The nature of Strategic human resource management

1. STRATEGIC HUMAN RESOURCE MANAGEMENT AND HUMAN RESOURCE STRATEGY

Our understanding of HR strategy has changed considerably since strategy first became the subject of great attention. We have moved from viewing strategy as a physical docu­ment to seeing it as an incremental process, affected by political influences and gener­ating learning. Tyson’s (1995) definition of human resource strategy is a useful starting point, although somewhat limited, as will be seen from our later discussion:

the intentions of the corporation both explicit and covert, toward the management of its employees, expressed through philosophies, policies and practices. (Tyson 1995)

This definition is helpful because research on human resource strategy in the early 1980s tended to focus on seeking an HR strategy document in order to determine whether there was a strategic approach to HR and what that approach was. This was rather like searching for the Holy Grail. Not surprisingly few complete HR strategies were found and HR specialists berated themselves for having failed in this critical area. Gradually the thinking changed to encompass a view that HR strategy need not be written on a piece of paper or need not, indeed, be explicit, as the Tyson quotation illustrates. Further developments in thinking began to accept the idea that strategies are neither finished, nor complete, but rather incremental and piecemeal. There is compelling evidence to suggest that strategic HR tends to be issue based rather than the formulation of a complete and integrated strategy (for example, Grundy 1998; Hall and Torrington 1998). Strategic thinking, strategic decision making and a strategic orienta­tion (for example, Hunt and Boxall 1998) were gradually understood as much more realistic expectations.

In parallel with this thinking there were developments in the general strategy literature which viewed strategy as a process which was not necessarily rational and top down, but a political and evolutionary process (see, for example, Mintzberg 1994). Mintzberg argues that strategy is ‘formed’ rather than ‘formulated’ and that any intended strategy

is changed by events, opportunities, the actions of employees and so on – so that the realised strategy is different from the initial vision. Strategy, Mintzberg argues, can only be identified in retrospect and, as Boxall and Purcell (2003) suggest, is best seen in the ultimate behaviour of the organisation. Wrapped up in this view is also the idea that strategy is not necessarily determined by top management alone but can be influenced ‘bottom up’, as ideas are tried and tested in one part of the organisation and gradually adopted in a wholesale manner if they are seen to be applicable and successful. This is not to say that producing a strategy is an unhelpful act, and indeed research carried out by PriceWaterhouseCoopers indicated that those organisations with a written HR strategy generated 35 per cent greater revenues per employee than those without (Higginbottom 2002).

This leads on to the concept of strategy as learning both in content and in process (see, for example, Senge 1990; Pedler et al. 1991), which is supported by the notion of strategy as a process of change (see, for example, Hendry and Pettigrew 1992). Literature draws out the need to sense changes in the environment, develop a resultant strategy and turn this strategy into action. While the HR function has often found itself excluded from the strategy formation process, HR strategy has more often been seen in terms of the implementation of organisational strategies. However, implementation of HR strategy has been weak, at best. Among the qualities of the most successful organ­isations is the ability to turn strategy into action quickly (Ulrich 1998), in other words to implement the chosen strategy (Grensing-Pophel 1999), and Guest (1987) maintained that the capability to implement strategic plans is an important feature of successful HRM. However, a lack of attention to the implementation of HR strategy has been identified (Beaumont 1992; Lundy and Cowling 1996; Skinner and Mabey 1997), and the information that does exist suggests that this is a problematic area. Legge (1995) main­tained that the evidence of implementation of HR strategies was patchy and sometimes contradictory, and Skinner and Mabey (1997) found that responsibility for implementa­tion was unclear, with only 54 per cent of respondents, in organisations with an HR director, perceiving that the HR function played a major part in implementation. In their research Kane and Palmer (1995) found that the existence of an HR strategy was only a minor influence on the HR policies and procedures that were used. Frameworks such as the HR scorecard (Becker et al. 2001) are aimed, at least in part, at facilitating the management and implementation of HR architecture (‘the sum of the HR function, the broader HR system, and the resulting employee behaviors’, p. 1) as a strategic asset, and we look at this in more detail in Chapter 33.

One organisation where the HR function has had a major role to play in the successful implementation of HR strategy is Kwik-Fit Financial Services. The overriding strategic purpose was to make the organisation ‘a fantastic place to work’ and this led to initia­tives focusing on improving the working environment and encouraging employees to bring their whole selves to work (Griffiths 2006). There are further details in a case study on the website www.pearsoned.co.uk/torrington.

2. THE LINK BETWEEN BUSINESS AND HR STRATEGY

The nature, desirability and feasibility of the link between business strategy and HR strategy is a consistent theme which runs through the strategy literature, although, as we shall discuss later, some theories suggest that implementing ‘best practice’ in HRM is even more important than this. Figure 2.1 is a simple model that is useful in visualising different ways in which this relationship may be played out and has relevance for the newer conceptions of strategy based on the resource-based view of the firm, as well as earlier conceptions.

In the separation model (A) there is no relationship at all, if indeed organisational and human resource strategy does exist in an explicit form in the organisation. This is a typical picture of twenty years ago, but it still exists today, particularly in smaller organisations.

The fit model (B) represents a growing recognition of the importance of people in the achievement of organisational strategy. Employees are seen as key in the implementa­tion of the declared organisational strategy, and human resource strategy is designed to fit with this. Some of the early formal models of human resource strategy, particularly that proposed by Fombrun et al. (1984), concentrate on how the human resource strategy can be designed to ensure a close fit, and the same approach is used in the Schuler and Jackson example in Table 2.1.

This whole approach depends on a view of strategy formulation as a logical rational process, which remains a widely held view. The relationship in the fit model is exem­plified by organisations which cascade their business objectives down from the senior
management team through functions, through departments, through teams and so on. Functions, for example, have to propose a functional strategy which enables the organ­isational strategy to be achieved. Departments have to propose a strategy which enables the functional strategy to be achieved, and so on. In this way the HR function (as with any other) is required to respond to organisational strategy by defining a strategy which meets organisational demands.

The dialogue model (C) takes the relationship one step further, as it recognises the need for two-way communication and some debate. What is demanded in the organisa­tion’s strategy may not be viewed as feasible and alternative possibilities need to be reviewed. The debate, however, is often limited, as shown in the example in the Window on practice which follows.

3. WINDOW ON PRACTICE

In one large multinational organisation an objectives-setting cascade was put in place. This cascade allowed for a dialogue between the planned organisation strategy and the response of each function. In the organisation strategy there was some emphasis on people growth and development and job fulfilment. The HR Department’s response included among other things an emphasis on line management involvement in these areas, which would be supported by consultancy help from the HR Department.

The top management team replied to this by asking the HR Department to add a strategic objective about employee welfare and support. The HR Department strongly argued that this was a line management responsibility, along with coaching, development and so on. The HR Function saw its customers as the managers of the organisation, not the employees. The result of the debate was that the HR Function added the strategic objective about employee welfare.

Although the approach in this case appeared two-way, the stronger of the parties was the management team, and they were determined that their vision was the one that would be implemented!

The holistic model and the HR-driven model (D and E) show a much closer involve­ment between organisational and human resource strategy.

The holistic model (D) represents the people of the organisation being recognised as the key to competitive advantage rather than just the way of implementing organisa­tional strategy. In other words HR strategy is not just the means for achieving business strategy (the ends), but an end in itself. Human resource strategy therefore becomes critical and, as Baird et al. (1983) argued, there can be no strategy without human resource strategy. Boxall (1996) develops this idea in relation to the resource-based firm, and argues convincingly that business strategy can usefully be interpreted as more broad than a competitive strategy (or positioning in the marketplace). In this case business strategy can encompass a variety of other strategies including HRM, and he describes these strategies as the pieces of a jigsaw. This suggests mutual development and some form of integration, rather than a slavish response to a predetermined business strategy.

The HR-driven model (E) offers a more extreme form, which places human resource strategy in prime position. The argument here is that if people are the key to com­petitive advantage, then we need to build on our people strengths. Logically, then, as the potential of our employees will undoubtedly affect the achievement of any planned strategy, it would be sensible to take account of this in developing our strategic direction. Butler (1988/89) identifies this model as a shift from human resources as the implementors of strategy to human resources as a driving force in the formulation of the strategy. Again this model is a reflection of a resource-based strategic HRM perspective, and sits well with the increasing attention being given to the notion of ‘human capital’ where it is the collective nature and quality of the people in the organisation which provide the potential for future competitive advantage (see, for example, Lengnick-Hall and Lengnick-Hall 2003).

Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.