1

PART I
The practice of human
resource management
Pa r t I Co n t e n t s

01 The essence of human resource management (HRM)

02 Strategic HRM
03 Delivering HRM – systems and roles
04 HRM and performance
05 Human capital management
06 Knowledge management
07 Competency-based HRM
08 The ethical dimension of HRM
09 Corporate social responsibility

Introduction
provision of services that enhance the well-being of
Human resource management (HRM) is a com­ employees. These are based on human resource (HR)
prehensive and coherent approach to the employ- strategies that are integrated with one another and
ment and development of people. HRM can be aligned to the business strategy.
regarded as a philosophy about how people should Some people object to the term ‘human resources’
be managed, which is underpinned by a number because it implies that people can be manipulated
of theories relating to the behaviour of people and like any other factor of production. Instead they
organizations. It is concerned with the contribution favour ‘people management’. But HRM is the most
it can make to improving organizational effective- commonly used term.
ness through people but it is, or should be, equally Whatever term is adopted the approach should
concerned with the ethical dimension – how people be based on the principle laid down by Schneider
should be treated in accordance with a set of moral (1987: 450): ‘Organizations are the people in them;
values. HRM involves the application of policies that people make the place.’ He went on to explain
and practices in the fields of organization design that: ‘Positive job attitudes for workers in an organ­
and development, employee resourcing, learning and ization can be expected when the natural inclina-
development, performance and reward and the tions of the persons there are allowed to be reflected
2 Part 1  The Practice of Human Resource Management

in their behaviours by the kinds of processes and a relationship based on trust, openness and personal
structures that have evolved there.’ fulfilment.
As Keegan and Francis (2010: 873) noted: HR This first part of the handbook deals with the
work is now ‘largely framed as a business issue’. The broad areas and concerns of the practice of HRM
emphasis is on business alignment and strategic fit. covering its conceptual basis, the strategic frame-
These are important requirements but focusing on work within which HRM activities take place
them can lead HR professionals to place corre- and the various factors that affect it, including
spondingly less emphasis on employee needs and the impact of HRM on performance, the specific
motivations when developing their new and altered functions of human capital management, knowledge
arrangements. A simplistic view of the business management and competency-based HRM and,
imperative permits little room for considering how importantly, the ethical and social responsible
HR strategy should impact on individual employ- considerations that need to be taken into account
ees. HRM indeed aims to support the achievement when practising HRM. International HRM is dealt
of business goals but, equally, it should aim to build with in Part IX.

References
Keegan, A and Francis, H (2010) Practitioner talk: the Schneider, B (1987) The people make the place,
changing textscape of HRM and emergence of HR Personnel Psychology, 40 (3), pp 437–53
business partnership, The International Journal of
Human Resource Management, 21 (6), pp 873–98
 3

01
The essence of
human resource
management (HRM)
K e y co n c e p t s a n d t e r m s
Added value Humanism
Agency theory Institutional theory
AMO theory Matching model of HRM
Commitment Motivation
Contextual model of HRM Organizational behaviour theory
Contingency theory Organizational capability
European model of HRM Resource-based theory
5-P model of HRM Resource dependence theory
Hard HRM Soft HRM
Harvard framework Strategic alignment
HR philosophy Strategic human resource management
Human capital theory (SHRM)
Human relations Transaction costs theory
Human resource management (HRM) Unitarist

L e a r n i n g o u tcom e s

On completing this chapter you should be able to define these key concepts. You should
also know about:
●● The fundamental concept of HRM and ●● The underpinning theories
how it developed ●● The reservations made about HRM
●● The meaning of HRM ●● Models of HRM
●● The goals of HRM ●● The position of HRM today
●● The philosophy of HRM
4 Part 1  The Practice of Human Resource Management

that human factors are paramount in the study of

Introduction – the HRM organ­izational behaviour and that people should be
concept treated as responsible and progressive beings.
An early reference to human resources was
made by Bakke (1966). Later, Armstrong (1977: 13)
Human resource management (HRM) is concerned
observed that in an enterprise ‘the key resource
with all aspects of how people are employed and
is people’. But HRM did not emerge in a fully
managed in organizations. It covers the activities of
fledged form until the 1980s through what might
strategic HRM, human capital management, know­
be called its founding fathers. These were the US
ledge management, corporate social responsibility,
academics Charles Fombrun and his colleagues
organization development, resourcing (workforce
in the ‘matching model’, and Michael Beer and his
planning, recruitment and selection and talent manage­
colleagues in the ‘Harvard framework’ as described
ment), learning and development, performance and
on page 9.
reward management, employee relations, employee
In the UK they were followed by a number of com-
well-being and the provision of employee services.
mentators who developed, explained and frequently
It also has an international dimension. As described
criticized the concept of human resource manage-
in Chapter 3, HRM is delivered through the HR
ment. Legge (2005: 101) commented that: ‘The term
architecture of systems and structures, the HR func-
[HRM] was taken up by both UK managers (for
tion and, importantly, line management.
example, Armstrong, 1987; Fowler, 1987) and UK
The practice of referring to people as resources
academics’. Hendry and Pettigrew (1990: 18) stated
as if they were any other factor of production is often
that HRM was ‘heavily normative from the start:
criticised. Osterby and Coster (1992: 31) argued that:
it provided a diagnosis and proposed solutions’.
‘The term “human resources” reduces people to the
They also mentioned that: ‘What HRM did at this
same category of value as materials, money and tech-
point was to provide a label to wrap around some
nology – all resources, and resources are only valu-
of the observable changes, while providing a focus
able to the extent they can be exploited or leveraged
for challenging deficiencies – in attitudes, scope,
into economic value.’ People management is some-
coherence, and direction – of existing personnel
times preferred as an alternative, but in spite of its
management’ (ibid: 20). Armstrong (1987: 31) argued
connotations, HRM is most commonly used.
that:

HRM is regarded by some personnel managers

The development of the HRM as just a set of initials or old wine in new bottles.
It could indeed be no more and no less than
concept another name for personnel management, but as
usually perceived, at least it has the virtue of
The term HRM has largely taken over that of
emphasising the virtue of treating people as
‘personnel management’, which took over that
a key resource, the management of which is the
of ‘labour management’ in the 1940s, which took
direct concern of top management as part of the
over that of ‘welfare’ in the 1920s (the latter process strategic planning processes of the enterprise.
emerged in the munitions factories of the First Although there is nothing new in the idea,
World War). HRM largely replaced the human insufficient attention has been paid to it in
relations approach to managing people founded many organizations.
by Elton Mayo (1933) who based his beliefs on the
outcome of the research project conducted in the However, commentators such as Guest (1987) and
1920s known as the Hawthorne studies. Members Storey (1995) regarded HRM as a substantially dif-
of this school believed that productivity was directly ferent model built on unitarism (employees share
related to job satisfaction and that the output of the same interests as employers), individualism, high
people would be high if someone they respected commitment and strategic alignment (integrating
took an interest in them. HRM also shifted the HR strategy with the business strategy). It was also
emphasis away from humanism – the belief held by claimed that HRM was more holistic than tradi-
writers such as Likert (1961) and McGregor (1960) tional personnel management and that, importantly,
 Chapter 1  The Essence of HRM 5

it emphasized the notion that people should be original concept can lead us to believe. This is
regarded as assets rather than variable costs. illustrated by the various models summarized in
this section which provide further insights into the
nature of HRM. The chapter ends with an assess-
The conceptual framework of HRM ment of where the concept of HRM has got to
now. Following this analysis the next two chapters
HRM as conceived in the 1980s had a conceptual explain how in general terms HRM is planned
framework consisting of a philosophy underpinned through the processes of strategic HRM and deliv-
by a number of theories drawn from the behavioural ered through the HR architecture and system, the
sciences and from the fields of strategic manage- HR function and its members, and, importantly,
ment, human capital and industrial relations. The line managers.
HRM philosophy has been heavily criticized by
academics as being managerialist and manipulative
but this criticism has subsided, perhaps because it
became increasingly evident that the term HRM HRM defined
had been adopted as a synonym for what used to be
called personnel management. As noted by Storey Human resource management can be defined as
(2007: 6): ‘In its generic broad and popular sense a strategic, integrated and coherent approach to
it [HRM] simply refers to any system of people the employment, development and well-being of the
management.’ people working in organizations. It was defined by
Boxall and Purcell (2003: 1) as ‘all those activities
associated with the management of employment
HRM practice today relationships in the firm’. A later comprehensive
definition was offered by Watson (2010: 919):
HRM practice is no longer governed by the original
philosophy – if it ever was. It is simply what HR HRM is the managerial utilisation of the efforts,
people and line managers do. Few references are knowledge, capabilities and committed behaviours
made to the HRM conceptual framework. This is which people contribute to an authoritatively
a pity – an appreciation of the goals, philosophy co-ordinated human enterprise as part of an
and underpinning theories of HRM and the various employment exchange (or more temporary
HRM models provides a sound basis for under- contractual arrangement) to carry out work tasks
standing and developing HR practice. But account in a way which enables the enterprise to continue
needs to be taken of the limitations of that philo­ into the future.
sophy as expressed by the critics of HRM set out
later in this chapter.
The goals of HRM
The goals of HRM are to:
Aim of this chapter
●● support the organization in achieving its
The aim of this chapter is to remedy this situation. objectives by developing and implementing
It starts with a selection of definitions (there have human resource (HR) strategies that are
been many) and elaborates on these by examining integrated with the business strategy
HRM goals. Because the original concept of HRM (strategic HRM);
is best understood in terms of its philosophy and
●● contribute to the development of
underpinning theories these are dealt with in the
a high-performance culture;
next two sections. Reference is then made to the
reservations made about HRM but it is noted that ●● ensure that the organization has the talented,
while these need to be understood, much of what skilled and engaged people it needs;
HRM originally set out to do is still valid. However, ●● create a positive employment relationship
as explained in the next section of the chapter, between management and employees and
HRM is more diverse than interpretations of the a climate of mutual trust;
6 Part 1  The Practice of Human Resource Management

●● encourage the application of an ethical therefore HR policies should be integrated into the
approach to people management. business strategy.
An earlier list of HR goals was made by Dyer and
Holder (1988: 22–28) who analysed them under
the headings of contribution (what kind of em-
ployee behaviour is expected?), composition (what
Underpinning theories of
headcount, staffing ratio and skill mix?), com­ HRM
petence (what general level of ability is desired?) and
commitment (what level of employee attachment The original notion of HRM had a strong theore­
and identification?). Guest (1987) suggested that tical base. Guest (1987: 505) commented that:
the four goals of HRM were strategic integration, ‘Human resource management appears to lean
high commitment, high quality and flexibility. heavily on theories of commitment and motivation
And Boxall (2007: 63) proposed that ‘the mission of and other ideas derived from the field of organ­
HRM is to support the viability of the firm through izational behaviour.’ A number of other theories,
stabilizing a cost-effective and socially legitimate especially the resource-based view, have contributed
system of labour management’. to the understanding of purpose and meaning of
HRM. These theories are summarized below.

The philosophy of human Commitment

resource management The significance in HRM theory of organizational
commitment (the strength of an individual’s identi-
Doubts were expressed by Noon (1992) as to fication with, and involvement in, a particular organ­
whether HRM was a map, a model or a theory. ization) was highlighted in a seminal Harvard Business
But it is evident that the original concept could Review article by Richard Walton (1985).
be interpreted as a philosophy for managing people
in that it contained a number of general principles
and beliefs as to how that should be done. The
Source review
following explanation of HRM philosophy was
made by Legge (1989: 25) whose analysis of a
number of HRM models identified the following From control to commitment –
common themes: Walton (1985: 77)
That human resource policies should be Workers respond best – and most creatively – not
integrated with strategic business planning when they are tightly controlled by management,
and used to reinforce an appropriate (or change placed in narrowly defined jobs and treated as
an inappropriate) organizational culture, that
an unwelcome necessity, but, instead, when they
human resources are valuable and a source of
are given broader responsibilities, encouraged to
competitive advantage, that they may be tapped
most effectively by mutually consistent policies contribute and helped to take satisfaction in their
that promote commitment and which, as a work. It should come as no surprise that eliciting
consequence, foster a willingness in employees commitment – and providing the environment in
to act flexibly in the interests of the ‘adaptive which it can flourish – pays tangible dividends for
organization’s’ pursuit of excellence. the individual and for the company.
Storey (2001: 7) noted that the beliefs of HRM
included the assumptions that it is the human
resource that gives competitive edge, that the aim The traditional concept of organizational commit-
should be to enhance employee commitment, that ment resembles the more recent notion of organiza-
HR decisions are of strategic importance and that tional engagement (see Chapter 15).
 Chapter 1  The Essence of HRM 7

Motivation Institutional theory

Motivation theory explains the factors that affect Organizations conform to internal and external
goal-directed behaviour and therefore influences environmental pressures in order to gain legitimacy
the approaches used in HRM to enhance engage- and acceptance.
ment (the situation in which people are committed
to their work and the organization and are moti-
vated to achieve high levels of performance). Human capital theory
Human capital theory is concerned with how people
The resource-based view in an organization contribute their knowledge, skills
and abilities to enhancing organizational capability
Resource-based theory expressed as ‘the resource- and the significance of that contribution.
based view’ states that competitive advantage is
achieved if a firm’s resources are valuable, rare and
costly to imitate. It is claimed that HRM can play Resource dependence theory
a major part in ensuring that the firm’s human
resources meet these criteria. Resource dependence theory states that groups
and organizations gain power over each other by
controlling valued resources. HRM activities are
Organizational behaviour theory assumed to reflect the distribution of power in the
system.
Organizational behaviour theory describes how
people within their organizations act individually
or in groups and how organizations function in AMO theory
terms of their structure, processes and culture. It
therefore influences HRM approaches to organiza- The ‘AMO’ formula as set out by Boxall and Purcell
tion design and development and enhancing organ­ (2003) states that performance is a function of
izational capability (the capacity of an organization Ability + Motivation + Opportunity to Participate.
to function effectively in order to achieve desired HRM practices therefore impact on individual
results). performance if they encourage discretionary effort,
develop skills and provide people with the oppor­
tunity to perform. The formula provides the basis
Contingency theory for developing HR systems that attend to employees’
interests, namely their skill requirements, motiva-
Contingency theory states that HRM practices are tions and the quality of their job.
dependent on the organization’s environment and
circumstances. This means that, as Paauwe (2004:
36) explained: ‘The relationship between the rele- Social exchange theory
vant independent variables (eg HRM policies and
practices) and the dependent variable (perform- Employees will reciprocate their contribution to
ance) will vary according to the influences such as the organization if they perceive that the organ­
company size, age and technology, capital intensity, ization has treated them well.
degree of unionization, industry/sector ownership
and location.’
Contingency theory is associated with the notion Transaction costs theory
of fit – the need to achieve congruence between an Transaction costs economics assumes that businesses
organization’s HR strategies, policies and practices develop organizational structures and systems that
and its business strategies within the context of its economize the costs of the transactions (interrelated
external and internal environment. This is a key exchange activities) that take place during the course
concept in strategic HRM. of their operations.
8 Part 1  The Practice of Human Resource Management

Agency theory together) is questionable. Fowler (1987: 3)

commented that: ‘At the heart of the concept
Agency theory states that the role of the managers is the complete identification of employees
of a business is to act on behalf of the owners of the with the aims and values of the business –
business as their agents. But there is a separation employee involvement but on the company’s
between the owners (the principals) and the agents terms. Power in the HRM system remains
(the managers) and the principals may not have very firmly in the hands of the employer. Is it
complete control over their agents. The latter may really possible to claim full mutuality when
therefore act in ways that are against the interests of at the end of the day the employer can decide
those principals. Agency theory indicates that it is unilaterally to close the company or sell it to
desirable to operate a system of incentives for someone else?’ Later, Ramsey et al (2000:
agents, ie directors or managers, to motivate and 521) questioned the unitarist assumption
reward acceptable behaviour. underlying much mainstream management
theory that claims that everyone benefits
from managerial innovation.

Reservations about the ●● HRM is ‘macho-management dressed up as

benevolent paternalism’ Legge (1998: 42).
original concept of HRM ●● HRM is manipulative. Willmott (1993: 534)
asserted that: ‘any (corporate) practice/value
On the face of it, the original concept of HRM as is as good as any other so long as it secures
described above had much to offer, at least to man- the compliance of employees’. HRM was
agement. But for some time, HRM was a controver- dubbed by the Labour Research Department
sial topic, especially in academic circles. The main (1989: 8) as ‘human resource manipulation’.
reservations as set out below have been that HRM John Storey (2007: 4) referred to ‘the
promises more than it delivers and that its morality potential manipulative nature of seeking
is suspect: to shape human behaviour at work’.
●● Guest (1991: 149) referred to the ‘optimistic ●● HRM is managerialist. ‘The analysis of
but ambiguous label of human resource employment management has become
management’. increasingly myopic and progressively more
irrelevant to the daily experience of being
●● HRM ‘remains an uncertain and imprecise
employed. While the reasons for this
notion’ Noon (1992: 16).
development are immensely complex... it is
●● ‘The HRM rhetoric presents it as an all or primarily a consequence of the adoption of
nothing process which is ideal for any the managerialist conception of the discourse
organization, despite the evidence that different of HRM’ (Delbridge and Keenoy, 2010: 813).
business environments require different
●● HRM overemphasizes business needs.
approaches’. (Armstrong, 2000: 577)
Keegan and Francis (2010) have rightly
●● HRM is simplistic – as Fowler (1987: 3) wrote: criticized the increasing focus on the business
‘The HRM message to top management tends partnership role of HR at the expense of its
to be beguilingly simple. Don’t bother too function as an employee champion. An
much about the content or techniques of illustration of this is provided by the
personnel management, it says. Just manage Professional Map produced by the British
the context. Get out from behind your desk, Chartered Institute of Personnel and
bypass the hierarchy, and go and talk to Development (CIPD), which as stated by the
people. That way you will unlock an enormous CIPD (2013: 2): ‘Sets out standards for HR
potential for improved performance.’ professionals around the world: the
●● The unitarist approach to industrial relations activities, knowledge and behaviours needed
implicit in HRM (the belief that management for success.’ The map refers to ‘business’ 82
and employees share the same concerns and times but to ‘ethics’ only once and ‘ethical’
it is therefore in both their interests to work only twice.