59 HR procedures 522 60 Dealing with the legal aspects of employment 528 PART XV International HRM 543 61 The basis of international HRM 545 62 The practice of international HRM 551 63 Managing expatriates 559 PART XVI People management skills and competencies 569 64 Strategic people management skills 571 65 Business skills 573 66 Dealing with business issues from an HR perspective 581 67 Problem-solving and decision-making skills 586 68 Analytical and critical skills 591 69 Research skills 596
  • 10. ix Contents in Brief 70 Statistical skills 608 71 Selection interviewing skills 613 72 Job, role and skills analysis and competency modelling 623 73 Learning and development skills 638 74 Negotiating skills 643 75 Change management 649 76 Influencing skills 659 77 Leadership 663 78 Handling people problems 671 79 Handling challenging conversations 678 80 Managing conflict 679 81 Political skills 683 82 Project management 687 PART XVII Conclusion 689 83 Trends in HRM 691 CIPD Profession Map: Cross-references to text 696 Author index 700 Subject index 705
  • 11. THIS PAGE IS INTENTIONALLY LEFT BLANK x
  • 12. CONTENTS List of figures xxxi List of tables xxxiii Preface xxxv PART I Fundamentals of human resource management 1 01 The essence of HRM 3 Introduction 3 The practice of HRM 3 The HR architecture 3 The HR system 4 The philosophy of people management 11 People practices 12 References 15 02 Human capital management 17 Introduction 17 Human capital management defined 17 The concept of human capital 17 The constituents of human capital 18 Measuring human capital 19 Approaches to HRM raised by human capital theory 20 HCM and investment decisions 20 References 22 03 The context of HRM 24 Introduction 24 Environmental factors 24 The labour market 25 References 26 04 The future of work 27 Introduction 27 The nature of work 27 Theories explaining the meaning of work 27 What is happening to work? 29 The factors affecting work 29 xi
  • 13. xii Contents What is happening to work now? 30 What is going to happen to work? 32 References 33 05 HRM and organizational performance 35 Introduction 35 Measuring organizational performance 35 The impact of HR 36 How HRM makes an impact 38 The development of high-performance working 42 High-performance work systems 42 References 45 06 The ethical dimension of HRM 47 Introduction 47 The meaning and concerns of ethics 47 The nature of ethical decisions and judgements 47 Fairness 48 Equity theory 49 Justice 49 HRM ethical guidelines 50 Ethical dilemmas 52 The ethical role of HR 53 References 55 07 Corporate social responsibility 57 Introduction 57 Corporate social responsibility defined 57 Strategic CSR defined 58 CSR activities 58 The rationale for CSR 59 The opposing view 59 Social responsibility investment criteria 60 Benefits of CSR 60 The basis for developing a CSR strategy 60 The role of HR 61 References 62 PART II The strategic approach to HRM 63 08 Strategic HRM 65 Introduction 65 The nature of strategic human resource management 65 The resource-based view of SHRM 66 Strategic fit 67
  • 14. xiii Contents Critical evaluation of the concept of SHRM 70 References 72 09 HR strategy 74 Introduction 74 The nature of HR strategy 74 Approaches to HR strategy 75 Developing HR strategy 78 Implementing HR strategy 81 References 82 PART III Delivering HR 85 10 The role of HR 87 Introduction 87 The HR function 87 The role of the HR professional 92 References 98 11 The HRM role of line managers 100 Introduction 100 The people management role of line managers 100 How well does devolution to line managers of HR responsibilities work? 101 Factors affecting the quality of the implementation of HRM by line managers 102 Dealing with the factors 103 References 105 PART IV Human resource management processes 107 12 Evidence-based HRM 109 Introduction 109 Evidence-based HRM defined 109 Evidence-based management 109 The approach to evidence-based HRM 110 References 112 13 HR analytics 113 Introduction 113 HR analytics defined 113 The purpose of HR analytics 113 The content of HR analytics 114 The process of HR analytics 114
  • 15. xiv Contents Types of HR analytics 114 Keeping people informed 118 References 118 14 Digital HRM 119 Introduction 119 Digital HRM defined 119 The purpose of digital HRM 119 The uses of digital HRM 120 Digital transformation 121 Human resource information system (HRIS) 121 Cloud computing 121 Artificial intelligence 122 Managing digital HRM 123 References 126 15 Knowledge management 127 Introduction 127 Knowledge management defined 127 The meaning of knowledge 127 Approaches to knowledge management 128 Knowledge management issues 129 Implementing knowledge management 129 References 130 16 Competency-based HRM 131 Introduction 131 Competency defined 131 Knowledge, skills and abilities (KSAs) 132 Competency frameworks 132 Developing a competency framework 133 Approaches to using competencies 133 Applications of competency-based HRM 134 Keys to success in using competencies 134 References 135 PART V Organization 137 17 Organizational behaviour 139 Introduction 139 Organizational behaviour defined 139 The sources and applications of organizational behaviour theory 140 How organizations function 141 Organizational culture 144
  • 16. xv Contents Organizational climate 147 Organizational processes 148 Characteristics of people 150 Implications for HR specialists 153 References 156 18 Organization design 158 Introduction 158 Organization design theories 158 Organization design guidelines 159 Organizational choice 160 The approach to organization design 161 Successful organization design 162 References 163 19 Work design 164 Introduction 164 Work design – a short history 164 Work system design 164 Approaches to work design 165 The role of HR in work design 168 References 169 20 Job design 171 Introduction 171 Job quality 171 What is a good job? 172 The practice of job design 173 Principles of job design 175 Approaches to job design 176 Responsibility for job design 176 Job crafting 176 References 178 21 Organization development 179 Introduction 179 Organization development defined 179 The nature of organization development 179 The story of organization development 180 Organization development strategy 183 Organization development programmes 184 Organizational diagnosis 184 Conclusions on organization development 189 References 190
  • 17. xvi Contents PART VI Factors affecting the behaviour of people at work 193 22 Motivation 195 Introduction 195 The meaning of motivation 195 Reinforcement theory 196 Content theory 196 Process theory 199 Intrinsic and extrinsic motivation 201 Motivation and job satisfaction 202 Motivation and financial incentives 205 Conclusions on motivation theory 205 Motivation strategies 205 References 207 23 Commitment 210 Introduction 210 The meaning of organizational commitment 210 Mutuality and commitment 210 Commitment and performance 211 The mutual gains perspective 211 Commitment and engagement 212 Factors affecting commitment 212 Critical evaluation of the concept of commitment 213 Developing a commitment strategy 214 References 216 24 Employee engagement 218 Introduction 218 The meaning of employee engagement 218 The theory of engagement 219 The components of employee engagement 219 Drivers of employee engagement 221 Outcomes of engagement 221 Engagement strategy 222 Enhancing job engagement 222 Enhancing organizational engagement 225 Burnout 225 Measuring engagement 226 Critical evaluation of the concept of employee engagement 227 References 229
  • 18. xvii Contents PART VII People resourcing 231 25 Resourcing strategy 233 Introduction 233 Strategic resourcing 233 The nature of resourcing strategies 233 Reference 234 26 Workforce planning 235 Introduction 235 Workforce planning defined 235 The link between workforce and business/corporate planning 236 Incidence of workforce planning 236 Workforce planning issues 236 Systematic workforce planning 237 Approach to workforce planning 241 References 243 27 Recruitment and selection 245 Introduction 245 The recruitment and selection process 245 Defining requirements 246 Attracting candidates 247 Sourcing candidates 248 Screening applications 253 Selection methods 253 Selection interviews 255 Selection testing 257 Assessment centres 260 Making the decision 260 Provisional offers and obtaining references 261 Offering employment 262 Following up 262 Dealing with recruitment problems 262 References 263 28 Talent management 265 Introduction 265 Talent management defined 265 Talent management policy 266 Talent management strategy 267 The process of talent management 268 The talent pool 268 Talent planning 269
  • 19. xviii Contents Resourcing 269 Identifying talent 269 Talent development 271 References 274 PART VIII Employment practices 275 29 The employee experience 277 Introduction 277 The concept of the employee experience 277 References 280 30 Managing employment 281 Introduction 281 Introduction to the organization 281 Managing employee retention 283 Employee turnover 285 Redundancy 289 Fire and rehire 289 Dismissal 290 Absence management 290 Presenteeism 293 References 296 31 Managing diversity and inclusion 298 Introduction 298 The meaning and significance of managing diversity and inclusion 298 The rationale for managing diversity and inclusion 299 How to manage diversity and inclusion 299 References 302 32 Managing flexibility 303 Introduction 303 Forms of flexibility 303 Flexible working 305 Zero-hours contracts 306 The role of HR 307 References 308 33 Managing home and hybrid working 309 Introduction 309 Incidence of home and hybrid working 309 Working from home: general considerations 310
  • 20. xix Contents Employers 310 Line managers 311 Individual employees 312 Managing home and hybrid working processes 313 References 315 PART IX Learning and development 317 34 The basis of learning and development 319 Introduction 319 Learning and development defined 319 The basis of learning 319 The elements of learning and development 319 Formal and informal learning 320 Connected learning 322 The components of learning and development 322 Relationships between L&D and other people management activities 322 The ethical dimension 322 The state of L&D 322 References 324 35 Strategic learning and development 325 Introduction 325 Strategic learning and development 325 Learning and development strategies 325 Formulating and implementing L&D strategies 327 Reference 328 36 Organizational learning and the learning organization 329 Introduction 329 Organizational learning 329 The learning organization 331 Comparison of the organizational learning and learning organization concepts 332 References 333 37 Individual learning 334 Introduction 334 The characteristics of individual learning 334 How people learn 335 The 70:20:10 model 337 Self-directed learning 337 Learning to learn 340 Personal development planning 341
  • 21. xx Contents Continuing professional development 341 References 342 38 The process of learning and development 344 Introduction 344 Identify learning needs 344 Planning learning and development 347 Implement 347 Evaluate learning 347 References 352 39 The practice of learning and development 353 Introduction 353 Workplace learning 353 Social learning 356 Digital learning 357 Training 361 Apprenticeships 364 References 365 40 Leadership and management development 366 Introduction 366 Leadership and management development defined 366 The nature of leadership and management 366 Leadership development 368 Management development 370 Criteria for leadership and management development 373 References 374 PART X Performance management 375 41 The basis of performance management 377 Introduction 377 Performance management defined 377 The purpose and aims of performance management 378 The nature of performance management 378 The impact of performance management 379 Performance management – the ethical dimension 379 Factors affecting the approach to managing performance 380 Choice of approach to managing performance 380 How managers can manage performance 380 References 382
  • 22. xxi Contents 42 Performance management systems 383 Introduction 383 Features of a performance management system 383 Performance and development planning 383 Monitoring 385 Reviewing 385 360-degree feedback 386 The reality of performance management 387 Performance management issues 388 References 391 43 Performance leadership 393 Introduction 393 What ‘engaging managers’ do 393 The concept of performance leadership 394 Performance leadership skills 395 Performance conversations 395 Conclusion 398 References 399 PART XI Reward management 401 44 The basis of reward management 403 Introduction 403 Reward management defined 403 The reward system 404 Aims of reward management 404 Reward drivers 405 Values and beliefs 405 Reward policy 406 Financial rewards 410 Non-financial rewards 411 Total reward 411 References 414 45 Reward strategy 415 Introduction 415 The content of reward strategy 415 Formulating reward strategy 416 Critical evaluation of the concept of reward strategy 418 References 419
  • 23. xxii Contents 46 The practice of reward management 420 Introduction 420 Market pricing 420 Job evaluation 421 Base pay management 422 Contingent pay 426 Recognition schemes 429 Employee benefits 429 Administering reward management 430 References 434 47 Managing reward for special groups 435 Introduction 435 Executive remuneration 435 Reward management for sales and customer service staff 438 Paying manual workers 440 References 444 48 Reducing the gender pay gap 445 Introduction 445 Reasons for the gender pay gap 445 Actions to reduce gender pay gaps 446 Narrowing the gap at organizational level 448 References 451 PART XII Employment relations 453 49 The basis of employment relations 455 Introduction 455 The meaning of employment relations 455 Approaches to employment relations 456 Management style in employment relations 456 Employment relations policies 457 References 458 50 Employment relations strategy 459 Introduction 459 The nature of employment relations strategy 459 Strategy for creating a constructive and positive employment relations climate 460 Strategy for achieving mutual gains 460 Partnership agreement strategy 461 Strategy for building trust 461 Employee voice strategy 461
  • 24. xxiii Contents Trade union recognition strategy 462 References 463 51 The employment relationship 464 Introduction 464 The nature of the employment relationship 464 The basis of the employment relationship 464 Labour process theory and the employment relationship 465 Employment relationship contracts 466 Managing the employment relationship 466 Developing a climate of trust 467 References 468 52 The psychological contract 469 Introduction 469 The psychological contract defined 469 The significance of the psychological contract 470 The psychological contract and the employment relationship 470 How psychological contracts develop 470 The problem with psychological contracts 470 Developing and maintaining a positive psychological contract 471 References 472 53 The practice of industrial relations 473 Introduction 473 Trade union membership 473 Union recognition 473 Collective bargaining 474 Collective agreements 475 Dispute resolution 476 Informal employee relations processes 477 References 478 54 Employee voice 479 Introduction 479 The need for employee voice 479 Degrees of employee voice 479 Direct voice 480 Indirect voice 482 Employees’ experience of voice 483 References 484
  • 25. xxiv Contents 55 Employee communications 486 Introduction 486 The importance of communications 486 What should be communicated 486 Approach to communications 487 Communication channels 487 Employee communication strategy 488 References 489 PART XIII Employee wellbeing 491 56 Principles and practice of employee wellbeing 493 Introduction 493 The basis of wellbeing 493 The case for caring about wellbeing 494 Factors affecting wellbeing 495 Employee wellbeing strategy 495 References 499 57 Health and safety 501 Introduction 501 Managing health and safety at work 501 Health and safety policies 501 Conducting risk assessments 502 Health and safety audits 504 Health and safety inspections 505 Accident prevention 505 Occupational health programmes 506 Managing stress 506 Measuring health and safety performance 507 Communicating the need for better health and safety practices 508 Health and safety training 508 Organizing health and safety 509 References 511 PART XIV HR practices 513 58 HR policies 515 Introduction 515 Why have HR policies? 515 Overall HR policy 515 Specific HR policies 516 Developing HR policies 520 Implementing HR policies 520
  • 26. xxv Contents 59 HR procedures 522 Introduction 522 Capability procedure 522 Disciplinary procedure 523 Grievance procedure 524 Redundancy procedure 525 60 Dealing with the legal aspects of employment 528 Introduction 528 Employment law provisions 528 How is employment law enforced? 536 HRM and employment law 537 Dealing with Employment Tribunal claims and cases 539 References 542 PART XV International HRM 543 61 The basis of international HRM 545 Introduction 545 The international scene 545 International HRM strategies 546 Contextual factors 546 Convergence and divergence 548 References 549 62 The practice of international HRM 551 Introduction 551 HR in international subsidiaries 551 Differences between international and domestic HRM 552 Workforce planning 552 Resourcing 552 International talent management 554 International performance management 554 International reward management 555 Multicultural working 556 Role of the international HR function 556 References 558 63 Managing expatriates 559 Introduction 559 Why use expatriates? 559 The process of managing expatriates 559 Resourcing policies 560
  • 27. xxvi Contents Recruitment and selection policies 561 Preparation policy 562 Assimilation and support 562 Career management 563 Performance management 563 Re-entry policies 564 Pay and allowances policies 564 References 566 PART XVI People management skills and competencies 569 64 Strategic people management skills 571 Introduction 571 The strategic role of the HR professional 571 The strategic business partner model 571 The strategic skills required 571 Reference 572 65 Business skills 573 Introduction 573 Business skills 573 Financial skills 574 Business models 577 Business model innovation 577 References 580 66 Dealing with business issues from an HR perspective 581 Introduction 581 Identify business issues 581 Establish people factors 582 Critically analyse relevant HR policy and practice 582 Conduct or participate in research 583 Analyse quantitative and qualitative information 583 Draw conclusions 584 Prepare and make the business case 584 Reference 585 67 Problem-solving and decision-making skills 586 Introduction 586 Problem solving 586 Decision making 588 References 590
  • 28. xxvii Contents 68 Analytical and critical skills 591 Introduction 591 Analytical skills 591 Diagnostic skills 592 Logical reasoning 592 Critical thinking 593 Critical evaluation 593 Developing and justifying arguments 594 A final word 594 References 595 69 Research skills 596 Introduction 596 The nature of research 596 Planning and conducting research programmes 597 Research methodology 598 Methods of collecting data 599 Processes involved in research 602 References 607 70 Statistical skills 608 Introduction 608 Frequency 608 Measures of central tendency 608 Measures of dispersion 608 Correlation 609 Regression 609 Causality 610 Tests of significance 610 Testing hypotheses 611 References 612 71 Selection interviewing skills 613 Introduction 613 Preparing for the interview 613 Conducting a selection interview 614 Types of interviews 615 Selection interview questions 617 Common interviewing mistakes 619 Coming to a conclusion 620 References 622
  • 29. xxviii Contents 72 Job, role and skills analysis and competency modelling 623 Introduction 623 Definitions 623 Job analysis 624 Job descriptions 626 Role analysis and role profiles 628 Skills analysis 628 Competency modelling 632 References 637 73 Learning and development skills 638 Introduction 638 Coaching 638 Mentoring 639 Facilitating 639 Job instruction 640 References 642 74 Negotiating skills 643 Introduction 643 The process of negotiation 643 Stages of negotiation 643 Negotiating and bargaining skills 647 Reference 648 75 Change management 649 Introduction 649 Change 649 The process of change management 650 The responsibility for change 655 Guidelines for change management 656 References 657 76 Influencing skills 659 Introduction 659 Persuading people 659 Case presentation 660 Making a business case 660 Facilitating 661 Coordinating discussions 661 77 Leadership 663 Introduction 663 The meaning of leadership 663
  • 30. xxix Contents Leadership theories 663 What leaders do 664 Leadership styles 664 Types of leaders 665 The qualities of a good leader 667 Effective leadership 668 References 669 78 Handling people problems 671 Introduction 671 Approach 671 Disciplinary issues 671 Absenteeism 672 Handling poor timekeeping 673 Handling negative behaviour 674 Dealing with under-performance 676 79 Handling challenging conversations 678 80 Managing conflict 679 Introduction 679 Handling inter-group conflict 679 Handling interpersonal conflict 680 Resolving conflict between team members 681 Reference 682 81 Political skills 683 Introduction 683 Typical political approaches 683 Using political means to get things done 684 Political sensitivity 684 Dangers of politics 684 Dealing with organizational politics 685 Reference 686 82 Project management 687 Introduction 687 Project planning 687 Setting up the project 688 Controlling the project 688
  • 31. xxx Contents PART XVII Conclusion 689 83 Trends in HRM 691 Introduction 691 Overall trends 691 Specific trends 693 References 695 CIPD profession map: Cross-references to text 696 Author index 700 Subject index 705
  • 32. LIST OF FIGURES FIGURE 0.1 Handbook route map xxxvii FIGURE 1.1 An HR system 5 FIGURE 2.1 Human capital evaluation – Civil Aviation Authority 21 FIGURE 5.1 The black box phenomenon 39 FIGURE 5.2 Impact of HRM on organizational performance 40 FIGURE 5.3 The AMO model as a framework for performance-enhancing HRM practices 41 FIGURE 9.1 The different strategy domains 75 FIGURE 9.2 The Five Strategic Pillars at MHCLG 77 FIGURE 9.3 HR effectiveness checklist 79 FIGURE 9.4 Stakeholder analysis matrix 80 FIGURE 9.5 The Selfridge stakeholder value model 80 FIGURE 12.1 Interrelationships between the components of evidence-based management 111 FIGURE 17.1 Sources and applications of organization behaviour theory 140 FIGURE 20.1 Model of job quality 172 FIGURE 22.1 The process of motivation according to content theory 197 FIGURE 22.2 Motivation model (Porter and Lawler) 199 FIGURE 24.1 IES model of employee engagement 220 FIGURE 24.2 How reward policies influence performance through engagement 224 FIGURE 26.1 Workforce planning flow chart 238 FIGURE 27.1 Example of a person specification 247 FIGURE 27.2 Example of an application form 252 FIGURE 27.3 Use of different types of selection methods 254 FIGURE 27.4 A normal curve 258 FIGURE 28.1 The process of talent management 268 FIGURE 28.2 A nine-point performance/potential assessment grid 270 FIGURE 28.3 The CEMEX model of talent management 272 FIGURE 30.1 A survival curve 287 FIGURE 33.1 Guidelines for managing home and hybrid workers 312 FIGURE 34.1 Formal and informal learning 320 FIGURE 34.2 The components of learning and development 321 FIGURE 36.1 Single- and double-loop learning 330 FIGURE 37.1 The Kolb learning cycle 335 FIGURE 38.1 Learning needs analysis – areas and methods 345 FIGURE 38.2 The learning gap 345 FIGURE 38.3 A learning specification 346 FIGURE 39.1 Systematic training model 361 xxxi
  • 33. xxxii List of Figures FIGURE 41.1 Lloyds Banking Group: Definition of the purpose of the performance management system 378 FIGURE 42.1 The performance management cycle 384 FIGURE 42.2 Model of the performance management system in Astra-Zeneca 384 FIGURE 42.3 Model of the performance management system in Halifax Bank 385 FIGURE 42.4 Model of the performance management system in Pfizer Inc 385 FIGURE 42.5 Performance management form (part 1) 386 FIGURE 42.6 Performance management form (part 2) 387 FIGURE 43.1 Example of competency profile for a performance leader with positive and negative indicators 396 FIGURE 43.2 Features of effective performance and development conversations 397 FIGURE 44.1 The reward system 404 FIGURE 44.2 Reward drivers 405 FIGURE 44.3 Total reward model 411 FIGURE 45.1 A model of the reward strategy development process 417 FIGURE 46.1 Typical grade and pay structures 423 FIGURE 46.2 A direct link between ratings and pay increases 432 FIGURE 46.3 A pay matrix 432 FIGURE 51.1 Dimensions of the employment relationship 465 FIGURE 54.1 Stages of employee voice 480 FIGURE 70.1 Examples of charts 609 FIGURE 70.2 A scattergram with regression (trend) line 610 FIGURE 71.1 Telephone interview assessment form 616 FIGURE 71.2 Example of an interview rating form 621 FIGURE 72.1 Example of a job description 627 FIGURE 72.2 Example of a role profile 629 FIGURE 72.3 Example of a generic role profile 630 FIGURE 74.1 Negotiating range with a settlement zone 646 FIGURE 74.2 Negotiating range without a settlement zone 646 FIGURE 77.1 John Adair’s model of leadership 664
  • 34. LIST OF TABLES TABLE 1.1 Comparison between HRM and people management 13 TABLE 5.1 Research on the link between HRM and organizational performance 37 TABLE 5.2 Components of an HPWS 43 TABLE 10.1 Key HR specialist competency areas 95 TABLE 13.1 HR data and their possible uses 115 TABLE 16.1 Example of a basic competency framework 132 TABLE 16.2 Example of competency framework definition with positive and negative indicators 133 TABLE 17.1 Schools of organization theory 142 TABLE 18.1 Mechanistic and organic design 161 TABLE 21.1 Organization development activities 187 TABLE 22.1 Summary of motivation theories 203 TABLE 22.2 Motivation strategies 206 TABLE 24.1 Employee engagement management competency framework 223 TABLE 27.1 Validity of different selection methods 254 TABLE 30.1 A survival rate analysis 287 TABLE 30.2 Leavers’ length of service analysis 288 TABLE 37.1 The practical implications of learning theory 338 TABLE 37.2 The staged self-directed learning model 340 TABLE 44.1 Theories explaining pay levels 407 TABLE 46.1 Summary description of different formal grade and pay structures 424 TABLE 46.2 Summary of individual contingent pay schemes 427 TABLE 47.1 Summary of payment and incentive arrangements for sales staff 438 TABLE 47.2 Comparison of shop floor payment-by-result schemes 441 TABLE 48.1 Actions that can be taken by organizations to reduce a gender pay gap 448 TABLE 56.1 Wellbeing factors and actions 495 TABLE 62.1 Advantages and disadvantages of using PCNs or HCNs 553 TABLE 69.1 Analysis of basic data collection methods 604 TABLE 71.1 Dos and don’ts of selection interviewing 620 TABLE 72.1 Criteria for a fully rigorous competency definition (Shippman et al, 2000) 633 TABLE 74.1 Commercial and industrial relations negotiations compared 644 xxxiii
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  • 36. PREFACE TO THE 16TH EDITION This 16th edition of the Handbook of Human Resource Management Practice includes new chapters on the future of work, digital HRM, the employee experience, managing home and hybrid working, performance leader- ship and trends in HRM. Other chapters have been extensively revised and the handbook has been brought up to date by reference to the findings of a number of significant research pro- jects and other investigations of how HRM op- erates in practice. The plan of the book is illustrated in the ‘route map’ shown in Figure 0.1. The logic of the sequence of 16 parts is as follows. ● ● Part I provides a conceptual framework for the rest of the handbook. It consists of a general introduction to human resource management (HRM) and human capital management HCM), a description of the context within which HRM operates, analyses of the future of work and the contribution HRM makes to performance and, finally, two chapters covering respectively the important subjects of HRM ethics and corporate social responsibility. ● ● Part II extends the descriptions of the fundamental features of HRM covered in Part I to examine the more dynamic aspects of HRM – generally in the process of strategic HRM, and specifically in the formulation and implementation of specific HRM. ● ● Part III describes how HRM is delivered through the HR function and line managers. ● ● Part IV deals with the HRM processes that affect the whole organization, namely evidence-based HRM, HR analytics, digital HRM, the growing use of artificial intelligence (AI), knowledge management, competency-based HRM, the ethical dimension of HRM and corporate social responsibility. ● ● Parts V and VI cover the general considerations relating to organizational and individual behaviour that need to be taken into account in planning and managing the specific HRM practices dealt with in subsequent parts of the book. ● ● Parts VII to XIII contain descriptions of the main HRM activities, namely resourcing, employment, learning and development, performance management, reward management, employment relations and employee wellbeing. ● ● Part XIV describes the HR practices concerned with HR policies, HR procedures and dealing with employment legislation. ● ● Part XV is concerned with international HRM. It covers the special considerations that affect how organizations manage the people working in other countries, including local inhabitants and expatriates. These considerations include how the HRM practices described in earlier parts may need to be adapted to suit international requirements. ● ● Part XVI is devoted to describing the considerable range of skills and competencies needed by HR professionals. ● ● Part XVII presents conclusions on trends in HRM. The appendix provides cross-references from the core and specialist knowledge requirements set out in the current version of the CIPD Profession Map to the text. The companion website at www.koganpage. com/Armstrong/HRMPresources provides extensive additional resources for lecturers and students. These comprise: ● ● A lecturer’s manual containing notes on how teaching could be organized by xxxv
  • 37. xxxvi Preface reference to the chapters in the main text and the supplementary material in the manual. Suggestions are made on various kinds of semesters and guidance is provided on the links between the handbook text and CIPD core and specialist knowledge requirements.The manual includes sections for each chapter containing a summary of the main learning points, an outline of the subject matter, discussion points and questions with comments on the points to be considered. In many chapters there are multiple- choice questions, case studies and role-playing exercises. Most of the chapters contain supplementary abstracts from relevant HRM publications. ● ● Additional material is provided for lecturers in the shape of PowerPoint slides with notes covering all the chapters. ● ● A student’s manual consisting of material that can be used to reinforce the contents of the main book. Summaries of each chapter are provided and in addition most of the chapters include supplementary abstracts from relevant HRM literature. To assist in revision, the extra material includes multiple- choice questions and ‘flash’ cards containing questions and answers about key aspects of the subject matter. There are also: ● ● A number of case studies ● ● A glossary of HRM terms ● ● An HRM bibliography
  • 38. xxxvii Preface FIGURE 0.1 Handbook route map 7 People resourcing 25 Resourcing strategy 26 Workforce planning 27 Recruitment and selection 28 Talent management 8 Employment practices 29 The employee experience 30 Managing employment 31 Managing diversity and inclusion 32 Managing flexibility. 33 Managing home and hybrid working 9 Learning and development (L&D) 11 Reward management (RM) 56 The practice of employee wellbeing 57 Health and safety 15 International HRM 10 Performance management 1 Fundamentals of human resource management (HRM) 1 Human resource management (HRM) 2 Human capital management 3 The context of HRM 4 The future of work 5 HRM and performance 6 The ethical dimension of HRM 7 Corporate social responsibility 5 Organization 17 Organizational behaviour 18 Organization design 19 Work design 20 Job design 21 Organization development 22 Motivation 23 Commitment 24 Employee engagement 6 Factors affecting the behaviour of people at work 2 The strategic approach to HRM 8 Strategic HRM 9 HR strategy 3 Delivering HR 10 Role of HR 11 The HRM role of line managers 4 HRM processes 12 Evidence-based HRM 13 HR analytics 14 Digital HRM 15 Knowledge management 16 Competency-based HRM 16 HR skills and competencies 17 Conclusion: Trends in HRM 64 Strategic skills 65 Business skills 66 Dealing with business issues 67 Problem-solving and decision-making skills 68 Analytical and critical skille 69 Research skills 70 Statistical skills 71 Selection interviewing 72 Job, role and competency analysis 73 L&D skills 74 Negotiating skills 75 Change management 76 Influencing skills 77 Leadership 78 Handling people problems 79 Handling challenging conversations 80 Managing conflict 81 Political skills 82 Project management 58 HRM policies 59 HRM procedures 60 Dealing with the legal aspects of employment 44 The basis of RM 45 Reward strategy 46 The practice of RM 47 Managing reward for special groups 48 Reducing the gender pay gap 34 The basis of L&D 35 Strategic L&D 36 Organizational learning 37 Individual learning 38 The process of L&D 39 The practice of L&D 40 Leadership and management development 41 The basic of performance management 42 Performance management systems 43 Performance leadership 13 Employee wellbeing 49 The basis of employment relations 50 Employment relations strategy 51 The employment relationship 52 The psychological contract 53 The practice of industrial relations 54 Employee voice 55 Employee communications 12 Employment relations 14 HR practices 61 The basis of international HRM 62 The practice of international HRM 63 Managing expatriates
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  • 40. PART I Fundamentals of human resource management PART I CONTENTS 01 The essence of HRM 02 Human capital management 03 The context of HRM 04 The future of work 05 HRM and organizational performance 06 The ethical dimension of HRM 07 Corporate social responsibility Introduction Human resource management (HRM) is about the management of people in order to achieve desired results. The aim of this part is to look at HRM in general and review a number of the factors that affect it in order to provide a backcloth to the detailed consid- eration given to the practice of HRM elsewhere in the handbook. The term HRM generally refers to the overall concept and practice of human resource manage- ment, while the term HR often refers specifically to the function responsible for HRM or HRM practi- tioners. However, HR is frequently used as a syn- onymous term for HRM. Chapter 1 covers the conceptual basis of human resource management and the characteristics of an HR system. Chapter 2 examines the associated concept of humancapitalmanagement(HCM).Thisis­concerned with a basic tenet of human resource management – that people should be valued as assets. It is therefore important to measure the value of that human capital and make good use of the information gained from the measurements. The practice of HRM is affected by the context in which it takes place and this is covered in Chapter 3. A separate chapter (4) is devoted to an important aspect of the context – the future of work as affected by developments in new technology and events such as the Covid-19 pandemic. 1
  • 41. 2 Part 1 | Fundamentals of Human Resource Management A theme running through most of the chapters in this book is the impact of different aspects of HRM on performance. Chapter 5 provides a background for these discussions by considering how HRM makes an impact. Another theme throughout the handbook is the need for organizations to take full account of their social responsibilities. This includes acting ethically in accordance with articulated values when dealing with any matters concerning employees and other stakeholders and exercising concern over social and environmental issues. These issues are dealt with in Chapters 6 and 7 respectively.
  • 42. 01 The essence of HRM This is explained by contingency theory which states that HRM practices must fit the organization’s envi- ronment and circumstances. This is the notion of ‘best fit’ which contrasts with that of ‘best practice’. The latter makes the dubious assumption that there is a set of best HRM practices that are universal in the sense that they are best in any situation. The sig- nificance of contingency theory is that it draws at- tention to the needs, first to be clear about how any proposed or existing HR practice will fit the particu- lar needs and characteristics of the organization, and second to avoid simply reproducing what is regarded as best practice irrespective of its relevance. The process of managing people is carried out through the HR system within the framework of what is termed the HR architecture. The HR architecture The HR architecture is a comprehensive representa- tion of all that is involved in HRM. It incorporates the HR system of policies and practices, the roles and be- haviour of managers and employees generally and the contribution made by members of the HR function. The term ‘HR architecture’ was first used by Becker and Gerhart (1996: 786) in an article exam- ining the strategic impact of HR on key perfor- mance outcomes. They wrote that ‘There may be a best HR system but whatever the bundles or con- figurations of policies implemented, the individual policies must be aligned with one another and be consistent with the HR architecture if they are ulti- mately to have an effect on firm performance.’ The concept was developed by Lepak and Snell (1999), who stated that the HR architecture in an organiza- tion consists of its different employment modes, employment relationships and HR configurations. They suggested that it draws attention to HRM as a Introduction Organizations depend on people.They have to obtain and develop the capable, skilled, and engaged em- ployees they need, manage their performance, reward them in accordance with their contribution, create and maintain positive employment relationships and provide for their wellbeing. In essence, this is what human resource management (HRM) is about. The ultimate responsibility for how an organiza- tion manages people rests with senior managers. They are responsible for good governance – provid- ing leadership to ensure that the organization func- tions effectively. They set the tone and make policy decisions on key matters affecting the employment, development and wellbeing of employees. Line managers bring these polices to life. HR or people management professionals are there to provide both senior management and line managers with the advice, support and services they need. The practice of managing people as described in the first section of this chapter is commonly referred to as HRM (human resource management) or HR (human resources). This does not necessarily mean that it is deliberately based on the philosophy of HRM as developed in the 1980s. It is often no more than a convenient label. As Storey (2007: 6) pointed out: ‘In its generic broad and popular sense it [HRM] simply refers to any system of people man- agement.’ The term people management is being increasingly used as an alternative to HRM, espe- cially by the Chartered Institute of Personnel and Development (the CIPD). The practice of HRM How HRM is practised will vary according to the type of organization, the kind of people employed and the context in which the organization operates. 3
  • 43. 4 Part 1 | Fundamentals of Human Resource Management strategic asset, enables the study of the alternative employment arrangements used by firms and helps those concerned to understand which forms of human capital have the potential to be a source of competitive advantage. As explained by Becker et al (2001:12): ‘We use the term HR architecture to broadly describe the continuum from the HR pro- fessionals within the HR function, to the system of HR-related policies and practices, through the com- petencies, motivation and associated behaviours of the firm’s employees.’ The concept of HR architecture highlights the fact that managing people is a complex process af- fected by a number of interconnected factors. As Lepak and Snell (1999: 32) emphasized: It may be inappropriate to simplify the nature of human capital investments and suggest that there exists a single “optimal” HR architecture for managing all employees. Rather, we believe that the most appropriate mode of investment in human capital will vary for different types of human capital. The HR system The HR system provides the basis for managing peo- ple in an organization in order to achieve the results required. The core of the system consists of a set of interrelated and jointly supportive HRM practices or activities. The range and nature of these activities is governed by the organization’s context (its inter- nal and external environments) and by its people management philosophy, strategies and policies. The HR system is a key component of the HR architec- ture, which is in turn affected by the behaviours of employees and the contribution of the HR function. A strong HR system Bowen and Ostroff (2004) advocated a ‘strong’ HR system to ensure the more effective implementation of HRM practices. They developed a model of HRM in which HR practices can be viewed as com- munications from the employer to employee. They suggested that ‘when the HRM system is perceived as high in distinctiveness, consistency, and consen- sus, it will create a strong situation’ (2004: 208). They argued that a strong HRM system can signifi- cantly affect firm performance by creating power- ful, focused organizational cultures that help to structure and direct employee behaviour and effort towards desired organizational goals. They also em- phasized the important role of implementation in translating the intended HRM system into action. This point was later reinforced by Nishii and Wright (2008) who observed that there are gaps between intended and implemented HR systems and be- tween implemented and perceived HR systems. The components of an HR system An HR system as illustrated in Figure 1.1 incorpo- rates: ● ● HR strategies, which define the direction in which it is intended that HRM should go in each of its main areas of activity. The concept of strategic human resource emphasizes the importance of integrating HR strategies with corporate strategies to ensure that the former support the achievement of organizational goals. It also stresses the need to integrate strategies covering different aspects of HR with one another. ● ● HR policies, which set out what HR does and provide guidelines defining how specific aspects of HR should be applied and implemented. ● ● HR practices, which consist of the HR activities involved in managing and developing people and in managing the employment relationship. These are part of the HR architecture and provide the core of the system. They are affected by the considerations of stakeholder interests, corporate social responsibility and HR values. The CIPD Profession map describes these as ‘people activities’. The system will be aligned to the interests of stake- holders. It will take account of the need to exercise social responsibility and to be value-driven. Stakeholder interests The system needs to satisfy the interests of stakehold- ers. A stakeholder (a term introduced by Freeman, 1984) is a person or a body that has a legitimate in- terest in an organization. Internal ­ stakeholders can
  • 44. 5 Chapter 1 | The Essence of HRM FIGURE 1.1 An HR system Resourcing Organization Learning and development Reward management Employment relations Employee wellbeing HR processes Stakeholder interests HR strategies HR policies and procedures practices Context – internal and external environment Context – internal and external environment Human capital management Organization design Performance management Wellbeing policy and practice Employment relationship Organization development Workforce planning Managing diversity and inclusion Knowledge management Industrial relations Recruitment and selection Organizational learning Job evaluation and pay surveys Work design Talent management Individual learning Base pay management and contingent pay Employee voice Health and safety Digital HRM Job design Employment practices Leadership and management development Employee benefits Employee communi- cations Employment law compliance HR analytics HR practices HR architecture Employee behaviours HR function Strategic HRM International HRM The employee experience HR values
  • 45. 6 Part 1 | Fundamentals of Human Resource Management include the owners of a company (shareholders or the authorities or trustees in charge of an organiza- tion), senior management and employees generally. External stakeholders consist of customers, clients, suppliers and the community or public at large. In a business, its owners and its senior management as principal agents of those owners are two of the key stakeholders. They will aim to achieve competitive advantage (the ability to outperform competitors) and financial success (maximize shareholder value) as a necessary requirement for the survival of the business. In a not-for-profit organization the aim of those in charge will be to achieve its purpose effec- tively and efficiently. In both cases, these aims will be expressed as strategic goals. Employees are the other key stakeholders in an organization. Their interests will be to be treated fairly and justly, to be given opportunities and a rea- sonable degree of security, and to be provided with a working environment in which their wellbeing is properly looked after. The interests of the external stakeholders are addressed through corporate ­ social responsibility policies and practices. Corporate social responsibility Corporate social responsibility (CSR) is exercised by organizations when they conduct their business in an ethical way, taking account of the social, environ- mental and economic impact of how they operate, and going beyond compliance. A socially responsi- ble approach to running an organization will ­directly affect its HR philosophy and, therefore, its HR strategies and policies. Values for managing people Organizations and the HR function within them should be value-driven. The values should be based on the belief that people are valuable in themselves as well as sources of value. Values may not be ar- ticulated although they can be an important albeit implicit aspect of the corporate culture: ‘the way things are done around here’. But there is much to be said for expressing them formally as a value statement so that they function as a set of guiding principles – setting out what is believed to be ­ appropriate behaviour and action. The nature of these will be affected by the culture and context of the organization. But guidance on what might be covered in a value statement is provided by the following British Standards Institution (2015) standards: ● ● People working on behalf of the organization have intrinsic value, in addition to their protections under the law or in regulation, which needs to be respected. ● ● Stakeholders and their interests are integral to the best interests of the organization. ● ● Every organization is part of wider society and has a responsibility to respect its social contract as a corporate citizen and operate in a manner that is sustainable. ● ● A commitment to valuing people who work on behalf of the organization and to meeting the requirements of the standard is made and supported at the highest level. An example of a ten-point value statement is given below: 1 People should be treated with dignity and respect. 2 Just treatment is the absolute right of all employees. 3 The organization has a duty of care for those who work there and should promote their wellbeing in the broadest sense. 4 People have the moral right to be dealt with properly above and beyond their legal rights. 5 Everyone should be given the scope to use and develop their talents effectively. 6 People should have equal access to opportunities at work in line with their capabilities. 7 People should be able to influence the decisions that affect them. 8 The environment should enable different kinds of people to thrive and succeed. 9 The organization is committed to dealing with diversity and inclusion on the basis that everyone should be valued as an individual and treated fairly irrespective of their race, gender, level of disability, religion, sexual orientation or age. 10 The organization has to exercise social responsibility by being concerned with the interests of all its stakeholders.
  • 46. 7 Chapter 1 | The Essence of HRM Values such as these form the basis of good people practice. They will be influenced by the philosophies attached to the concepts of HRM and people man- agement as examined later in this chapter. However, while it is not too difficult to devise and publish a set of values, it is much more difficult to put them into practice, to make them ‘values in use’. It is helpful if they are articulated but they are more likely to influ- ence behaviour when employees have participated in developing them and if they are explicitly supported by people management policies and practice and by the example and leadership of senior management. The main components of the model illustrated in Figure 1.1 in terms of processes, practices and the employee experience are described below. HR processes Strategic human resource management (SHRM) – an approach to managing people that is concerned with ensuring that key issues of human resource management are dealt with strategically in order to support the achievement of organizational goals. Dealing with HR issues strategically means decid- ing what needs to be done now and in the longer term through the integration of HR strategies with business strategy and with one another, and then ensuring that what needs to be done is done. SHRM can be regarded as an attitude of mind rather than a set of prescribed techniques. Human capital management (HCM) – treating peo- ple as assets and achieving competitive advantage by strategic investments in those assets. It involves measuring the value of human capital in order to represent the value of people and making good use of the information gained from measurements gen- erated by HR analytics. Knowledge management – storing, sharing and making good use of the wisdom, understanding and expertise accumulated in an organization about its processes, techniques and operations. HR analytics – the application of mathematical, sta- tistical and data collection techniques to obtain data on and therefore insight into HR matters con- cerned with the application and impact of HR em- ployment, learning and development and reward strategies, policies and practices, and to inform ­ evidence-based HR decisions. Digital HRM – the use of digital technologies in the form of web-based applications involving analytics, artificial intelligence (AI), cloud technologies, com- puter hardware and software, smart phones and social media to help deliver HRM services. HR procedures – these set out the ways in which certain actions concerning people should be carried out by the management or individual managers. In effect, they constitute a formalized approach to dealing with specific matters of policy and practice such as handling disciplinary issues, redundancies or poor performance (capability). Employment law compliance – ensuring that em- ployment law requirements are met by the organi- zation and its individual managers and employees and dealing with employment law issues if they arise. HR practices Organization – designing organization structures, work systems and jobs and developing organiza- tions to ensure that they function effectively. Resourcing – the employment activities of: ● ● workforce planning – establishing an organization’s people requirements so that plans can be made to satisfy them; ● ● recruitment and selection – finding the people the organization needs and deciding which applicants or candidates should be appointed to fill vacancies. ● ● talent management – ensuring that the organization has the capable and well- qualified people it needs to attain its goals. It involves the systematic attraction, retention, identification and development of individuals who are of particular value to an organization. Employment – managing the employee experience (what happens to people at work and how they feel about it) and dealing with the following aspects of employment in an organization: induction (on- boarding), release and retention of employees, ab- sence management, fulfilling the obligations of the organization to promote inclusion and manage di- versity, seeking ways in which to increase flexible
  • 47. 8 Part 1 | Fundamentals of Human Resource Management working to benefit both individuals and the organi- zation and managing home and hybrid workers. Learning and development – ensuring that the or- ganization has the capable people it needs to achieve its goals. Learning and development takes place at organizational and individual levels. It involves ena- bling employees to acquire knowledge and skills and develop their potential through experience and social contacts, coaching, mentoring, guidance pro- vided by line managers, self-managed learning, digi- tal learning and formal training provided by the organization. It includes special arrangements for developing leadership and management capabilities. Performance management – the continuous process of agreeing objectives for individuals and teams, aligning those objectives with the strategic goals of the organization, planning performance to achieve the objectives, reviewing and assessing progress, taking steps to improve performance when neces- sary and developing the capabilities of people. Performance management is exercised by line man- agers acting as performance leaders. It provides a means of identifying learning and development needs and rewarding people through recognition and the provision of opportunities as well as in- forming performance pay decisions where these are required. Reward management – the development, implemen- tation and maintenance of a reward system that provides for contribution and merit to be recog- nized by financial and non-financial means. Financial reward management consists of processes for deciding the value of jobs (job evaluation and pay surveys), base pay management (administering pay structures), contingent (performance) pay and employee benefits such as pensions. Non-financial reward management means providing rewards by recognition or by giving people the scope for achievement, responsibility, autonomy, influence and personal growth. Employment relations (also known as employee re- lations) – managing the employment relationship and the psychological contract and relating to em- ployees either collectively through trade unions ­ (industrial relations) or individually. Employment relations also involve providing employees with a voice and developing communications between them and management. Employee wellbeing – improving the quality of working life of individuals in terms of their experi- ence of work – how satisfied they are with their job and how the organization treats them. This includes their work–life balance, flexible working, physical, mental and financial wellbeing, relationships with their line manager and colleagues and the extent to which they have a sense of purpose and feel in con- trol of what they do. International HRM – the process of managing peo- ple across international boundaries by multina- tional companies (MNCs).It involves the ­worldwide management of people, not just the management of expatriates. HR processes and procedures – implementing HRM through a variety of processes and procedures that affect the approach adopted in practice areas and support the implementation of HR strategies, poli- cies and activities. They interact with one another and other aspects of people management and there- fore play a key part in the operation of HRM as a system. The employee experience The employee experience is about what happens to people at work and how they feel about it. This is influenced by all the other HR activities in the HR system. The reactions of employees to these activi- ties and their views about them should be taken into account in deciding on the nature of the activities. HRM as a philosophy HRM as a philosophy presents a particular view of the ways in which people should be managed at work which may directly or indirectly affect an or- ganization’s people management philosophy. As originally conceived, HRM emphasizes the impor- tance of a strategic approach, proposes that people should be treated as assets rather than costs, and indicates that it is primarily the responsibility of senior management. Origins HRM emerged in the 1980s as a conceptual frame- work for the management of human resources
  • 48. 9 Chapter 1 | The Essence of HRM ­ underpinned by a number of theories drawn from the behavioural sciences and from the fields of stra- tegic management, human capital management and industrial relations. As Hendry and Pettigrew (1990: 18) observed: ‘HRM was heavily normative from the start: it provided a diagnosis and proposed solutions.’ They also stated that ‘What HRM did at this point was to wrap around some of the observ- able changes, while providing a focus for challeng- ing deficiencies – in attitudes, scope, coherence and direction – of existing personnel management’ (20). The ‘founding fathers’ of HRM were two teams of US academics. Beer et al (1984: 1) in their ‘Harvard framework’ proposed that ‘Human re- source management (HRM) involves all manage- ment decisions and actions that affect the nature of the relationship between the organization and em- ployees – its human resources.’ They argued that the three characteristic features of HRM were that (1) a strategic approach is adopted involving the align- ment of competitive strategy and HR policies, (2) employees are regarded as social capital (assets rather than costs) and (3) senior management, not the HR function, is responsible for HR policy deci- sions. In the ‘Michigan framework’ or ‘matching model’, Fombrun et al (1984: 37) recommended that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy: ‘The critical management task is to align the formal structure and human re- source systems so that they drive the strategic objec- tives of the organization.’ In the UK the founding fathers were followed by a number of commentators who developed, ex- plained and frequently criticized the concept. Guest (1987: 505) stated that ‘Human resource manage- ment appears to lean heavily on theories of commit- ment and motivation and other ideas derived from the field of organizational behaviour.’ And Karen Legge (2005: 101) commented that ‘The term [HRM] was taken up by both UK managers (for example, Armstrong, 1987; Fowler, 1987) and UK academics.’ Storey (1989: 8) distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that ‘The hard one emphasizes the quantitative, calculative and busi- ness-strategic aspects of managing human resources in as “rational” a way as for any other economic fac- tor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communica- tion, motivation and leadership.’ However, it was suggested by Keenoy (1997: 838) that ‘hard and soft HRM are complementary rather than mutually ex- clusive practices.’ Research in eight UK organizations by Truss et al (1997) indicated that the distinction between hard and soft HRM was not as precise as some commentators have implied. Themes An analysis of HRM philosophy was made by Karen Legge (1989: 25) who looked at a number of HRM models and suggested that their common themes were that … human resource policies should be integrated with strategic business planning and used to reinforce an appropriate (or change an inappropriate) organizational culture, that human resources are valuable and a source of competitive advantage, that they may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act flexibly in the interests of the ‘adaptive organization’s’ pursuit of excellence. This description of the HRM philosophy was rein- forced by John Storey (2001:7) who wrote that The beliefs of HRM include the assumptions that it is the human resource which gives competitive edge, that the aim should be to enhance employee commitment, that HR decisions are of strategic importance and that therefore HR policies should be integrated into the business strategy. Criticisms of HRM On the face of it, the original philosophy of HRM had much to offer, at least to management. But for some time HRM has been a controversial topic in academic circles. Peccei (2004) identified two main perspectives. The first ‘optimistic’ one is the idea that HRM can make a positive impact on the wellbeing of employees. In accordance with social exchange the- ory, when management adopts progressive HR poli- cies that provide a more interesting, supportive and rewarding work environment, workers will respond with enhanced levels of engagement with the organi- zation and their work and thus achieve higher levels of performance. Both the organization and its em-
  • 49. 10 Part 1 | Fundamentals of Human Resource Management ployees will therefore benefit – the concept of‘mutual gains’. In contrast, the second ‘pessimistic’ perspec- tive is that HRM is potentially harmful to employees and leads to the ­ intensification of work and their sys- tematic exploitation. It is employers rather than em- ployees who benefit from HRM – profits before people. An early criticism was made by a practitioner, Alan Fowler (1987: 3): At the heart of the concept is the complete identification of employees with the aims and values of the business – employee involvement but on the company’s terms. Power in the HRM system remains very firmly in the hands of the employer. Is it really possible to claim full mutuality when at the end of the day the employer can decide unilaterally to close the company or sell it to someone else? Keenoy (1990: 3) developed this notion and referred to HRM as a ‘wolf in sheep’s clothing’ – fundamen- tally exploitative (that’s what happens to resources) but presented under the guise of the contention that human factors were paramount (a ‘humanistic’ ap- proach). This view was reinforced by Legge (1998: 42) who asserted that HRM is ‘macho-management dressed up as benevolent paternalism’. Guest (1999: 6) referred to such comments as the ‘radical critique of HRM’ and summarized them as follows: This view of HRM, in which workers are viewed primarily as resources or objects, is attractive to some managers, if only to remind them of past neglect of a potentially untapped resource. But it is also an easy and familiar target for criticism. It reflects a long-standing capitalist tradition in which the worker is viewed as a commodity. The resultant exploitation may be paternalist and benevolent; but equally, it may operate against the interests of workers. Essentially, workers are simply resources to be squeezed and disposed of as business requirements dictate. More importantly, the interests of workers and their wellbeing are of no significance in themselves. Marchington (2015: 176) observed that HRM has always been located at the interface of potentially conflicting forces within organizations. However, in its quest for legitimacy, HRM has tended primarily to look up the hierarchy and focus on narrow performance goals, so neglecting other long-standing values and stakeholders. Unless HRM reasserts its independence, it is likely to wither both in academic and practitioner circles. Dundon et al (2017:19) referred to the‘inherent bias in managerial writings to treat workers as objects to be subservient to some employer-led mission.’ They also commented unfavourably on the unitarist fla- vour of mainstream HRM – the belief that manage- ment and employees share the same concerns. Guest (2017: 22) noted that, while what he called the mu- tual gains model suggests that HRM should benefit both individuals and organizations, ‘the dominant models within HRM theory and research continue to focus largely on ways to improve performance, with employee concerns very much a secondary con- sideration.’ Dundon and Rafferty (2018: 377) ar- gued that HRM as a form of professional practice ‘… is at risk of impoverishment. The main reason for this… is ideological individualism and marketi- sation with an attendant neglect of wider organiza- tional, employee and societal concerns.’ There is something in these criticisms although they tend to ignore the positive proposals of Michael Beer and his colleagues or fail to take account of the fact that managements can exploit employees and ignore their interests irrespective of the philosophy of HRM. Armstrong (2000) suggested that many of the practices associated with the concept of human re- source management were flourishing under different names before the notion of HRM emerged. There have been a number of developments in these prac- tices, for example HR analytics, performance man- agement, talent management, competency-based HR, the focus on experiential and self-managed learning, the attention paid to employee engagement and the concept of total reward, but they have not been driven by the theory and philosophy of HRM. The fact that the pace of change in people manage- ment is faster than before the 1980s is not attribut- able to the advent of HRM. It has been forced on organizations by the rapidly changing business, po- litical, economic and social environment. And the criticisms quoted above could equally apply to the approach of ‘profits before people’ as practiced by some businesses, which owes little to the HRM con- cept and a lot to a perspective on ­ capitalism in which, as Hyman (1987) observed, meant that em- ployers required employees to be both ­ dependable and disposable.
  • 50. 11 Chapter 1 | The Essence of HRM The philosophy of people management The term ‘human resources’ is controversial. Osterby and Coster (1992: 31) claimed that it ‘reduces people to the same category of value as materials, money and technology – all resources, and resources are only valuable to the extent they can be exploited or leveraged into economic value.’ This view has accel- erated the move to replace it with ‘people manage- ment’ and this is the term that is generally used by theCharteredInstituteofPersonnelandDevelopment (CIPD). However, it is not enough simply to replace HRM with a more acceptable name.A philosophy of people management needs to be developed to pro- vide guidance on how people should be treated. This should be based on two interrelated principles. The first is the use of a multi-stakeholder approach The second is that employees should be regarded as peo- ple rather than as exploitable resources. Treating employees as stakeholders Employees have a stake in their organization that is just as important as the stake held by owners and senior management. The attention given to the in- terests of employees has to equal the attention given to the interests of the business. In their seminal book on HRM, Beer et al (1984: 15) observed that HRM policies are and indeed should be influenced by the interests of various stakeholders: shareholders, management, employees, community and government. Unless these policies are influenced by all stakeholders, the enterprise will fail to meet the needs of these stakeholders in the long run and it will fail as an institution. In 2015 Michael Beer, Paul Boselie and Chris Brewster reviewed the state of this somewhat ­ neglected perspective after 30 years. They stated that ‘we need to take a wider, more contextual, more multi-layered approach founded on the long-term needs of all relevant stakeholders’ (2015: 427). They also argued that ‘Fundamental to a multi-stakeholder approach must be the crea- tion, maintenance, and development of a culture of trust among the different stakeholders. Consid­ ering HRM as a social system, in contrast to the dominant individual perspective, puts the rela- tionships between stakeholders at the centre of our studies’ (432). In a business, its owners and its senior manage- ment as principal agents of those owners are two of the key stakeholders. They will aim to achieve financial success as a necessary requirement for the survival of the business. So where does HRM stand? Boxall (2013: 59) noted that ‘HR strategy is part and parcel of a larger business model, and it fails if it does not serve the economic imperatives that are essential to that model.’ However, a funda- mental feature of people management is that ­ policies and practices should be looked at and de- veloped in accordance with the interests of the people affected by them, not just the economic needs of the business. Thompson and Harley (2007: 149) remarked that In an environment where employee skills and commitment are central to organizational success it is precisely by giving employees more that organizations will gain more… Successful strategies therefore rely on aligning employer and employee interests. A multi-stakeholder approach to managing the em- ployment relationship recognizes the need to sat- isfy the interests of the owners (the shareholders) of a business or achieve the purposes of a public or voluntary sector organization. It also recognizes the interests of the management of the organiza- tion and the organization’s responsibilities to its suppliers and the public at large (the community). Equally, however, it recognizes the interests of the people the organization employs and acts accord- ingly. People are not simply treated as resources – commodities or disposable factors of production who exist to be exploited at the behest of the own- ers and management. Essentially, people manage- ment aims to achieve a balance between the needs of employees and those of the other stakeholders, hard though that may be. It pursues employment policies that are socially legitimate and produce benefits for both employees and employers. It avoids the temptation to look upwards and focus on the strategic (business) aims of the organization at the expense of the wellbeing of the people in the organization.
  • 51. 12 Part 1 | Fundamentals of Human Resource Management Treating employees as people rather than as exploitable resources John Rawls (1973: 183) wrote that ‘We must treat persons solely as ends and not in any way as means.’ Schneider (1987: 450) argued that ‘Organizations are the people in them; that people make the place.’ Managing the employee experience is a ‘bottom up’ rather than a ‘top down’ process. To enhance the experience, the starting point is to gain understand- ing of how employees perceive what it is like to work in the organization and from that analysis ob- tain the evidence on what needs to be done to deal with any issues. Comparison between HRM and people management People management involves all aspects of manag- ing employees in accordance with the principles of adopting a multi-stakeholder approach and treating them as valued resources. A people management system will cover the same areas as an HRM sys- tem. People professionals will be responsible for the same things as HR professionals, but the ways in which they do them will differ. A comparison of the characteristics of HRM with those of people man- agement is given in the table below. People practices People practices are defined in the CIPD’s Profession Map (2021) as ‘the processes and approaches that we use across the employee life cycle: learning needs analysis, creating talent pools, developing people policies, analysing people data, managing griev- ances, recruiting people.’ The areas covered by peo- ple practices are similar to the HR system activities described earlier in this chapter but a philosophy of people management does or should guide their de- velopment and implementation. As the CIPD stated, people practices are applied in each stage of the employee life cycle.This ­ consists of the six stages of an employee’s involvement with an organization, namely: attraction, recruitment, onboarding, development, retention and ­separation. What good people practice looks like Good people practice is based on the evidence- based analysis of the circumstances of the organiza- tion, the challenges it has to meet, its people ­ requirements in terms of numbers and skills, and the levels of motivation, commitment and engage- ment employees need to play their part in achieving the organization’s strategic goals. The purpose and objectives of people practices will be clearly defined by reference to this analysis. Account will be taken of good practice elsewhere but care will be exer- cised to ensure that this practice fits the particular circumstances of the organization. Good people practice will be underpinned by the belief as expressed by the CIPD (2020: 21) that ‘Ultimately, all employees need to work in a sup- portive, engaging environment that welcomes indi- vidual perspectives.’ It will be strongly influenced by the views of line managers and employees generally on what is required. Good people practices are clear, easy to understand and readily administered by line managers with the help and guidance of peo- ple professionals as necessary. The impact of people practices People management practices impact on: ● ● performance – of individuals and the whole organization through resourcing and skills development; ● ● behaviour – influencing motivation, commitment and engagement; ● ● culture – through organizational development interventions; ● ● structures – by influencing organization design; ● ● systems – by influencing work and job design. Developing integrated people practices Complementary practices should be bundled into an integrated whole as described in Chapter 4. A strategic approach is required, necessitating the use
  • 52. 13 Chapter 1 | The Essence of HRM TABLE 1.1 Comparison between HRM and people management HRM (Traditional version) People management Concept/ philosophy Calvinism (focus on the values of order and regularity) Darwin (survival of the fittest) Quakerism (emphasis on non-authoritarian fellowship) Rawls (treat people as ends, not means) Ownership and priority Shareholder/senior management driven Employees regarded as factors of production Multi-stakeholder with employees as key Focus on employee wellbeing Approach Fads and flavours of the month Evidence-based Employment relationship Unitary perspective Legal employment contracts Compliance De-recognition Focus on managing diversity Formal joint consultation processes Pluralist perspective Psychological contracts Voluntarism Partnership/mutual gains Focus on both inclusion and diversity Importance attached to all forms of employee voice Work Work intensification Mechanistic Emphasis on job quality Flexible working Analytics Descriptive Annual engagement survey Predictive Pulse surveys Digital Human resource information systems Web-based applications: social media, cloud technologies, chatbots, smart phones Learning and development Systematic training Learning organization E-Learning Workplace/experiential/self-managed/social learning Organizational learning Blended learning Talent management Buy in the best talent and win the talent war Exclusive approach Elitist meritocracy Grow everyone’s talents Inclusive approach Grow your own (talent on demand) Performance emphasis Financial Individual Balanced scorecard Collective Rewards and incentives Financial emphasis Highly differentiated Individual performance pay and bonuses Total reward and recognition More widely shared – tackle low pay issues Profit sharing Performance management Formal system Results and pay focus Annual event Formal system Line managers as performance leaders Strengths-based and development focus Continuous dialogue and feedback SOURCE Adapted from an unpublished paper by Duncan Brown
  • 53. 14 Part 1 | Fundamentals of Human Resource Management of evidence-based HRM that involves line manag- ers and other employees (see Chapters 9 and 12). Testing new people practices New people management practices need to be tested to ensure that their objectives and perfor- mance criteria are being attained. These should have been defined when they were initiated in terms, for example, of return on investment. Reactions should be obtained from those responsi- ble for implementing and managing the practice and those affected by it on how well it is working and the extent to which it is meeting their needs. The costs and benefits of the practice should be as- sessed and an estimate of the added value it has produced. Any problems in implementing the pol- icy or practice should be identified and methods of solving them worked out. Managing people Organizations have to obtain and develop the talented, skilled and engaged people they need, manage their performance, reward them in accordance with their contribution, create and maintain positive employment relationships and provide for the wellbeing of their employees. The HR architecture The HR architecture is a comprehensive representation of all that is involved in HRM. It incorporates the HR system of policies and practices, the roles and behaviour of managers and employees generally and the contribution made by members of the HR function. The HR system The core of the HR system is a set of interrelated and jointly supportive people management practices or activities. The range and nature of these activities is governed by the organization’s context – its internal and external environments – and its HR philosophy, strategies and policies. The components of an HR system are: ● ● HR strategies, which define the direction in which it is intended that HRM should go in each of its main Key learning points areas of activity. The concept of strategic human resource emphasizes the importance of integrating HR strategies with corporate strategies to ensure that HR strategies support the achievement of organizational goals. ● ● HR policies, which set out what HR is there to do and provide guidelines defining how specific aspects of HR should be applied and implemented. ● ● HR practices, which consist of the HR activities involved in managing and developing people and in managing the employment relationship. HRM philosophy HRM philosophy emphasizes the importance of a strategic approach, proposes that people should be treated as assets rather than costs and indicates that it is primarily the responsibility of senior management. People management philosophy A philosophy of people management should be based on two interrelated principles: the first is the use of a multi-stakeholder approach; the second is that employees should be regarded as people rather than as exploitable resources.
  • 54. 15 Chapter 1 | The Essence of HRM References Armstrong, M (1987) Human resource management: a case of the emperor’s new clothes? Personnel Management, August, pp 30–35 Armstrong, M (2000) The name has changed but has the game remained the same? Employee Relations, 22 (6), pp 576–89 Becker, B E and Gerhart, S (1996) The impact of human resource management on organizational performance: progress and prospects, Academy of Management Journal, 39 (4), pp 779–801 Becker, B E, Huselid, M A and Ulrich, D (2001) The HR Score Card: Linking people, strategy, and performance, Boston, MA, Harvard Business School Press Beer, M, Boselie, P and Brewster, C (2015) Back to the future: implications for the field of HRM of the multi-stakeholder perspective proposed 30 years ago, Human Resource Management, 54 (3), pp 427–38 Beer, M, Spector, B, Lawrence, P, Quinn Mills, D and Walton, R (1984) Managing Human Assets, New York, The Free Press Bowen, D E and Ostroff, C (2004) Understanding HRM-firm performance linkages: the role of the ‘strength’ of the HRM system, Academy of Management Review, 29 (2), pp 202–21 Boxall, P F (2013) Mutuality in the management of human resources: assessing the quality of alignment in employment relationships, Human Resource Management Journal, 23 (1), pp 3–17 British Standards Institution (2015) BS 76000 Valuing people in organizations, https://shop.bsigroup. com/products/human-resource-valuing-people- management-system-requirements-and-guidance (archived at https://perma.cc/S3ZJ-KW4D) Chartered Institute of Personnel and Development (2020) People Profession 2030, London, CIPD Chartered Institute of Personnel and Development (2021) HR Profession Map, London, CIPD Dundon, T, Cullinane, N and Wilkinson, A (2017) A Very Short, Fairly Interesting and Reasonably Cheap Book About Employment Relations, London, Sage Dundon, T and Rafferty, A (2018) The (potential) demise of HRM? Human Resource Management Journal, 28 (3), pp 377–91 Fombrun, C J, Tichy, N M and Devanna, M A (1984) Strategic Human Resource Management, New York, Wiley Fowler, A (1987) When chief executives discover HRM, Personnel Management, January, p 3 Freeman, R E (1984) Strategic Management: A stakeholder perspective, Englewood Cliffs, NJ, Prentice Hall Guest, D E (1987) Human resource management and industrial relations, Journal of Management Studies, 24 (5), pp 503–21 Guest, D E (1999) Human resource management: the workers’ verdict, Human Resource Management Journal, 9 (2), pp 5–25 Guest, D E (2017) Human resource management and employee wellbeing: towards a new analytic framework, Human Resource Management Journal, 27 (1), pp 22–38 Hendry, C and Pettigrew, A (1990) Human resource management: an agenda for the 1990s, International Journal of Human Resource Management, 1 (1), pp 17–44 Hyman, R (1987) Strategy or structure? Capital, labour and control, Employment and Society, 1 (1), pp 25–55 Keenoy, T (1990) HRM: a case of the wolf in sheep’s clothing, Personnel Review, 19 (2), pp 3–9 Keenoy, T (1997) HRMism and the images of re-presentation, Journal of Management Studies, 34 (5), pp 825–41 Legge, K (1989) Human resource management: a critical analysis, in (ed) J Storey, New Perspectives in Human Resource Management, London, Routledge, pp 19–40 Legge, K (1998) The morality of HRM, in (eds) C Mabey, D Skinner and T Clark, Experiencing Human Resource Management, London, Sage, pp 14–32 Legge, K (2005) Human Resource Management: Rhetorics and Realities, 2nd edn, Basingstoke, Palgrave Macmillan Lepak, D P and Snell, S A (1999) The human resource architecture: toward a theory of human capital allocation and development, Academy of Management Review, 24 (1), pp 31–48 Marchington, M (2015) Human resource management (HRM): too busy looking up to see where it is going longer term? Human Resource Management Review, 25 (2), pp 176–87 Nishii, L H and Wright, P M (2008) Variability within organizations: implications for strategic human resource management, in (ed) D B Smith, The
  • 55. 16 Part 1 | Fundamentals of Human Resource Management People Make the Place, Mahwah, NJ, Lawrence Erlbaum Associates, pp 225–48 Osterby, B and Coster, C (1992) Human resource development – a sticky label, Training and Development, April, pp 31–32 Peccei, R (2004) Human Resource Management and the Search for a Happy Workplace, Rotterdam, Erasmus Research Institute of Management (ERIM) Rawls, J (1973) A Theory of Justice, Oxford, Oxford University Press Schneider, B (1987) The people make the place, Personnel Psychology, 40 (3), pp 437–53 Storey, J (1989) From personnel management to human resource management, in (ed) J Storey, New Perspectives on Human Resource Management, London, Routledge, pp 1–18 Storey, J (2001) Human resource management today: an assessment, in (ed) J Storey, Human Resource Management: A critical text, London, Thompson Learning, pp 3–20 Storey, J (2007) What is human resource management? in (ed) J Storey, Human Resource Management: A critical text, 2nd edn, London, Thompson Learning, pp 3–19 Thompson, P and Harley, B (2007) HRM and the worker: labour process perspectives, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford, Oxford University Press, pp 147–65 Truss, C, Gratton, L, Hope-Hailey, V, McGovern, P and Stiles, P (1997) Soft and hard models of human resource management: a re-appraisal, Journal of Management Studies, 34 (1), pp 53–73
  • 56. 02 Human capital management Introduction Human capital management (HCM) is an approach to managing people which recognizes their value and the importance of measuring that value. It re- gards people as assets and emphasizes that competi- tive advantage is achieved by strategic investments in those assets. As Hitt et al (2001) established through their research in professional service firms, leveraging human capital had a positive effect on firm performance. This chapter starts with a definition of the con- cept of human capital and continues with an analy- sis of its constituents and a discussion of how it can be measured. The chapter then describes the ap- proaches to people management raised by human capital theory, and concludes with a look at invest- ment decisions and HCM. Human capital management defined Human capital management (HCM) is concerned with the knowledge, skills, abilities and capacity to develop and innovate possessed by people in an or- ganization and the added value they therefore pro- vide. It treats them as assets to be invested in through resourcing, talent management and learn- ing and development policies and practices. The aim is to enhance the value of the organization’s human capital so that the business can perform successfully in the short and longer term and achieve competi- tive advantage. HCM also involves measuring the value of an organization’s human capital, assessing the contribution of people and measuring the effec- tiveness of the HR practices used to manage them. As pointed out by Delery and Roumpi (2017: 9), human capital in the shape of intellectual and social capital is different from other types of resources in that it is owned by employees and can be transferred to other firms if they leave. Therefore, it is critical for firms to use HRM systems to enhance existing levels of human capital, initially by attracting high- quality people and providing them with develop- ment opportunities, and then preventing the loss of their human capital investments to other firms by enhancing the commitment of employees to the firm and applying retention policies. As Wright et al (1994: 320) noted: ‘Sustained competitive advan- tage is achieved only by the interaction between the human capital pool and the HR practices.’ Skaggs and Youndt (2004) used a sample of 234 service organizations and found strong empirical sup- port to indicate that if fit is achieved between human capital and the organization's strategic positioning, the result is positive organizational ­ performance. The concept of human capital Human capital is the knowledge, skills and abilities of the people employed in an organization. Human capital theory regards people as assets and stresses that investment by organizations in people will gen- erate worthwhile returns. It was noted by Wong (2017: 2) that: The [human capital] journey starts with clarity on the value that the organisation and its activities 17