20_hrdevelopment

8/6/2019 20_hrdevelopment

1/57

HR Development in Local Government: How does HR strategy matter inorganizational change and development?

Paper prepared for XIV IRSPM ConferenceUniversity of Berne, Centre of Competence for Public Management7-9 April 2010

- Panel track 20: Public Management Education and Training

Please do not quote without prior permission

Dr. Hans-Jrgen Bruns


2/57

2

Human Resource Development in Local Government: How

does HR strategy formation matter in organizationalchange and development?

Key words

Organizational change, human resource strategy, case study, resource-based view

INTRODUCTION

Human resource (HR) management has been proposed as one of the core drivers of

modernizing public organisations (e.g. Pollit/Bouckaert 2004, Boyne 2004; Maddock

2002, Rashman/Radnor 2005). For instance, within the Public Management literature

it is a commonly accepted that local governments can potentially improve individual

and organizational performance by strengthening their HR management (e.g. Selden2009, Carmeli/Schaubroeck 2005). Thus, current strands of research focused the

strategic HR role in the modern public sector (e.g. Truss 2008, Harris 2002) and

discussed the necessity of business partnerships to modernize the public sector

(e.g. Teo/Rodwell 2004; Bach/Kessler 2007). Despite such interest in the strategic

HR role only a few studies have explored how and why the relationship between HRmanagement, organizational strategy and improved performance occurs.

Due to the acknowledged significance of strategic HR management, research has to

reveal more about the link between strategic HR management and organisational

change. One main premise is that the effect is best explained through a strategicapproach, a position consistent with Strategic HR management scholarship. Thus,

developing a resource- and capability-driven perspective gains different insights to

elaborate the strategic HR role and how it is assigned to organizational change in


3/57

3

THE STRATEGIC ROLE OF HR MANAGEMENT IN PUBLIC

ORGANIZATIONSHuman resource (HR) management has been proposed as one of the core drivers of

organizational change and development in the public sector and one of the crucial

concepts to improve performance in state and local government (e.g. Pollit/Bouckaert

2004, Boyne 2004; Maddock 2002, Rashman/Radnor 2005). Within the Public

Management literature, it is a commonly accepted that local governments can

potentially derive organizational cost-effectiveness and service improvements from

their stock of human capital. It is also accepted that the distinct value of the human

capital stock strengthens HR management, especially in the fields of HR

development and public service motivation (e.g. Selden 2009, Ingraham 2005,

Carmeli/Schaubroeck 2005).

This proposition can be traced back to competing perspectives on public HR

management and their values. Regularly, the personnel system-approach has been

appreciated positively as model employer with regard to the dominant values of a

civil service system like functionalism, paternalism, individual rights, and social

equity. Under the recent reform agenda, a managing people as resources-approach

replaces the traditional approach by emphasizing employment relationships and

contracting, and creates a public HRM model that refers to shifting conditions in the

public sector, e.g. privatization, partnerships, and public service performance

(Klingner 2009, Brown 2004, Bach/Kessler 2007, Llorens/Battaglio 2010).Subsequently, modernization proposals focus opportunities to change HR policies

encouraging performance-based rewards or career-based HR development. This

stream of research identifies several consequences for the effectiveness of HR


4/57

4

practices which represents a new range of opportunities as well as daunting

pressures (e.g. Pollit/Bouckaert 2004, Teo/Rodwell 2007). Additionally, it has to beconsidered that HR management is proposed as an antecedent capacity to leverage

the distinctive value of people to opportunities of change in public services (e.g.

Carmeli/Schaubroeck 2005; Brown 2004).

One main premise is the notion that the effect of public HR management is best

explained through a strategic approach, a position consistent with common

perspectives in Strategic HR management scholarship (e.g. Perry 2010, Selden

2009, Garavan 2007). Additionally, this stream of research suggests that extending

the terminology from people to HR management reflects a conceptual reorientation

extending the focus from the person-job fit to competitive value of HR, especially with

references to the resource-based view of strategy (e.g. Snell/Shadur/Wright 2001,

Clardy 2008). Within a common tenet of viewing people as strategic assets for

organizational change and renewal, recent literature focuses on three topics: the

pressure to adopt HR concepts or components similar to business principles, partly

enforced by legal regulations (e.g. Pichault 2007; Truss 2009b; Hays/Kearney 2001),

the opportunity to develop strategic HR roles and effective HR processes (e.g. Harris

2005; 2002; Truss 2008; 2009b), both coupled with a discussion how the

modernization of HR policies and practices contributes to managing change (e.g.

Currie/Procter 1998, Brown 2004) and performance in public organizations (e.g.

Teo/Rodwell 2007; Bach/Kessler 2007).

Despite such interest only a few studies have explored how and why the relationship

between HR management, organizational strategy and performance occurs.

While much of the prescriptive literature has advocated the strategic role of HR


5/57

5

professionalism and operational involvement (e.g. Teo/Rodwell 2007, Truss 2008).

But, surprisingly, the recommended involvement of senior HR managers in strategic

activities does not seem to have any impact on the level of influence or strategic

integration (e.g. Teo/Rodwell 2007).

Furthermore, the studies commonly suggest that the counterpart, e.g. chief

executives or senior line managers responsible for local public services, represents

the business role putting pressure on HR becoming more proactive. But why could

one expect that the so-called business level activities are inherently strategic and co-

evolve, i.e. that they adopt common HR policies or practices on behalf of an

organizational strategy (Clardy 2008, Truss/Gill 2009). As some of the studies show,

we need to account for two related subjects: first, for the multiplicity of perceptions

about how to build a strategic HR management in public organizations (Teo/Rodwell

2007, 277, Pichault 2007); and second, for relational issues concerning how a

strategically positioned HR management is linked into organizing change in local

governments (Truss/Gill 2009, Wright/Dunford/Snell 2001, Clardy 2008). Thus, one

critical constraint seems to be the capacity to assimilate or align HR policies and

practices at both sides of the strategic coin - not at all adopting or copying best

practices to modernize public HR systems (Clardy 2008; Pichault 2007; Teo/Rodwell

2007). Even if the strategic HR role is identified, core aspects remain uncertain

because of the processes by which a strategically positioned HR management is put

into its organizational effects, for example enabling radical changes associated with

the modernization of public service organizations (Pichault 2007; McNulty/Ferlie

2004; Greenwood/Hinings 1996).

Due to the acknowledged significance of HR management under New Public


6/57

6

capabilities, the link between strategy and HR development has been identified as

one critical capacity to gain sustainability in organizational effectiveness (Luoma

2000; Clardy 2008; Snell/Shadur/Wright 2001). Although public management

scholars suggest that HR management is a guiding force behind change and

innovation in public service renewal (e.g. Brown 2004, Maddock 2002, Boyne 2003),

a resource- and capability-driven perspective extends this contingent approach and

displays how the process of HR strategy formation in organizational change and

development evolve. Thus, we can expect that a resource- and capability-driven

perspective gains different insights to carefully elaborate the question why some local

authorities fail to become more strategic in their HR management, whereas others

are more successful as agents of organizational change.

The study refers to a multiple case study in German local government. From 2001 to

2005 the formation of HR strategies was observed in 6 municipalities. In this paper

empirical data will be presented that allows insights into the process of HR strategy

formation. It further addresses how this facilitates organizational change and

development with regard to the implementation of accrual accounting. In Germany,

policy programs to change the cash-based accounting system have shifted

significantly (Reichard 2003, Budus/Behm/Adam 2003). First, at the state level the

enactment of new budget laws enforced local authorities (counties, municipalities) to

modernize their accrual accounting. Second, at organizational level new forms of

financial and managerial accounting were recommended to increase efficiency and

accountability in public services. Therefore, accrual accounting reforms could be

regarded as a distinct change to extend or reinvent accounting knowledge and to

adjust control and responsibility for public service performance.


7/57

7

Lengnick-Hall et al. 2009, Boxall/Purcell/Wright 2007), especially because of

conceptual evolutions of ideas, constructs and paradigms or approaches within the

fields. Reviewing the field of HR strategy, Snell et al. (2001) identified the evolution of

three paradigms guiding research issues, named as person-job fit, systematic fit, and

competitive potential. With the premise that strategy formation is a process, Sminia

(2009) distinguishes between three types of process research, named as tracking

strategy (the Mintzberg-approach), contextualism (the Pettigrew-approach), and

Minnesota studies (the Van de Ven-Approach). Garavan (2007) synthesizes a

contextual and dynamic framework describing Strategic HR development (SHRD).

His review differentiates traditional, transactional, and transformational SHRD

activities that fit to specific domains of organizational development, such as

performance, learning and change. In general, Lengnick-Hall et al (2009) and others

(e.g. Delery/Doty 1994) show the richness of themes reflecting strategic SHRM

research, but they also categorize competing frameworks within this strand of

research, marked as universal, contingency, configurational, and contextual

approaches.

Within this heterogeneity, the application of a resource- and capability-driven

approach suggests that research should focus on the process by which managing

people creates a strategic contribution to achieve organizational goals (e.g.

Lengnick-Hall et al 2009, Way/Johnson 2005; Wright/Dunford/Snell 2001).

Additionally, Chadwick/Dabu (2009) proposed a rent-based view to distinguish

contributions of HR to organizational outcomes, and their implications for rent-

seeking behaviour related to HRM activities. Thus, a resource- and capability-driven

approach differs to what has been done so far, especially testing the applicability of

discrete HR practices in different organizational settings (a universal variance driven


8/57

8

the context of distinct organizational settings (e.g. public, non-profit, private

organisations, Moore 2000),

the role of strategy-based HR Management (e.g., the notion of horizontal and

vertical fit in HRM scholarship, Lengnick-Hall et al 2009, Way/Johnson 2005), and

how strategic outcomes depend on HR development, e.g. explaining processes of

reconfiguring organizational capabilities (Lengnick-Hall et al 2009;

Snell/Shadur/Wright 2001; Pichault 2007).

With regard to strategic HR development such a process approach refers to a multi-

level and temporal analysis of HR development and its long-term organizational

effects (Garavan 2007, Hitt et al. 2007). It is important to note, that a resource-based

view proposes that competences (knowledge, skills, and abilities) as well as

behaviour control and coordination represent important sources of organizational

outcomes (e.g. Wright/Snell 1991, Wright/McMahan/McWilliams 1994, Gratton 1999).

The distinctive value of HR and the relevance of HR management may be

understood by considering their idiosyncratic relationships to strategy and change in

commercial as well as in local public services (Carmeli/Schaubroeck 2005).

From this point of view, public HR management practices are capable to leverage a

particular stock of human capital by developing or streamlining it in ways that are

uniquely matched to the particular organizational strategy. Thus, the concept of

leveraging refers to attributes of the HR capital that mutually reinforce the design of

organisational capabilities to deliver public services. Given a strong HR capital stock,

public organizations must effectively leverage it against the design and strategic

orientation of its services. Thus, the process of leveraging enfolds idiosyncratically

b f i i l i d i i Th P bli M


9/57

9

Organizational change and development: Empirical research that seeks to

understand how HR management relates to organizational change and development

in public service organisations needs to be guided by a concept that theorizes the

scale, pace and sequencing of change and development in public organizations

(Osborne/Brown 2005; McNulty/Ferlie 2004; Pettigrew/Woodman/Cameron 2001).

Regularly this is termed as the contextualist analyses that is directed to investigate

how exogenous as well as endogenous forces shape and are shaped by the

character of change processes. Within research on strategy formation, the concepts

of path dependency, dynamic capabilities and strategic logic reflect this iteration (e.g.

Teece/Pisano/Shuen 1997; Eisenhardt/Martin 2000; Bingham/Eisenhardt 2008).

Tushman and Romanellis (1985) seminal concept for assessing organizational

change is associated with the distinction of incremental versus transformational

phases or templates of organizational change. Greenwood and Hinings (1996) use

the concept of archetypes to differentiate how and why organizational change

evolves. While evolutionary change occurs gradually within a dominant archetype,

defined as a configuration of structures and systems of organizing within a common

strategic orientation, revolutionary change happens rapidly and affects all parts of the

organization simultaneously. Thus, the degree of change is associated with a

sufficient enabling capacity for action combined with either a reformative or

competitive pattern of value commitments and moderated by power dependencies.

Additionally, the concept of co-evolution is concerned with both the macro- and

micro-level of analysing strategy formation (e.g. Burgelman 2002, Bower/Doz/Gilbert

2005). It reflects contextual dependencies or the embeddedness of organizational

processes as well as strategic choices that constitute mutual evolutionary


10/57

10

building new organizational forms is much lower than the relative rate at which

environmental conditions change (Hannan/Freeman 1984, 151). More specifically

and with regard to capability reconfiguration, Lavie (2006) distinguished substitution,

evolution, and transformation as mechanisms that link benefits and risks of

technological resource investments to attributes of organizational capabilities.

Leonard-Barton (1992) explores the managerial paradox associated with

organizational inertia. Building new organizational forms relates to discrediting the

managerial systems traditionally favoured to gain organizational advantages, and

managing both inhibits the degree of organizational change (Benner/Tushman 2003,

March 1991). Untangling this paradox Gilbert (2005) distinguishes the structure of

inertia into distinct categories. Resource rigidity refers to the failure to make resource

investments; whereas, routine rigidity refers to the failure to perform processes and

procedures that use those resource investments.

Recent studies on HRM-based reforms and radical change in public organisations

substantiate why contextualist (e.g. McNulty/Ferlie 2004, Pichault 2007; Osborne

1998, Erakovic 2006) and co-evolutionary perspectives (e.g. Paauwe/Boselie 2005,

Truss 2009b) are helpful for considering how and why the HR management itself and

the comprehensive organizational settings evolve over time. Referring to

organisational change in public services, Osbornes study on UK local public services

(1998, Osborne/Brown 2005) identifies change in providing public services (an

internal, efficiency-oriented concept) and change in addressing client needs (an

external, effectiveness-oriented concept) as distinct dimensions of public service

improvement. Thus, the study underscores the relevance of differentiating the degree

of discontinuity in modernizing public services. It also distinguishes four modes of

organizational change named developmental evolutionary expansionary and total


11/57

11

evolutionary forces. Thus, the enactment of strategic HR choices and the temporal

dimension are critical to understand why unique HR functional roles evolve in public

organisations. Based on their comparative studies on US State and Local

Government management systems, Kneedler Donahue/Selden/Ingraham (2000;

Ingraham/Kneedler Donahue 2000a, 2000b; Ingraham 2007) emphasize the concept

of managerial capacity of public authorities to deal with their ability to develop, direct,

and control resources effectively in pursuit of public service performance.

HR development: The term HR development has got different meanings in

contemporary literature. Luoma (2000) as well as others (Clardy 2008, Garavan

2007) differentiate the planned procedures through which an organizations HR

capital grows, the certain HRD function among others in the organization, or the

outcomes of HRD procedures, that is developing employee skills and knowledge.

However, from a resource-based view SHRM scholars depict a somewhat different

framework (e.g. Wright/Dunford/Snell 2001, Wright/McMahan/McWilliams 1994,

Wright/Snell 1998, Bowen/Ostroff 2004). This strand of research recognizes that

organizational outcomes can only be achieved if the members of the HR capital pool

individually and collectively choose to engage in behaviour that benefits the

organization. First, HR capital is seen as the carrier of knowledge, attitudes or

behaviours necessary to maintain an organizational strategy, not its outcomes.

Second, the organizational and social structures of HR behaviour make up the

distinctive capabilities of the organization. Thus, the term knowledge refers to

individual HR capital, but also to organizational knowledge shared within groups or

networks (i.e., social capital) or institutionalized within organizational processes or

routines (organizational capital) (e g Snell/Shadur/Wright 2001) Therefore strategic


12/57

12

organizational change is suggested, HR development relates to patterns of strategic

HR policies, such as resource development or behavioural control, rather than to

simply set out some sub-functional activities, such as staffing, training or rewards

(Wright/Dunford/Snell 2001, 715). More specifically, Gratton et al. (1999, Gratton

1999) categorize transformational- and performance-related clusters of HR-

processes which serve to link strategic aims to individual and to organizational

performance by bundling different HRM systems in specific ways.

With regard to this macro approach, Bowen/Ostroff (2004) extend a process-oriented

framework to examine how such patterns come into effect. That is how the HRM

process contributes to organizational performance by motivating employees to adopt

desired behaviours. They introduce the concept of strength of the HRM system to

propose that the distinctiveness, consistency, and consensus of an HRM system

derives as a linking mechanism that maintains as well as creates shared perceptions

among employees. Similarly, Gratton et al (1999; Gratton/Truss 2003) have argued if

employees as well as managers perceive a complimentary, non-ambiguous strategic

HR policy about what is expected of them, they are able to value appropriate

behaviours. This study supports a criteria-based assessment that adds the

action/inaction dimension to investigate the degree to which HR systems are enacted

and put into practice. Thereby, it is suggested that strong HR policies might be

inflexible and resistant to change issues (e.g. Leonard-Barton 1992). They may also

disperse, for example in organizations pursuing multiple and sedimented strategic

objectives such as professional public service organisations (e.g. McNulty/Ferlie

2004).

Within the HRM organizational performance linkage the concept delineates the


13/57

13

strength of HRM-based reforms, four potential situations can be distinguished.

Despite the proposed effect related to consistent signals through the HRM system

(Bowen/Ostroff 2004, Gratton/Truss 2003), we have to consider the risk of ambiguity

in strategic HR policies, and its crucial effect on coping with transformational

situations in public organisations.

HR strategy: The creation of linkage or integration between strategic aims, HRM

systems and organizational performance is the cornerstone of strategic HRM

research (Gratton et al. 1999). In their seminal paper Wright/McMahan (1992, 298)

term HR strategy as the pattern of planned HR deployments and activities intended

to enable an organization to achieve its goals. With regard to these patterns of HR

strategy, this approach distinguished two sets of strategic alignment:

strategic contingencies or circumstances and the vertical linkage (or external

alignment) between organizational goals and individual objectives, and

the horizontal linkage (or internal alignment) to ensure coherence among bundles

of HRM practices, e.g. high-commitment or high-performance work systems (e.g.

Way/Johnson 2005; Snell/Shadur/Wright 2001, Lengnick-Hall et al 2009,

Gratton/Truss 2003).

The proposed dimensions of strategic alignment associated with a resource- and

capability-based view of strategy stress the importance of their adjustment to

organizational changes, and how this effect enfolds. As Tyson (1997) point it out, the

concept of HR strategy may be interpreted either in terms of organizational aims, the

variety of HR policies or systems and partly their successful implementation (e.g.

Gratton/Truss 2003; Khilji/Wang 2006), or as an intra-organisational process of

d i i ki l d hi d i b hi h HR li i ti


14/57

14

Within the different approaches to adjust the link between organizational strategy and

HR development, respectively the distinct logic of strategic alignment (e.g.

Gratton/Truss 2003; Clardy 2008, Bingham/Eisenhardt 2008), Luoma (2000)

differentiates three modes of strategic alignment. The needs-driven HRD relates to a

skill-performance gap, and the opportunity-driven HRD refers to employee

development and growth. The capability-driven HRD highlights both the

enhancement of HR capital, for example by a coherent and strong training system,

and the appropriateness of HR development to the organizational setting as an

enabling mechanism of capability development (Hendry/Pettigrew 1992). It is

important to note, that the proposed figure not only creates distinct HRD-approaches

but also suggests the opportunity to value each strategic approach differently. Thus,

as Clardy (2008) argues, an organizations HRD strategy has to be profiled in terms

of the extent to which it refers to specific features, e.g. its tasks, resources, HR

systems, and performance criteria (Luoma 2000, 783). While the first two ones are

well-established approaches, Clardy (2008) and others (Wright/Dunford/Snell 2001,

Clardy 2008, Chadwick/Dabu 2009) extend the capability-driven approach and

distinguish specific HRD activities related to the valuation of HR capital and (re-

)configuration of organizational capabilities.

Referring to strategic HR development processes, we are concerned with the

services, roles, and contributions that organizational members like senior and line

managers or HR executives undertake in the course of strategic alignment and how

they enact HR policies and their effectiveness (Tyson 1997, Wright/Dunford/Snell

2001, Truss 2001). With regard to this issue, the literature commonly refers to the

multiple-constituency of HR functional roles, thereby addressing the different status

and departmental power of HR departments (e g Teo/Rodwell 2007 Farndale/Hope


15/57

15

Nevertheless, Truss and Gill (2009) argue, that managing the HR functions

strategically relates to structural and social relationships that emerge from its

operational as well as from strategic involvement. Thus, a strategic HR role

incorporates a specific form of social capital (and departmental power) as source to

cope with issues of HR strategy formation (Tsai 2000; Adler/Kwon 2002,

Farndale/Hope-Hailey 2009).

Additionally, and partly distinct from this approach, a resource- and capability-based

view of strategy emphasises the antecedent organizational and strategic routines by

which public organizations cope with capability development (Eisenhardt/Martin

2000, Ridder/Bruns/Spier 2005; Pablo et al. 2007). Thus, even understanding that

structural and social relationships are a source of HR development, public

organisations must still recognize that the temporal and sequential order to couple

HR assessment and capability development is a critical antecedent to gain

organizational benefits (e.g. Teece/Pisano/Shuen 1997, Eisenhardt/Martin 2000).

More specifically, this strand of research identifies different effects with regard to the

patterns of resource allocation through which the organization purposefully creates or

modifies its organizational capabilities (e.g. Helfat et al. 2007, Bower/Doz/Gilbert

2005).The literature regularly distinguishes induced and autonomous strategic

activities (e.g. Burgelman 2002, Bower/Doz/Gilbert 2005) as well as integration and

learning modes of how capability development occurs (e.g. March 1991, Zollo/Winter

2002, Benner/Tushman 2003). Public management literature somewhat refers to this

assumption (e.g. Pablo et al. 2007, Bryson/Ackermann/Eden 2007). Several studies

highlight the relevance of management and leadership behaviour as contingent

factors of strategy formation and thereby reflect a particular order of change and


16/57

16

organisational learning (e.g. Burgelman 2002, 16, March 1991). Thus, the concept of

institutions to change reflects issues that frame HR strategy formation in public

organisations, usefully characterized as the distribution of strategic leadership roles,

and the antecedent routines to create strategic alignment by knowledge integration

as well as learning procedures.

METHODSThe present study investigates the link between strategic HR management,

organizational change and performance in public organisations. Despite increasing

interest in this topic, there is a gap in the public management literature in identifying

how HR management, e.g. its policies, strategies, actors as well as the underlying

HRM systems contributes to organizational change and development. Thus, the

study addresses how the formation of HR strategies evolves in managing

organizational change in local governments. As proposed, the concept HR strategy

formation refers to the process by which an organization develops and deploys its

human resources to enhance organizational effectiveness. This is partly different to

the concept of strategy formulation (or policy making in the public sector) that is howan organization intends or plans to develop its resources to an organizational end

(Mintzberg 1978). Therefore, the data analysis takes a fine-grained look at the

antecedents of HR development in local government and investigates why some

local authorities are successful as agents of organizational change whereas others

fail to be become more strategic in their HR management.

The purpose of the study can best be described as theory elaboration in which the

research design is driven by pre-existing conceptual ideas on strategic HR


17/57

17

Research design and setting

This study used a multiple-case research design (Eisenhardt 1989, Yin 2003;

Lee/Mitchell/Sablynski 1999). Multiple cases support a replication logic to investigate

processes of organizational change and strategy formation in HR development in six

municipalities in Germany. The primary unit of analysis covered the patterns of HR

development in municipalities related to a new budget law that enforced local

authorities (counties, municipalities) to accounting change. The embedded unit dealt

with the particular managerial capacity to deal with HR related issues of this

organizational change, e.g. the distributed leadership roles as well as the managerial

and organizational routines to configure the implementation process at different

organizational levels (top/level, financial/HR department). The analysis was carried

out using a temporal bracketing strategy (Langley 1999, Denis/Lamothe/Langley

2001) decomposing the chronological data into three periods of time that become

comparative units of analysis within the cases.

Table 1 describes the six municipalities and the implementation projects that were

studied. The six research sites were part of an interorganizational project for

developing a new budget law to introduce accrual accounting in the state of North

Rhine-Westphalia (Germany). Starting in 1999, the ministry of the interior decided to

launch a project in cooperation with six municipalities. The aim of this project was to

develop a concept of New Local Financial Management (NKF) according to the

needs of local government in North Rhine-Westphalia. The municipalities started to

implement NKF from 2001 to 2003 and improved the concept until 2005. All

municipalities intended to implement NKF in the entire organization. However, only

one case (case F, the smallest municipality) planned to implement NKF

i l l i ffi ( li d 2003) h ll h i i li i


18/57

18

accounting change (time period starting 2001 or later; depending on the case),

whereas the frontier between the developmental and implementation period was

assigned by implementing accounting procedures across all organizational units

(time period starting 2003 or later; depending on the case).

For the purpose of this study this sample satisfied important criteria for a multiple-

case design (Yin 2003, 46ff.). First, within the common context of a new budget law

the research sides are comparable with regard to their specific aims and resource

investments related to accounting change. All the sites are well-known with respect

to their modernization approach; and this generally matched the research questions.

Within the research setting, there are no municipalities which deny accounting

change, or solely react on the legal pressure. Second, with regard to the replication

logic, the research sides represented important differences in size, financial

resources, organizational structure; and reform history as the participation of

municipalities was driven by the intention to cover their various types in North Rhine-

Westphalia. The multiple-case design supports the inquiry focusing on how local

authorities develop their HR and organizational capabilities to adapt to accounting

change, and the desire to match subgroups of embedded change processes to

investigate why municipalities are more or less different in dealing with their

opportunities to leverage HR development to accounting change issues.

Case Inhabitants(in thous. in2003)*

Annual grossbudget (mill. in2003)*

Number ofoffices/pilotoffices

Experience inNPM***)

Conversion to NKF

A 590 1,439 27 - 7 Extensive 01.01.2006

B 573 2,973 35 - 7 Extensive 01.01.2009

C 270 631 37 - 5 Less extensive 01.01.2008


19/57

19

Data sources

The case studies involve data sources collected at two different points, including

semi-structured interviews and documents. The data-sourcing was organized in three

sections. First, in order to identify the reform history and idiosyncrasies of

modernizing local governments within the municipalities, initial interviews were

conducted at the end of the initiation period (2001) with project managers (n=6)

responsible for the implementation process about how they perceive and organize

the implementation of accrual accounting. Addressing change management in

modernizing public financial management, a semi-structured questionnaire was

developed to gain more insights about the main concepts which derive from the

literature. Second, 4 to 9 semi-structured interviews were conducted in each case

which typically lasted from 60 to 120 minutes. The interviews included respondents

from top management, financial management, human resource management, and in

particular those managers responsible for the implementation process. Third, at the

frontier of developmental and implementation period the same set of interviews were

conducted to capture the emergence of HR strategy formation. In all cases multiple

informants, internal documents, and public documents were used to obtain different

perspectives and to ensure for the validity of the data. All of the interviews were

taped, transcribed and coded with a software program for qualitative data analysis.

Data Analysis

Prior research has suggested that the model of personnel administration limits the

opportunities to introduce New Public Management and therefore, a shift to public

HR management should enhance the implementation of accrual accounting. The

investigation of this relationship was informed by concepts summarized in table 2.


20/57

20

and to examine how strategizing, managing change, and strategic HR issues evolved

in each period. I used the embedded design to corroborate findings at different levels

of management (top/middle) and divergent organizational areas (financial

department, HR department and operational units). Furthermore, temporal bracketing

and the embedded design opened the opportunity to investigate the antecedents to

HR development, especially focusing on distributed leadership roles and routines

contributing to strategic alignment across the periods. Drawing initially from the

viewpoints espoused by my informants, I developed a set of factors and their

relationships and investigated whether these findings emerged at subsequent sites

and over time, using sets in which matched-pair cases were applicable (Eisenhardt

1989, Yin 2003). The analysis was assisted by categorizing municipalities according

to the concepts, by identifying similarities as well as differences between the pairs,

and by using flow charts to describe events and sequences related to the formation

of HR strategies (Eisenhardt 1989, 544, Miles/Huberman 1994).

ANALYSIS OF DATA

Organizational change and development: Modernization agenda andpatterns of resource investments as contextual features

Since 1999, public policy programs to change the cash-based accounting system in

German local governments have shifted significantly. The enactment of new budget

laws enforced local authorities (counties, municipalities) to shift their cash-based

systems to the financial world of double-entry bookkeeping and accrual accounting,

frequently related to cost calculation, budget balancing, and performance

measurement (e.g. Budus/Behm/Adam 2003, Reichard/Bals 2002, Pollit/Bouckaert

2004) Thus it is important to note that at institutional level - the introduction of new


21/57

21

First, local governments face the legal pressure to restructure their formal rules and

procedures of financial decision-making, and have to invest in the applicability of

their prevailing resources. Therefore, investing in HR development by recruiting or

training programs remains one part in a portfolio of resource investments, e.g.

technological resources, or restructuring organizational systems.

Second, the legal reframing adjusts the pressure to modernize local public financial

management because it enhances the comprehensiveness and complexity of

implementation. In spite of European reform trends so far (e.g. Lder/Jones 2003),

the new legal framework comprises core elements of a new budgeting and

accounting system, but varies in how extensively the modernization of the local

public financial management should take place. With reference to principles of

double-entry book-keeping the opportunities range from accrual accounting with

extended cost calculation to a modernization approach which serves accrual output-

based budgeting and performance auditing in public services (e.g.

Budus/Behm/Adam 2003, 344-66; Rubin/Kelly 2005; Carlin/Guthrie 2003).

Clearly, the analysis showed that local governments account for the legal pressure

as well as for their opportunities, therefore, resource investments do not exclusively

draw on legal threats imposed by the new budget law. But similarly, the value and

strategic direction of accounting change depends on their path of modernization and

organizational renewal. Thus, the following section outlines contextual features to

explore and differentiate how HR management relates to the scale, pace and

sequencing of accounting change at the local level. The main findings are

summarized in table 3 and discussed below.

Fi t f ll th fi di t d th t t t i ( i ti l i


22/57

22

municipality, targeted a more radical and total approach to modernize public

management, governance and service delivery. For instance, in case F the transition

from cash-based to accrual accounting (2003) is followed by activities to reorganize

and reduce public service departments as well as political committees (2003), and to

restructure the financial accounting department (2005). The Chief Financial Officer

stated it as: The NKF is a valuable source of development helping us to step

forward in our management capacity . In case A the comprehensive modernization

process started in 1993, including the internal decentralization of public service

responsibilities (1997) and the implementation of cost accounting (1998) followed by

input-oriented budgeting and contracting (1999-2000). Thus, the transition to accrual

accounting was seen as an essential part of the strategic logic underpinning the

process of modernizing public services, as the project manager (case A) revealed:

We have the objective to become a service and efficiency oriented public

administration, and NKF offers the chance to fulfil these aims .

Second, the availability of financial means is commonly valued as a critical source of

modernizing local government. Within the research setting, the group of

municipalities which is confronted with ongoing financial pressure consisted of a

smaller, a middle-size, and a larger municipality (case A, D; F) whereas in one case

financial pressure increased in the developmental period (case C). However, the

cases suggested that financial pressures are important (case C, D). But again, tight

budgets did not necessarily narrow strategic choices to an incremental or more

fragmented approach to implement accrual accounting (case A, F). The first state is

observed in case C. Within the developmental period, the scheduled implementation

failed due to its financial requirements and an unbalanced budget situation.

Revealing the scope of resource investments needed to implement accrual


23/57

23

A third observation related to reform history and resource dependencies. Large as

well as small- and medium-sized municipalities disposed of different experiences with

the application of managerial accounting, especially in fields like cost calculation, or

budgeting. The cases demonstrated that idiosyncratic capabilities in public financial

management affected the implementation of accrual accounting. This state is

differently observed in two pair of cases: the small- and middle-size cases (a) and the

large municipalities (b).

(a) The small- and middle-size cases illustrated the obsolescence of former resource

investments and the risk of resource dependencies. Partly not disposing financial

capabilities, these municipalities estimated (in the initiation phase) or experienced (in

the developmental phase) the necessity of making extensive resource investments.

Referring to technological change and the outdated cameralistic applications, to draw

on well-established cooperations with data-processing providers was a common

solution to improve technological resources (case D, E, F). But, cooperation projects

decreased gradually because of their limited capacity to develop competitive

technological solutions. Subsequently, technology gaps occurred within the

developmental period by increasing costs, variety in time frames, and heterogeneity

in education and training. Note that increasing threats of resource dependencies

forced strategic decisions towards capability substitution, as case E illustrated. The

emerging risk of failure induced a radical switch from the improvement of cameralistic

applications to a new commercially oriented technological solution.

(b) The large municipalities exhibited resource dependencies related to the portfolio

of technological, organizational, and human resources. Disposing of financial

capabilities these municipalities valued the implementation effort against the


24/57

24

commercial knowledge had to be developed by training programs, internal knowledge

transfers, or job rotations. Secondary, the allocation of commercial knowledge changed

within the workforce. Due to these effects, HR related activities started to ensure that

designated HR investments were in line with the direction of accounting change.

The final observations related to the HR department and its strategic role at the

outset of accounting change. Considering the traditional role of personnel

administration, it was interesting to note that four research sites had already

strengthened their HR departments (case A, B, C, and D) whereas one research site

started to formulate a standard HR development program (case E). Professionalism

was indicated as the municipalities configured centralized sub-units responsible for

core HR functions, e.g. staffing, education, and personnel development. Partly, the

responsibility for HR management, organizational development and information

technology were joined as specific units in a common division (case C, D). Regularly,

the head of the HR departments were qualified by further education and self-

improvement.

As one consequence, the HR departments more or less successfully implemented

modular concepts for education and training programs, specific modules for

performance appraisals, and to some extent goal setting procedures. For instance, in

the majority of cases HRM projects to launch a standard education and training

program were appreciated by politicians. But the formulation procedures in

themselves were time-consuming (as in case E, evolving from 2001 up to 2005) and

partly rejected in their final stages (as in Case D, because of political assessment).

As another consequence, strategic HR role definition remained vague and

ambiguous Commonly the HR departments claimed for their administrative and


25/57

25

responsibility and the lack of structural integration to launch a timely balanced HR

training program. The second state is observed in case E. Referring to workforce

planning and designing HR staffing programs, the HR officer stated the mayor`s

authority to react on personnel decisions. This background job decreased the

effectiveness as well as credibility of HR decision making.

Thus, the key distinction was that the process of HR strategy formation referred to

the more general level of managing accounting change and implementation than to

the strategic role of the HR department itself. Notwithstanding the particular case, the

small sized local authority (case F) highlighted the relevance of its change

management capacity enabling the degree of strategic involvement of key

stakeholders by pre-configuring roles, responsibilities, and the sequential order of

change. In case F, the part-time HR position concerned an administrative HR role but

the HR officer was strongly involved into the project management group. The small

size of the local authority led to a project configuration focused on involving (and

restricting) the interests and influence of key stakeholders, e.g. politicians,

department heads. Managerial responsibility was given to the Chief Financial Officer;

whereas, the project administration was assigned to the financial department itself.

In general, the New Public Financial Management was a strategic domain of the

finance department; therefore, local governments put their Chief Financial Officer

(CFO) in charge of the accounting change induced by the budget law. This was

illustrated by all cases as they established the project management group within the

finance department. Furthermore, the municipalities recruited accountants to

constitute a project management group consisting of employees highly qualified in

commercial knowledge or well experienced in cameralistic accounting Note that


26/57

26

Figure 1: Patterns of accounting change

Intraorganizational level

local project groups in thedepartment of finance

New Public FinancialManagement

Inter-organizational level

A FEDCB

Organizational level(e.g. reform history, resourceinvestments, modernization

agenda)

different project structure(roles, responsibilities)

For instance, in one case a new staff unit was set up with an externally recruited

project leader. Managerial responsibility was strongly related to the Chief Financial

Officers but loosely involved into the conventional routines of the financial

departmental (case C). Consequently, the project leader was put in charge of

concept development, but did not have any managerial authority towards internal

constituencies, e.g. department heads, politicians, or the financial department

authorities. Regularly, the project management was located within the department of

finance (case A, B, D, E, F), but the division of managerial responsibility was a

diff Th iddl i d i i li i ( D E) dd d h i l i


27/57

27

department itself. Finally, it is worthy to note that in general politicians were assigned

as generously indifferent to accounting change referring to positive attitudes, formal

political support and limited interests to strategic aims and opportunities within the

initiation period.

Simultaneously, formal structures and procedures were arranged in the way in which

organizational units (e.g. HR, information technology) as well as workers

representatives should participate and cooperate. Therefore, formal institutions and

the strength of reform experience regulated managerial responsibilities and the

appointment of strategic HR roles within the project management group. For

instance, in case B managerial responsibility was assigned to the financial officer

who was in charge of financial accounting and budget planning. Project

administration was executed by a staff unit which strongly supported the

development and implementation by a detailed scheduling of tasks. The HR

department defined itself as a service provider for accounting change, and the chief

HR officer demanded their involvement. Therefore, the HR department developed

and administered the internal training program for accrual accounting. Case A is

partly different and stated the relevance of modernization experience. As mentioned

above, accounting change was assigned to be the core driver to become a service-

oriented local authority. Again, accounting change was the strategic domain of the

financial department, but managerial leadership was embedded into an

institutionalized setting of organizational routines to coordinate and exploit the

modernization agenda (e.g. mission statement, budget plans/controlling, and

benchmarking). Therefore, one project manager commented: The team falls back on

well-established structures . In this case, procedures of change management were

thoroughly formalized partly decentralized and supported by a staff council


28/57

28

cannot perform at a particular level, they will not achieve the level of effectiveness

the organization requires to achieve its goals. Additionally, public organization invest

in HR development to increase an employee`s psychological commitment to the

organization (e.g. Selden 2009, 85ff.). Referring to the application of a new budget

law at the organizational level, considerable emphasis is given to job training and

skills development and, as such, it is not surprising that HR development is regarded

as a crucial activity for accounting change. For instance, the German Kommunale

Gemeinschaftsstelle (KGSt) an association of municipalities for managerial reforms

(e.g. Reichard 2003) prescribed a concept and instruments for a common HR

training and development plan (in 2003, 2004). The intergovernmental project group

itself revealed and published (in 2002; 2003) HRD practices of some municipalities

(case A, B, F) as best practice-approaches. More specifically, HR development for

accounting change represented a significant resource investment for accounting

change. For example, in one case the estimated spending for a training program

covered around 530 thousand for the developmental period from 2004 to 2007.

Therefore, the necessity to invest in HR development was a commonplace in the

ongoing debate on how to put accounting change into practice.

Perhaps the most striking feature of this longitudinal study is to identify how these

HRD systems evolve. Thus, the study investigated the degree to which HR systems

enabled the acquisition or development of HR and leveraged them to organisational

outcomes. The analysis was oriented by a criteria-based methodology using a set of

standard criteria which derived from previous research on strategic and public HR

management (e.g. Gratton et al. 1999; Gratton 1999; Donahue/Selden/Ingraham

2000). This type of analysis is valued because it provides a useful method to

evaluate public management and strategic HR management systems in a way that

29


29/57

29

dimensional concept to investigate the formation and strength of HR management

systems across each of the six cases (e.g. Gratton et al. 1999, Bowen/Ostroff 2004).

Although the procedural logic of HR-related processes was apparent in the initiation

period and across the cases, the results illustrated varying strength in HR strategy

formulation. The core pattern of HR development was competence-related and

focused the transformation of the commercial knowledge base by HR training

programs (short-term cycle) and planning leadership and workforce development

(long-term cycle). More specifically, the developmental period illustrated that

pressure to invest in HR development increased when the implementation of accrual

accounting proceeded.

Table 4 summarizes the evidence. The findings indicated that processes to identify

the HR gap were shaped by the short-term link between HR training programs and

accounting change issues (e.g. prelimary fixing of accounting procedures, introducing

software applications), which, partly, increased transformational-related processes

(e.g. planning workforce and leadership development). Comparing the research sites

revealed that shifting the procedural logic of HR development was regulated by

strategic direction and threats to enhance HR investments. Additionally, opportunities

to re-direct the cluster of competence-related processes from short-term training to

transformational-related processes drew the attention away from additional HR-

related processes. Nevertheless, failures to implement HR training programs

successfully were evident as well (case C, D, E).

Short-term trainings and gaps to HR development: In all of the research sites the

project management groups claimed a considerable need to identify required skill

30


30/57

30

bookkeeping, accounting, budgeting) and determination of effective delivering

formats, including decisions about the provider (internal/external). Note that standard

procedures to design short-term trainings were partly insufficient because of different

requirements within the target groups and their changing role within the

developmental and implementation period. With one exception (case F), this flaw

was illustrated at each research sites. In the developmental period, large and middle-

sized municipalities started the implementation with selected pilot offices in order to

gain experiences with the application of accrual accounting. Thus, activities were

dominated by a more technical and operational mode of implementation. In the

ongoing course of action, the complexity of HR development increased according to

the variety of public service and department characteristics (e.g. size, configuration of

tasks, or degree of financial responsibilities) and forecasts of procedural failures (e.g.

time delays due to lacking software applications). Furthermore, the common standard

of short-term training induced further resource dependencies. In particular, small-

and middle-sized municipalities (case D, E) were bounded by established inter-

organizational partnerships to regional colleges of further education. As a

consequence, assessing workforce development by designing short-term training

programs remained as a rather uncertain issue.

Therefore, identifying the prospective development of the workforce and estimating

the value of leveraging commercial competencies was a shortcoming at the outset of

the developmental phase. This state was observed during the developmental period

when the necessity increased to develop and assign accounting knowledge to

organizational sub-units (e.g. case A, B, D). In order to understand gaps in HR

development and to stress the alignment of HR-related processes to organizational

development a set of managerial activities enfolded For instance in case B a `Junior

31


31/57

31

necessity to dispose consequences for the workforce (e.g. a more centralized

configuration, upgrading of positions, and redeployment of employees). This was

illustrated especially by case A. Therefore, HR planning was enforced to align current

requirements with long-term issues of HR development. In particular, in large

municipalities the complexity which appeared from heterogeneous public services

forced processes to align the prospective workforce capabilities with the current

allocation of commercial competencies throughout the organisation.

Cluster of transformational-related processes: Four of the research sites developed

long-term consequences out of their modernization agenda and the prospective

workforce capability. Again, the smallest municipality (case F) was the exceptional

case because of its directed outcomes and the specific architecture of strategy and

HR development. Here, the scenario to change local governance encouraged a

process of organizational development whereby the prospective workforce consisted

of the project group itself proposing capability reconfiguration. Thus, restructuring

financial management capabilities, workforce development, and individual promotion

were a simultaneous effect of the experience-based learning model of managing

change. As already mentioned, the ongoing accounting change increased the

complexity to assess the prospective workforce capabilities within the larger

municipalities (case A, B, C). In particular, within the core target group cameralistic

accountants were responsible for financial accounting or budgetary controlling in the

financial department as well as their managerial counterparts within the operational

services (e.g. social welfare, library, maintenance depot, or sports). Note that

implementation schedules and partly the anticipated centralization of financial

accounting enhanced work force planning and fixed the formulation of HR

development programs (e g General higher qualification of public management

32


32/57

32

Missing value organizing the horizontal alignment of HR-related processes: After

all, one observation related to the concept of horizontal fit and how competence-

related HR processes were aligned to HRM systems more directly associated with

behaviour control. Note that accrual accounting was intentionally linked with

performance-related HRM systems (e.g. performance metrics, objective setting,

contracting). For instance, the project leaders commented that contract management

and performance measurement had to be an essential part of accounting change.

Thus, one project leader (case B) suggested: The understanding for specific

performance metrics appears with the daily practice of bookkeeping. Then a

reporting system will develop. With that department heads will learn to deal . But the

evidence illustrated that the initiation of such performance-related processes failed.

In addition, the research revealed that the strength of competence-related processes

weakened the coupling of accrual accounting with HRM systems to enhance public

service performance. For example, the large municipalities (case A, B) debated the

benefits of generally accepted benchmarks and their applicability to well-established

internal performance metrics. But both research sites kept this process apart, and

even vaguer with regard to the outcomes of accounting change. Others (case D, E,

F) acknowledged the problem, but it was considered as a planned project drawing

on NKF (CFO, case F). Only one of all the cases initiated a process to develop a

management for results -system (case A). Thus, the findings illustrated the

subordinate role of performance metrics and contract management, and, therefore,

leaved open whether and how strategic leadership roles and behaviour would have

been rearranged by performance-oriented HR management systems.

The strategic direction of these transformational-related processes stemmed from the

agenda to modernize public financial management as outlined by the project

33


33/57

33

resource investments arose, partly caused by political decisions, or by a more short-

term orientated project management group. Third, the evidence indicated that the

linkage was strengthened when the modernization agenda was associated with

increasing organizational commitment to HR investments, caused by the budget law

and enhanced by the strategic direction of resource investment patterns. Therefore,

the shift to transformational-related processes was built gradually by an ongoing

assessment of the workforce capability.

Thus, the mediating effect of an HR strategy stemmed from processes to enable the

understanding of the resource gap by developing HR related interventions out of the

modernization agenda and the prospective development of the workforce. Comparing

the patterns of competence-related processes within the research sites showed why

the formation of an HR strategy caused divergent effects. Table 5 summarizes the

evidence. Pattern matching accounted for two important exceptions, as in one case

the implementation of accounting change failed due to political assessment (case C)

and in one other the modernization approach strongly differed with regard to each of

the other research sites (case F). Therefore, the analysis was based on two sets of

matched-pair cases: the middle (case D, E) and the large municipalities (case A, B).

Failure to implement accounting change - rigidities constraining competence-related

processes in middle-sized municipalities: The first observation is that the procedural

logic of HR-related interventions tended to be a rather modular and short-term

oriented HR development limited to expected demands of the initiation anddevelopmental period. Thus, project administration issues as well as low

professionalized HR department illustrated why this direction of HR interventions

evolves

34


34/57

accounting change were not directed before. Indeed, the relevance of HR

interventions (e.g. short-term training) was generally accepted, but the project

management group as well as HR managers valued the actual necessity as low.

Within the HR departments, experiences with former HR interventions justified

expectations that queried the adoption of a strategic HR role. This state is

illustrated in case D. Within the initiation period, the HR department arranged a

task force to professionalize the outmoded short-term training procedure. But as

already mentioned, in its final phase the proposed HR development concept

failed. The municipal council honoured the induced HRD strategy but denied the

required resources. Similarly, in case E the improvement of HR development was

a planned project starting in 2001 and induced in 2005. Again, neither the HR

department nor the HR strategy formulation were involved or aligned to

accounting change. Thus, as opposed to the formal integration into the project

administration, HR officers delegated managerial responsibility for HR-related

processes to the project management group.

Capabilities in HR and change management were still under construction .

Recruiting HR managers is based on administrative careers and further education

in HR management. Furthermore, HR managers lack professionalism as agents

of change due to short reform histories in which they were unable to develop the

required expertise.

In general, HR management initiated or continued professionalization of its

operational capabilities but their integration within the accounting change failed.

Managerial responsibility for HR-related processes was partly vague, or more or less

explicitly delegated to the project management group. The effect was twofold. First,

i iti ti f HR i t t d d d th HR ti f th j t

35


35/57

deal with HR investments. For instance, in case D the turnover of the CFO led to the

promotion of the project manager and the project co-manager. Therefore, not only

did managerial responsibility decrease, but the expertise in accounting and change

management as well. In case E the particular situation changed as the CFO enforced

redirecting accounting change to a more radical approach. Thus, cooperation with an

accounting consultancy substituted any strategic HR department role by delivering an

operational short-term HR training program.

Structural assets to implement accounting change - institutions emphasizing

transformational-related processes: As mentioned above, the large municipalities

differentiated their HR departments to professionalize their HR systems. A further

observation revealed that the municipalities induced structures and procedures to

arrange in a way in which organizational units as well as worker councils should

participate in modernization projects. This is illustrated by an employment agreement

in case A. Therefore, formal institutions and the strength of past experience regulated

the integration of HR capacity into accounting change, e.g. the constellation of HR

management responsibilities and the appointment of leadership roles within the

project management group.

In both research sites the general order of implementation constituted the managerial

responsibility for HR investments. In case B accounting change is defined as a core

task of the financial department. Managerial responsibility and project administration

was assigned to the financial department and executed by a staff unit which stronglysupports the implementation by a detailed scheduling of tasks. The HR department

defined itself as a service provider for accounting change, and the chief HR officer

demanded their involvement into the project management group Therefore a HRD

36


36/57

of the financial department with managerial responsibility assigned to the project

group. But, as a project member expressed: The team falls back on well-established

structures .

A second observation related to the induced HR strategy. HR strategy formulation

referred to the direction of accounting change, and therefore varied with regard to

competence-related HR processes. In case B, the HR strategy prolonged the

approach to professionalize public financial management to an internal, target-group

oriented, consecutive planning of HR development. The competence-related process

was directed to ensure availability of accounting knowledge with regard to planned

implementation phases. Flexibility within this order stemmed from its core elements:

first, designing modularity within the HR training program, second, realigning the HR

programs to changing needs by the HRD task force, and third, the specific career

program to provide professional advice and mentoring to organizational units and

public services. In case A, the HR strategy was assessed with regards to the

prospective workforce capability. Thus, resource flexibility was the distinct value. This

state is illustrated by two observations. First, cooperating with a regional college for

public management education, a HRD task force designed a course of studies with afinal degree as Certified Public Management Accountant . Second, certified

accountants were assigned to each unit or public service ensuring the operational

availability of accounting knowledge. Note that the HR strategy was critically audited

for two reasons: by the audit office because of its deficient input-output equation (HR

input: high quality, costly; output: less specified) and therefore vague organizationalbenefits, and by department heads because of the individual benefits of higher

education and, again, more vague departmental benefits. Thus, the distinctiveness of

the HRD system collided with non consensual agreements on its organizational

37


37/57

financial officer stated a radical change to a more strategically induced assignment of

the public management accountants: We dont support the idea of rotation anymore:

I would work three years with the social welfare office, then three years with the

youth welfare office, then three years with the financial department and then again

three years with the land registry office. This practice which we have followed up till

now [] will not be continued anymore. Related to the financial and accounting

system we have recognized that we need more continuity, and we need specialized

knowledge. And if somebody has first decided to work in this area, then he should

also do so for a couple of years.

However, the difference to be emphasized is how the prospective workforce

capability was made available for and integrated into accounting change. The

findings can be redefined in terms of institutions to change that direct the partial

leadership constellations and enhanced the strategic involvement of HR capacities

within the accounting change. Thus a final observation was important. Linking and

leveraging HR development to organizational capabilities were supported by

generative mechanisms to increase the mutual understanding of operational

procedures and strategic opportunities of accounting change. Obviously, this state isillustrated by the concept of internal consultancy in case B. The project management

group anticipated the necessity to transfer accounting knowledge to public services.

Thus, the concept of internal consultancy realized by junior accounting specialists

was introduced to exploit the mutual relationship between accounting procedures and

capability development. In case A the relevance of mutual relationships emergedthroughout the development phase. Powered by its first experiences with accounting

changes at the department level, the project management group arranged an

advisory and mentoring concept symbolizing its fortune by a four leave clover

38


38/57

DISCUSSION AND CONCLUSIONS

The introduction to this paper emphasized the necessity to explore how and why therelationship between HR management, organizational strategy and performance in

public organisation occurs. Whereas a number of scholars have suggested that

strategic HR management is a catalyst that enables organizational change and the

improvement of public service delivery (Truss 2009b, Harris 2005, Boyne 2003),

others have found that becoming a strategic partner or agent of organizational

change is a crucial issue of HRM-based reforms in public organisations (Teo/Rodwell

2007, Harris 2005, Pichault 2007). Some scholars put forward that strategic HRM

research needs to account for structural and social relationship to investigate how the

strategic alignment of HR management and change in public service delivery evolves

(Truss/Gill 2009, Snell/Shadur/Wright 2001). However, the relationship between HR

management and organizational change remains ambiguous and contradictory. Prior

research has suggested that a strategic approach directly addresses the area of HR

processes by which public organisations deploy their human resources when an

organizational strategy changes. In this paper the lens of a resource- and capability-

driven perspective was adopted to undertake an exploratory investigation into how

the process of HR strategy formation evolves. The study conducted qualitative

research in six case study organizations, focusing on accounting change in German

local government enforced by a new budget law.

The focus was on the process of HR strategy formation in organisational change,

rather than the more generally impact that modernized HRM systems may have on

individual or organisational level outcomes. As the critical review pointed out, the

study builds on prior research into the contextual relevance of organizational

39


39/57

Denis/Lamothe/Langley 2001, Truss 2009a). Thus, a resource- and capabilities-

based perspective adds the concept of dynamic capabilities that judged for

managerial and organisational routines as generative mechanisms of organizational

change and renewal.

When considering the strategic role of HR management at the outset of accounting

change, the study found broadly that the municipalities exhibited idiosyncratic modes

of organisational change. Whereas modernization proposals associated with the new

budget law and the six local authorities themselves stated the significance of a

transformational shift in public financial management by accounting change, the

study identified the distinctiveness of strategy formation and resource allocation at

the organizational level. The study showed that contextual characteristics (e.g.

reform history, organizational size, or tight budgets) affected the transition to accrual

accounting, but they appeared not as contingencies determining the modernization

agenda. Despite their crucial financial situation, two of the municipalities (case A, F)

developed a more radical agenda to change public management and service

delivery, whereas, another municipality (case C) had to adjust its agenda for

accounting change because of increasing financial pressures and decreasing politicalsupport. When considering the strategic agenda of accounting change, the study

found that the induced modernization agenda depended both on value commitment

and the degree of resource investments. This dependency was obvious in the two

middle-sized municipalities (case D, E), where the shift to the new accounting system

was valued and sponsored by the top level (e.g. the mayor, the CFO), but decreasedbecause of lacking resources (e.g. managerial responsibility and authority,

accounting skills). Specifically, case B illustrated the mutual relationship and why the

strategic agenda changed because of the reassignment of managerial capacity and

40


40/57

resources necessary to accounting change. Thus, the findings reveal the risks of

resource rigidity (Gilbert 2005) and the relevance of distributed strategic-decision

processes and emergent strategy making in local governments (Mintzberg 1978;

Burgelman 2002).

Concerning the status and distribution of strategic HR leadership role, the study

explored how the strategic role of the HR department was linked in with the

accounting change. Prior research has highlighted the significance of functional

professionalism, strategic involvement, and structural or social relationship to cope

with HR related requirements of organisational change (Truss 2009a: 2008;

Teo/Rodwell 2007). The study found evidence for strengthening professionalism by

centralizing of HR functions or implementation of standardized HR programs in all

municipalities. Nevertheless, strategizing on HR-related processes appeared asmore vague and ambiguous. Ways contradicting the strategic role of HR departments

were different, including devolution of HR managerial responsibility to the line in large

cities (case A), ad-hoc interventions of decision makers in middle-sized municipalities

(case D) and, most important, delegating the assignment of strategic roles to line or

project management (case C, D, E). As accounting change was a strategic domain ofthe financial department, strategic involvement of HR department was pre-configured

by change management and executed by HR-related task forces (A, B, F). In

particular, the findings illustrated the risk of routine rigidity when a decreasing change

management capacity jeopardized the HR role (case C, D, E). However, in the area

of accounting change and its assigned nature to be a strategic change in localgovernments, strategizing on HR-related processes referred more to the process

level of managing and configuring organisational change than to a strategic role of

the HR department itself This reflects findings of other studies that have emphasized

41


41/57

six local authorities advocated a HRM-policy emphasizing Person-Job fit and HR

training programs, the findings illustrated how the procedural logic of

transformational-related HR processes comes about. In particular, during the

initiation phase HR gap analysis was broadly dominated by a running the system -

mode of accounting change, including the identification of required skill

developments. However, forecasts of procedural failures in the middle-sized

municipalities (case D, E), the variety of public service characteristics and formalized

implementation schedules in the cities (case A, B, C), and more broadly the induced

reconfiguration of financial workflows (case A, B, F) increased the complexity of HR

development in the ongoing course of action. Ways in which HR strategy making

evolved included appointing of HRD task forces, developing sophisticated HR

development programs, and thereby emphasizing the prospective workforce

development. The study showed that three of the cases (case A, B, F) improved theiropportunities to strengthen and align the HRM system (case A: an opportunity-driven

approach, B: a needs-driven approach), while others failed for different reasons,

including the risk of employee turnover and decreasing change management

capacity (case C, D). Note that the distinctiveness of competence-related HR

processes partly collided with non-consensual agreements on their organisationalbenefits and the expended financial efforts (case A, C). Considering the strategy

making aspects of HR-related processes in both periods, the study illustrated that the

mediating effect of HR strategies stemmed from processes to enable the

understanding of a resource gap, and that organizational failures induced the switch

between different levels of strategic integration of HR development. This reflects priorresearch pointing out the necessity of vertical integration (e.g. Gratton 1999;

Way/Johnson 2005; Shell/Shadur/Wright 2001), and reveals that forces of strategic

alignment change over time Thus the temporal bracketing strategy of the study

42


42/57

temporal bracketing strategy of this study emphasized forces that enabled (or

constrained) HR strategy formation leading to a unique outcome over time. The study

showed that the realized HRD performance can be traced back to managerial and

organizational routines contributing to strategic alignment. The large cities (case A,

B, C) illustrated strategic opportunities of accounting change and HR development,

and the very small municipality (case F) as well. Nevertheless, the middle-sized

municipality (case D, E) seemed to be caught in the middle.

Comparing the patterns of accounting change of the middle municipalities, the

study found evidence that getting a little more than sponsorship by upper echelons

(case D: the mayor, case: the CFO) increased the risks for accounting change, HR

strategy formulation, and strategic alignment. As already mentioned, in both cases

change management capacity was partly weak. According to this, a delegation-effect became more important. The middle municipalities illustrated the tension

between professionalizing operational HR capabilities and the devolution of

managerial HR responsibilities to the line, followed by a low degree of formal or

informal integration of HR activities. Strategic alignment failed because initiating HR-

related processes was delegated to a project management weakened by a faultyresource allocation. Thus, accounting change and HR strategy formation depended

on the success and continuity of managerial leadership within the periods of

accounting change, including specific risks of failure at the individual level (e.g. low

managerial HR management skills). More specifically, there were no managerial or

organisational routines regulating the managerial responsibility for HR investmentsas in the large municipalities. Both cases illustrated that strategic involvement was

negotiated by the HR department (case B) or already institutionalized by a set of

formal and informal routines (case C) and that HR management was executed by

43


43/57

In terms of HR development and public service improvement, the study found that

leveraging HR development to organizational capabilities depended on further

mechanism supporting the transfer and integration of accounting knowledge. This

was observable comparing the patterns of accounting change of the large cities

(case A, B). In both cases, distinct transformational-related HR processes adjusted to

their modernization agenda and accounting change were realized. In case B a more

needs-driven HRD strategy was valued, whereas in case A resource-flexibility is

valued by a more opportunity-driven strategy launching Certified Public Management

Accountants . Due to the outcomes of HR development both cases exhibited HRD

systems encouraging the transfer of accounting knowledge to the variety of

organizational units. Thus, the distinct process of leveraging HR outcomes of a

needs- or opportunity-driven HRD-approach to capabilities of public services was

illustrated by more formalized procedures of internal consultancy (case B) andmentoring (case A) intended to bundle different fields of accounting expertise. Thus,

the departmental transition from cash-based to accrual accounting the operational

mode of accounting change and the opportunity to develop organizational

capabilities the strategic mode of accounting change depended on strategic HR

development and the order to link accounting knowledge with public serviceimprovements. Thus, it remains to be investigated how such patterns of relationship

are likely to facilitate value creation in public services. This can built on prior research

on accounting change (Bogt, H.J. ter 2008); control of professionalism in public

services (Broadbent/Laughlin 2001; Ferlie/Geraghty 2005); and the concept of

relational archetypes (Kang/Morris/Snell 2007) offering further insights into patternsof learning and continuous improvement that facilitate public service performance.

Overall this study has valued a resource and capability driven perspective to

44


44/57

research that reveals several issues for further research. For example, Denis,

Lamothe, and Langley (2001) reported a see-saw theory of managerial leadership

and strategic change implying the need to identify generative mechanisms or forces

of coupling or alignment. This study deals with forces of alignment in strategic HR

management that refer to different layers of strategic change as indicated by the

distinction of strategic HR development (Garavan 2007) and aligning HRD to

capability reconfiguration (Clardy 2008; Kang/Morris/Snell 2007). One limitation of

this study is that it is based on a specific research setting representing German localgovernments, and that the analysis focuses the link between strategic HR

development and managing accounting change. Of course, it would be useful to

explore this issue with a more mixed sample of public organisations and with a

different setting of strategic change. But as the results indicated, it would be

beneficial to explore the interrelationship between HR development and capabilityreconfiguration considering the variety of public services in local government. Putting

emphasis on this relationship remains as the final step in a cascading process of

modernizing local governments by accounting change concerning its radical impetus.

45


45/57

References

Adler, P.S. and Kwon, S.W. (2002) Social capital: Prospects for a new concept.Academy of Management Review , 27:1 pp17-40

Auluck, R. K. (2006) The Human Resource Development function: the ambiguity ofits status within the UK public service. International Review of Administrative Sciences, 72:1, pp27-41

Bach, St. and Kessler, I. (2007) HRM and the New Public Management in: Boxall,P., Purcell, J., Wright, P. (eds) The Oxford Handbook of Human Resource Management. Oxfo

20_hrdevelopment

Documents