Armstrong''''s Handbook of Human Resource Management Practice potx

Supporting resources for instructors and students xix Introduction 4; Human resource management defi ned 4; The objectives of HRM 5; Theories of HRM 6; Characteristics of HRM 7; The dev

“The most comprehensive of similar texts covering human resources… Michael Armstrong could

well be offering the definitive text in the field… an excellent book.”

The Times Higher Education Supplement

“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 Armstrong’s Handbook of Human Resource Management Practice is the classic text for all

students and practitioners of HRM Now in its eleventh edition, this internationally best-selling

text has been updated to incorporate new developments in human resource management policy

and research

A complete resource for understanding and implementing HR in relation to the needs of the

business as a whole, it includes in-depth coverage of all the key areas essential to the

HR function, including:

This new edition is in full colour and contains numerous learning features designed to help

students to reflect on and test their learning

Visit the companion website at www.koganpage.com/resources/academicservices for both

lecturer and student resources, including: teaching and learning notes for every chapter;

additional case studies; an HR glossary; and a unique guide to taking CIPD exams

Armstrong’s Handbook of Human Resource Management Practice is written for students

studying HRM in undergraduate, postgraduate and professional programmes, including CIPD

qualifications It also provides a complete manual of practice for HR professionals

Michael Armstrongis a Companion and former Chief Examiner of the Chartered Institute of

Personnel and Development, joint managing partner of e-reward and an independent

management consultant He has sold over 500,000 books on the subject of HRM (published with

• health, safety and welfare;

• HR policies, procedures and systems

MICHAEL ARMSTRONG

ii

London and Philadelphia

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 publisher 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 any of the authors.

First edition published in 1977 as A Handbook of Personnel Management Practice by Kogan Page Limited 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

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 trans- mitted, 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:

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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

Armstrong, Michael, 1928–

Armstrong’s handbook of human resource management practice / Michael Armstrong Eleventh ed.

p cm.

Rev ed of: A handbook of human resource management practice 10th ed 2006.

Includes bibliographical references and index.

ISBN 978-0-7494-5242-1

1 Personnel management Handbooks, manuals, etc I Armstrong, Michael, 1928– Handbook of human resource management practice II Title III Title: Handbook of human resource management practice HF5549.17.A76 2009

658.3 dc22

2008053904

Typeset by Saxon Graphics Ltd, Derby

Printed and bound in India by Replika Press Pvt Ltd

iv

Contents in Brief

v

vi Brief Contents

Brief Contents vii

A Example of Employee Engagement and Commitment Survey 1019

This page has been left intentionally blank

viii

Supporting resources for instructors and students xix

Introduction 4; Human resource management defi ned 4; The

objectives of HRM 5; Theories of HRM 6; Characteristics of HRM 7;

The development of the concept of HRM 13; Reservations about

HRM 14; The context of HRM 17; The ethical dimension 19

Introduction 26; The conceptual basis of strategic HRM 26;

Strategic HRM defi ned 29; The resource-based view of strategic

HRM 30; Strategic fi t 32; Perspectives on strategic HRM 32; The

best practice approach 33; The best fi t approach 35; Bundling 37;

The reality of strategic HRM 39; Practical implications of

strategic HRM theory 40

Introduction 48; What are HR strategies? 48; General HR

strategies 49; Specifi c HR strategies 52; Criteria for an effective HR

strategy 53; How should HR strategies be formulated? 54; Issues in

developing HR strategies 55; Implementing HR strategies 59

Introduction 66; Human capital management defi ned 66; The

concept of human capital 66; The constituents of human capital 68;

Human capital measurement 69; Human capital internal

reporting 75; Human capital external reporting 76; Introducing

HCM 77

ix

x Full Contents

Introduction 82; The role of the HR function 82; The organization

of the HR function 84; Evaluating the HR function 87; HR shared

service centres 92; Outsourcing HR work 93; Offshoring 94;

Using management consultants 94; Marketing the HR function 95;

HR budgeting 96; The HR role of front line managers 97

Introduction 105; The basic role 105; The business partner role 106; The strategic role of HR specialists 108; The change agent role 111;

The internal consultancy role 112; The service delivery role 112; The guardian of values role 113; Models of HR roles 113; Gaining support and commitment 117; Ethical considerations 120; Professionalism in human resource management 121; Ambiguities in the role of HR

practitioners 122; Confl ict in the HR contribution 124; The qualities required by HR professionals 125; Continuous professional

development 129

Introduction 136; The impact made by HRM 136; How HRM

strategies make an impact 141; How HRM practices make an

impact 144

Introduction 151; International HRM defi ned 151; Issues in

international HRM 151; Global HR policies and practices 156;

Managing expatriates 156

Introduction 166; Strategic CSR defi ned 166; CSR activities 167; The rationale for CSR 168; Developing a CSR strategy 170

Introduction 175; The nature of research 175; Research

philosophy 176; Planning and conducting research programmes 178; Literature reviews 180; Quantitative and qualitative methods of

research 181; Methods of collecting data 182; Processes involved in

research 187; Statistical analysis 191

Introduction 202; Types of competencies 202; Competency

frameworks 204; Coverage of competencies 209; Applications of

competency-based HRM 210; Developing a competency

framework 212; Competencies and emotional intelligence 214

Full Contents xi

Introduction 219; Knowledge management defi ned 219; The concept

of knowledge 220; The purpose and signifi cance of knowledge

management 221; Knowledge management strategies 222; Knowledge

management systems 223; Knowledge management issues 223; The

contribution of HR to knowledge management 225

Introduction 231; High-performance culture 231; High-performance

work system defi ned 232; Characteristics of a high-performance

work system 234; Components of an HPWS 235; Impact of

high-performance work systems 238; Reservations about the impact of

an HPWS 240; Developing a high-performance work system 241

Introduction 252; The nature of work 252; Organizational factors

affecting work 255; Changes in the pattern of employment 256; The

future of work 257

Introduction 261; The employment relationship defi ned 261; The

basis of the employment relationship 262; Employment relationship

contracts 263; What is happening to the employment relationship 265;

Managing the employment relationship 266; Developing a high

trust organization 267; Theories explaining the employment

relationship 270

Introduction 277; The psychological contract defi ned 277; The

psychological contract and the employment relationship 279; The

signifi cance of the psychological contract 280; Changes to the

psychological contract 282; State of the psychological contract

2004 283; How psychological contracts develop 284; Developing and

maintaining a positive psychological contract 285

Introduction 292; Organizational behaviour defi ned 292;

Characteristics of organizational behaviour 292; Organizational

behaviour and the social and behavioural sciences 293; Explaining

organizational behaviour 294; Factors affecting organizational

behaviour 294; The sources and applications of organization behaviour

theory 295; The signifi cance of organizational behaviour theory 296

xii Full Contents

Introduction 300; Individual differences 300; Personal

characteristics 302; Types of behaviour 307; Implications for HR

Introduction 336; The concepts of engagement and commitment

compared 336; Employee engagement 337; Organizational

commitment 345; The contribution of HR to developing

commitment 351

Introduction 358; Organization theory 359; Organization

structure 365; Types of organization 366; Organizational

Measuring organizational climate 392; Appropriate cultures 394;

Supporting and changing cultures 394

Introduction 404; The process of organizing 404; Aims of

organization design 405; Conducting organization reviews 406;

Who does the work? 412

Introduction 416; Organization development defi ned 416;

Organization development programmes 417; Assumptions and

values of organization development 417; Organization development activities 418

Introduction 424; Types of change 424; The change process 426;

Change models 426; Resistance to change 430; Implementing

change 432; Guidelines for change management 433; Organizational transformation 434; The role of HR in managing change 437

Full Contents xiii

Introduction 444; Defi nitions 444; Job analysis 446; Job

descriptions 449; Role analysis and role profi les 451; Generic role

profi les 453; Behavioural competency modelling 454; Analysing

technical competencies 461; Skills analysis 461

Introduction 467; Job design 467; Role development 473

Introduction 480; The objective of people resourcing strategy 480; The

strategic HRM approach to resourcing 480; Integrating business and

resourcing strategies 481; The components of people resourcing

strategy 482; Bundling resourcing strategies and activities 482

Introduction 486; Human resource planning defi ned 486; Aims of

human resource planning 487; Use of human resource planning 488;

Approaches to human resource planning 488

Introduction 496; Employee value proposition 496; Employer

brand 497; Employee turnover 497; Retention planning 503; Absence

management 506; Flexibility planning 509

Introduction 515; The recruitment and selection process 515;

Defi ning requirements 515; Recruitment planning 518; Attracting

candidates 519; Processing applications 527; Selection methods 529;

Dealing with recruitment problems 533; References and offers 534

Introduction 541; Purpose 541; The basis of an interview – the person

specifi cation 541; The nature of an interview – obtaining the

information 542; Advantages and disadvantages of interviews 544;

Interviewing arrangements 545; Preparation 546; Planning an

interview 547; Types of interviews 548; Interview techniques – starting

and fi nishing 552; Interviewing techniques – asking questions 552;

Selection interviewing skills 560; Coming to a conclusion 562

Introduction 568; Psychological tests 568; Aptitude tests 571;

Characteristics of a good test 572; Interpreting test results 573;

Choosing tests 574; The use of tests in a selection procedure 574;

Good practice in psychological testing 575

xiv Full Contents

Introduction 580; The meaning of talent management 580; The

process of talent management 582; Developing a talent management strategy 584; Management succession planning 586

Introduction 603; Induction: what it is and why it is important 603; Reception 604; Documentation 604; Company induction – initial

briefi ng 605; Introduction to the workplace 605; Formal induction

courses 606; On-the-job induction training 607

Introduction 610; Redundancy 610; Dismissal 611; Retirement 612

Introduction 618; Performance management defi ned 618; Objectives

of performance management 619; Characteristics of performance

management 619; Underpinning theories 620; The performance

management cycle 621; Conducting a performance review

meeting 627; Assessing performance 629; Dealing with

under-performers 634; Introducing performance management 636; Line

managers and performance management 638

Introduction 644; Use of 360-degree feedback 644; 360-degree

feedback – methodology 644; 360-degree feedback – advantages and disadvantages 646; Development and implementation 647

Introduction 654; Features of a learning and development

strategy 654; Learning culture 656; The learning organization 657;

The contribution of learning and development to organizational

performance 658

Introduction 664; Learning and development defi ned 664; Elements

of learning and development 665; Approaches to learning and

Full Contents xv

development 666; Informal and formal learning 666; E-learning 670;

Blended learning 673; Self-directed learning 673; Development 674;

Training 675

Introduction 684; The business case for learning and

development 684; Planning and delivering learning programmes and

events 685; Responsibility for the implementation of learning 689;

Identifying learning needs 690; Evaluation of learning 693

Introduction 701; Learning defi ned 701; The learning process 701;

Learning theory 702; Learning styles 704; Learning to learn 706; The

learning curve 706; The motivation to learn 708; The implications of

learning theory and concepts 709

Introduction 714; Organizational learning defi ned 714; The process

of organizational learning 715; Outcomes of organizational

learning 717; Evaluative enquiry 717; Organizational learning and

the learning organization 718

Introduction 721; Management development policy 721;

Management development strategy 722; Approaches to management

development 723; The integrated approach to management

development 726; Responsibility for management development 727;

Criteria for management development 730

Introduction 736; Reward management defi ned 736; The philosophy

of reward management 737; The reward system 739; Total reward 741;

Reward strategy 746; Reward management and line management

capability 751

Introduction 756; Job evaluation defi ned 756; Approaches 757;

Analytical job evaluation schemes 758; Non-analytical schemes 761;

Market pricing 764; Computer-aided job evaluation 765; Choice of

approach 766; Designing an analytical point-factor job evaluation

scheme 769; Designing an analytical matching job evaluation

scheme 776; Equal pay considerations 777; Conclusions 779

Introduction 784; The concept of a market rate 784; Job matching 785;

Use of benchmark jobs 786; Sources of market data 787; Interpreting

and presenting market rate data 792; Using survey data 792

xvi Full Contents

Introduction 796; Defi nitions 796; Types of grade and pay

structure 798; Designing grade and pay structures 807

Introduction 816; Contingent pay as a motivator 816; Arguments for and against contingent pay 817; Alternatives to contingent pay 819; Criteria for success 820; Performance-related pay 821; Competency-related pay 822; Contribution-related pay 823; Skill-based pay 825;

Readiness for individual contingent pay 827; Developing and

implementing individual contingent pay 827; Service-related

pay 828; Summary of individual contingent pay schemes 829; Bonus schemes 829; Team-based pay 832; Organization-wide bonus

schemes 833; Choice of approach to contingent pay 834

Reward management for directors and executives 840; Reward

management for sales representatives 842; Paying manual

workers 844

Employee benefi ts 850; Pensions 852; Communicating pensions

policies 855; Total reward statements 856; Allowances 856

Introduction 860; Controlling reward 860; Monitoring and

evaluating reward policies and practices 861; Conducting pay

reviews 862; Reward procedures 867; Managing the development of reward systems 868; Devolution to line managers of responsibility

for reward 868; Communicating to employees 871

Introduction 878; The basis of employee relations 878; Industrial

relations as a system of rules 880; Regulations and rules in industrial relations 881; Collective bargaining 882; The unitary and pluralist

views 884; The concept of social partnership 886; Individualism and collectivism 886; Voluntarism and its decline 887; The HRM

approach to employee relations 887; The context of industrial

relations 889; Developments in industrial relations 890; The parties

to employee relations 893

Introduction 906; Employee relations policies 906; Employee relations strategies 909; Employee relations climate 910; Union recognition 912; Collective bargaining arrangements 913; Collective bargaining

outcomes 915; Informal employee relations processes 920; Other

Full Contents xvii

features of the industrial relations scene 921; Negotiating and

bargaining 923; Managing with unions 927; Managing without trade

unions 929; The state of employment relations 930; Handling

employment issues 931

Introduction 936; The meaning of employee voice 936; The forms of

employee voice 937; The framework for employee voice 938;

Expression of employee voice 939; Joint consultation 941; Attitude

surveys 942; Suggestion schemes 944; Effectiveness of employee

involvement and participation 945; Planning for voice 945; EU

Directives affecting employee voice procedures 945

Introduction 950; The importance of employee communications 950;

What should be communicated? 950; Approach to communication 951;

Communication methods 951; Employee communication strategy 953

Introduction 960; Managing health and safety at work 960; Health

and safety policies 961; Conducting risk assessments 962; Health and

safety audits 965; Health and safety inspections 967; Accident

prevention 967; Occupational health programmes 968; Measuring

health and safety performance 969; Communicating the need for

better health and safety practices 970; Health and safety training 971;

Organizing health and safety 971

Introduction 976; Improving of the work environment 976; Services

for individuals 981; Group employee services 982

Introduction 988; Why have HR policies? 988; Overall HR policy 988;

Specifi c HR policies 990; Formulating HR policies 997; Implementing

HR policies 998

What are HR procedures? 1001; Capability procedure 1001;

Disciplinary procedure 1003; Grievance procedure 1005;

Redundancy procedure 1006

Introduction 1011; Reasons for introducing an HRIS 1011; The

functions of an HRIS 1011; Features of an HRIS 1013; Introducing

an HRIS 1014

xviii Full Contents

Appendices 1017

A Example of Employee Engagement and Commitment Survey 1019

Supporting Resources for Instructors and Students

As a reader of Armstrong’s Handbook of Human Resource Management Practice, you have

automatic access to a range of additional resources designed to enhance your ence and use of the book Full details are provided below

experi-For lecturers and instructors

List of Figures

Figure 0.1 Armstrong’s Handbook of Human Resource Management Practice

Figure 6.1 The John Storey model of personnel management 115

Figure 7.1 Impact of HRM on organizational performance 143

Figure 10.2 A scattergram with regression (trend) line 194

Figure 17.1 The sources and applications of organization behaviour theory 295

Figure 20.1 Combinations of the impact of engagement and

Figure 31.1 Competency-based person specifi cation for a recruitment

xxi

xxii List of Figures

Figure 42.2 Learning needs analysis – areas and methods 691

Figure 46.1 The reward management system: elements and

Figure 46.4 A model of the reward strategy development process 750

Figure 47.2 Point-factor job evaluation scheme design sequence 772Figure 47.3 Analytical matching job evaluation scheme design sequence 776

Figure 49.9 Flow chart: design of a new grade and pay structure 812

List of Tables

Table 2.1 Role behaviours appropriate for different strategies,

Table 3.1 Achieving vertical fi t between HR and business strategies 56Table 4.1 A summary of human capital measures and their possible uses 73

Table 7.1 Research on the link between HRM and fi rm performance 136Table 7.2 The HR practices that impact on performance 144

Table 10.2 Contrasts between quantitative and qualitative research

Table 11.1 Incidence of different competency headings 205

Table 13.1 Lists of HR practices in high-performance work systems 236Table 13.2 Examples of high-performance working ingredients 242

Table 19.2 Factors affecting motivation strategies and the HR contribution 330Table 26.1 Criteria for a rigorous competency defi nition 455

Table 31.1 Person specifi cation classifi cation schemes 517Table 32.1 Advantages and disadvantages of interviews 544

Table 41.1 Characteristics of formal and informal learning 669Table 43.1 The implications of learning theory and concepts 709

xxiii

xxiv List of Tables

Table 47.3 Comparison of different job evaluation methods 767

Table 49.1 Summary analysis of different grade and pay structures 805Table 50.1 Summary of contingent pay and service-related pay schemes 830Table 51.1 Summary of payment and incentive arrangements for

Table 51.2 Comparison of shop fl oor payment-by-result schemes 845

Table 55.1 Industrial relations negotiations/commercial negotiations 923

‘route map’ in Figure 0.1.

The design of the book has been radically updated, with the aim of providing a text that encourages and facilitates better learning Chapters contain key concepts and terms, learning outcomes, key learning points, questions and further reading; allowing stu-dents to recap, refl ect and test their learning

The companion website provides further resources for both students and lecturers Students can expand on their learning and are provided with help and advice on taking examinations Lecturers are provided with a range of resources, including PowerPoint slides and support notes for teaching

xxv

17 Essence of tional behaviour

organiza-18 Characteristics of people

19 Motivation

20 Engagement and commitment

21 How organizations function

22 Organizational culture

V Organization design and development

23 Organization design

24 Organization development

25 Change management

26 Job and role analysis

27 Job and role design

38 The process of performance management

39 360-degree feedback

VIII Learning and development

40 Learning and development strategy

41 The process of learning and development

42 Learning and development programmes

43 How people learn

44 Organizational learning

45 Management development

IX Rewarding people

46 Reward management

47 Job evaluation

48 Market rate analysis

49 Grade and pay structures

50 Contingent pay

51 Rewarding special groups

52 Employee benefits and pensions

53 Managing reward systems

60 HR policies

61 HR procedures

62 HR information systems

Figure 0.1 Armstrong’s Handbook of Human Resource Management Practice route map

Part I

Human Resource Management

This part describes the basic features and characteristics of human resource ment, strategic human resource management and HR strategies (Chapters 1, 2 and 3) This provides the framework within which the detailed descriptions of HRM strate- gies, policies, processes and practices that occupy most of this book take place The roles of the HR function and the HR practitioner are examined in Chapters 4 and 5, and Chapter 6 deals with the impact of HRM Chapter 7 covers human capital manage- ment and the part ends with an analysis of international HRM, corporate social respon- sibility and HRM research methods.

manage-Part I contents

1 The practice of human resource management 3

2 Strategic human resource management 25

3 HR strategies 47

4 Human capital management 65

5 The role and organization of the HR function 81

6 The role of the HR practitioner 104

7 The impact of HRM on performance 135

8 International HRM 150

9 Corporate social responsibility 165

10 Human resource management research methods 174

1

This page has been left intentionally blank

2

•Pluralistic employee relations

•The resource-based view

•The soft version of HRM

•Strategic integration

•

On completing this chapter you should be able to defi ne these key concepts

You should also be able to:

•

as a conceptUnderstand the context in which

•HRM operates

3

4 Human Resource Management

Introduction

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, organi-zation development, resourcing (human resource planning, recruitment and selection, and talent management), performance management, learning and development, reward manage-ment, 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 defi nition 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 defi ned

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 defi nitions 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, fl exibility 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)

The Practice of Human Resource Management 5

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 fi rms to learn and capitalize on new opportuni-ties.’ 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, staffi ng ratio and skill mix?), competence (what general level of ability is desired?) and commitment (what level of employee attachment and identifi cation?)

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 fl exibly in the interests of the ‘adaptive organization’s’ pursuit of excellence (Legge, 1989)

Human resource management is a distinctive approach to employment ment which seeks to achieve competitive advantage through the strategic deploy- ment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques (Storey, 1995)

manage-HRM is: ‘The management of work and people towards desired ends.’ (Boxall et

al, 2007)

HRM is concerned with how organizations manage their workforce (Grimshaw and Rubery, 2007)

6 Human Resource Management

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 tudinal commitment refl ected in a strong identifi cation with the enterprise

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

4 Flexibility: functional fl exibility and the existence of an adaptable zation structure with the capacity to manage innovation

The policy goals for HRM identifi ed 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 fi t of HR policies, proce-dures 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 fi t (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 fi rms that have a fi t 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’

The Practice of Human Resource Management 7

Characteristics of HRM

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

phil-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

strate-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, moti-

vations and the quality of their job (Appelbaum et al, 2000; Bailey et al,

2001; Boxall and Purcell, 2003)

8 Human Resource Management

The diversity of HRM

There are no universal characteristics of HRM Many models exist, and practices within ent organizations are diverse, often only corresponding to the conceptual version of HRM in a

differ-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, fi rms, 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 benefi t 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-work-ers 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 defi ned the ‘hard’ model of HRM as a process emphasizing ‘the close tion 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’

integra-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 indi-

vidual’ 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 identifi ed This suggested to the researchers that the distinction between hard and soft HRM was not as precise as some com-mentators 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

The Practice of Human Resource Management 9

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 signifi cant feature of HRM is the importance attached to strategic tion Legge (1989) argued that one of the common themes of the typical defi nitions of HRM

integra-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 gener-ally John Storey (1989) believes that: ‘The concept locates HRM policy formulation fi rmly 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 identifi cation 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

-fl exibly 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 identifi cation 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 fi rmly 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 cerns and it is therefore in both their interests to work together) was emphasized by Walton (1985a) as follows:

con-The new HRM model is composed of policies that promote mutuality – mutual goals, mutual infl uence, 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.

10 Human Resource Management

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 plural-ist view recognizes that the interests of employees will not necessarily coincide with their employ-ers and suggests that the unitary view is nạve, 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 tive advantage’ Armstrong and Baron (2002) stated that:

competi-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 signifi cant 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 impor-tance attached to strategic integration and strong cultures, which fl ow 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 fi t the culture

In 1995 Legge noted that HRM policies are adapted to drive business values and are modifi ed

in the light of changing business objectives and conditions She suggested that evidence cated more support for the hard versions of HRM than the soft version

indi-Organization- versus employee-centred outcomes

In line with labour process theory, Thompson and Harley (2007) asserted that; ‘What is pening 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

hap-The Practice of Human Resource Management 11

opinion that there is more to HRM than that This is the employee-centred and ethical sion of HRM, discussed at the end of the chapter

dimen-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 ration- ality – a stakeholder perspective is required, ie develop and maintain sustainable rela- tionships 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 the needs of the fi rm with the needs, aspirations and interests of the workforce and the values 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’

In its traditional form, HRM, as pointed out by Boselie et al (2005), can be viewed as ‘a

collec-tion of multiple discrete practices with no explicit or discernible link between them’ In trast ‘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 defi ning 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 con-nections that create positive synergistic effects on organizational outcomes.’

con-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

12 Human Resource Management

defi ne the direction in which HRM intends to go, HR policies that provide guidelines defi ning how these values, principles and the strategies should be applied and implemented in specifi c 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 prac-tices to be implemented according to plan Becker and Gerhart (1996) have classifi ed these components into three levels: the system architecture (guiding principles), policy alternatives, and processes and practices

Learning and development

Reward managment

Employee relations Resourcing

Organization

Organizational learning

Individual learning

Management development

Performance management

Design Human resource

planning

Development Recruitment & selection

Job/role design Talent

management

Health and safety

Industrial relations

Employee voice

Communications

Employee benefits Employee

wellbeing

Corporate social responsibility

HR strategies, policies, processes, practices and programmes

HR philosophies

HUMAN RESOURCE MANAGEMENT

Figure 1.1 The HRM system

The Practice of Human Resource Management 13

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 man-aging 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 man- agement, 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, insuffi cient attention has been paid to it in many organizations.

However, commentators such as Guest (1987) and Storey (1995) regard HRM as a tially 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 manage-ment HRM has also emphasized the notion that people should be regarded as assets rather than variable costs

substan-Origins of the concept of HRM

The concept of HRM was fi rst defi ned by Bakke (1966) who wrote that:

The general type of activity in any function of management… is to use resources tively for an organizational objective… The function which is related to the under- standing, maintenance, development, effective employment, and integration of the potential in the resource of ‘people’ I shall call simply the human resources function.

effec-However, HRM did not emerge in a fully fl edged form until the 1980s in the ‘matching model’ and the Harvard framework, described below

The matching model of HRM

One of the fi rst 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