Is it fair to criticize the concept of SHRM because it is over-concerned with the interests and needs of the business and neglects the interests and needs of the people employed in the business?

Chapter 5 The reality of SHRM

Introduction

The reality of strategic HRM (SHRM) as it has evolved over the years is that it has remained over-concerned with the interests of the business and its shareholders. But it is also an academic construct that seems to leave practitioners cold. In this chapter the reality and limitations of the SHRM concept are discussed and a case is made for modifying the approach.

The reality of SHRM

The rationale for SHRM is the perceived advantage of having an agreed and understood basis for developing and implementing approaches to human resource management which takes into account the corporate plans and priorities of the organization and the changing context in which it operates. As Dyer and Holder (1988: 13) remarked, SHRM should provide ‘unifying frameworks which are at once broad, contingency based and integrative’. This is compelling stuff. But a literature review of SHRM by Armstrong and Brown (2018) left them the impression that it is more of an academic construct than a description of the reality of strategy formulation and implementation in organizations. Brown et al (2019: 43) commented following their research for the Institute for Employment Studies (IES) that: ‘Maybe the proponents of strategic HRM had some very pertinent ideas but used jargon which got in the way of people management becoming genuinely more strategic.’ The IES researchers were struck by the absence in current HR language of the term strategic human resource management. It is interesting to note that the CIPD’s New Profession Map (CIPD, 2018) setting out its professional standards does not mention it. Strategic HRM is a concept of some academic importance but less practical significance. It only becomes real when people management professionals and line managers jointly practise strategic management and together develop and implement people strategies which address the people and business requirements and issues facing their organization.

The limitations of SHRM

As emphasized by Armstrong and Brown (2018), a fundamental problem with SHRM is that it has been over-concerned with the interests of one set of stakeholders – meeting the needs of the shareholders and business leaders – and has been much less concerned with the interests of the other stakeholders, especially employees. This issue was raised by Kaye (1999) who asked the question: ‘Does SHRM benefit employees as well as their organizations?’ He observed that virtually all SHRM research takes the managerial/organizational perspective, with an emphasis on the consequences for organizational performance. This, he wrote, suggests that SHRM may be improving the bottom line of companies, but may also be hurting employees – especially when workers are viewed as commodities. Cascio (2015: 424) argued that: ‘In SHRM research, organizational performance is sometimes viewed only in terms of operational outcomes (productivity, quality, service, innovation) and financial outcomes (return on assets, return on equity, sales growth, overall financial performance).’ Yet as Beer et al (1984) emphasized in their seminal work, performance has to be framed more broadly to include meeting corporate ethical and social responsibilities, including job satisfaction, industrial democracy and distributive justice. They advocated a multi-stakeholder approach to HRM, commenting: HRM policies are and indeed should be influenced by the interests of various stakeholders: shareholders, management, management, employees, community and government. Unless these policies are influenced by all stakeholders, the enterprise will fail to meet the needs of these stakeholders in the long run and it will fail as an institution. (Beer et al, 1984: 15) In his 2015 article ‘HRM at a crossroads’, Michael Beer looked at what had happened to SHRM in the 30 years since he and his colleagues wrote Managing Human Assets. He commented on the pluralistic view expressed in that book, with its emphasis on the need to adopt a multi-stakeholder approach. He observed that this perspective has largely disappeared from HRM, with scholars focusing on proving that human assets are causal to financial performance, especially in the United States but not so much in Europe. He also argued that ‘the field must reorient itself to producing useful, and I would add, usable (actionable) knowledge, if it is to remain relevant to practitioners’ (Beer, 2015: 420). Beer et al (2015: 427) reviewed the state of this perspective after 30 years. They stated that ‘we need to take a wider, more contextual, more multi-layered approach founded on the long-term needs of all relevant stakeholders’. They also argued that ‘Fundamental to a multi-stakeholder approach must be the creation, maintenance, and development of a culture of trust among the different stakeholders. Considering HRM as a social system, in contrast to the dominant individual perspective, puts the relationships between stakeholders at the centre of our studies’ (p 432).

SHRM: the assumptions and the reality

SHRM is based on three assumptions:

· HR strategies should be vertically integrated with the business strategy.

· HR strategies should be horizontally integrated with one another.

· HR strategies should take account of the interests of all the organization’s stakeholders (the multi-stakeholder view). As often described, SHRM focuses on the first of these assumptions, pays lip service to the second and to a large extent ignores the third. A different approach is required and this can be described under the heading ‘people management’.

The case for people management

A case for adopting the term people management rather than strategic HRM was made by the Institute for Employment Studies based on their research (Brown et al, 2019: 43): Reflecting on the case study interviews the IES team was struck by the absence in current HR language of the term Strategic Human Resource Management. Indeed, although the function commonly calls itself HR, and often wants to be more strategic in its orientation, it tends not even to talk much about Human Resource Management. While the somewhat confusing mix of terms may not be helping academics to define and study the concept and HR functions to attract the recognition they seek, the perhaps less jargon-ridden and less alienating term ‘People Management’ does seem to be coming to the fore again and can apply both at strategic level and to management practice. We hope the term People Management leads to the wider use of the term People Strategy to cover the big picture of employment and workforce management as we have found it a useful term in reflecting on this research. Maybe the proponents of strategic HRM had some very pertinent ideas but used jargon which got in the way of people management becoming genuinely more strategic. The idea of people strategy provides a broader view of the ways in which people should be managed in organizations than that of strategic HRM. A definition is required of the difference between people management and human resource management (it should not just be a name change). This is done in the next chapter.

Key learning points

· Rationale for SHRM

· The rationale for SHRM is the perceived advantage of having an agreed and understood basis for developing and implementing approaches to human resource management which takes into account the corporate plans and priorities of the organization and the changing context in which it operates.

· Problems with SHRM

· A literature review of SHRM by Armstrong and Brown in 2018 left the impression that SHRM is more of a construct (in the sense of a subjective theory containing various conceptual elements) than a description of the reality of strategy formulation and implementation in organizations.

· Strategic HRM is a concept of some academic importance but less practical significance. It is fundamentally conceptual.

· A fundamental problem with SHRM is that it has been over-concerned with the interests of one set of stakeholders – meeting the needs of the shareholders and business leaders – and has been much less concerned with the interests of the other stakeholders.

· People management

· ‘People management’ is increasingly being used as an alternative to ‘human resource management’ but it should mean more than just a change to a more acceptable name.

· The fundamental aim of people management is to ensure that the organization has the knowledgeable, skilled, engaged and productive people it needs. This is, of course, the same as the basic aim of human resource management. But the ways in which it is achieved are different.

· People management aims to achieve a balance between the needs of employees and those of the other stakeholders. It pursues employment policies that are socially legitimate and produce benefits for both employees and employers.

· Strategic people management is concerned with the ways in which people in an organization should be managed in order to satisfy the interests and needs of its stakeholders now and in the future.

· The idea of strategic people management provides a much broader view of the ways in which people should be managed in organizations than that of strategic HRM.