Exceptional Proff 600

The term HRM has largely taken over that of ‘personnel management’, which took over that of ‘labour management’ in the 1940s, which took over that of ‘welfare’ in the 1920s (the latter process emerged in the munitions factories of the First World War). HRM largely replaced the human relations approach to managing people founded by Elton Mayo (1933) who based his beliefs on the outcome of the research project conducted in the 1920s known as the Hawthorne studies. Members of this school believed that productivity was directly related to job satisfaction and that the output of people would be high if someone they respected took an interest in them. HRM also shifted the emphasis away from humanism – the belief held by writers such as Likert (1961) and McGregor (1960) that human factors are paramount in the study of organizational behaviour and that people should be treated as responsible and progressive beings.

An early reference to human resources was made by Bakke (1966). Later, Armstrong (1977: 13) observed that in an enterprise ‘the key resource is people’. But HRM did not emerge in a fully fledged form until the 1980s through what might be called its founding fathers. These were the US academics Charles Fombrun and his colleagues in the ‘matching model’, and Michael Beer and his colleagues in the ‘Harvard framework’ as described on page 9.

In the UK they were followed by a number of commentators who developed, explained and frequently criticized the concept of human resource management. Legge (2005: 101) commented that: ‘The term [HRM] was taken up by both UK managers (for example, Armstrong, 1987; Fowler, 1987) and UK academics’. Hendry and Pettigrew (1990: 18) stated that HRM was ‘heavily normative from the start: it provided a diagnosis and proposed solutions’. They also mentioned that: ‘What HRM did at this point was to provide a label to wrap around some of the observable changes, while providing a focus for challenging deficiencies – in attitudes, scope, coherence, and direction – of existing personnel management’ (ibid: 20). Armstrong (1987: 31) argued 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 emphasising 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) regarded 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 was also claimed that HRM was more holistic than traditional personnel management and that, importantly, it emphasized the notion that people should be regarded as assets rather than variable costs.

HRM as conceived in the 1980s had a conceptual framework consisting of a philosophy underpinned by a number of theories drawn from the behavioural sciences and from the fields of strategic management, human capital and industrial relations. The HRM philosophy has been heavily criticized by academics as being managerialist and manipulative but this criticism has subsided, perhaps because it became increasingly evident that the term HRM had been adopted as a synonym for what used to be called personnel management. As noted by Storey (2007: 6): ‘In its generic broad and popular sense it [HRM] simply refers to any system of people management.’

HRM practice is no longer governed by the original philosophy – if it ever was. It is simply what HR people and line managers do. Few references are made to the HRM conceptual framework. This is a pity – an appreciation of the goals, philosophy and underpinning theories of HRM and the various HRM models provides a sound basis for understanding and developing HR practice. But account needs to be taken of the limitations of that philosophy as expressed by the critics of HRM set out later in this chapter.

The goals of HRM are to:

· support the organization in achieving its objectives by developing and implementing human resource (HR) strategies that are integrated with the business strategy (strategic HRM);

· contribute to the development of a high-performance culture;

· ensure that the organization has the talented, skilled and engaged people it needs;

· create a positive employment relationship between management and employees and a climate of mutual trust;

· encourage the application of an ethical approach to people management.

An earlier list of HR goals was made by Dyer and Holder (1988: 22–28) who analysed them 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 (what level of employee attachment and identification?). Guest (1987) suggested that the four goals of HRM were strategic integration, high commitment, high quality and flexibility. And Boxall (2007: 63) proposed that ‘the mission of HRM is to support the viability of the firm through stabilizing a cost-effective and socially legitimate system of labour management’.

The philosophy of human resource management

Doubts were expressed by Noon (1992) as to whether HRM was a map, a model or a theory. But it is evident that the original concept could be interpreted as a philosophy for managing people in that it contained a number of general principles and beliefs as to how that should be done. The following explanation of HRM philosophy was made by Legge (1989: 25) whose analysis of a number of HRM models identified the following common themes:

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.

Storey (2001: 7) noted that the beliefs of HRM included the assumptions that it is the human resource that 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.

Underpinning theories of HRM

The original notion of HRM had a strong theoretical base. Guest (1987: 505) commented that: ‘Human resource management appears to lean heavily on theories of commitment and motivation and other ideas derived from the field of organizational behaviour.’ A number of other theories, especially the resource-based view, have contributed to the understanding of purpose and meaning of HRM. These theories are summarized below.

The significance in HRM theory of organizational commitment (the strength of an individual’s identification with, and involvement in, a particular organization) was highlighted in a seminal Harvard Business Review article by Richard Walton (1985).

Source review

From control to commitment – Walton (1985: 77)

Workers respond best – and most creatively – not when they are tightly controlled by management, placed in narrowly defined jobs and treated as an unwelcome necessity, but, instead, when they are given broader responsibilities, encouraged to contribute and helped to take satisfaction in their work. It should come as no surprise that eliciting commitment – and providing the environment in which it can flourish – pays tangible dividends for the individual and for the company.

Motivation theory explains the factors that affect goal-directed behaviour and therefore influences the approaches used in HRM to enhance engagement (the situation in which people are committed to their work and the organization and are motivated to achieve high levels of performance).

Resource-based theory expressed as ‘the resource-based view’ states that competitive advantage is achieved if a firm’s resources are valuable, rare and costly to imitate. It is claimed that HRM can play a major part in ensuring that the firm’s human resources meet these criteria.

Organizational behaviour theory describes how people within their organizations act individually or in groups and how organizations function in terms of their structure, processes and culture. It therefore influences HRM approaches to organization design and development and enhancing organizational capability (the capacity of an organization to function effectively in order to achieve desired results).

Contingency theory states that HRM practices are dependent on the organization’s environment and circumstances. This means that, as Paauwe (2004: 36) explained: ‘The relationship between the relevant independent variables (eg HRM policies and practices) and the dependent variable (performance) will vary according to the influences such as company size, age and technology, capital intensity, degree of unionization, industry/sector ownership and location.’

Contingency theory is associated with the notion of fit – the need to achieve congruence between an organization’s HR strategies, policies and practices and its business strategies within the context of its external and internal environment. This is a key concept in strategic HRM.

Organizations conform to internal and external environmental pressures in order to gain legitimacy and acceptance.

Human capital theory is concerned with how people in an organization contribute their knowledge, skills and abilities to enhancing organizational capability and the significance of that contribution.

Resource dependence theory states that groups and organizations gain power over each other by controlling valued resources. HRM activities are assumed to reflect the distribution of power in the system.

The ‘AMO’ formula as set out by Boxall and Purcell (2003) states that performance is a function of Ability + Motivation + Opportunity to Participate. HRM practices therefore impact on individual performance if they encourage discretionary effort, develop skills and provide people with the opportunity to perform. The formula provides the basis for developing HR systems that attend to employees’ interests, namely their skill requirements, motivations and the quality of their job.

Employees will reciprocate their contribution to the organization if they perceive that the organization has treated them well.

Transaction costs economics assumes that businesses develop organizational structures and systems that economize the costs of the transactions (interrelated exchange activities) that take place during the course of their operations.

Agency theory states that the role of the managers of a business is to act on behalf of the owners of the business as their agents. But there is a separation between the owners (the principals) and the agents (the managers) and the principals may not have complete control over their agents. The latter may therefore act in ways that are against the interests of those principals. Agency theory indicates that it is desirable to operate a system of incentives for agents, ie directors or managers, to motivate and reward acceptable behaviour.

Reservations about the original concept of HRM

On the face of it, the original concept of HRM as described above had much to offer, at least to management. But for some time, HRM was a controversial topic, especially in academic circles. The main reservations as set out below have been that HRM promises more than it delivers and that its morality is suspect:

· Guest (1991: 149) referred to the ‘optimistic but ambiguous label of human resource management’.

· HRM ‘remains an uncertain and imprecise notion’ Noon (1992: 16).

· ‘The HRM rhetoric presents it as an all or nothing process which is ideal for any organization, despite the evidence that different business environments require different approaches’. (Armstrong, 2000: 577)

· HRM is simplistic – as Fowler (1987: 3) wrote: ‘The HRM message to top management tends to be beguilingly simple. Don’t bother too much about the content or techniques of personnel management, it says. Just manage the context. Get out from behind your desk, bypass the hierarchy, and go and talk to people. That way you will unlock an enormous potential for improved performance.’

· The unitarist approach to industrial relations implicit in HRM (the belief that management and employees share the same concerns and it is therefore in both their interests to work together) is questionable. Fowler (1987: 3) commented that: ‘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?’ Later, Ramsey et al (2000: 521) questioned the unitarist assumption underlying much mainstream management theory that claims that everyone benefits from managerial innovation.

· HRM is ‘macho-management dressed up as benevolent paternalism’ Legge (1998: 42).

· HRM is manipulative. Willmott (1993: 534) asserted that: ‘any (corporate) practice/value is as good as any other so long as it secures the compliance of employees’. HRM was dubbed by the Labour Research Department (1989: 8) as ‘human resource manipulation’. John Storey (2007: 4) referred to ‘the potential manipulative nature of seeking to shape human behaviour at work’.

· HRM is managerialist. ‘The analysis of employment management has become increasingly myopic and progressively more irrelevant to the daily experience of being employed. While the reasons for this development are immensely complex… it is primarily a consequence of the adoption of the managerialist conception of the discourse of HRM’ (Delbridge and Keenoy, 2010: 813).

· HRM overemphasizes business needs. Keegan and Francis (2010) have rightly criticized the increasing focus on the business partnership role of HR at the expense of its function as an employee champion. An illustration of this is provided by the Professional Map produced by the British Chartered Institute of Personnel and Development (CIPD), which as stated by the CIPD (2013: 2): ‘Sets out standards for HR professionals around the world: the activities, knowledge and behaviours needed for success.’ The map refers to ‘business’ 82 times but to ‘ethics’ only once and ‘ethical’ only twice.

These concerns merit attention, but the more important messages conveyed by the original notion of HRM such as the need for strategic integration, the treatment of employees as assets rather than costs, the desirability of gaining commitment, the virtues of partnership and participation and the key role of line managers are still valid and are now generally accepted, and the underpinning theories are as relevant today as they ever were.

And it should be remembered that these objections, with the exception of the last one, mainly apply to the original concept of HRM. But today, as explained in the final section of this chapter, HRM in action does not necessarily conform to this concept as a whole. The practice of HRM is diverse. Dyer and Holder (1988) pointed out that HRM goals vary according to competitive choices, technologies, characteristics of employees (eg could be different for managers) and the state of the labour market. Boxall (2007: 48) referred to ‘the profound diversity’ of HRM and observed 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.’ There are in fact a number of different models of HRM as described below.

Models of HRM

The most familiar models defining what HRM is and how it operates are as follows.

Fombrun et al (1984) proposed the ‘matching model’, which indicated that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy. This point was made in their classic statement that: ‘The critical management task is to align the formal structure and human resource systems so that they drive the strategic objectives of the organization’ (ibid: 37). Thus they took the first steps towards the concept of strategic HRM.

Beer et al (1984) produced what has become known as the ‘Harvard framework’. They started with the proposition that: ‘Human resource management (HRM) involves all management decisions and actions that affect the nature of the relationship between the organization and employees – its human resources’ (ibid: 1). They believed that: ‘Today… many pressures are demanding a broader, more comprehensive and more strategic perspective with regard to the organization’s human resources’ (ibid: 4). They also stressed that it was necessary to adopt ‘a longer-term perspective in managing people and consideration of people as a potential asset rather than merely a variable cost’ (ibid: 6). Beer and his colleagues were the first to underline the HRM tenet that it belongs to line managers. They suggested that HRM had two characteristic features: 1) line managers accept more responsibility for ensuring the alignment of competitive strategy and HR policies; 2) HR has the mission of setting policies that govern how HR activities are developed and implemented in ways that make them more mutually reinforcing.

The contextual model of HRM emphasizes the importance of environmental factors by including variables such as the influence of social, institutional and political forces that have been underestimated in other models. The latter, at best, consider the context as a contingency variable. The contextual approach is broader, integrating the human resource management system in the environment in which it is developed. According to Martin-Alcázar et al (2005: 638): ‘Context both conditions and is conditioned by the HRM strategy.’ A broader set of stakeholders is involved in the formulation and implementation of human resource strategies that is referred to by Schuler and Jackson (2000: 229) as a ‘multiple stakeholder framework’. These stakeholders may be external as well as internal and both influence and are influenced by strategic decisions

As formulated by Schuler (1992) the 5-P model of HRM describes how HRM operates under the five headings of:

1. HR philosophy – a statement of how the organization regards its human resources, the role they play in the overall success of the business, and how they should be treated and managed.

2. HR policies – these provide guidelines for action on people-related business issues and for the development of HR programmes and practices based on strategic needs.

3. HR programmes – these are shaped by HR policies and consist of coordinated HR efforts intended to initiate and manage organizational change efforts prompted by strategic business needs.

4. HR practices – these are the activities carried out in implementing HR policies and programmes. They include resourcing, learning and development, performance and reward management, employee relations and administration.

5. HR processes – these are the formal procedures and methods used to put HR strategic plans and policies into effect.

Brewster (1993) described a European model of HRM as follows:

· environment – established legal framework;

· objectives – organizational objectives and social concern – people as a key resource;

· focus – cost/benefits analysis, also environment;

· relationship with employees – union and non-union;

· relationship with line managers – specialist/line liaison;

· role of HR specialist – specialist managers – ambiguity, tolerance, flexibility.

The main distinction between this model and what Brewster referred to as ‘the prescribed model’ was that the latter involves deregulation (no legal framework), no trade unions and a focus on organizational objectives but not on social concern.

As set out by Mabey et al (1998: 107) the characteristics of the European model are:

· dialogue between social partners;

· emphasis on social responsibility;

· multicultural organizations;

· participation in decision-making;

· continuous learning.

Storey (1989: 8) distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that: ‘The hard one emphasises the quantitative, calculative and business-strategic aspects of managing human resources in as “rational” a way as for any other economic factor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communication, motivation and leadership.’

However, it was pointed out by Keenoy (1997: 838) that ‘hard and soft HRM are complementary rather than mutually exclusive 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. Their conclusions were as follows.

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Conclusions on hard and soft models of HRM – Truss et al (1997: 70)

Even if the rhetoric of HRM is ‘soft’, the reality is almost always ‘hard’, with the interests of the organization prevailing over those of the individual. In all the organizations, we found a mixture of both hard and soft approaches. The precise ingredients of this mixture were unique to each organization, which implies that factors such as the external and internal environment of the organization, its strategy, culture and structure all have a vital role to play in the way in which HRM operates.

HRM today

As a description of people management activities in organizations the term HRM is here to stay, even if it is applied diversely or only used as a label to describe traditional personnel management practices. Emphasis is now placed on the need for HR to be strategic and businesslike and to add value, ie to generate extra value (benefit to the business) by the expenditure of effort, time and money on HRM activities. There have been plenty of new interests, concepts and developments, including human capital management, engagement, talent management, competency-based HRM, e-HRM, high performance work systems, and performance and reward management. But these have not been introduced under the banner of the HRM concept as originally defined.

HRM has largely become something that organizations do rather than an aspiration or a philosophy and the term is generally in use as a way of describing the process of managing people. A convincing summary of what HRM means today, which focuses on what HRM is rather than on its philosophy, was provided by Peter Boxall, John Purcell and Patrick Wright (2007), representing the new generation of commentators.

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The meaning of HRM – Boxall et al (2007: 1)

Human resource management (HRM), the management of work and people towards desired ends, is a fundamental activity in any organization in which human beings are employed. It is not something whose existence needs to be radically justified: HRM is an inevitable consequence of starting and growing an organization. While there are a myriad of variations in the ideologies, styles, and managerial resources engaged, HRM happens in some form or other. It is one thing to question the relative performance of particular models of HRM in particular contexts… It is quite another thing to question the necessity of the HRM process itself, as if organizations cannot survive or grow without making a reasonable attempt at organizing work and managing people.

Key learning points: The essence of human resource management

Strategic human resource management (strategic HRM or SHRM) is an approach to the development and implementation of HR strategies that are integrated with business strategies and support their achievement. SHRM has been described by Boxall (1996) as the interface between HRM and strategic management. Schuler and Jackson (2007: 5) stated that SHRM is fundamentally about ‘systematically linking people with the firm’.

Baird and Meshoulam (1988: 116) pointed out that: ‘Business objectives are accomplished when human resource practices, procedures and systems are developed and implemented based on organizational needs, that is, when a strategic perspective to human resource management is adopted.’ Wright and McMahan (1992: 295) explained that the field of HRM has ‘sought to become integrated with the strategic management process through the development of a new discipline referred to as strategic human resource management’.

In essence, strategic HRM is conceptual; it is a general notion of how integration or ‘fit’ between HR and business strategies is achieved, the benefits of taking a longer-term view of where HR should be going and how to get there, and how coherent and mutually supporting HR strategies should be developed and implemented. Importantly, it is also about how members of the HR function should adopt a strategic approach on a day-to-day basis. This means that they operate as part of the management team, ensure that HR activities support the achievement of business strategies on a continuous basis and add value.

The aim of this chapter is to explore what this involves. It starts with an analysis of the meaning of SHRM. It then covers: an examination of its nature and its aims; an analysis of its underpinning concepts – the resource-based view and strategic fit. This is followed by a description of how strategic HRM works, namely the universalistic, contingency and configurational perspectives defined by Delery and Doty (1996) and the three approaches associated with those perspectives – best practice, best fit and bundling. The chapter continues with a summary of the distinctive features of strategic HRM and ends with an examination of how HR strategies are developed and implemented when an SHRM approach is adopted.

The conceptual basis of strategic HRM

Strategic HRM takes the notion of HRM as a strategic, integrated and coherent process and associates it with an approach to management that involves adopting a broad and long-term view of where the business is going and managing it in ways that ensure that this strategic thrust is maintained. It is influenced by the concepts of strategic management and strategy.

According to Boxall and Purcell (2003: 44): ‘Strategic management is best defined as a process. It is a process of strategy making, of forming and, if the firm survives, reforming its strategy over time.’ Strategic management was described by Johnson et al (2005: 6) as ‘understanding the strategic position of an organization, making strategic choices for the future, and turning strategy into action’. The purpose of strategic management has been expressed by Kanter (1984: 288) as being to ‘elicit the present actions for the future’ and become ‘action vehicles – integrating and institutionalizing mechanisms for change’ (ibid: 301).

The key strategic management activity identified by Thompson and Strickland (1996: 3) is ‘deciding what business the company will be in and forming a strategic vision of where the organization needs to be headed – in effect, infusing the organization with a sense of purpose, providing long-term direction, and establishing a clear mission to be accomplished.’

The focus is on identifying the organization’s mission and strategies, but attention is also given to the resource base required to make it succeed. Managers who think strategically will have a broad and long-term view of where they are going. But they will also be aware that they are responsible, first, for planning how to allocate resources to opportunities that contribute to the implementation of strategy, and second, for managing these opportunities in ways that will add value to the results achieved by the firm.

Strategy is the approach selected to achieve specified goals in the future. As defined by Chandler (1962: 13) it is: ‘The determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.’ The formulation and implementation of corporate strategy is a process for developing a sense of direction, making the best use of resources and ensuring strategic fit.

Strategy has three fundamental characteristics. First, it is forward looking. It is about deciding where you want to go and how you mean to get there. It is concerned with both ends and means. In this sense a strategy is a declaration of intent: ‘This is what we want to do and this is how we intend to do it.’ Strategies define longer-term goals but they also cover how those goals will be attained. They guide purposeful action to deliver the required result. A good strategy is one that works, one that in Abell’s (1993: 1) phrase enables organizations to adapt by ‘mastering the present and pre-empting the future’. As Boxall (1996: 70) explained: ‘Strategy should be understood as a framework of critical ends and means.’

The second characteristic of strategy is the recognition that the organizational capability of a firm (its capacity to function effectively) depends on its resource capability (the quality and quantity of its resources and their potential to deliver results). This is the resource-based view as described later in this chapter.

The third characteristic of strategy is that it aims to achieve strategic fit – the need when developing functional strategies such as HR to achieve congruence between them and the organization’s business strategies within the context of its external and internal environment.

‘Implementation entails converting the strategic plan into action and then into results’ (Thompson and Strickland, 1996: 20). Dreaming up a strategy is fairly easy; getting it to work is hard. Kanter (1984: 305) noted that: ‘Many companies, even very sophisticated ones, are much better at generating impressive plans on paper than they are at getting “ownership” of the plans so that they actually guide operational decisions.’

The development of corporate strategy is often assumed to be a logical, step-by-step affair, the outcome of which is a formal written statement that provides a definitive guide to the organization’s intentions. Many people still believe and act as if this were the case, but it is a misrepresentation of reality. In practice, the formulation of strategy may not be as rational and linear a process as some writers describe it or as some managers attempt to make it. There are limitations to the totally logical model of management that underpins the concept of strategic human resource management. In the words of Mabey et al (1998: 74): ‘The reality is… that strategies may not always be easy to discern, that the processes of decision-making may be implicit, incremental, negotiated and compromised.’

Sparrow et al (2010: 4) asserted succinctly that: ‘Strategy is not rational and never has been.’ Strategy formulation can best be described as ‘problem solving in unstructured situations’ (Digman, 1990: 53) and strategies will always be formed under conditions of partial ignorance. Quinn (1980: 9) stated that a strategy may simply be ‘a widely held understanding resulting from a stream of decisions’. He believed that strategy formulation takes place by means of ‘logical incrementalism’, ie it evolves in several steps rather than being conceived as a whole. Pettigrew and Whipp (1991: 26) observed that: ‘strategy does not move forward in a direct linear way, nor through easily discernable sequential phases. Quite the reverse; the pattern is much more appropriately seen as continuous, iterative and uncertain.’

Another difficulty is that strategies are often based on the questionable assumption that the future will resemble the past. Some years ago, Heller (1972: 150) had a go at the cult of long-range planning: ‘What goes wrong’ he wrote, ‘is that sensible anticipation gets converted into foolish numbers: and their validity always hinges on large loose assumptions.’ Faulkner and Johnson (1992: 17–18) said of long-term planning that it:

was inclined to take a definitive view of the future, and to extrapolate trend lines for the key business variables in order to arrive at this view. Economic turbulence was insufficiently considered, and the reality that much strategy is formulated and implemented in the act of managing the enterprise was ignored. Precise forecasts ending with derived financials were constructed, the only weakness of which was that the future almost invariably turned out differently.

Strategy formulation is not necessarily a deterministic, rational and continuous process, as was emphasized by Mintzberg (1987). He noted that, rather than being consciously and systematically developed, strategy reorientation happens in what he calls brief ‘quantum loops’. A strategy, according to Mintzberg, can be deliberate – it can realize the intentions of senior management, for example to attack and conquer a new market. But this is not always the case. In theory, he says, strategy is a systematic process: first we think, then we act; we formulate then we implement. But we also ‘act in order to think’. In practice, ‘a realized strategy can emerge in response to an evolving situation’ (ibid: 68) and the strategic planner is often ‘a pattern organizer, a learner if you like, who manages a process in which strategies and visions can emerge as well as be deliberately conceived’ (ibid: 73). This concept of ‘emergent strategy’ conveys the essence of how in practice organizations develop their business and HR strategies.

Boxall and Purcell (2003: 34) suggested that ‘it is better if we understand the strategies of firms as sets of strategic choices some of which may stem from planning exercises and set-piece debates in senior management, and some of which may emerge in a stream of action’. Research conducted by Tyson (1997: 280) confirmed that, realistically, strategy:

· has always been emergent and flexible – it is always ‘about to be’, it never exists at the present time;

· is not only realized by formal statements but also comes about by actions and reactions;

· is a description of a future-oriented action that is always directed towards change;

· is conditioned by the management process itself.

The nature of strategic HRM

Strategic HRM is an approach that defines how the organization’s goals will be achieved through people by means of HR strategies and integrated HR policies and practices. It was defined by Mabey et al (1998: 25) as the process of ‘developing corporate capability to deliver new organizational strategies’. It is based on two key ideas, namely the resource-based view and the need for strategic fit, as discussed later in this chapter.

SHRM can be regarded as a mindset underpinned by certain concepts rather than a set of techniques. It provides the foundation for strategic reviews in which analyses of the organizational context and existing HR practices lead to decisions on strategic plans for the development of overall or specific HR strategies. SHRM involves the exercise of strategic choice (which is always there) and the establishment of strategic priorities. It is essentially about the integration of business and HR strategies so that the latter contribute to the achievement of the former.

Strategic HRM is not just about strategic planning, nor does it only deal with the formulation of individual HR strategies. Its main concern is with integrating what HR does and plans to do with what the business does and plans to do. As modelled in Figure 2.1, SHRM is about both HR strategies and the strategic management activities of HR professionals.

Aims of SHRM

The fundamental aim of strategic HRM is to generate organizational capability by ensuring that the organization has the skilled, engaged, committed and well-motivated employees it needs to achieve sustained competitive advantage. Alvesson (2009: 52) wrote that strategic HRM is about ‘how the employment relationships for all employees can be managed in such a way as to contribute optimally to the organization’s goal achievement’.

SHRM has three main objectives: first to achieve integration – the vertical alignment of HR strategies with business strategies and the horizontal integration of HR strategies. The second objective is to provide a sense of direction in an often turbulent environment so that the business needs of the organization and the individual and the collective needs of its employees can be met by the development and implementation of coherent and practical HR policies and programmes. The third objective is to contribute to the formulation of business strategy by drawing attention to ways in which the business can capitalize on the advantages provided by the strengths of its human resources.

Critical evaluation of the concept of SHRM

The whole concept of SHRM is predicated on the belief that HR strategies should be integrated with corporate or business strategies. Vertical integration (strategic fit between business and HR strategies) may be desirable but it is not easy to achieve for the following reasons.

The different levels at which strategy is formulated and the different styles adopted by organizations may make it difficult to develop a coherent view of what sort of HR strategies will fit the overall strategies and what type of HR contributions are required during the process of formulation.

Business strategy formulation and implementation is a complex, interactive process heavily influenced by a variety of contextual and historical factors. In these circumstances, as Guest (1991) has asked, how can there be a straightforward flow from the business strategy to the HR strategy? It has been pointed out by Truss (1999: 44) that the assumption of some matching models of strategic HRM is that there is a simple linear relationship between business strategy and human resource strategy, but this assumption ‘fails to acknowledge the complexities both between and within notions of strategy and human resource management… [It] is based on a rational model of organizations and individuals which takes no account of the significance of power, politics and culture.’

The evolutionary and incremental nature of strategy making may make it difficult to pin down the HR issues that are likely to be relevant. Hendry and Pettigrew (1990) suggest that there are limits to the extent to which rational HR strategies can be drawn up if the process of business strategic planning is itself irrational.

If, because of its evolutionary nature, the business strategy has not been clearly articulated, this would add to the problems of clarifying the business strategic issues that human resource strategies should address.

Business strategies tend, or at least aim, to be expressed in the common currency of figures and hard data on portfolio management, growth, competitive position, market share, profitability, etc. HR strategies may deal with quantifiable issues such as resourcing and skill acquisition but are equally likely to refer to qualitative factors such as engagement, commitment, motivation, good employee relations and high employment standards. The relationship between the pursuit of policies in these areas and individual and organizational performance may be difficult to establish.

The concept of SHRM implies that HR strategies must be totally integrated with corporate/business strategies in the sense that they both flow from and contribute to such strategies. But as Brewster (2004) argued, HR strategy will be subjected to considerable external pressure; for example, in Europe, legislation about involvement. These may mean that HR strategies cannot be entirely governed by the corporate/business strategy.

The question: ‘To what extent should HR strategy take into account the interests of all the stakeholders in the organization, employees in general as well as owners and management?’ also needs to be answered.

The difficulties mentioned above are real, but they are frequently glossed over in rhetorical statements about the need for integration. Too often the outcome is a platitudinous statement such as: ‘Our HR strategy is to develop a performance culture’ or: ‘Our HR strategy is to ensure that the organization has the talented people it needs’. These are perfectly laudable broad objectives but they need to be more specific about how the aims will be achieved and how they will support the achievement of business goals.

Matching HR and business strategies is a problematic process but this doesn’t mean that the attempt to do so should be abandoned. HR strategists must make every effort to understand the business model of their organization (ie a picture of an organization that explains how it achieves competitive advantage and makes money) and the plans for business model innovation (the process followed by an organization to develop a new business model or change an existing one). They have to take into account the difficulties mentioned above but they need to overcome these by persistent efforts designed to obtain insight into the real issues facing the organization, leading to plans for practical interventions that address those issues.

The resource-based view of SHRM

To a very large extent, the philosophy of SHRM is underpinned by the resource-based view. This states that it is the range of resources in an organization, including its human resources, that produces its unique character and creates competitive advantage. The resource-based view is founded on the ideas of Penrose (1959: 24–25), who wrote that the firm is ‘an administrative organization and a collection of productive resources’ and saw resources as ‘a bundle of potential services’. It was expanded by Wernerfelt (1984: 172), who explained that strategy ‘is a balance between the exploitation of existing resources and the development of new ones’. Resources were defined by Hunt (1991: 322) as ‘anything that has an enabling capacity’.

The concept was developed by Barney (1991: 102), who stated that ‘a firm is said to have a competitive advantage when it is implementing a value-creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy’. This will happen if their resources are valuable, rare, inimitable and non-substitutable. He noted later (Barney 1995: 49) that an environmental analysis of strengths, weaknesses, opportunities and threats (SWOT analysis) was only half the story: ‘A complete understanding of sources of a firm’s competitive advantage requires the analysis of a firm’s internal strengths and weaknesses as well.’ He emphasized that:

Creating sustained competitive advantage depends on the unique resources and capabilities that a firm brings to competition in its environment. To discover these resources and capabilities, managers must look inside their firm for valuable, rare and costly-to-imitate resources, and then exploit these resources through their organization. (ibid: 60)

The following rationale for resource-based strategy was produced by Grant (1991: 13):

The resources and capabilities of a firm are the central considerations in formulating its strategy: they are the primary constants upon which a firm can establish its identity and frame its strategy, and they are the primary sources of the firm’s profitability. The key to a resource-based approach to strategy formulation is understanding the relationships between resources, capabilities, competitive advantage and profitability – in particular, an understanding of the mechanisms through which competitive advantage can be sustained over time. This requires the design of strategies which exploit to maximum effect each firm’s unique characteristics.

Resource-based SHRM can produce what Boxall and Purcell (2003) referred to as ‘human resource advantage’. The aim is to develop strategic capability. This means strategic fit between resources and opportunities, obtaining added value from the effective deployment of resources, and developing managers who can think and plan strategically in the sense that they understand the key strategic issues and ensure that what they do enables the strategic goals of the business to be achieved. In line with human capital theory, the resource-based view emphasizes that investment in people increases their value to the firm. It proposes that sustainable competitive advantage is attained when the firm has a human resource pool that cannot be imitated or substituted by its rivals.

Boxall (1996: 66) suggested that ‘the resource-based view of the firm provides a conceptual basis, if we needed one, for asserting that key human resources are sources of competitive advantage’. He noted that human resource advantage is achieved by a combination of ‘human capital advantage’, which results from employing people with competitively valuable knowledge and skills, and ‘human process advantage’, which follows from the establishment of ‘difficult to imitate, highly evolved processes within the firm, such as cross-departmental cooperation and executive development’. Accordingly, ‘human resource advantage’, the superiority of one firm’s labour management over another’s, can be thought of as the product of its human capital and human process advantages. He also observed (ibid: 66) that the strategic goal emerging from the resource-based view was to ‘create firms which are more intelligent and flexible than their competitors’ by hiring and developing more talented staff and by extending their skills base. Resource-based strategy is therefore concerned with the enhancement of the human or intellectual capital of the firm. As Ulrich (1998: 126) commented: ‘Knowledge has become a direct competitive advantage for companies selling ideas and relationships. The challenge to organizations is to ensure that they have the capability to find, assimilate, compensate and retain the talented individuals they need.’

The strategic goal emerging from the resource-based view is to create firms that are more intelligent and flexible than their competitors (Boxall, 1996) by hiring and developing more talented staff and by extending their skills base. Resource-based strategy is therefore concerned with the enhancement of the human or intellectual capital of the firm. Resource dependence theory (Pfeffer and Davis-Blake, 1992) suggests that HR strategies such as those concerned with reward are strongly influenced by the need to attract, retain and energize high-quality people.

The resource-based view has had considerable influence on thinking about human resource management. It provides a justification for attaching importance to resourcing activities, especially those concerned with talent management. It can also be used to enhance the value of the HR contribution in achieving competitive advantage. But it has the following limitations:

· it may be difficult to find resources that satisfy all the criteria;

· external factors such as product market pressures are ignored;

· it provides only generalized guidance on what resources are suitable;

· different resource configurations can provide the same value for firms;

· as Priem and Butler (2001) pointed out, the theory is tautological because valuable resources and competitive advantage are defined in the same terms.

Strategic fit

The concept of strategic fit stresses that when developing HR strategies it is necessary to achieve congruence between them and the organization’s business strategies within the context of its external and internal environment. This notion is fundamental to SHRM, as was stressed by Wright and Snell (1998: 758) who wrote: ‘The primary role of strategic HRM should be to promote a fit with the demands of the competitive environment.’ In more detail, Schuler (1992: 18) stated that:

Strategic human resource management is largely about integration and adaptation. Its concern is to ensure that: (1) human resources (HR) management is fully integrated with the strategy and strategic needs of the firm (vertical fit); (2) HR policies cohere both across policy areas and across hierarchies (horizontal fit); and (3) HR practices are adjusted, accepted and used by line managers and employees as part of their everyday work.

Perspectives on SHRM

Taking into account the concepts of the resource-based view and strategic fit, Delery and Doty (1996: 802) contended that ‘organizations adopting a particular strategy require HR practices that are different from those required by organizations adopting different strategies’ and that organizations with ‘greater congruence between their HR strategies and their (business) strategies should enjoy superior performance’ (ibid: 803). They identified three HRM perspectives:

1. The universalistic perspective – some HR practices are better than others and all organizations should adopt these best practices. There is a universal relationship between individual ‘best’ practices and firm performance.

2. The contingency perspective – to be effective an organization’s HR policies must be consistent with other aspects of the organization. The primary contingency factor is the organization’s strategy. This can be described as ‘vertical fit’.

3. The configurational perspective – this is a holistic approach that emphasizes the importance of the pattern of HR practices and is concerned with how this pattern of independent variables is related to the dependent variable of organizational performance.

This typology provided the basis for what has become the most commonly used classification of approaches, which is to adopt the terms ‘best practice’ and ‘best fit’ for the universalistic and contingency perspectives, and ‘bundling’ as the third approach (Richardson and Thompson, 1999). This followed the classification made by Guest (1997) of fit as an ideal set of practices, fit as contingency and fit as bundles.

This model is based on the assumption that there is a set of best HRM practices that are universal in the sense that they are best in any situation, and that adopting them will lead to superior organizational performance.

A number of lists of ‘best practices’ have been produced, the most quoted being by Pfeffer (1998):

· employment security;

· selective hiring;

· self-managed teams;

· high compensation contingent on performance;

· training to provide a skilled and motivated workforce;

· reduction of status differentials;

· sharing information.

The best fit model is in line with contingency theory. It emphasizes that HR strategies should be congruent with the context and circumstances of the organization. ‘Best fit’ can be perceived in terms of vertical integration or alignment between the organization’s business and HR strategies. There are three models: life cycle, competitive strategy and strategic configuration.

The life cycle model is based on the theory that the development of a firm takes place in four stages: start-up, growth, maturity and decline. This is in line with product life cycle theory. The basic premise of this model was expressed by Baird and Meshoulam (1988: 117) as follows:

Human resource management’s effectiveness depends on its fit with the organization’s stage of development. As the organization grows and develops, human resource management programmes, practices and procedures must change to meet its needs. Consistent with growth and development models it can be suggested that human resource management develops through a series of stages as the organization becomes more complex.

Three strategies aimed at achieving competitive advantage were identified by Porter (1985):

1. Innovation – being the unique producer.

2. Quality – delivering high-quality goods and services to customers.

3. Cost leadership – the planned result of policies aimed at ‘managing away’ expense.

It was argued by Schuler and Jackson (1987) that to achieve the maximum effect it is necessary to match the role characteristics of people in an organization with the preferred strategy.

Another approach to best fit is the proposition that organizations will be more effective if they adopt a policy of strategic configuration (Delery and Doty, 1996). This means matching their strategy to one of the ideal types defined by theories such as those produced by Miles and Snow (1978). They identified the following four types of organizations, classifying the first three types as ‘ideal’ organizations:

1. Prospectors, which operate in an environment characterized by rapid and unpredictable changes. Prospectors have low levels of formalization and specialization and high levels of decentralization. They have relatively few hierarchical levels.

2. Defenders, which operate in a more stable and predictable environment than prospectors and engage in more long-term planning. They have more mechanistic or bureaucratic structures than prospectors and obtain coordination through formalization, centralization, specialization and vertical differentiation.

3. Analysers, which are a combination of the prospector and defender types. They operate in stable environments, like defenders, and also in markets where new products are constantly required, like prospectors. They are usually not the initiators of change, like prospectors, but they follow the changes more rapidly than defenders.

4. Reactors, which are unstable organizations existing in what they believe to be an unpredictable environment. They lack consistent well-articulated strategies and do not undertake long-range planning.

The notion of best practice assumes that there are universally effective HR practices that can readily be transferred. This rubric has been attacked by a number of commentators. Cappelli and Crocker-Hefter (1996: 7) commented that the notion of a single set of best practices has been overstated: ‘There are examples in virtually every industry of firms that have very distinctive management practices… Distinctive human resource practices shape the core competencies that determine how firms compete.’

Purcell (1999: 26) noted that ‘the search for best practice tends to take on the flavour of a moral crusade’. He has also criticized the best practice or universalist view by pointing out the inconsistency between a belief in best practice and the resource-based view, which focuses on the intangible assets, including HR, that allow the firm to do better than its competitors. He asked how can ‘the universalism of best practice be squared with the view that only some resources and routines are important and valuable by being rare and imperfectly imitable?’ and stated that: ‘The claim that the bundle of best practice HRM is universally applicable leads us into a utopian cul-de-sac’ (ibid: 36). Boxall (2007: 5) concluded that he was ‘deeply sceptical about claims for universal applicability for particular HRM practices or clusters of practices [but] this does not rule out the search for general principles in the management of work and people’.

However, a knowledge of what is assumed to be best practice can be used to inform decisions on what practices are most likely to fit the needs of the organization, as long as it is understood why a particular practice should be regarded as a best practice and what needs to be done to ensure that it will work in the context of the organization. Becker and Gerhart (1996) argued that the idea of best practice might be more appropriate for identifying the principles underlying the choice of practices, as opposed to the practices themselves.

The best fit model seems to be more realistic than the best practice model. As Dyer and Holder (1988: 31) observed: ‘The inescapable conclusion is that what is best depends.’ But there are limitations to the concept. Paauwe (2004: 37) emphasized that: ‘It is necessary to avoid falling into the trap of “contingent determinism” (ie claiming that the context absolutely determines the strategy). There is, or should be, room for making strategic choices.’

There is a danger of mechanistically matching HR policies and practices with strategy. It is not credible to claim that there are single contextual factors that determine HR strategy, and internal fit cannot therefore be complete. Purcell (1999: 35) pointed out that: ‘each firm has to make choices not just on business and operational strategies but on what type of HR system is best for its purposes’. As Boxall (2007: 61) asserted: ‘It is clearly impossible to make all HR policies reflective of a chosen competitive or economic mission.’ They may have to fit with social legitimacy goals. And Purcell (1999: 37) commented that: ‘The search for a contingency or matching model of HRM is also limited by the impossibility of modelling all the contingent variables, the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others.’

Best fit models tend to be static and don’t take account of the processes of change. They neglect the fact that institutional forces shape HRM – it cannot be assumed that employers are free agents able to make independent decisions.

It is often said that best fit is better than best practice but this statement can only be accepted with reservations. As Stavrou et al (2010: 952–53) argued:

There may be merit in both approaches where the debate is between general principles/bundles (training and development, staffing, compensation and benefits, communication and participation, and planning) and the manner in which they are carried out… It seems that the ‘best fit’ and ‘best practice’ approaches of the HR-performance relationship are not necessarily mutually exclusive. On the contrary, they may be combined to provide a more holistic picture.

This is particularly the case if the term ‘best practice’ is replaced by ‘good practice’, thus avoiding the notion of universality implied by the former term. For example, the meta-analysis carried out by Schmidt and Hunter (1998) established conclusively that when selecting people, the best levels of predictive validity are achieved by a combination of structured interviews and intelligence tests. But a decision on what sort of structured interview should be adopted and whether or not to use intelligence tests would depend on the situation in which the decision was made.

‘Bundling’ is the development and implementation of several HR practices together so that they are interrelated and therefore complement and reinforce each other. This is the process of horizontal integration, which is also referred to as the use of ‘complementarities’. Richardson and Thompson (1999) suggested that a strategy’s success turns on combining vertical or external fit and horizontal or internal fit. They concluded that a firm with bundles of associated HR practices should have a higher level of performance, provided it also achieves high levels of fit with its competitive strategy.

Dyer and Reeves (1995: 656–57) noted that: ‘The logic in favour of bundling is straightforward… Since employee performance is a function of both ability and motivation, it makes sense to have practices aimed at enhancing both.’ Thus there are several ways in which employees can acquire needed skills (such as careful selection and training) and multiple incentives to enhance motivation (different forms of financial and non-financial rewards). Their study of various models listing HR practices that create a link between HRM and business performance found that the activities appearing in most of the models were involvement, careful selection, extensive training and contingent compensation.

The process of bundling HR strategies is an important aspect of the concept of strategic HRM. In a sense, SHRM is holistic: it is concerned with the organization as a total system or entity and addresses what needs to be done across the organization as a whole. It is not interested in isolated programmes and techniques, or in the ad hoc development of HR strategies and practices.

Bundling can take place in a number of ways. Competency frameworks (a set of definitions of the competencies that describe the types of behaviour required for the successful performance of a role) can be devised that have a variety of uses, for example to specify recruitment standards, provide a framework for structured interviews, identify learning and development needs and indicate the standards of behaviour or performance required. Job evaluation can also be used to clarify and define levels in an organization. Grade structures can define career ladders in terms of competency requirements (career family structures) and thus provide the basis for learning and development programmes. Total reward approaches ‘bundle’ financial and non-financial rewards together. High-performance systems are in effect based on the principle of bundling because they group a number of HR practices together to produce synergy and thus increase their impact.

Bundling sounds like a good idea. The research by MacDuffie (1995) and others has shown that bundling can improve performance. But there are a number of inhibiting factors, namely:

· deciding which bundles are likely to be best – there is no evidence that one bundle is generally better than another;

· actually linking practices together – it is always easier to deal with one practice at a time;

· managing the interdependencies between different parts of a bundle;

· convincing top management and line managers that bundling will benefit the organization and them.

These can be overcome by dedicated HR professionals, but it is hard work. What can be done, with difficulty, is to find ways in which different HR practices can support one another, as in the examples given above.

HR strategies

HR strategies indicate what the organization wants to do about its human resource management policies and practices and how they should be integrated with the business strategy and each other. They set out aspirations that are expressed as intentions, which are then converted into actions. As suggested by Chesters (2011: 32), they should be regarded as a statement of the organization’s collective endeavour. They are not just a laundry list of everything that the organization would like to do.

HR strategies were described by Dyer and Reeves (1995: 656) as ‘internally consistent bundles of human resource practices’. Richardson and Thompson (1999: 3) observed that:

A strategy, whether it is an HR strategy or any other kind of management strategy must have two key elements: there must be strategic objectives (ie things the strategy is supposed to achieve), and there must be a plan of action (ie the means by which it is proposed that the objectives will be met).

Purcell (2001: 72) made the point that: ‘Strategy in HR, like in other areas, is about continuity and change, about appropriateness in the circumstances, but anticipating when the circumstances change. It is about taking strategic decisions.’

The purpose of HR strategies is to articulate what an organization intends to do about its HRM policies and practices now and in the longer term to ensure that they contribute to the achievement of business objectives. However, it is necessary to bear in mind the dictum of Fombrun et al (1984) that business and managers should perform well in the present to succeed in the future.

HR strategies may be defined formally as part of a strategic HRM process that leads to the development of overall or specific strategies for implementation by HR and, vitally, line managers. But an organization that has developed an HR strategy will not be practising SHRM unless that HR strategy has strategic relevance to the organization’s success. As Wright and McMahan (1999: 52) indicated, HRM can only be considered to be strategic if ‘it enables an organization to achieve its goals’.

Pettigrew and Whipp (1991: 30) emphasized that strategy, ‘far from being a straightforward, rational phenomenon, is in fact interpreted by managers according to their own frame of reference, their particular motivations and information’. They were writing about business strategy, but the same applies to HR strategy, which can appear through an emergent, evolutionary and possibly unarticulated process influenced by the business strategy as it develops and changes in the internal and external environment. But there are still strong arguments for a systematic approach to identifying strategic directions that can provide a framework for decision-making and action. The main argument for articulating HR strategies is that unless you know where you are going, you will not know how to get there or when you have arrived.

Because all organizations are different, all HR strategies are different. There is no such thing as a standard strategy. Research into HR strategy conducted by Armstrong and Long (1994) and Armstrong and Baron (2002) revealed many variations. Some strategies are simply very general declarations of intent. Others go into much more detail. The two types of HR strategies are: 1) general strategies such as high-performance working; 2) specific strategies relating to the different aspects of HRM such as learning and development and reward.

General strategies describe the overall system or bundle of complementary HR practices that the organization proposes to adopt or puts into effect in order to improve organizational performance. The three main approaches are summarized below.

High-performance management aims, through high-performance work systems (bundles of practices that enhance employee performance and facilitate their engagement, motivation and skill enhancement), to make an impact on the performance of the organization in such areas as productivity, quality, levels of customer service, growth and profits. High-performance working practices include rigorous recruitment and selection procedures, extensive and relevant training and management development activities, incentive pay systems and performance management processes.

One of the defining characteristics of HRM is its emphasis on the importance of enhancing mutual commitment (Walton, 1985). High-commitment management has been described by Wood (1996) as: ‘A form of management which is aimed at eliciting a commitment so that behaviour is primarily self-regulated rather than controlled by sanctions and pressures external to the individual, and relations within the organization are based on high levels of trust.’

As defined by Benson et al (2006: 519): ‘High-involvement work practices are a specific set of human resource practices that focus on employee decision-making, power, access to information, training and incentives.’ Camps and Luna-Arocas (2009: 1057) observed that: ‘High-involvement work practices aim to provide employees with the opportunity, skills and motivation to contribute to organizational success in environments demanding greater levels of commitment and involvement.’ The term ‘high-involvement’ was used by Lawler (1986) to describe management systems based on commitment and involvement, as opposed to the old bureaucratic model based on control.

· A local authority: as expressed by the chief executive of this borough council, its HR strategy is about ‘having a very strong focus on the overall effectiveness of the organization, its direction and how it’s performing; there is commitment to, and belief in, and respect for individuals, and I think that these are very important factors.’

· A public utility: ‘The only HR strategy you really need is the tangible expression of values and the implementation of values… unless you get the human resource values right you can forget all the rest’ (managing director).

· A manufacturing company: ‘The HR strategy is to stimulate changes on a broad front aimed ultimately at achieving competitive advantage through the efforts of our people. In an industry of fast followers, those who learn quickest will be the winners’ (HR director).

· A retail stores group: ‘The biggest challenge will be to maintain [our] competitive advantage and to do that we need to maintain and continue to attract very high calibre people. The key differentiator on anything any company does is fundamentally the people, and I think that people tend to forget that they are the most important asset. Money is easy to get hold of, good people are not. All we do in terms of training and manpower planning is directly linked to business improvement’ (managing director).

Specific HR strategies set out what the organization intends to do in areas such as:

· Implement the rewards strategy of the society to support the corporate plan and secure the recruitment, retention and motivation of staff to deliver its business objectives.

· Manage the development of the human resources information system to secure productivity improvements in administrative processes.

· Introduce improved performance management processes for managers and staff of the society.

· Implement training and development that supports the business objectives of the society and improves the quality of work with children and young people.

There are three broad strands to the Organization and People Strategy:

1. Reward and recognition: use recognition and reward programmes to stimulate outstanding team and individual performance contributions.

The key components of the HR strategy are:

· Investing in people – improving the level of intellectual capital.

· Performance management – integrating the values contained in the HR strategy into performance management processes and ensuring that reviews concentrate on how well people are performing those values.

· Job design – a key component concerned with how jobs are designed and how they relate to the whole business.

· The reward system – in developing reward strategies, taking into account that this is a very hard-driven business.

The focus is on the organization of excellence. The strategy is broken down into eight sections: employee relations, recruitment and retention, training, performance management, pay and benefits, health and safety, absence management and equal opportunities.

An effective HR strategy is one that works in the sense that it achieves what it sets out to achieve. Its criteria are that it:

· will satisfy business needs;

· is founded on detailed analysis and study and is evidence-based – it is not just wishful thinking;

· can be turned into actionable programmes that anticipate implementation requirements and problems;

· is coherent and integrated, being composed of components that fit with and support each other;

· takes account of the needs of line managers and employees generally as well as those of the organization and its other stakeholders.

Research conducted by Wright et al (2004) identified two approaches that can be adopted by HR to strategy formulation: 1) the inside-out approach begins with the status quo HR function (in terms of skills, processes, technologies, etc) and then attempts (with varying degrees of success) to identify linkages to the business (usually through focusing on ‘people issues’), making minor adjustments to HR activities along the way; 2) the outside-in approach in which the starting point is the business and the customer, competitor and business issues it faces. The HR strategy then derives directly from these challenges to add real value.

Wright et al commented that HR strategies are more likely to flow from business strategies dominated by product/market and financial considerations. But there is still room for HR to make an essential contribution at the stage when business strategies are conceived, for example by focusing on resource issues. This contribution may be more significant when strategy formulation is an emergent or evolutionary process – HR strategic issues will then be dealt with as they arise during the course of formulating and implementing the corporate strategy.

As Gratton (2000: 30) commented: ‘There is no great strategy, only great execution.’ Strategies cannot be left as generalized aspirations or abstractions. But getting strategies into action is not easy: intent does not always lead to action. Too often, strategists act like Charles Dickens’s character Mr Pecksmith, who was compared by Dickens (Martin Chuzzlewit, Penguin Classics, 2004: 23) to ‘a direction-post which is always telling the way to a place and never goes there.’ It is necessary to avoid saying, in effect: ‘We need to get from here to there but we don’t care how.’

If, in Kanter’s (1984) phrase, HR strategies are to be action vehicles, they must be translated into HR policies that provide guidelines on decision-making and HR practices that enable the strategy to work. These can be the basis for implementation programmes with clearly stated objectives and deliverables.

To a large extent, HR strategies are implemented by line managers. As Purcell et al (2003: x) stressed, it is front-line managers who ‘bring policies to life’. They pointed out that:

Implementing and enacting policies is the task of line managers. It is necessary first to involve line managers in the development of HR strategy – bearing in mind that things done with line managers are much more likely to work than things done to line managers. Second, ensure that the HR policies they are expected to put into practice are manageable with the resources available. Third, provide managers with the training, supporting processes and on the spot guidance they need.

Key learning points: Strategic HRM