Block 4 Flashcards
The Rise of Human Resource Management
(Rose, 1988, p.81)
…technology supplanted the human relations climate as the favourite variable for explaining human behaviour… increasingly, investigators took the title of
‘organisation theorists’. Combined with applied psychology, the sociology of organisations formed the core of a newly popular and heavily promoted academic area, organisational behaviour.
Organisational Behaviour
Its theoretical agenda is similar to that of human relations, but it is methodologically far more sophisticated, in part because it has developed as a branch of applied psychology. It is not primarily concerned with rationality – compared with economics rationality it is treated as a variable not an assumption – and is not always concerned to measure business outcomes such as efficiency or productivity. OB deals with two concepts which have been central so far: hierarchy and contract.
HR function should organise itself around 3 types of activity
(each of which supports the business and its line managers in different ways)
- Shared services. Ulrich says that HR departments can perform the set of basic administrative tasks required in the management of a workforce. These are the sorts of activities through which economies of scale may be achieved by the concentration of activity on an enterprise-wide basis. These activities include management of payroll, absence control and employee databases more generally. It is possible to save money if these activities are grouped into one HR function, rather than distributed across the business. The measures of performance of such units are essentially the quality and timeliness of data provision and cost. There are clear outsourcing possibilities, since inter-firm scale economies can be exploited subject to confidentiality concerns about employee data. For instance, outsourcing companies are regularly used to help organise payroll. One example of such a company is Moorepay, who at the time of writing claimed to provide 500,000 payslips for a wide range of clients each year.
- Centres of expertise. Ulrich says that HR departments have a role to play in supporting and advising line managers where relevant issues arise. When acting as centres of expertise, HR departments focus on areas of knowledge where there may also be economies of scale but where the complexity of information requires specific HR knowledge. Examples would be the selection of employees, designing and applying reward systems (including pensions), employee relations (including dealing with unions), training and termination of employees. Compliance with relevant law is often an issue in all such areas. Performance measures here are more complicated, but would include, in addition to those for shared services, some line management evaluation of quality of advice.
- Business partnership. Finally Ulrich says that HR departments can work with high-level line management to improve firm performance through more strategic initiatives. This type of work often involves small HRM teams working with senior managers to change the organisation with the intention of improvement. Examples would be issues such as strategy implementation, organisational design and change management. At this level, initiatives can be driven by the business or even by the HR professionals, assisting the firm to maximise its use of human assets. Performance measures here are challenging, if not impossible because it is very difficult to isolate and measure the value of HR separate to the rest of the firm.
the resource-based theory of the firm.
Once this intellectual toolkit was in place, and employees could be seen as a source of competitive advantage, the stage was clear for HRM to make a bid to be strategic.
Wright and McMahan, 1992 (p.298).
HRM became strategic – defined as the ‘pattern of planned human resource deployments and activities intended to enable an organisation to achieve its goals’
Hamel and Prahalad, 1996
“The way we organise our business and leverage our intangible assets, primarily vested in people, is one of the most fundamental and sustainable sources of competitive advantage.”
1/3 Central Issues: Which HRM practices actually generate competitive advantage?
Pfeffer (1994) offers seven generic (universally applicable) practices for building profits by ‘putting people first’.
They are:
1. employment security (people feeling protected in their jobs)
2. selective hiring (choosing the right person for the job)
3. self-managed teams or team working (allowing people to work in autonomous or semi-autonomous groups with whom they identify)
4. high pay contingent on company performance (people being rewarded for the company doing well)
5. reduction of status differences (using initiatives which flatten the hierarchy or at least make it feel flatter)
6. sharing information (making sure that there are processes to pass information around and a culture of doing so).
Macduffie, 1995, p.199
Innovative human resource practices are likely to contribute to improved economic performance only when three conditions are met:
- when employees possess knowledge and skills that managers lack
- when employees are motivated to apply this skill and knowledge through discretionary effort
- when the firm’s business or production strategy can only be achieved when employees contribute such discretionary effort.
2/3 Central Issues: Do the same HRM practices work everywhere?
The second issue concerns inter-firm variation; if firm strategies are different, maybe HRM practices need to be.
Wall and Wood (2005, p.431) identify three types of ‘fit’ between HRM practices and the firm.
1. Internal fit ‘posits synergy among the practices, meaning that their collective effect will be greater than the sum of their individual parts’. This means that HRM practices themselves need to be related and to make sense together. If you spend time recruiting and selecting really good graduates, it would be sensible to make sure that you offer them the learning and training you know that they need and want.
2. Organisational fit ‘concerns the role of HRM in enhancing the effectiveness of other organisational practices or technologies, and vice versa’. If your company has spent lots of money developing a new piece of technology, you will want to make sure that you recruit people who you think have the ability to learn how to use it.
3. Strategic fit ‘assumes that HRM practices need to be aligned with the organization’s strategy to have their full effect on performance’. Starbucks’ mission is to ‘inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time’. You may want to make sure that your appraisal system measures how good your baristas are at making coffee, or making your customers feel happy, so that they have the highest chance of feeling nurtured and being inspired
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The first concept of fit suggests that some combinations of HRM practice may be better than others. The second implies that some combinations may optimise the performance of certain technologies. But the third reaches to the heart of Ulrich’s idea about the organisation of the HRM department and its relationship to line management. For Ulrich, the essence of competitive advantage from HRM is the HRM–line management relationship, rather than a bundle of practices. The bundle of practices is a dependent variable.
3/3 Central Issues: How can you measure the impact of HRM practices on competitive advantage?
De Menezes et al. have used data on both operations management practice and the use of HRM in a longitudinal study that indicates the way forward in this field. They show that firms that innovate early and integrate HRM with production practices generate sustained performance improvement, arguing:
An integrated managerial philosophy is potentially a source of competitive advantage, highlighting the importance of continuous improvement and learning that is often allied to the lean production concept. (De Menezes et al., 2010, p.1065)
So, in the HRM field, it does not seem that simply adopting a practice or set of practices employed by a successful competitor offers a high chance of replicating their success. Many firms in many sectors do so for both practices and for targets, in a process known as ‘benchmarking.
Organisational behaviour has recently been influentially defined as….
A field of study devoted to understanding, explaining, and ultimately improving the attitudes and behaviours of individuals and groups in organizations. (Colquitt, LePine and Wesson, 2009, p.7)
Economics VS. Organisational Behaviour
Two sub-fields illustrate how this field differs from one that makes assumptions about rationality and self-interest. Economic approaches use principal–agent theory to describe hierarchy, while OB talks about leadership. Economists describe employment contracts as incomplete, whereas OB academics study how these silences are filled. We look at each in turn, as illustrations of the difference between rational choice and psychological approaches to organisation.
Judge et al. (2002) on the Trait perspective of leadership.
They organised others’ findings around the Big Five personality traits (extraversion; openness; agreeableness; conscientiousness; and neuroticism). They found that leaders tend to be high in extraversion, openness and conscientiousness, and low in neuroticism (their agreeableness was found to be largely irrelevant).
Issues with this theory: implies that your propensity for leadership is fixed and cannot be learnt, and researchers have been unable to agree on the list of traits that are desirable. These reasons make it unsurprising that the literature turned away from the trait approach.
2 critical categories of leadership (identified by Ohio State University (1945)
(Behavioural Perspective)
- People-oriented leadership (consideration)
- Task-oriented leadership (initiating structure)
-research was based on questionnaires to leaders and their subordinates.
-found that both categories were independent of one another, but that those leaders who are most effective possess a strong ability to work with others, as well as a strong ability in creating structure in which tasks can successfully be completed.
In the 1950s, the Michigan Leadership Studies and indicated that leadership behaviours could be classified as either ‘employee centred’ or ‘job centred’.
Thus, in both studies, twin categories of ‘task’ and ‘relationship’ behaviours emerge to be important to leadership, with effective leaders tending to be ‘high’ in both.
Behavioural Perspective
Type of leadership theory: Behavioural
Main proposition: Leadership is a set of behaviours
Legacy: Presenting good leaders as those who have a focus on both people and tasks
Main criticisms: Ignores context, Ignores audience, Research methods not rigorous enough
