Running head: HUMAN RESOURCE MANAGEMENT 1
Human Resources Management: Literature Review
Mary-Ann R. Foster
Liberty University
August 12, 2014
HUMAN RESOURCE MANAGEMENT 2
Abstract
Human Resource Management (HRM) plays a vital role in any organization, as it is the
initial and the final interaction an employee will have with the organization. As HRM continues
to evolve, the role of HR and its effects on organizations continues to change also. HR practices
affect both internal and external factors of an organization, such as competition, compensation,
legislation, recruitment and labor relation. These factors influence the organization’s competitive
advantage over competitors, both domestic and international. After reading this review the reader
will have a better understanding of the role of HRM today, how HRM has evolved, how HRM is
influenced by internal and external factors of its environment and the effects of HRM on
organizations today compared to the past. The future of HRM will also be discussed. The review
will also highlight research gaps in previous research, and provide suggestions about the HR
areas that future research should address.
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Literature Review
Human resource management (HRM) entails making the best use of people in the
organization in order to attain organizational objectives. This definition was formulated towards
the end of the twentieth century. After that, job satisfaction and employee motivation gained
more interest instead of just rational administration (Hartel et al., 2007). At the present,
organizations across the globe are facing serious challenges such as globalization, economic
changes, investing in human capital, change management, and growth. Surviving these
challenges has been associated with the ability to develop new capabilities. There is thus a need
to identify opportunities through those emerging challenges. In that case, human resource
strategies may be used as an essential tool for dealing with the challenges, as well as for attaining
organizational success. Strategic management of human capital may be best attained through
effectual HR practices (Hussain & Ahmad, 2012).
Hussain and Ahmad (2012) maintain that, HRM has assumed additional significance after
realizing that individuals are of great strategic importance. The ability of HR to convert other
organizational resources such as money into products and or services creates a competitive
advantage for an organization (Tiwari & Saxena, 2012).
According to Koch and McGrath (1996), effective HRM needs sound HRM systems.
Improved employee performance is one way in which Human Resources management can assist
organizations in improving organizational behavior (Lingham, 2013). An organization ought to
have effective HRM practices in order for it to have a reasonable HRM system. HRM practices
denote organizational activities that are directed towards managing the team of human resources,
as well as making sure that the human resources are utilized towards achievement of
organizational goals and mission (Koch & McGrath, 1996; Wright & Snell, 1991).
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Evolution of HRM
The field of human resource management keeps on evolving. Originally perceived to deal
with employee hiring and compensation, the function currently has a close alignment with an
organization’s strategic plan. To receive the respect that the function deserves, HR managers
should respond appropriately to challenges such as lacking power, maintenance of a balance
amid employees and management, as well as handling employees in difficult situations
(Vosburgh, 2007).
Labor Relations
As from the 1900s, when the Industrial Revolution took place, organizational managers
had a tendency of treating individuals as interchangeable. When conflicts and disputes arose,
mediators were used to solve the problems. Compared to the past, the HRM function currently
involves negotiating and managing collective bargaining treaties with unions. It also involves
providing training, advice and support to supervisors and managers on employees’ issues
(Vosburgh, 2007).
Industrial Relations
Drawing from Vosburgh (2007), after the First World War, during the 1920s, employees’
rights as well as formal rights emerged. Industrial Relation focuses on the development of
scientific knowledge, addressing ethical issues, and solving problems. At the present, most
organizations do not have a function for industrial relations because only fewer unions exist.
Personnel Administration
During the 1940s, administration of personnel focused on enhancing efficiency. In the
1960s, the function evolved to incorporate legal compliance, recruiting, hiring, assessing, and
training employees. Failure to adhere to regulations put organizations at risk of lawsuits.
HUMAN RESOURCE MANAGEMENT 5
Workforce administrative tasks concentrated on completing paperwork in order to avert the risks
(Christensen, 2006).
Human Resources
Christensen (2006) asserts that, during the 1980s, management of human resources
included application of novel theories relating to motivation, team building, and change
management. During that period, many organizations experienced acquisitions and mergers. This
resulted in augmented focus on optimizing the employees. In recent times, the growing use and
popularity of computers has resulted in the rise of Web-based HR systems, as well as automated
procedures.
Organizational Capability
Younger, Brockbank and Ulrich (2012) argue that, successful HRM aligns business
strategy and HR. At the present, HR departments pay less attention to the transactional activities
of personnel administration. Instead, they focus more on recruiting the appropriate employees,
developing and training the workforce, as well as managing performance. The four-quadrant
model developed by Ulrich puts administrative professionals at the lower-left quadrant, while the
lower-right quadrant is for employee relations professionals. The lower quadrants represent a
daily operational focus within the company. Under the upper-left quadrant, HR managers act as
strategic partners with other top managers to create and sustain an organizational capability and
culture. Under the upper-right quadrant, workforce planning and organizational design experts
collaborate with business managers. The top quadrants reflect strategic planning and the way the
HR function influences other functions of the organization (Younger, Brockbank, & Ulrich,
2012).
Influential Factors in HRM
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Internal factors as well as external factors may affect HRM although the way it affects
the organization may vary based on the organization and demographic location. These factors are
responsible for the variation in HRM practices in different organizations and countries. HRM
practices are affected by its internal environment. Moreover, the external factors that affect a
company’s HR practices are the pressures on the company that are not within its control, and
cannot be changed in its favor in the short-term.
Internal Factors
Organizational Structure
Human resources should consider the structure and strategic methods of an organization
when considering changes or flexibility. There are significant structural differences amid
organizations that affect the manner in which their HR practices are formulated and implemented
(Hudson, Smart, & Bourne, 2001).
Business Strategy
Drawing from Hudson, Smart and Bourne (2001), to attain a competitive advantage,
organizations use various competitive strategies. Such strategies are highly effective when they
are matched with an organization’s HRM practices. Organizations can enhance their work setting
by making right choices regarding HR practices that always support their business strategy.
Strategy
One of the main factors that HRM considers when implementing change is a strategic
approach especially when it comes to diversity. Accordingly, HR practices should be done
according to an organization’s preset HR strategy (Hudson, Smart, & Bourne, 2001).
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Culture and Past Practices in HRM
Pardo and Fuentes (2003) maintain that, several closely associated factors, such as
traditions, history, and previous practices of organizations have a tendency of creating resistance
to change within most companies. As a result, in most cases, human resource management is
conducted in a way that depends on a company’s previous way of undertaking HR practices.
Management
The influence of senior managers on HRM practices is highly acknowledged by many
scholars, thought it is just to the level of advising the senior managers to support the designing
and implementation of HR policies (Alas, Karrelson, & Niglas, 2008). Line managers have the
responsibility of creating value within an organization, and thus, they should incorporate HRM
practices when discharging their work (Alas, Karrelson, & Niglas, 2008). HR professionals often
take part in making organizational decisions regarding HR practices and policies.
External Factors
Economic Changes
The global dimension of HRM practices has turned out to be more and more important
following the development of the worldwide economy. The importance of globalization has
forced HR practices to shift from conventional topics to international competition and
globalization (UKessay.com, 2014). In other words, HRM practices are adapted to suit prevailing
economic changes both in the local and global markets (Garavan et al., 2008).
Innovation in Technological
Technology alters the way people work, the activities they undertake, as well as the
relations through which work is done. It facilitates the expansion of multinational corporations
but generates concurrent issue of “unpluggedness” amid geographically dispersed employees.
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Technology is central in the manufacturing industry since it provides a number of business
benefits. Consequently, technological developments change the framework of HR practices
along with the manner in which they are implemented.
Characteristics of Industries and Sectors
Service and manufacturing are the two categories HRM concentrates on because of
production and needs of the organization. Therefore, HRM practices of an organization will
depend on the type of sector or industry in which it operates (Garavan et al., 2008).
The effects of Regulations and Legislations
Regulations and legislations directly affect Human Resources. Every nation has
developed a group of regulations and legislations that oversee the management of personnel.
Thus, HRM practices must be modified or designed in accordance with these regulations and
legislations.
Effect of Competition
There are several ways through which organizations may attain a sustained and lasting
advantage or a competitive edge over their rivals, amid them being development of effective HR
practices (Kane and Palmer, 1995).
Globalization
Tayeb (1998) asserts that, the world has turned out to be a single market because of
globalization. Organizations are crossing their home countries’ boundaries and are extending
their operations across different nations. This has resulted in a great challenge for companies in
managing their human resources. Some organizations have attempted to shift their HRM
functions from one nation to another. Some practices may be shifted across nations, nearly
without any modifications, but some have to be changed to become applicable in another
HUMAN RESOURCE MANAGEMENT 9
location. Moreover, some HRM practices are more intensely culture-specific and are always not
transferable. The results of the study carried out by Tayeb (1998) endorse the claim that, the
HRM practices of multinational corporations are highly susceptible to domestic cultural
influences compared to their general business strategies and policies. In addition, a number of the
practices that organizations imported from overseas have to be altered to make them match their
local non-cultural and cultural contexts.
Models
Different groups of researchers have developed different models of HRM from one time
to another, including Harvard model, Michigan model, Guest model, and Warwick model. The
previously mentioned models have played an important role Human Resources Management.
Harvard Model
The Harvard model acts as a tactical map to direct all managers concerning their
relationships with workers, and focuses on the soft or human element of HRM. The Harvard
Model encourages employee loyalty rather than control. In addition, the model works on the
principle that workers need to be competent, cost effective, and congruent (Beer et al., 1984).
Michigan Model
The Michigan model concentrates on the most important aspects of HRM and, advices
that employees should be treated as if though they were as equally important as other resources
based on cost, knowledge and availability .The model also stresses the interconnectedness of
HRM practices. To improve performance Human Resources Management should consider or
factor in training, the selection process and reward methods.
Guest Model
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According to Guest (1997), this model is based on the principle that a group of
incorporated HRM practices will lead to superior organizational and individual performance. It
maintains that, there is a major difference between personnel management and HRM. To
improve an organization the Human Resources Management department should consider cost,
innovating and innovation strategies, focusing on these main factors will enable HRM to
effectively provide or develop better strategies to confront employee development, cost and
training which translates to job security and a successful organization. These practices will in
turn, result in better organizational outcomes, such as flexibility and commitment. Ultimately,
organizational performance will be improved through increased productivity, enhanced
innovation, and through limited absenteeism, employee turnover, customer complaints, and
conflicts (Guest, 1997).
Warwick Model
The Warwick model stresses on a systematic approach to management of human
resources. Moreover, the model acknowledges the impact of HR practices on HR strategy. It
focuses on both the internal and external context of an organization (Hendry & Pettigrew, 1990).
Role of HRM in Organizations
HRM plays an essential role within an organization since it helps ensure effective and
efficient utilization of human capital, which in turn contributes to the success of the organization.
HRM affects and benefits an organization both directly or indirectly through its influence on
other organizational variables, such as competitive advantage, employee-employer relationship,
trust, service quality, and effective utilization of workers. Other variables include employee
commitment, organizational performance, financial performance, employee productivity,
HUMAN RESOURCE MANAGEMENT 11
effective management of workers, innovation and growth, job satisfaction, and employee
turnover.
Competitive Advantage
Vanhala and Ahteela (2011) argue that, HRM practices assist organizations to attain
competitive advantage over their rival companies. Competitive advantage can be developed and
retained be creating a unique. In that case, the skills, knowledge, and experience possessed by an
organization’s employees cannot be imitated by competitors. Although, other organization have
the ability to copy products and services the functions of an organization HRM department
cannot be easily duplicated as there are created just for that organization. People are among the
most essential factors providing adaptability and flexibility to organizations (Vanhala & Ahteela,
2011).
Relationships between Employees and Management
One way to improve the relationship between employee and management is to improve
the way employees view HRM and effective HRM practices. Tzafrir and his colleagues carried
out a survey to establish how effective HRM practices impact on workers’ trust on their
superiors. Employees respect and are confident in employers who communicate effectively, are
fair, and provide growth potential wither it is through training or promotions. The main goal and
missing of HRM should be to provide a bridge between employees and employers. In addition,
HRM practices act as a channel of communication amid employer and workers, and are contract-
shaping events.
Effective Utilization of Workers
Vanhala and Ahteela (2011) presented a claim for fostering HRM practices claiming that
human resources are often underutilized, and frequently perform below the HRM ability for this
HUMAN RESOURCE MANAGEMENT 12
reason employee motivation and skills can be greatly affected. HRM methods have the ability to
affect employee’s skills in various ways such as development and control/ acquisition. The
selection process and method is crucial as it sets the standard of the type of skilled employees an
organization is able to attract, acquire and retain.
Service Quality
Research provides proof to indicate that HRM practices assist an organization to enhance
its services’ quality. Tsaur and Lin (2004) carried out an empirical examination of the
relationship amid HRM practices, service quality, and service behavior in the tourism sector.
Employees as well as customers get there perception of an organization through HRM as they
are the introduction to the organization and interacts with the employee through the period in
which that there is contact between employee and management. Customers rely on HRM to
effectively inform the organization on changes that may affect the customer as well as the
organization, whether it is technology, service or products. This implies that workers’ service
behavior partly mediates the link between service quality and HRM practices.
Employee Commitment
Organizations are able to retain and recruit skilled and knowledgeable employees based
on effective HRM practices. Maheshwari and his colleagues undertook a study to assess health
officials’ commitment and its respective implications for human resource practices in
Maharashtra. According to the research findings, the health officials did not have strong
commitment to their department. Thus, the state needed to modify its HRM practices to
efficiently strengthen the health care system’s functioning. The findings also suggested that
investment in developing various strategies for career development and growth of health workers
was needed (Maheshwari, Bhat, & Saha, 2005). In other words, HRM practices designed towards
HUMAN RESOURCE MANAGEMENT 13
the career development and growth of employees can help an organization foster employee
commitment. On the other hand, where such practices are lacking, low levels of employee
commitment are likely to prevail.
Studies have been conducted to compare different HRM practices in two different types
of firms. The study was aimed at examining the level of employee commitment within the two
firms that can be associated with HRM practices. From the study, there was a significant
difference in the HRM practices of the two firms, with the fashion firm having a higher mean
score on different HRM practices. Regression results indicated that different HRM practices
significantly predicted organizational commitment among employees in both firms. Performance
review and employees’ attitudes towards the HRM department constituted the major predictors
of employee commitment in the two organizations.
In another research, Chew and Chan (2008) assessed how HR practices influenced
permanent workers’ organizational commitment, as well as their intention of staying in the
organization. They established that, employees’ organizational commitment had a positive
correlation with person-organization fit, recognition, remuneration, and a chance to carry out
challenging employment tasks. Results showed that employees’ motivation to stay in an
organization was related to factors such as employee recognition, training, and career
development. Additionally, the researchers found that career development and training did not
have a significant relation with organizational commitment. Furthermore, challenging tasks did
not have a significant relation with employees’ intentions of staying.
Performance
The research by Rondeau and Wager (2001) analyzed the relationship as it relates to
workplace climate, HRM practices, and perceptions on organizational performance and
HUMAN RESOURCE MANAGEMENT 14
concluded that nursing homes had better HRM practices or concepts. They established that,
nursing homes that had more effective HRM practices along with a workplace environment that
strongly endorsed employee participation, accountability, and empowerment, were likely to be
considered to generally do better in several vital organizational outcomes. Another study was
conducted to examine whether some particular features of hotels influenced organizational
performance, as well as to assess whether certain HRM systems affected organizational
performance. It was found that the performance of hotels was positively related to hotel type and
category. Compared to nursing homes hotels performance showed a positive relationship as it
relates to Human resources Management. Selection and recruitment are examples of many
factors to be considered when analyzing HRM practices.
Furthermore, a study by Soomro, Gilal and Jatoi (2011) showed that there exists a
significant relationship between firm performance and HRM practices, and that strategic
positioning of HRM is a driver for organizational performance. The researchers also established
that, HRM practices contributed to increased banks’ performance. Furthermore, the results
showed that HRM practices such as training and employee involvement in decision making
enhanced organizational performance significantly. Soomro, Gilal and Jatoi, (2011) also found
that effective implementation of HR practices within an organization has a considerable impact
on an organization’s performance.
Financial Performance
Drawing from Tiwari and Saxena (2012), high performance job practices have a
considerable impact on subordinate employees’ outcomes, such as productivity and turnover, as
well as on long-term and short-term measures of a firm’s financial performance. In addition,
assessing how HRM practices impact on organizational profitability, there is little empirical
HUMAN RESOURCE MANAGEMENT 15
support for an affirmative direct relationship amid organizational profitability and HRM
practices. In other words, HRM practices may indirectly lead to organizational profitability
through other positive outcomes, such as decreased employee turnover, and increased employee
productivity. In general, research shows that investing in HRM practices may substantially help
an organization perform better.
There is an impressive relationship between HRM practices between non-managerial and
managerial employees as it relates to performance. An assessment of how HRM practices in
China affected organizational performance, as well as employee relations found that HRM
practices have positive and direct impacts on operational performance, financial performance,
and employee relations (Tiwari & Saxena, 2012).
Employees Productivity
Involvement of employees in form of delegating responsibility and obtaining suggestions
from workers on organizational matters might positively impact on the productivity of
employees. Positive employee contribution can be attributed to cross training among different
departments which some organizations refer as detail positions.
Effective Management of Workers
Laxman and Kumuda (2008) established that a bigger percentage of the sampled IT firms
institute complex HRM practices. Most of the firms follow those HRM practices, which may be
considered adaptive in nature. The researchers suggested that giving jobs plus open and online
house tests, flexible training alternatives, education referral recruitment, and project and skills
centric training, could contribute to effective management of workers. Additionally, transparent
performance appraisal systems, above average remuneration, more non-salary employment
benefits, and opportunities for career development, are among HRM practices which, when
HUMAN RESOURCE MANAGEMENT 16
rigorously followed would help in the effective management of human resources in IT
companies.
Innovations and Growth
Laxman and Kumuda (2008) further maintain that, an organization’s HRM practices have
a more considerable influence on innovation and growth indices rather than on financial
performance. The links between HRM, performance, and technology innovation have a positive
effect on an organization’s technological innovation. On the other hand, outcome control and
material motivation have an adverse influence on a firm’s technological innovation.
Furthermore, technological innovation was found to have a positive relationship with
organizational performance.
Job Satisfaction
HRM practices affect the level to which employees are satisfied with their jobs. Ruwan
(2007) evaluated the relationship amid employees’ overall job contentment and satisfaction with
their pay, and HRM practices. The results showed that a number of HRM practices increase
employees’ overall job satisfaction, as well as their contentment with pay.
Employees Turnover
Employee turnover constitutes a big challenge for most organizations, but organizations
can lessen employee turnover rate through the implementation of effectual HRM practices.
Research shows that compensation, job analysis, career development, and reasonable job
information have a negative correlation with IL. Moreover, poor work-family balance has a
positive correlation with the IL of marketing executives. Regression results of HR practices
against marketing executives’ IL indicated job analysis and compensation as strong predictors of
IL.
HUMAN RESOURCE MANAGEMENT 17
Future of HRM
Existing literature on human resource management has shown that the HR function plays
a central role in the success of an organization, since it significantly influences employees’
behavior and performance, as well as other organizational functions. The literature has also
shown that, HR professionals are now operating as strategic partners in the formulation of
organizational strategies and policies. Accordingly, the future of HRM seems promising. Given
the growing popularity and adoption of strategic HRM by most organizations, there is a
possibility of HRM of assuming a more central position in the running of organizations in future.
There is also a possibility of the HR function being given more strategic responsibilities in
future.
Having that in mind, HRM is likely to have a successful future that will revolve around
three overlapping and complementary roles, including facilitator, designer, and educator. These
roles will emphasize on less control over employees, and enhanced learning (Brewster &
Mayrhofer, 2012).
Facilitator
According to Brewster and Mayrhofer (2012), HR will facilitate employee-employer
connection, mainly through empowering procedural and digital technologies, which emphasize
managerial independence and employee self-service. This role will result in a continuous strive
to lessen dependent relationships amid managers/employees and HR by transferring expertise
and knowledge from HR to the clients of HR. This will be accomplished partly through the use
of computer-aided technologies allowing managers and employees to undertake transactions
online, which they formerly required a HR expert to administer.
Designer
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HR will design and help in the implementation of high performance employee strategies
along with line staff. Such strategies include employment security, selective employment of new
employees, extensive training, extensive sharing of performance and financial information,
reduced barriers and status distinctions, relatively high compensation dependent on performance,
and decentralized decision-making and self-managed teams (Brewster & Mayrhofer, 2012).
Educator
HR will act as a medium for communication and learning. As an educator, HR will have
three sub-roles. First, it will introduce new ideas and fresh thinking to promote innovation,
successful adaptation, and creativity within the enterprise. Second, it will continue enhancing
mastery of espoused organizational process enhancement methodologies and practices by
managers and employees. Lastly, HR will communicate extensively to employees on what will
be happening within the company and why (Brewster & Mayrhofer, 2012).
Conclusion and Recommendations
Previous research on HRM has focused mainly on evolution of HRM, factors that
influence HRM, as well as how HRM interacts and influences other functions within an
organization. It has also concentrated on how HRM practices such as training and development,
performance appraisal, compensation, career growth opportunities, and recruitment and
selection, have affected employees’ performance, productivity, motivation, and satisfaction. The
major developments that have taken place over time include a shift from mere personnel
administration, to human resource management, and then to strategic human resource
management.
In terms of research gaps, previous research has not paid much attention on the
effectiveness of different HR models in practice. Accordingly, future research should look into
HUMAN RESOURCE MANAGEMENT 19
that area. Moreover, a number of studies have highlighted human capital as a good source of
competitive advantage. However, extensive empirical research on how different organizations
use or have been using their human resources to attain a competitive edge over their rivals is yet
to be carried out.
My research will depart from previous research that has mainly highlighted the
significance of human capital as a crucial source of competitive advantage for organizations.
Instead, it will undertake an extensive qualitative research on this area through case studies of
real organizations. The research will make a great contribution to the field of human resource
management by providing empirical evidence and facts, which can guide other organizations and
human resource professionals on how they can use their human resources to attain various
organizational benefits.
HUMAN RESOURCE MANAGEMENT 20
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