The practice of human resource management

The practice of human resource management (HRM) is concerned with all aspects of how people are employed and managed in organizations. It covers activities such as strategic HRM, human capital management, corporate social responsibility, knowledge management, organization development, resourcing (human resource planning, recruitment and selection, and talent management), performance management, learning and development, reward management, employee relations, employee well-being and health and safety and the provision of employee services. HRM practice has a strong conceptual basis drawn from the behavioural sciences and from strategic management, human capital and industrial relations theories. This foundation has been built with the help of a multitude of research projects.

The aim of this chapter is to provide a general introduction to the practice and underpinning concepts of HRM. It covers the definition of HRM, the objectives of HRM, HRM theory, the characteristics of HRM, the components of HRM systems, the development of HRM as an approach to managing people, the views expressed about HRM by key commentators, the context within which HRM functions, and the ethical dimensions that affect HR policy and practice.

Human resource management defined

Human resource management (HRM) is a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organizations.

Other definitions of HRM

Human resource management involves all management decisions and action that affect the nature of the relationship between the organization and its employees – its human resources. (Beer et al, 1984) HRM comprises a set of policies designed to maximize organizational integration, employee commitment, flexibility and quality of work. (Guest, 1987)

HRM consists of the following propositions:

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. (Legge, 1989) Human resource management is a distinctive approach to employment manage-ment which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques. (Storey, 1995). HRM is: ‘The management of work and people towards desired ends.’ (Boxall etal, 2007). HRM is concerned with how organizations manage their workforce (Grimshawand Rubery, 2007)

The objectives of HRM

The overall purpose of human resource management is to ensure that the organization is able to achieve success through people. HRM aims to increase organizational effectiveness and capability – the capacity of an organization to achieve its goals by making the best use of the resources available to it. Ulrich and Lake (1990) remarked that: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities.’ But HRM has an ethical dimension which means that it must also be concerned with the rights and needs of people in organizations through the exercise of social responsibility. Dyer and Holder (1998) analysed management’s HR goals under the headings of contribution (what kind of employee behaviour is expected?), composition (what headcount, staffing ratio and skill mix?), competence (what general level of ability is desired?) and commitment (whatlevel of employee attachment and identification?).

HRM policy goals, David Guest (1987, 1989a, 1989b, 1991)

1.      Strategic integration: the ability of the organization to integrate HRM issues into its strategic plans, ensure that the various aspects of HRM cohere, and provide for line managers to incorporate an HRM perspective into their decision making.

2.      High commitment: behavioural commitment to pursue agreed goals, and attitudinal commitment reflected in a strong identification with the enterprise.

3.      High quality: this refers to all aspects of managerial behaviour that bear directly on the quality of goods and services provided, including the management of employees and investment in high quality employees.

4.      Flexibility: functional flexibility and the existence of an adaptable organization structure with the capacity to manage innovation.

The policy goals for HRM identified by Caldwell (2004) included managing people as assets that are fundamental to the competitive advantage of the organization, aligning HRM policies with business policies and corporate strategy, and developing a close fit of HR policies, procedures and systems with one another.

Theories of HRM

The practice of HRM is underpinned by a number of theories. The categories of HRM theory listed by Guest (1997) and Boselie et al (2005) are listed below.

Theories of HRM, David Guest (1997)

1. Strategic theories – in the UK the implicit but untested hypothesis is that good fit (between HR practice and the internal and external context) will be associated with superior performance. In the United States the focus has been more on classifying types of HR strategy. The hypothesis is that firms that have a fit between business strategy, structure and HRM policy will have superior performance.
2. Descriptive theories – these either list areas of HR policy and outcomes (Beer et al, 1984) or adopt a systems approach, describing the relationships between levels (Kochan et al, 1986). They are largely non-prescriptive.
3. Normative theories – these are normative in the sense that they establish a norm or standard pattern in the form of prescribed best practice. These take a considerable risk in implying ‘one best way’.

Theories of HRM, Boselie et al (2005)

1. Contingency theory – HRM is influenced by the organization’s environment and circumstances (Legge, 1978).
2. The resource-based view – HRM delivers added value through the strategic development of the organization’s rare, hard to imitate and hard to substitute human resources (Barney, 1991, 1995).
3. AMO theory – the formula Performance = Ability + Motivation +Opportunity to Participate provides the basis for developing HR systems that attend to employees’ interests, namely their skill requirements, motivations and the quality of their job (Appelbaum et al, 2000; Bailey et al, 2001; Boxall and Purcell, 2003).

Characteristics of HRM

HRM was regarded by Storey (1989) as a ‘set of interrelated policies with an ideological and philosophical underpinning’. He listed four aspects that constitute the meaningful version of HRM:

1. a particular constellation of beliefs and assumptions;
2. a strategic thrust informing decisions about people management;
3. the central involvement of line managers; and
4. reliance upon a set of ‘levers’ to shape the employment relationship.

As Boselie et al (2005) explained, HRM:

responds accurately and effectively to the organization’s environment and complements other organizational systems (cf contingency theory) and delivers ‘added value’ through the strategic development of the organization’s rare, inimitable and non-substitutable resources, embodied – literally – in its staff (cf the resource-based view). The characteristics of HRM are that it is diverse, strategic and commitment-oriented, adopts a unitary rather than pluralist viewpoint, is founded on the belief that people should be treated as assets and is a management-driven activity. HRM tends to focus on business values although there is a growing body of opinion (eg Guest, 2002) that it has also to be concerned with employee-centred outcomes. In its fully developed form, HRM functions as a system. As Schuler (1992) indicated, HRM links, integrates and coheres.

The diversity of HRM

There are no universal characteristics of HRM. Many models exist, and practices within different organizations are diverse, often only corresponding to the conceptual version of HRM in a few respects. Boxall et al (2007) remarked that: ‘Human resource management covers a vast array of activities and shows a huge range of variations across occupations, organizational levels, business units, firms, industries and societies.’ A distinction was made by Storey (1989) between the ‘hard’ and ‘soft’ versions of HRM. The hard version emphasizes that people are important resources through which organizations achieve competitive advantage. These resources have therefore to be acquired, developed and deployed in ways that will benefit the organization. The focus is on the quantitative, calculative and business-strategic aspects of managing human resources in as ‘rational’ a way as for any other economic factor. The soft version of HRM has its roots in humanism – an approach devoted to human interests that views people as responsible and progressive beings. It also traces its origins to the human relations school founded by Elton Mayo (1933), which believed that productivity was directly related to job satisfaction and that the output of people will be high if they like their co-workers and are given pleasant supervision. But this is a fairly remote connection. The soft version of HRM as described by Storey (1989) involves ‘treating employees as valued assets, a source of competitive advantage through their commitment, adaptability and high quality (of skills, performance and so on)’. It therefore views employees, in the words of Guest (1999b), as means rather than objects, but it does not go as far as following Kant’s (1781) advice: ‘Treat people as ends unto themselves rather than as means to an end.’ The soft approach to HRM stresses the need to gain the commitment (the ‘hearts and minds’) of employees through involvement, communication, leadership and other methods of developing a high-commitment, high-trust organization. Attention is also drawn to the key role of organizational culture. In 1998, Karen Legge defined the ‘hard’ model of HRM as a process emphasizing ‘the close integration of human resource policies with business strategy which regards employees as a resource to be managed in the same rational way as any other resource being exploited for maximum return’. In contrast, the soft version of HRM sees employees as ‘valued assets and as a source of competitive advantage through their commitment, adaptability and high level of skills and performance’. It has, however, been observed by Truss (1999) that ‘even if the rhetoric of HRM is soft, the reality is often hard, with the interests of the organization prevailing over those of the individual’. Research carried out by Gratton et al (1999) found that in the eight organizations they studied, a mixture of hard and soft HRM approaches was identified. This suggested to the researchers that the distinction between hard and soft HRM was not as precise as some commentators have implied. But as Dyer and Holder (1998) emphasized: ‘HRM goals vary according to competitive choices, technologies or service tangibles, characteristics of their employees (eg could be different for managers), the state of the labour market and the societal regulations and national culture.’ And Boxall et al (2007) noted that: ‘The general motives of HRM are multiple.

The strategic nature of HRM

Perhaps the most significant feature of HRM is the importance attached to strategic integration. Legge (1989) argued that one of the common themes of the typical definitions of HRM is that human resource policies should be integrated with strategic business planning. Keith Sisson (1990) suggested that a feature increasingly associated with HRM is the emphasis on the integration of HR policies both with one another and with business planning more generally. John Storey (1989) believes that: ‘The concept locates HRM policy formulation firmly at the strategic level and insists that a characteristic of HRM is its internally coherent approach.’

The commitment-oriented nature of HRM

One of the aims of HRM is to promote commitment – the strength of an individual’s identification with, and involvement in, a particular organization. It was noted by Karen Legge (1995) that human resources ‘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’. However, this emphasis on commitment has been criticized from the earliest days of HRM. Guest (1987) asked: ‘commitment to what?’ and Fowler (1987) has stated: 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? Focus on mutuality The importance of mutuality (the belief that management and employees share the same concerns and it is therefore in both their interests to work together) was emphasized by Walton (1985a) as follows: The new HRM model is composed of policies that promote mutuality – mutual goals, mutual influence, mutual respect, mutual rewards, mutual responsibility. The theory is that policies of mutuality will elicit commitment which in turn will yield both better economic performance and greater human development. The concept of mutuality is based on the notion of unitary employee relations, described below. 

Unitary and pluralist employee relations

HRM is characterized by a unitarist rather than a pluralist view of employee relations with the emphasis on individual contracts, not collective agreements. A unitarist view expresses the belief that people in organizations share the same goals and work as members of one team. The pluralist view recognizes that the interests of employees will not necessarily coincide with their employers and suggests that the unitary view is naïve, unrealistic and against the interest of employees.

Treating people as assets or human capital

The notion that people should be regarded as assets rather than variable costs, in other words, treated as human capital, was originally advanced by Beer et al (1984). HRM philosophy, as mentioned by Legge (1995), holds that ‘human resources are valuable and a source of competitive advantage’. Armstrong and Baron (2002) stated that: People and their collective skills, abilities and experience, coupled with their ability to deploy these in the interests of the employing organization, are now recognized as making a significant contribution to organizational success and as constituting a major source of competitive advantage.

Focus on business values

The concept of hard HRM is based on a management- and business-oriented philosophy. It is concerned with the total interests of the organization – the interests of the members of the organization are recognized but subordinated to those of the enterprise. Hence the importance attached to strategic integration and strong cultures, which flow from top management’s vision and leadership, and which require people who will be committed to the strategy, who will be adaptable to change and who fit the culture. In 1995 Legge noted that HRM policies are adapted to drive business values and are modified in the light of changing business objectives and conditions. She suggested that evidence indicated more support for the hard versions of HRM than the soft version.

Organization- versus employee-centred outcomes

In line with labour process theory, Thompson and Harley (2007) asserted that; ‘What is happening is a process of “capitalizing on humanity” rather than investing in human capital.’ The emphasis may have been on the business orientation of HRM but there is a growing body of opinion that there is more to HRM than that. This is the employee-centred and ethical dimension of HRM, discussed at the end of the chapter. Grant and Shields (2002) argued that the emphasis typically placed on the business case for HRM suggests a one-sided focus on organizational outcomes at the expense of employees. It was noted by Paauwe (2004) that:

Added value represents the harsh world of economic rationality, but HRM is also about moral values… The yardstick of human resource outcomes is not just economic rationality – a stakeholder perspective is required, ie develop and maintain sustainable relationships with all the relevant stakeholders, not just customers and shareholders.

Kochan (2007) contended that:

The HR profession has always had a special professional responsibility to balance theneeds of the firm with the needs, aspirations and interests of the workforce and thevalues and standards society expects to be upheld at work… A regime which provides human beings no deep reason to care about one another cannot long preserve its legitimacy. Ulrich and Brockbank (2005a) believe that ‘caring and listening to employees remains a centre piece of HR work’.HRM as a system An open systems view of HRM has been developed by Wright and Snell (1998). An open system is dependent on the environment for inputs, which are transformed during throughput to produce outputs that are exchanged in the environment. Wright and Snell defined an open HRM system as a competence model of organizations. Skills and abilities are treated as inputs from the environment; employee behaviours are treated as throughput; and employee satisfaction and performance are treated as outputs. In its traditional form, HRM, as pointed out by Boselie et al (2005), can be viewed as ‘a collection of multiple discrete practices with no explicit or discernible link between them’. In contrast ‘the more strategically minded systems approach views HRM as an integrated and coherent bundle of mutually reinforcing practices’. As Kepes and Delery (2007) comment, a defining characteristic of HRM is that HRM systems and not individual HRM practices are the source of competitive advantage. ‘Coherent and internally aligned systems form powerful connections that create positive synergistic effects on organizational outcomes.’ As illustrated in Figure 1.1 an HRM system brings together HR philosophies that describe the overarching values and guiding principles adopted in managing people, HR strategies that define the direction in which HRM intends to go, HR policies that provide guidelines defining how these values, principles and the strategies should be applied and implemented in specific areas of HRM, HR processes that comprise the formal procedures and methods used to put HR strategic plans and policies into effect, linked HR practices that consist of the approaches used in managing people, and HR programmes that enable HR strategies, policies and practices to be implemented according to plan. Becker and Gerhart (1996) have classified these components into three levels: the system architecture (guiding principles), policy alternatives, and processes and practices.

The development of the concept of HRM

The terms ‘human resource management’ (HRM) and ‘human resources’ (HR) have virtually replaced the term ‘personnel management’ as a description of the processes involved in managing people in organizations, although what is now described as HRM is in practice often synonymous with what used to be described as personnel management. In the early days of HRM it was suggested by Armstrong (1987) that: HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel management, but as usually perceived, at least it has the virtue of emphasizing the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufficient attention has been paid to it in many organizations. However, commentators such as Guest (1987) and Storey (1995) regard HRM as a substantially different model built on unitarism (employees share the same interests as employers), individualism, high commitment and strategic alignment (integrating HR strategy with the business strategy). It is claimed that HRM is more holistic than traditional personnel management. HRM has also emphasized the notion that people should be regarded as assets rather than variable costs.

Origins of the concept of HRM

The concept of HRM was first defined by Bakke (1966) who wrote that: The general type of activity in any function of management… is to use resources effectively for an organizational objective… The function which is related to the understanding, maintenance, development, effective employment, and integration of the potential in the resource of ‘people’ I shall call simply the human resources function. However, HRM did not emerge in a fully fledged form until the 1980s in the ‘matching model’ and the Harvard framework, described below.

The matching model of HRM

One of the first detailed statements of the HRM concept was made by the Michigan school (Fombrun et al, 1984). They held that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy (hence the name ‘matching model’). They further explained that there is a human resource cycle that consists of four generic processes or functions that are performed in all organizations: selection, appraisal, rewards and development.

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