Human Resource Strategy

Formulation, Implementation, and Impact

Michal Biron, Corine Boon, Peter A. Bamberger

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781135122256
• Edition: 2
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

What is human resource strategy? How are human resources strategies formulated and how can we explain the variance between what is espoused and what is actually implemented? What impact – if any – does human resource strategy have on the organization's "bottom line, " and how can this impact be explained? Is there one best HR strategy for all firms, or is the impact of HR strategy on performance contingent on some set of organizational, technological or environmental factors?

Human Resource Strategy, 2nd edition, provides an overview of the academic and practitioner responses to these and other questions. Applying an integrative framework, the authors review 30 years' worth of empirical and theoretical research in an attempt to reconcile often-conflicting conceptual models and competing empirical results. Complex theoretical models and scientific findings are presented in an accessible and relevant way, in the context of the strategic decisions that executives are forced to make on a regular basis.

This new edition features an updated literature review, coverage of the latest challenges to HR strategy, new mini-cases, discussion questions, additional examples, and an emphasis on the strategic implications of the research, making it an ideal resource for students and practitioners alike.

I Human Resource Strategy

Emergence and Types

DOI: 10.4324/9780203075838-1

1 Introduction

DOI: 10.4324/9780203075838-2

After close to 20 years of hopeful rhetoric about becoming “strategic partners” with a “seat at the table” where the business decisions that matter are made, most human-resources professionals aren’t nearly there…. HR is the corporate function with the greatest potential—the key driver, in theory, of business performance—and also the one that most consistently under-delivers.

—Hammonds (2005, p. 40)

The HR value proposition means that HR practices, departments, and professionals produce positive outcomes for key stakeholders—employees, line managers, customers, and investors…. When others receive value from HR work, HR will be credible, respected and influential.

—Ulrich and Brockbank (2005, pp. 2, 8)

Origins of Human Resources Strategy Research

Human resource management (HRM) has changed dramatically since its establishment as the discipline of personnel administration in the first quarter of the 20th century. Emerging from the “welfare officers” of the late 1800s, the new discipline—grounded in the nascent paradigm of industrial psychology and encouraged by the disciples of Frederick Taylor in the 1920s—was viewed as a possible solution to such nagging problems as worker inefficiency and worker unrest (Barley & Kunda, 1992; Schuler & Jackson, 2007). A core tenet of Taylorism was the notion that work becomes more productive and less arduous when individuals are placed in jobs appropriate to their abilities and when they are paid fairly. Taylor viewed the questions of how to match individuals with the job in which they would be most productive and to provide them with fair incentives as fundamental vocational and social issues (Savickas et al., 2009) that could be resolved by applying a scientific management approach. Hence, one of the functions of the new “employment administrators” was developing and applying new testing technologies to rationally select and place employees. To further reduce worker unrest, personnel directors offered a new approach to employee relations, one grounded in the use of entitlements to solidify workers’ allegiance to their employer. The personnel function became the locus of all activities having to do with employee relations, and eventually, contract administration.

The scope of these technical activities widened over the decades, with new functions and technologies added with every shift in managerial thought and discourse (Barley & Kunda, 1992; Francis & Keegan, 2006; Schuler & Jackson, 2007). For example, during the height of the human relations movement (1930s–1950s), personnel directors widened their package of services to include management development (as a means to develop personal potential) and collective bargaining, industrial due process, and labor-management collaboration (as mechanisms to structure and manage labor conflict). With the upsurge of operations research and systems rationalization in the 1960s and 1970s, personnel directors offered new technical services in areas such as work redesign, job evaluation, manpower forecasting and planning, and performance management systems.

However, demands in the 1980s for improvements in both cost efficiency and quality—a product of increased global competition, expansion of the services sector, declining trade union density, and movement toward a “knowledge economy”—placed personnel management at a crossroads (Rucci, 1997; Schuler & Jackson, 2007; Wright, 2008). On the one hand, since its establishment, the personnel function had based its legitimacy and influence on its ability to buffer an organization’s core technology from uncertainties stemming from a heterogeneous workforce, an unstable labor market, and a militant union movement. Yet by the 1980s, managers had become less concerned with these technical sources of uncertainty and were paying greater attention to quality, flexibility and agility, and unique competencies as sources of competitive advantage. Indeed, by the early part of that decade, the strategic management of human resources and the design of “strong” organizational cultures had become the focus of attention for a number of extremely influential management consultants and applied researchers (e.g., Deal & Kennedy, 1982; Ouchi, 1981; Peters & Waterman, 1982). These writers viewed the effective management of human resources (HR) as a critical source of competitive advantage. For example, one of Peters and Waterman’s (1982) “Eight Attributes” was “productivity through people,” which called for viewing human resources rather than capital investment as the fundamental source of improvements in efficiency—“treating the rank and file as the root source of quality and productivity gain” (p. 14).

Not surprisingly, by the mid-1980s, an increasing number of HR researchers were calling for the personnel function to take on more a strategic or business role. The birth of the strategic approach to HRM—that is, strategic HRM, or SHRM—can be traced to the foundational conceptual models of the Michigan (e.g., Fombrun, Tichy, & Devanna, 1984) and Harvard (e.g., Beer, Spector, Lawrence, Mills, & Walton, 1984) schools. According to the Michigan approach, the main HRM objective was to organize and utilize HRM functions (i.e., selection, appraisal, rewards, and development) so as to maximize their impact on organizational performance. According to the Harvard approach, the key objectives of HRM included aligning the interests of employees and management to boost organizational effectiveness and individual and societal well-being. The main distinction between the two approaches had to do with the point of view being limited to shareholders (Michigan) as opposed to also including other stakeholders (Harvard) (Legge, 1995).

Over the following decades, research has further contributed to the development of the strategic view of HRM. Tyson (1987), for example, called for the replacement of two traditional personnel models, namely the personnel director as the “clerk of works” (an administrative function responsible for the provision of pay, benefits, and employee welfare services) and the “contracts manager” (employee relations expert), with a new, “architect” model. According to this model, personnel would return the responsibility for people management (e.g., appraisal, individual counseling) back to line managers and would instead focus on aligning the firm’s human resource system with its business strategy. Similarly, Wright and McMahan (1992) argued that two important dimensions distinguish the strategic approach to human resource management from the more traditional practices of personnel management described above. First, “it entails the linking of human resource management practices with the strategic management process of the organization” (Wright & McMahan, 1992, p. 298). That is, it calls for the consideration of HR issues as part of the formulation of business strategy. Second, the strategic approach places an emphasis on synergy (or, at least, congruence) among the various HR practices (internal fit or horizontal integration), and on ensuring that these practices are aligned with the needs of the business as a whole and the broader environment within which the organization functions (external fit or vertical integration).

Becker and Huselid (2006) pithily summarize the difference between strategic and traditional HRM research in observing that SHRM “focuses on organizational performance rather than individual performance” (p. 899) and that it “emphasizes the role of HR management systems as solutions to business problems … rather than individual HR management practices in isolation” (p. 899). These more complex HRM systems, sometimes referred to as “best practices,” “high performance work systems,” or “HR bundles,” imply one recipe for successful HR activity that should lead to positive outcomes for all types of firms. This approach has been challenged by an alternative HRM model that focuses on more tailored configurations of HR practices. Referred to as the “contextually contingent” or “best fit” HRM model, this approach takes account of HR practices suitable for a given type of business under specific circumstances (Becker & Huselid, 2006; Cappelli & Neumark, 2001).

Mirroring the developments in HRM research described above, the HRM discourse over the past 25 years has sought to promote a vision of HR specialists as more closely aligned with the strategic imperatives of the firm, and accorded status as key contributors to business strategy through the effective management of its human capital. More specifically, given that traditional sources of competitive advantage, such as natural resources, access to financial resources, technology, protected or regulated markets, and economies of scale have become increasingly easier to imitate and have thus lost their strategic power, the potential for human capital to provide sustainable competitive advantage has created a new avenue for HR to become a strategic partner. The ultimate goal has become to create value for key stakeholders, including line managers, customers, and investors (Becker & Huselid, 2006; Schuler & Jackson, 2007; Ulrich & Brockbank, 2005). In short, HR professionals want “a seat at the table”—that is, membership in their firms’ top executive decision-making teams.

HR’s continuing search for “a seat at the table” involves a vision whereby HR strategies, systems, and practices are linked to the firm’s financial performance in a distinctive, inimitable way, with the goal of advancing the firm’s long-term success. This requires a systems-wide perspective, with the vertical and horizontal integration described above (based on continuous partnerships between HR professionals and different stakeholders). It also requires replacing subjective estimates of some qualitative impact with matrices for measuring the economic value added by HR activities—that is, their return on investment (e.g., Beatty, Huselid, & Schneier, 2003; Becker & Huselid, 2006; Fitz-Enz, 2002).

Conceptual Issues

Despite the increased attention paid to strategic human resource management and HR strategy (HRS) in recent years, researchers have failed to clarify the precise meaning of these two important concepts—a shortcoming that has complicated both theory development and testing. Generally speaking, SHRM may be viewed as encompassing a link between HR strategy and business strategy, with the upshot being increased organizational effectiveness and success. Indeed, with the most pressing theoretical and empirical challenge in the SHRM literature being the need for a clearer articulation of the “black box” linking HR and firm performance, researchers have focused on variables associated with strategy implementation capabilities such as the firm’s ability to attract, develop, and retain required human capital (Becker & Huselid, 2006; Collins & Clark, 2003; Jiang, Lepak, Hu, & Baer, 2012). In the sections below, we attempt to clear up some of the confusion with respect to these key constructs in the SHRM literature.

Business Strategy

Business strategy concerns the long-term direction and goals of a firm and the broad formula by which that firm attempts to acquire and deploy resources in order to secure and sustain competitive advantage (Hitt, Ireland, & Hoskisson, 2005; Porter, 1980). Notions of business strategy evolved under the influence of competitive thinking, which, in turn, was stimulated by such diverse areas as animal and social behaviors (e.g., game theory) as well as military science (Ghemawat, 2002). This has led management scholars (Mintzberg, 1990; Quinn, 1988) to define business strategy in terms of the set of organizational goals business leaders attempt to achieve (i.e., ends) and the policies (i.e., means) by which these leaders attempt to position the firm and its resources in relation to the firm’s environment, competitors, and other stakeholders in order to maximize the potential for goal attainment.

Most strategy research to date can be placed into one of two branches. The first, content research, seeks to answer the question of what underpins firms’ competitive advantage, while the second, process research, concerns how firms’ strategies emerge over time and lead to desired outcomes (e.g., Barney, 1991; Herrmann, 2005; Mellahi & Sminia, 2009). More specifically, content or policy research focuses on the link between a wide variety of structural (e.g., capacity, technology) and infrastructural (e.g., workforce) parameters and performance, and the ways in which this ...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• Part I Human Resource Strategy: Emergence and Types
• Part II Subsystem-Specific Human Resource Strategies
• Part III Human Resource Strategy: Impact, Challenges, and Developing Approaches
• References
• Suggestions for Further Information
• Index