BUS3022 - Strategic HRM Assignment Essay Question 2 Student No: 071087047 Word Count: 2193 25/11/09

Critically analyse the main models of Strategic Human Resource Management Despite being a relatively new area, there are many contrasting models of Strategic Human Resource Management (SHRM). SHRM can be defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop an organisational culture that fosters innovation and flexibility (Sims, R., 2006, p323).Strategic HRM believes that human resources should operate and be managed at a strategic level as opposed to being labelled as just another generic department. This paper will be exploring the most prevalent models of SHRM, considering their strengths and weaknesses in order to try to establish which models are the most valuable. To begin with, the underpinning theories of SHRM, including the Best practice, Best fit and Resource-based models will be examined. These are the principal philosophies SHRM. The prescriptive models or process theories, which detail specific management practices and methods of SHRM, will then be explored, consisting of the high performance, high commitment and high involvement management approaches. Over the years, there has been much interest in the notion of best practice human resource management (HRM). The idea behind this model is that a particular bundle of HR practices has the potential to bring about improved organisational performance for all organisations (Marchington, M., Wilkinson, A., 2005, p71). This universalistic attitude towards HRM ignores differences between organisations and sees all firms as homogenous. It concludes that no matter what organisation or industry the organisation operates in, the same set of best practices are applicable, and will work to ultimately maximise organisational performance. (H. Mess, 2004). This is one of the main perceived benefits of this perspective. Whilst other theories are complex and more intricate in terms of implementation, the best practice model is simpler with a prescribed universal code of practice for SHRM in firms. However, its argued that a system of HRM practices rather than an isolated or best-practice approach is necessary for sustained advantage. Armstrong concurred with this by saying what works well in one organization will not necessarily work well in another because it may not fit its culture, management style, technology or working practices (Armstrong, M., 2000 p65). For example, you would not expect a successful HR strategy in a centralised manufacturing firm, to achieve the same results if it was directly translated into in a decentralized financial service firm. It is the ignorance to the heterogeneity of organizations which creates the biggest flaw in this model. Whilst the best practice appears to be a sound and easy model to implement in theory, once looked at from a practical perspective, research suggests it is unlikely to be successful as all organisations are different. It becomes clearer that the closed nature of the model makes it difficult to integrate universally due to the complex nature and incompatibility of firms. The notion of strategic fit or integration, sometimes described as the matching or best fit model is another central concept of SHRM. This model directly contrasts the best practice attitude in the sense it takes an open approach to the

discipline. The best fit model considers strategic integration to be crucial to ensure business strategy and HR strategy correspond, so that the latter, underpins and supports the accomplishment of the former. The aim is therefore to provide strategic fit and consistency between policy goals of HRM and the business (Armstrong, M., 2000, p45-46). The main principle of this approach is that the success of the HR strategy depends on how effectively it is vertically and horizontally integrated into the organisation. As such, the degree to which they are in-line with organisational structure, culture and direction will determine how positive an impact they have on performance. Vertical integration is concerned with the alignment of HR policies with business strategy. For this to work, both areas must support each other and be flexible, because if policies are too rigid, they are unable to adjust as well to external changes. Horizontal integration involves making sure that HR strategies are mutually supporting. As such, the needs and characteristics of the firm and the capability and behaviours required of the employees need to be assessed. Links between practices should therefore be studied to see if they can mutually reinforce each other and become more effective as bundles. (Mearns, L., 2009) This theory appears to have more substance than the best practice perspective as it incorporates a greater consideration of the diverse nature of firms. It is more realistic as it doesnt see every firm as the same. Whilst best practice would dictate universal bundles for success, the best fit model suggests they should be organisation-specific. However, the difficulty with this theory is in its practical implementation. Due to the multi-faceted nature of firms, it is very challenging to achieve consistency across the broad spectrum of activities. This makes the successful adoption of the best fit model a tough task. Putting things into practice is harder than theory suggests because line manager and employees may be incapable of carrying out and maintaining the new initiatives over time. Furthermore, inexperience or a lack of understanding among HR staff can make the task of achieving integration even more arduous. The third foundation model of SHRM is the resource-based view (RBV). This theory is based on the notion that human resources can constitute to a source of competitive advantage (Truss, C., 2001). It follows the idea that firms are heterogeneous and there is money to be made from exploiting the differences (Schuler, R., Jackson, S., 1999, p79). This view is concerned with the acquisition, development and retention of intellectual capital to create human resource advantage (Armstrong, M., 2003, p109). This model looks at human resources in the long term, tries to nurture knowledge and encourage employees to buy-in to the policies. It also states that constructive deviance is rewarded. This means that once implemented, managers should welcome productive criticism in order to adjust, move forward and maximise organisational performance. The RBV is a flexible approach to SHRM because it sees that through addressing people as resources, the firm has dynamic capabilities. This means that

they are able to renew and adapt their core competencies over time. This makes a firm that adopts a RBV approach less vulnerable to external changes and market developments. The RBV can not only be valued for its role in creating a competitive advantage in a particular situation, but for its ability to generate a higher level of strategic capability. In the long-run, firms which adopt a RBV can become more intelligent than competitors and which display superior levels of co-ordination and cooperation. This is all achieved through the careful hiring and development of talented staff and synergising their contributions within the resource bundle of the firm (Schuler, R., Jackson, S., 1999, p80). However, the RBV does have its drawbacks. The lack of prescriptive implications within the theory mean that is rather vague and a guided set of practices are not as clear as in other models, making implementation more difficult. Furthermore, this theory relies on resources being imperfectly imitable and rare and unique to the firm, which seems fairly unrealistic and impractical. The process theories of SHRM present the means by which the underpinning theories are achieved. They indicate different approaches to managing human resources with the goal of improving organisational performance. High involvement management (HIM) is a term coined by Professor Ed Lawler for a HRM approach centred on employee involvement. This theory is characterised by communication within the organisation and the inclusion of employees in decision making. It gives employees the opportunity to participate in the business as a whole through practices such as; team-working, empowerment, idea capture schemes, information-sharing, organizational performance-related reward systems and extensive training and development (http://esrccoi.group.shef.ac.uk). Central to this concept is the issue of trust as employees are given more responsibility and seen as partners in the organisation. It is seen as an alternative to a rigid, control orientated approach of managing employees that would exist under autocratic management. Lawlers model of HIM has four main principles; power, information sharing, knowledge development and rewarding performance. The power is the base of the model in the sense that power should be distributed to lower levels of the organisation so that employees can genuinely participate in decision making. Once this is achieved, employees should have the right information, knowledge and rewards to use their power in ways which will contribute to organisational goals. (http://esrccoi.group.shef.ac.uk). This concept of HIM has benefits because employees who feel included and involved in key areas and decisions of the business are more likely to be dedicated to their work which is likely to induce better performance. However, the implementation of HIM is unlikely to have a positive impact on performance if the conditions are not right in the organisation. Top management must value involvement and trust employees enough to empower them. A long term perspective on employee relations and organisational strategy is also necessary for success. High commitment management was defined by Wood in 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. This concept is characterised by the development of career ladders, high levels of functional flexibility, reduction of hierarchies and a heavy reliance on team structure. (Mearns, L., 2009) It entails practices such as problem-solving groups, minimal status differences, job flexibility, and team working. More importantly, so its architects would argue, it entails using them in combination. (Wood, S., Menezes, L., 1998, p2) Furthermore, underlying the commitment of the employees is said to stem from the idea of them as assets to be developed rather than as disposable factors of production. This management style therefore has links with the resource based philosophy of SHRM. The idea that HCM can positively impact flexibility if implemented successfully highlights a clear benefit of this prescriptive model of SHRM. If a firm is more flexible, they are able to react and adjust to both internal and internal changes in order to stay competitive. However the extent to which the workforce is flexible will depend on how well employees adapt to new management techniques. If management is not skilled and employees are not capable of operating under the new regime, advantages are unlikely to be exploited. High performance management (HPM) concentrates on organisation performance through its employees in areas such as productivity, quality, growth and profits. (Mearns, L., 2009) Appelbaum's analysis of the steel industry in the USA suggested that bundles of high-performance work practices increase uptime substantially compared with a traditional work system (Appelbaum et al, 2000, p142). Whitfield and Poole concluded that extant research is strongly supportive of the hypothesis that firms adopting the high-performance approach have better outcomes than those which do not (Beardwell, J., Clayton, T., 2007) HPM, if implemented effectively, has the potential to reduce costs as it can reduce the number of employees needed to increase output and performance. This reduction in staff makes the firm more efficient and will reduce overheads, especially if training is successful in ensuring employees carry out tasks perfectly first time. This will reduce waste by getting it right first time around and will eliminate the need for the re-training of employees. However, HPM has its shortcomings in that the start-up costs in terms of implementation are often expensive. Furthermore, if training is not successful and team-working is not clearly defined and understood, there may adverse effects on employee performance. HPM, HCM and HIM represent not just significant variations in terminology, but attest to large scale conceptual confusion. (Butler et al, 2004, p5) This makes it difficult to determine the best way to approach SHRM because a piecemeal approach is often adopted from all three models in varied definitions of highperformance work systems (HPWS). This ad-hoc approach to SHRM is likely to occur until further clarification emerges and it is therefore difficult to determine which model is the best. In terms of HCM, HPM and HIM, for some, these are universally applicable, while for others, they are among several models of good personnel management, with their relevance being dependent on the organizations context. (Wood, S., Menezes, L., 1998, p2)

In conclusion to the analysis of the aforementioned models and theories, it is extremely difficult to put forward the best code of practice in terms of SHRM. The best practice model seems to have lost some credibility among academics due to its closed nature and lack of appreciation of the incompatibility of firms; however it has not been completely discarded. The RBV also has its flaws in that it places too much of an emphasis on the employees being inimitable and unique to the firm, however for many, it is still a valuable concept. The best fit model seems to be the most plausible approach to SHRM. Its main drawbacks lie in the complexity of implementation; however, one could argue that as long as the firm is committed to the change and qualified, dedicated, personnel are involved, a positive impact on organisational performance is possible. In terms of the means by which a SHRM approach should be implemented, it is crucial to learn from the most prevalent inadequacy of the best practice model, in that all firms are different. For example in a small, flexible marketing firm with a democratic management style and capable employees, HIM and HCM would probably be more suitable. However a larger, rigidly structured ship building firm with an autocratic management structure would be more likely to benefit from HPM. The heterogeneity of firms means that different organisations will lend themselves to different approaches. More specifically, the structure, culture, organisational direction and the ability of management and employees will be the main factors which determine the applicability and ultimately the success of a SHRM approach.

References Books Appelbaum, E, Gittell J.H., and Leana, C., 2000, High Performance Work Practices and Economic Recovery Armstrong, M., 2000, Strategic Human Resource Management: A Guide to Action, London: Kogan Page Armstrong, M., 2003, A Handbook of Human Resource Management Practice 9th Edition, London: Kogan Page Bratton J., Gold, J., 2001, Human Resource Management: Theory and Practice, Basingstoke: Palgrave Macmillan Marchington, M., Wilkinson, A., 2005, Human Resource Management at Work, London: CIPD Schuler, R., Jackson, S.,1999, Strategic Human Resource Management, Oxford: Blackwell Publishers Ltd Sims, R., 2006, Human Resource Management: Contemporary Issues, Challenges, and Opportunities, Charlotte: Information Age Publishing Beardwell, J., Clayton, T., 2007, Human resource management: a contemporary approach 5th edition, New Jersey: Prentice Hall Journals / Articles Butler, P. et al, 2004, High Performance Management: A Literature Review, Learning as Work Research Paper, No. 1 Ness, H., 2004, HRM Best Practice, Otago Management Graduate Review vol.2 Truss, C., 2001, Journal of Management Studies 38:8 Complexities and Controversies in Linking HRM with Organisational Outcomes, Kingston Business School Wood, S., Menezes, L., 1998, High Commitment Management in the U.K.: Evidence from the Workplace Industrial Relations Survey, and Employers Manpower and Skills Practices Survey, Human Relations, Vol. 51, No. 4, p1-31 Lecture Notes Mearns, L., 2009, Human Resource Management and Business Strategy Internet Resources http://esrccoi.group.shef.ac.uk/pdf/whatis/high_involvement_management.pdf

http://esrccoi.group.shef.ac.uk/pdf/whatis/high_performance.pdf Access date - 18/11/09 - Articles by Professor Steven Wood from the Institute of Work Psychology (Sheffield University)