1. 11TH EDITIONARMSTRONGSHANDBOOK OF HUMAN RESOURCEMANAGEMENT PRACTICE Michael Armstrong

2. iARMSTRONGS HANDBOOK OF HUMAN RESOURCEMANAGEMENT PRACTICE 3. ii 4. iiiARMSTRONGS HANDBOOK OF HUMAN RESOURCEMANAGEMENT PRACTICE11TH EDITIONMichael ArmstrongLondon and Philadelphia 5. ivPublishers noteEvery possible effort has been made to ensure that the information contained in this book is accurate at thetime of going to press, and the publisher and authors cannot accept responsibility for any errors or omissions,however caused. No responsibility for loss or damage occasioned to any person acting, or refraining fromaction, as a result of the material in this publication can be accepted by the editor, the publisher or any of theauthors.First edition published in 1977 as A Handbook of Personnel Management Practice by Kogan Page LimitedSeventh edition published in 1999 as A Handbook of Human Resource Management PracticeEleventh edition published in 2009 as Armstrongs Handbook of Human Resource Management PracticeApart from any fair dealing for the purposes of research or private study, or criticism or review, as permittedunder the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or trans-mitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case ofreprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerningreproduction outside these terms should be sent to the publishers at the undermentioned addresses:120 Pentonville Road 525 South 4th Street, #241London N1 9JNPhiladelphia PA 19147United Kingdom USAwww.koganpage.com Michael Armstrong, 1977, 1984, 1988, 1991, 1995, 1996, 1999, 2001, 2003, 2006, 2009The right of Michael Armstrong to be identied as the author of this work has been asserted by him in accord-ance with the Copyright, Designs and Patents Act 1988.ISBN 978 0 7494 5242 1British Library Cataloguing-in-Publication DataA CIP record for this book is available from the British Library.Library of Congress Cataloging-in-Publication DataArmstrong, Michael, 1928Armstrongs handbook of human resource management practice / Michael Armstrong. -- Eleventh ed.p. cm. Rev. ed. of: A handbook of human resource management practice. 10th ed. 2006. Includes bibliographical references and index. ISBN 978-0-7494-5242-1 1. Personnel management --Handbooks, manuals, etc. I. Armstrong, Michael, 1928 Handbook of humanresource management practice. II. Title. III. Title: Handbook of human resource management practice. HF5549.17.A76 2009 658.3--dc22 2008053904Typeset by Saxon Graphics Ltd, DerbyPrinted and bound in India by Replika Press Pvt Ltd 6. v Contents in BriefPreface xxvPart I Human Resource Management11. The Practice of Human Resource Management32. Strategic Human Resource Management 253. HR Strategies 474. Human Capital Management655. The Role and Organization of the HR Function816. The Role of the HR Practitioner1047. The Impact of HRM on Performance 1358. International HRM1509. Corporate Social Responsibility165 10. Human Resource Management Research Methods 174Part IIHuman Resource Management Processes199 11. Competency-based HRM 201 12. Knowledge Management 218 13. High-performance Work Systems230Part III Work and Employment249 14. Work 251 15. The Employment Relationship260 16. The Psychological Contract 276Part IVOrganizational Behaviour 289 17. The Essence of Organizational Behaviour291 18. Characteristics of People299 7. vi Brief Contents 19. Motivation 316 20. Engagement and Commitment335 21. How Organizations Function 357 22. Organizational Culture 383Part V Organization Design and Development401 23. Organization Design403 24. Organization Development 415 25. Change Management423 26. Job, Role, Competency and Skills Analysis443 27. Job and Role Design and Development466Part VIPeople Resourcing477 28. People Resourcing Strategy 479 29. Human Resource Planning485 30. People Resourcing Practice 495 31. Recruitment and Selection514 32. Selection Interviewing 540 33. Selection Tests567 34. Talent Management579 35. Career Management590 36. Introduction to the Organization 602 37. Release from the Organization609Part VII Performance Management 615 38. The Process of Performance Management617 39. 360-degree Feedback643Part VIIILearning and Development 651 40. Learning and Development Strategy653 41. The Process of Learning and Development663 42. Learning and Development Programmes and Events 683 43. How People Learn 700 44. Organizational Learning713 45. Management Development 720 8. Brief Contents viiPart IXRewarding People 733 46. Reward Management735 47. Job Evaluation 755 48. Market Rate Analysis 783 49. Grade and Pay Structures 795 50. Contingent Pay 815 51. Rewarding Special Groups 839 52. Employee Benets, Pensions and Allowances849 53. Managing Reward Systems859Part X Employee Relations 875 54. The Employee Relations Framework 877 55. Employee Relations Processes 905 56. Employee Voice 935 57. Employee Communications949Part XIHealth, Safety and Employee Well-being 957 58. Health and Safety959 59. Employee Well-being975Part XII HR Policies, Procedures and Systems985 60. HR Policies987 61. HR Procedures 1000 62. HR Information Systems1010Appendices 1017 A.Example of Employee Engagement and Commitment Survey1019 B.Example of Performance Management Survey1020 C.Example of Reward Survey1021 D.Learning and Development Activities and Methods 1022Useful Website Addresses 1031Subject Index1034Author Index 1057 9. viii This page has been left intentionally blank 10. ixContentsSupporting resources for instructors and students xixList of guresxxiList of tables xxiiiPreface xxvPart I Human Resource Management11. The Practice of Human Resource Management3 Introduction 4; Human resource management dened 4; The objectives of HRM 5; Theories of HRM 6; Characteristics of HRM 7; The development of the concept of HRM 13; Reservations about HRM 14; The context of HRM 17; The ethical dimension 192. Strategic Human Resource Management 25 Introduction 26; The conceptual basis of strategic HRM 26; Strategic HRM dened 29; The resource-based view of strategic HRM 30; Strategic t 32; Perspectives on strategic HRM 32; The best practice approach 33; The best t approach 35; Bundling 37; The reality of strategic HRM 39; Practical implications of strategic HRM theory 403. HR Strategies 48 Introduction 48; What are HR strategies? 48; General HR strategies 49; Specic HR strategies 52; Criteria for an effective HR strategy 53; How should HR strategies be formulated? 54; Issues in developing HR strategies 55; Implementing HR strategies 594. Human Capital Management65 Introduction 66; Human capital management dened 66; The concept of human capital 66; The constituents of human capital 68; Human capital measurement 69; Human capital internal reporting 75; Human capital external reporting 76; Introducing HCM 77 11. xFull Contents5. The Role and Organization of the HR Function 81 Introduction 82; The role of the HR function 82; The organization of the HR function 84; Evaluating the HR function 87; HR shared service centres 92; Outsourcing HR work 93; Offshoring 94; Using management consultants 94; Marketing the HR function 95; HR budgeting 96; The HR role of front line managers 976. The Role of the HR Practitioner 104 Introduction 105; The basic role 105; The business partner role 106; The strategic role of HR specialists 108; The change agent role 111; The internal consultancy role 112; The service delivery role 112; The guardian of values role 113; Models of HR roles 113; Gaining support and commitment 117; Ethical considerations 120; Professionalism in human resource management 121; Ambiguities in the role of HR practitioners 122; Conict in the HR contribution 124; The qualities required by HR professionals 125; Continuous professional development 1297. The Impact of HRM on Performance135 Introduction 136; The impact made by HRM 136; How HRM strategies make an impact 141; How HRM practices make an impact 1448. International HRM 150 Introduction 151; International HRM dened 151; Issues in international HRM 151; Global HR policies and practices 156; Managing expatriates 1569. Corporate Social Responsibility 165 Introduction 166; Strategic CSR dened 166; CSR activities 167; The rationale for CSR 168; Developing a CSR strategy 170 10. Human Resource Management Research Methods174 Introduction 175; The nature of research 175; Research philosophy 176; Planning and conducting research programmes 178; Literature reviews 180; Quantitative and qualitative methods of research 181; Methods of collecting data 182; Processes involved in research 187; Statistical analysis 191Part II Human Resource Management Processes199 11.Competency-based HRM 201Introduction 202; Types of competencies 202; Competencyframeworks 204; Coverage of competencies 209; Applications ofcompetency-based HRM 210; Developing a competencyframework 212; Competencies and emotional intelligence 214 12. Full Contents xi 12. Knowledge Management 218 Introduction 219; Knowledge management dened 219; The concept of knowledge 220; The purpose and signicance of knowledge management 221; Knowledge management strategies 222; Knowledge management systems 223; Knowledge management issues 223; The contribution of HR to knowledge management 225 13. High-performance Work Systems230 Introduction 231; High-performance culture 231; High-performance work system dened 232; Characteristics of a high-performance work system 234; Components of an HPWS 235; Impact of high- performance work systems 238; Reservations about the impact of an HPWS 240; Developing a high-performance work system 241Part III Work and Employment249 14. Work 251 Introduction 252; The nature of work 252; Organizational factors affecting work 255; Changes in the pattern of employment 256; The future of work 257 15. The Employment Relationship260 Introduction 261; The employment relationship dened 261; The basis of the employment relationship 262; Employment relationship contracts 263; What is happening to the employment relationship 265; Managing the employment relationship 266; Developing a high trust organization 267; Theories explaining the employment relationship 270 16. The Psychological Contract 276 Introduction 277; The psychological contract dened 277; The psychological contract and the employment relationship 279; The signicance of the psychological contract 280; Changes to the psychological contract 282; State of the psychological contract 2004 283; How psychological contracts develop 284; Developing and maintaining a positive psychological contract 285Part IVOrganizational Behaviour289 17. The Essence of Organizational Behaviour 291 Introduction 292; Organizational behaviour dened 292; Characteristics of organizational behaviour 292; Organizational behaviour and the social and behavioural sciences 293; Explaining organizational behaviour 294; Factors affecting organizational behaviour 294; The sources and applications of organization behaviour theory 295; The signicance of organizational behaviour theory 296 13. xiiFull Contents 18.Characteristics of People299Introduction 300; Individual differences 300; Personalcharacteristics 302; Types of behaviour 307; Implications for HRspecialists 311 19.Motivation 316Introduction 317; Motivation dened 317; Types of motivation 318;Motivation theories 319; Motivation and money 329; Motivationstrategies 330 20.Engagement and Commitment335Introduction 336; The concepts of engagement and commitmentcompared 336; Employee engagement 337; Organizationalcommitment 345; The contribution of HR to developingcommitment 351 21.How Organizations Function 357Introduction 358; Organization theory 359; Organizationstructure 365; Types of organization 366; Organizationalprocesses 369 22.Organizational Culture 383Introduction 384; Organizational culture dened 384; Organizationalclimate dened 385; How organizational culture develops 386; Thediversity of culture 387; The components of culture 387; Classifyingorganizational culture 390; Assessing organizational culture 391;Measuring organizational climate 392; Appropriate cultures 394;Supporting and changing cultures 394Part VOrganization Design and Development401 23.Organization Design403Introduction 404; The process of organizing 404; Aims oforganization design 405; Conducting organization reviews 406;Who does the work? 412 24.Organization Development 415Introduction 416; Organization development dened 416;Organization development programmes 417; Assumptions andvalues of organization development 417; Organization developmentactivities 418 25.Change Management423Introduction 424; Types of change 424; The change process 426;Change models 426; Resistance to change 430; Implementingchange 432; Guidelines for change management 433; Organizationaltransformation 434; The role of HR in managing change 437 14. Full Contents xiii 26.Job, Role, Competency and Skills Analysis 443Introduction 444; Denitions 444; Job analysis 446; Jobdescriptions 449; Role analysis and role proles 451; Generic roleproles 453; Behavioural competency modelling 454; Analysingtechnical competencies 461; Skills analysis 461 27.Job and Role Design and Development 466Introduction 467; Job design 467; Role development 473Part VI People Resourcing 477 28.People Resourcing Strategy479Introduction 480; The objective of people resourcing strategy 480; Thestrategic HRM approach to resourcing 480; Integrating business andresourcing strategies 481; The components of people resourcingstrategy 482; Bundling resourcing strategies and activities 482 29.Human Resource Planning 485Introduction 486; Human resource planning dened 486; Aims ofhuman resource planning 487; Use of human resource planning 488;Approaches to human resource planning 488 30.People Resourcing Practice495Introduction 496; Employee value proposition 496; Employerbrand 497; Employee turnover 497; Retention planning 503; Absencemanagement 506; Flexibility planning 509 31.Recruitment and Selection 514Introduction 515; The recruitment and selection process 515;Dening requirements 515; Recruitment planning 518; Attractingcandidates 519; Processing applications 527; Selection methods 529;Dealing with recruitment problems 533; References and offers 534 32.Selection Interviewing540Introduction 541; Purpose 541; The basis of an interview the personspecication 541; The nature of an interview obtaining theinformation 542; Advantages and disadvantages of interviews 544;Interviewing arrangements 545; Preparation 546; Planning aninterview 547; Types of interviews 548; Interview techniques startingand nishing 552; Interviewing techniques asking questions 552;Selection interviewing skills 560; Coming to a conclusion 562 33.Selection Tests 567Introduction 568; Psychological tests 568; Aptitude tests 571;Characteristics of a good test 572; Interpreting test results 573;Choosing tests 574; The use of tests in a selection procedure 574;Good practice in psychological testing 575 15. xivFull Contents 34.Talent Management579Introduction 580; The meaning of talent management 580; Theprocess of talent management 582; Developing a talent managementstrategy 584; Management succession planning 586 35.Career Management590Introduction 591; Career management dened 591; Aims 591; Careerstages 592; Career development strategy 593; Career managementactivities 593; The process of career management 594; Self-managedcareers 598 36.Introduction to the Organization 602Introduction 603; Induction: what it is and why it is important 603;Reception 604; Documentation 604; Company induction initialbrieng 605; Introduction to the workplace 605; Formal inductioncourses 606; On-the-job induction training 607 37.Release from the Organization609Introduction 610; Redundancy 610; Dismissal 611; Retirement 612Part VII Performance Management615 38. The Process of Performance Management 617 Introduction 618; Performance management dened 618; Objectives of performance management 619; Characteristics of performance management 619; Underpinning theories 620; The performance management cycle 621; Conducting a performance review meeting 627; Assessing performance 629; Dealing with under- performers 634; Introducing performance management 636; Line managers and performance management 638 39. 360-degree Feedback 643 Introduction 644; Use of 360-degree feedback 644; 360-degree feedback methodology 644; 360-degree feedback advantages and disadvantages 646; Development and implementation 647Part VIII Learning and Development 651 40.Learning and Development Strategy653Introduction 654; Features of a learning and developmentstrategy 654; Learning culture 656; The learning organization 657;The contribution of learning and development to organizationalperformance 658 41.The Process of Learning and Development663Introduction 664; Learning and development dened 664; Elementsof learning and development 665; Approaches to learning and 16. Full Contents xvdevelopment 666; Informal and formal learning 666; E-learning 670;Blended learning 673; Self-directed learning 673; Development 674;Training 675 42.Learning and Development Programmes and Events683Introduction 684; The business case for learning anddevelopment 684; Planning and delivering learning programmes andevents 685; Responsibility for the implementation of learning 689;Identifying learning needs 690; Evaluation of learning 693 43.How People Learn700Introduction 701; Learning dened 701; The learning process 701;Learning theory 702; Learning styles 704; Learning to learn 706; Thelearning curve 706; The motivation to learn 708; The implications oflearning theory and concepts 709 44.Organizational Learning 713Introduction 714; Organizational learning dened 714; The processof organizational learning 715; Outcomes of organizationallearning 717; Evaluative enquiry 717; Organizational learning andthe learning organization 718 45.Management Development720Introduction 721; Management development policy 721;Management development strategy 722; Approaches to managementdevelopment 723; The integrated approach to managementdevelopment 726; Responsibility for management development 727;Criteria for management development 730Part IX Rewarding People733 46.Reward Management 735Introduction 736; Reward management dened 736; The philosophyof reward management 737; The reward system 739; Total reward 741;Reward strategy 746; Reward management and line managementcapability 751 47.Job Evaluation755Introduction 756; Job evaluation dened 756; Approaches 757;Analytical job evaluation schemes 758; Non-analytical schemes 761;Market pricing 764; Computer-aided job evaluation 765; Choice ofapproach 766; Designing an analytical point-factor job evaluationscheme 769; Designing an analytical matching job evaluationscheme 776; Equal pay considerations 777; Conclusions 779 48.Market Rate Analysis783Introduction 784; The concept of a market rate 784; Job matching 785;Use of benchmark jobs 786; Sources of market data 787; Interpretingand presenting market rate data 792; Using survey data 792 17. xviFull Contents 49.Grade and Pay Structures 795Introduction 796; Denitions 796; Types of grade and paystructure 798; Designing grade and pay structures 807 50.Contingent Pay 815Introduction 816; Contingent pay as a motivator 816; Arguments forand against contingent pay 817; Alternatives to contingent pay 819;Criteria for success 820; Performance-related pay 821; Competency-related pay 822; Contribution-related pay 823; Skill-based pay 825;Readiness for individual contingent pay 827; Developing andimplementing individual contingent pay 827; Service-relatedpay 828; Summary of individual contingent pay schemes 829; Bonusschemes 829; Team-based pay 832; Organization-wide bonusschemes 833; Choice of approach to contingent pay 834 51.Rewarding Special Groups 839Reward management for directors and executives 840; Rewardmanagement for sales representatives 842; Paying manualworkers 844 52.Employee Benets, Pensions and Allowances849Employee benets 850; Pensions 852; Communicating pensionspolicies 855; Total reward statements 856; Allowances 856 53.Managing Reward Systems859Introduction 860; Controlling reward 860; Monitoring andevaluating reward policies and practices 861; Conducting payreviews 862; Reward procedures 867; Managing the development ofreward systems 868; Devolution to line managers of responsibilityfor reward 868; Communicating to employees 871Part XEmployee Relations875 54.The Employee Relations Framework877Introduction 878; The basis of employee relations 878; Industrialrelations as a system of rules 880; Regulations and rules in industrialrelations 881; Collective bargaining 882; The unitary and pluralistviews 884; The concept of social partnership 886; Individualism andcollectivism 886; Voluntarism and its decline 887; The HRMapproach to employee relations 887; The context of industrialrelations 889; Developments in industrial relations 890; The partiesto employee relations 893 55.Employee Relations Processes905Introduction 906; Employee relations policies 906; Employee relationsstrategies 909; Employee relations climate 910; Union recognition 912;Collective bargaining arrangements 913; Collective bargainingoutcomes 915; Informal employee relations processes 920; Other 18. Full Contents xviifeatures of the industrial relations scene 921; Negotiating andbargaining 923; Managing with unions 927; Managing without tradeunions 929; The state of employment relations 930; Handlingemployment issues 931 56.Employee Voice 935Introduction 936; The meaning of employee voice 936; The forms ofemployee voice 937; The framework for employee voice 938;Expression of employee voice 939; Joint consultation 941; Attitudesurveys 942; Suggestion schemes 944; Effectiveness of employeeinvolvement and participation 945; Planning for voice 945; EUDirectives affecting employee voice procedures 945 57.Employee Communications949Introduction 950; The importance of employee communications 950;What should be communicated? 950; Approach to communication 951;Communication methods 951; Employee communication strategy 953Part XI Health, Safety and Employee Well-being957 58.Health and Safety 959Introduction 960; Managing health and safety at work 960; Healthand safety policies 961; Conducting risk assessments 962; Health andsafety audits 965; Health and safety inspections 967; Accidentprevention 967; Occupational health programmes 968; Measuringhealth and safety performance 969; Communicating the need forbetter health and safety practices 970; Health and safety training 971;Organizing health and safety 971 59.Employee Well-being 975Introduction 976; Improving of the work environment 976; Servicesfor individuals 981; Group employee services 982Part XII HR Policies, Procedures and Systems985 60. HR Policies987 Introduction 988; Why have HR policies? 988; Overall HR policy 988; Specic HR policies 990; Formulating HR policies 997; Implementing HR policies 998 61. HR Procedures1000 What are HR procedures? 1001; Capability procedure 1001; Disciplinary procedure 1003; Grievance procedure 1005; Redundancy procedure 1006 62. HR Information Systems 1010 Introduction 1011; Reasons for introducing an HRIS 1011; The functions of an HRIS 1011; Features of an HRIS 1013; Introducing an HRIS 1014 19. xviii Full ContentsAppendices1017 A.Example of Employee Engagement and Commitment Survey 1019 B.Example of Performance Management Survey 1020 C.Example of Reward Survey 1021 D.Learning and Development Activities and Methods1022Useful Web Addresses1031Subject Index 1034Author Index1057 20. xix Supporting Resources for Instructors and StudentsAs a reader of Armstrongs Handbook of Human Resource Management Practice, you haveautomatic access to a range of additional resources designed to enhance your experi-ence and use of the book. Full details are provided below.For lecturers and instructorsResources include: Session outlines for each of the 62 chapters. Glossaries of key concepts and terms for 60 chapters. Questions for each chapter. A selection of multiple choice questions. Bibliographies for 59 chapters. Fifty case studies. Two hundred and thirty-seven PowerPoint slides.The lecturer resources are contained within the Free Resources section of the KoganPage website www.koganpage.com/resources. Using the left-hand menu, go to theAcademic Resources section, click on Lecturer Resources and follow the instructionsonline.For studentsResources include: Student learning notes with key learning points for each chapter. A glossary of key concepts and terms. 21. xx Supporting Resources Multiple choice questions. Case studies. A guide to taking CIPD exams, including an analysis of question papers from May 2005 to May 2008.The student resources are contained within the Free Resources section of the KoganPage website www.koganpage.com/resources. Using the left-hand menu, go to theAcademic Resources section, click on Student Resources and follow the instructionsonline. 22. xxi List of FiguresFigure 0.1Armstrongs Handbook of Human Resource Management Practiceroute map xxviFigure 1.1The HRM system12Figure 2.1Strategic HRM model 40Figure 6.1The John Storey model of personnel management 115Figure 6.2The Peter Reilly model of HR115Figure 7.1Impact of HRM on organizational performance 143Figure 10.1 Examples of charts 192Figure 10.2 A scattergram with regression (trend) line 194Figure 15.1 Dimensions of the employment relationship262Figure 16.1 A model of the psychological contract 280Figure 17.1 The sources and applications of organization behaviour theory 295Figure 19.1 The process of motivation 323Figure 19.2 Motivation model (Porter and Lawler) 326Figure 20.1 Combinations of the impact of engagement andorganizational commitment 337Figure 21.1 Channels of communication within groups 371Figure 26.1 Example of job description451Figure 26.2 Example of a role prole453Figure 26.3 Example of a generic role prole454Figure 29.1 Human resource planning ow chart 490Figure 30.1 A survival curve499Figure 31.1 Competency-based person specication for a recruitmentspecialist518Figure 31.2 Example of application form (compressed)530Figure 32.1 Example of an interview rating form 563Figure 33.1 A normal curve569Figure 34.1 The elements of talent management 582Figure 34.2 Management succession schedule587Figure 35.1 Career progression curves 593Figure 35.2 The process of career management595Figure 35.3 Competency band career progression system 597 23. xxii List of FiguresFigure 35.4Career paths in a career family structure 598Figure 38.1The performance management cycle621Figure 38.2Performance matrix633Figure 39.1360-degree feedback prole645Figure 41.1Elements of learning and development666Figure 41.2Systematic training model 677Figure 42.1The learning gap690Figure 42.2Learning needs analysis areas and methods 691Figure 42.3A learning specication 692Figure 43.1The Kolb learning cycle 704Figure 43.2A standard learning curve 707Figure 43.3Different rates of learning 707Figure 43.4A stepped learning curve708Figure 44.1Single- and double-loop learning716Figure 46.1The reward management system: elements and interrelationships 742Figure 46.2The components of total reward 743Figure 46.3Model of total reward745Figure 46.4A model of the reward strategy development process 750Figure 47.1A typical job evaluation programme 771Figure 47.2Point-factor job evaluation scheme design sequence 772Figure 47.3Analytical matching job evaluation scheme design sequence776Figure 49.1A multi-graded structure 799Figure 49.2A broad-graded structure 799Figure 49.3Narrow- and broad-banded structures800Figure 49.4A broad-banded structure with zones801Figure 49.5A job family structure 802Figure 49.6A career family structure803Figure 49.7A pay spine803Figure 49.8Incidence of grade and pay structures807Figure 49.9Flow chart: design of a new grade and pay structure812Figure 50.1Line of sight model821Figure 50.2Performance-related pay821Figure 50.3Competency-related pay 822Figure 50.4Contribution pay model (1) 824Figure 50.5Contribution pay model (2) 824Figure 50.6Contribution-related pay 825Figure 50.7Contribution-related pay model 825Figure 53.1Development of reward system 869Figure 56.1A framework for employee voice 938Figure 56.2Levels of employee voice 940Figure 62.1Introducing an HRIS 1015 24. xxiii List of TablesTable 2.1Role behaviours appropriate for different strategies, Schuler and Jackson (1987) 36Table 3.1Achieving vertical t between HR and business strategies 56Table 4.1A summary of human capital measures and their possible uses73Table 4.2Framework for external reporting 76Table 5.1Issues facing HR departments 83Table 5.2Measures of HR effectiveness and their use 89Table 6.1Competency framework for HR professionals 126Table 6.2Key competency areas127Table 7.1Research on the link between HRM and rm performance136Table 7.2The HR practices that impact on performance 144Table 10.1 Alternative research philosphies177Table 10.2 Contrasts between quantitative and qualitative research (Bryman and Bell, 2007) 181Table 11.1 Incidence of different competency headings205Table 11.2 Reasons for using competencies208Table 13.1 Lists of HR practices in high-performance work systems236Table 13.2 Examples of high-performance working ingredients242Table 14.1 Feelings at work (WERS, 2004) 254Table 16.1 Changes in the psychological contract 282Table 16.2 Job satisfaction (WERS, 2004) 283Table 19.1 Summary of motivation theories319Table 19.2 Factors affecting motivation strategies and the HR contribution 330Table 26.1 Criteria for a rigorous competency denition455Table 30.1 A survival rate analysis500Table 30.2 Leavers length of service analysis 501Table 31.1 Person specication classication schemes 517Table 32.1 Advantages and disadvantages of interviews544Table 32.2 Dos and donts of selection interviewing563Table 41.1 Characteristics of formal and informal learning 669Table 43.1 The implications of learning theory and concepts709Table 46.1 Economic theories explaining pay levels 738 25. xxiv List of TablesTable 47.1 A factor plan 759Table 47.2 A paired comparison 763Table 47.3 Comparison of different job evaluation methods767Table 48.1 Analysis of market rate data sources790Table 49.1 Summary analysis of different grade and pay structures805Table 50.1 Summary of contingent pay and service-related pay schemes 830Table 51.1 Summary of payment and incentive arrangements for sales staff 842Table 51.2 Comparison of shop oor payment-by-result schemes 845Table 53.1 A pay matrix865Table 55.1 Industrial relations negotiations/commercial negotiations 923 26. xxv PrefaceThis eleventh edition of Armstrongs Handbook of Human Resource ManagementPractice contains many additions and revisions. It covers major developments in thetheory and practice of human resource management in the last three years. There arenew chapters on the impact of HRM, corporate social responsibility, high perform-ance work systems, employee engagement, change management, resourcing strategyand practice and employee well-being. Signicant changes and improvements havebeen made to most of the other chapters. The plan of the book is illustrated in theroute map in Figure 0.1.The design of the book has been radically updated, with the aim of providing a text thatencourages and facilitates better learning. Chapters contain key concepts and terms,learning outcomes, key learning points, questions and further reading; allowing stu-dents to recap, reect and test their learning.The companion website provides further resources for both students and lecturers.Students can expand on their learning and are provided with help and advice on takingexaminations. Lecturers are provided with a range of resources, including PowerPointslides and support notes for teaching. 27. xxvi PrefaceI Human resource management1. Practice of HRM2. Strategic HRM3. HR strategies4. Human capital management5. Role of HR function6. Role of HR practitioner7. Impact of HRM8. International HRM9. Corporate social responsibility10. HRM research methods II HRM processesIII Work and IV Organizational V Organization design employment behaviour and development 11. Competency-based HRM 14. Work 17. Essence of organiza-23. Organization design 12. Knowledge 15. Employment tional behaviour24. Organization managementrelationship 18. Characteristics ofdevelopment 13. High performance16. Psychological contract people25. Change management work systems 19. Motivation26. Job and role analysis20. Engagement and27. Job and role designcommitment21. How organizationsfunction22. Organizational culture VI People resourcingVII PerformanceVIII Learning and IX Rewarding people management development 28. Resourcing strategy46. Reward management 29. Human resource38. The process of 40. Learning and47. Job evaluation planningperformancedevelopment strategy management 48. Market rate analysis 30. Resourcing practice41. The process of 39. 360-degree feedbacklearning and49. Grade and pay 31. Recruitment andstructuresdevelopment selection50. Contingent pay42. Learning and 32. Selection interviewing 51. Rewarding specialdevelopment 33. Selection testsprogrammesgroups 34. Talent management43. How people learn52. Employee benefits 35. Career management44. Organizationaland pensions 36. Introduction to thelearning53. Managing reward organization 45. Managementsystems 37. Release from the development organizationX Employee relationsXI Health, safety and XII HR processesemployee well-being and systems54. The employeerelations framework 58. Health and safety 60. HR policies55. Employee relations59. Employee well-being 61. HR proceduresprocesses 62. HR information56. Employee voicesystems57. EmployeecommunicationsFigure 0.1 Armstrongs Handbook of Human Resource Management Practice route map 28. 1Part I Human Resource ManagementThis part describes the basic features and characteristics of human resource manage-ment, strategic human resource management and HR strategies (Chapters 1, 2 and 3).This provides the framework within which the detailed descriptions of HRM strate-gies, policies, processes and practices that occupy most of this book take place. Theroles of the HR function and the HR practitioner are examined in Chapters 4 and 5,and Chapter 6 deals with the impact of HRM. Chapter 7 covers human capital manage-ment and the part ends with an analysis of international HRM, corporate social respon-sibility and HRM research methods.Part I contents 1. The practice of human resource management 3 2. Strategic human resource management25 3. HR strategies47 4. Human capital management 65 5. The role and organization of the HR function 81 6. The role of the HR practitioner 104 7. The impact of HRM on performance135 8. International HRM 150 9. Corporate social responsibility 16510. Human resource management research methods174 29. 2This page has been left intentionally blank 30. 31The Practice of HumanResource ManagementKey concepts and terms AMO theory The matching model of HRM Commitment Mutuality Contingency theory Pluralistic employee relations The hard version of HRM The resource-based view The Harvard framework The soft version of HRM HRM systems Strategic integration Human resource management(HRM)Learning outcomesOn completing this chapter you should be able to dene these key concepts.You should also be able to: Dene the objectives of HRM Dene the policy goals of HRM Describe the characteristics of Understand how HRM developedHRMas a concept Appreciate the reservations Understand the context in whichexpressed about HRMHRM operates Appreciate the ethical dimensionsof HRM 31. 4 Human Resource ManagementIntroductionThe practice of human resource management (HRM) is concerned with all aspects of howpeople are employed and managed in organizations. It covers activities such as strategic HRM,human capital management, corporate social responsibility, knowledge management, organi-zation development, resourcing (human resource planning, recruitment and selection, andtalent management), performance management, learning and development, reward manage-ment, employee relations, employee well-being and health and safety and the provision ofemployee services. HRM practice has a strong conceptual basis drawn from the behaviouralsciences and from strategic management, human capital and industrial relations theories. Thisfoundation has been built with the help of a multitude of research projects.The aim of this chapter is to provide a general introduction to the practice and underpinningconcepts of HRM. It covers the denition of HRM, the objectives of HRM, HRM theory, thecharacteristics of HRM, the components of HRM systems, the development of HRM as anapproach to managing people, the views expressed about HRM by key commentators, thecontext within which HRM functions, and the ethical dimensions that affect HR policy andpractice.Human resource management denedHuman resource management (HRM) is a strategic, integrated and coherent approach to theemployment, development and well-being of the people working in organizations.Other denitions of HRM Human resource management involves all management decisions and action that affect the nature of the relationship between the organization and its employees its human resources. (Beer et al, 1984) HRM comprises a set of policies designed to maximize organizational integration, employee commitment, exibility and quality of work. (Guest, 1987)HRM consists of the following propositions: That human resource policies should be integrated with strategic business planning and used to reinforce an appropriate (or change an inappropriate) 32. The Practice of Human Resource Management 5 organizational culture, that human resources are valuable and a source of competitive advantage, that they may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act exibly in the interests of the adaptive organizations pursuit of excellence. (Legge, 1989) Human resource management is a distinctive approach to employment manage- ment which seeks to achieve competitive advantage through the strategic deploy- ment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques. (Storey, 1995) HRM is: The management of work and people towards desired ends. (Boxall et al, 2007) HRM is concerned with how organizations manage their workforce (Grimshaw and Rubery, 2007)The objectives of HRMThe overall purpose of human resource management is to ensure that the organization is ableto achieve success through people. HRM aims to increase organizational effectiveness andcapability the capacity of an organization to achieve its goals by making the best use of theresources available to it. Ulrich and Lake (1990) remarked that: HRM systems can be thesource of organizational capabilities that allow rms to learn and capitalize on new opportuni-ties. But HRM has an ethical dimension which means that it must also be concerned with therights and needs of people in organizations through the exercise of social responsibility.Dyer and Holder (1998) analysed managements HR goals under the headings of contribution(what kind of employee behaviour is expected?), composition (what headcount, stafng ratioand skill mix?), competence (what general level of ability is desired?) and commitment (whatlevel of employee attachment and identication?). 33. 6Human Resource ManagementHRM policy goals, David Guest (1987, 1989a, 1989b, 1991)SOURCE REVIEW1. Strategic integration: the ability of the organization to integrate HRM issues into its strategic plans, ensure that the various aspects of HRM cohere, and provide for line managers to incorporate an HRM perspective into their decision making.2. High commitment: behavioural commitment to pursue agreed goals, and atti- tudinal commitment reected in a strong identication with the enterprise.3. High quality: this refers to all aspects of managerial behaviour that bear directly on the quality of goods and services provided, including the man- agement of employees and investment in high quality employees.4. Flexibility: functional exibility and the existence of an adaptable organi- zation structure with the capacity to manage innovation.The policy goals for HRM identied by Caldwell (2004) included managing people as assetsthat are fundamental to the competitive advantage of the organization, aligning HRM policieswith business policies and corporate strategy, and developing a close t of HR policies, proce-dures and systems with one another.Theories of HRMThe practice of HRM is underpinned by a number of theories. The categories of HRM theorylisted by Guest (1997) and Boselie et al (2005) are listed below.Theories of HRM, David Guest (1997)SOURCE REVIEW1. Strategic theories in the UK the implicit but untested hypothesis is that good t (between HR practice and the internal and external context) will be associated with superior performance. In the United States the focus has been more on classifying types of HR strategy. The hypothesis is that rms that have a t between business strategy, structure and HRM policy will have superior performance.2. Descriptive theories these either list areas of HR policy and outcomes (Beer et al, 1984) or adopt a systems approach, describing the relationships between levels (Kochan et al, 1986). They are largely non-prescriptive.3. Normative theories these are normative in the sense that they establish a norm or standard pattern in the form of prescribed best practice. These take a considerable risk in implying one best way. 34. The Practice of Human Resource Management 7Theories of HRM, Boselie et al (2005)1. Contingency theory HRM is inuenced by the organizations environ- ment and circumstances (Legge, 1978).2. The resource-based view HRM delivers added value through the strate- gic development of the organizations rare, hard to imitate and hard to substitute human resources (Barney, 1991, 1995).3. AMO theory the formula Performance = Ability + Motivation + Opportunity to Participate provides the basis for developing HR systems that attend to employees interests, namely their skill requirements, moti- vations and the quality of their job (Appelbaum et al, 2000; Bailey et al, 2001; Boxall and Purcell, 2003).Characteristics of HRMHRM was regarded by Storey (1989) as a set of interrelated policies with an ideological and phil-osophical underpinning. He listed four aspects that constitute the meaningful version of HRM:1. a particular constellation of beliefs and assumptions;2. a strategic thrust informing decisions about people management;3. the central involvement of line managers; and4. reliance upon a set of levers to shape the employment relationship.As Boselie et al (2005) explained, HRM: responds accurately and effectively to the organizations environment and complements other organizational systems (cf contingency theory) and delivers added value through the strategic development of the organizations rare, inimitable and non-substitutable resources, embodied literally in its staff (cf the resource-based view).The characteristics of HRM are that it is diverse, strategic and commitment-oriented, adopts aunitary rather than pluralist viewpoint, is founded on the belief that people should be treatedas assets and is a management-driven activity. HRM tends to focus on business values althoughthere is a growing body of opinion (eg Guest, 2002) that it has also to be concerned withemployee-centred outcomes. In its fully developed form, HRM functions as a system. AsSchuler (1992) indicated, HRM links, integrates and coheres. 35. 8 Human Resource ManagementThe diversity of HRMThere are no universal characteristics of HRM. Many models exist, and practices within differ-ent organizations are diverse, often only corresponding to the conceptual version of HRM in afew respects. Boxall et al (2007) remarked that: Human resource management covers a vastarray of activities and shows a huge range of variations across occupations, organizationallevels, business units, rms, industries and societies.A distinction was made by Storey (1989) between the hard and soft versions of HRM. Thehard version emphasizes that people are important resources through which organizationsachieve competitive advantage. These resources have therefore to be acquired, developed anddeployed in ways that will benet the organization. The focus is on the quantitative, calculativeand business-strategic aspects of managing human resources in as rational a way as for anyother economic factor.The soft version of HRM has its roots in humanism an approach devoted to human intereststhat views people as responsible and progressive beings. It also traces its origins to the humanrelations school founded by Elton Mayo (1933), which believed that productivity was directlyrelated to job satisfaction and that the output of people will be high if they like their co-work-ers and are given pleasant supervision. But this is a fairly remote connection. The soft versionof HRM as described by Storey (1989) involves treating employees as valued assets, a source ofcompetitive advantage through their commitment, adaptability and high quality (of skills,performance and so on). It therefore views employees, in the words of Guest (1999b), as meansrather than objects, but it does not go as far as following Kants (1781) advice: Treat people asends unto themselves rather than as means to an end. The soft approach to HRM stresses theneed to gain the commitment (the hearts and minds) of employees through involvement,communication, leadership and other methods of developing a high-commitment, high-trustorganization. Attention is also drawn to the key role of organizational culture.In 1998, Karen Legge dened the hard model of HRM as a process emphasizing the close integra-tion of human resource policies with business strategy which regards employees as a resource to bemanaged in the same rational way as any other resource being exploited for maximum return. Incontrast, the soft version of HRM sees employees as valued assets and as a source of competitiveadvantage through their commitment, adaptability and high level of skills and performance.It has, however, been observed by Truss (1999) that even if the rhetoric of HRM is soft, thereality is often hard, with the interests of the organization prevailing over those of the indi-vidual. Research carried out by Gratton et al (1999) found that in the eight organizations theystudied, a mixture of hard and soft HRM approaches was identied. This suggested to theresearchers that the distinction between hard and soft HRM was not as precise as some com-mentators have implied.But as Dyer and Holder (1998) emphasized: HRM goals vary according to competitive choices,technologies or service tangibles, characteristics of their employees (eg could be different for 36. The Practice of Human Resource Management 9managers), the state of the labour market and the societal regulations and national culture.And Boxall et al (2007) noted that: The general motives of HRM are multiple.The strategic nature of HRMPerhaps the most signicant feature of HRM is the importance attached to strategic integra-tion. Legge (1989) argued that one of the common themes of the typical denitions of HRMis that human resource policies should be integrated with strategic business planning. KeithSisson (1990) suggested that a feature increasingly associated with HRM is the emphasis onthe integration of HR policies both with one another and with business planning more gener-ally. John Storey (1989) believes that: The concept locates HRM policy formulation rmly atthe strategic level and insists that a characteristic of HRM is its internally coherent approach.The commitment-oriented nature of HRMOne of the aims of HRM is to promote commitment the strength of an individuals identi-cation with, and involvement in, a particular organization. It was noted by Karen Legge (1995)that human resources may be tapped most effectively by mutually consistent policies thatpromote commitment and which, as a consequence, foster a willingness in employees to actexibly in the interests of the adaptive organizations pursuit of excellence.However, this emphasis on commitment has been criticized from the earliest days of HRM.Guest (1987) asked: commitment to what? and Fowler (1987) has stated: At the heart of the concept is the complete identication of employees with the aims and values of the business employee involvement but on the companys terms. Power in the HRM system, remains very rmly in the hands of the employer. Is it really possible to claim full mutuality when at the end of the day the employer can decide unilaterally to close the company or sell it to someone else?Focus on mutualityThe importance of mutuality (the belief that management and employees share the same con-cerns and it is therefore in both their interests to work together) was emphasized by Walton(1985a) as follows: The new HRM model is composed of policies that promote mutuality mutual goals, mutual inuence, mutual respect, mutual rewards, mutual responsibility. The theory is that policies of mutuality will elicit commitment which in turn will yield both better economic performance and greater human development. 37. 10Human Resource ManagementThe concept of mutuality is based on the notion of unitary employee relations, described below.Unitary and pluralist employee relationsHRM is characterized by a unitarist rather than a pluralist view of employee relations with theemphasis on individual contracts, not collective agreements. A unitarist view expresses the beliefthat people in organizations share the same goals and work as members of one team. The plural-ist view recognizes that the interests of employees will not necessarily coincide with their employ-ers and suggests that the unitary view is nave, unrealistic and against the interest of employees.Treating people as assets or human capitalThe notion that people should be regarded as assets rather than variable costs, in other words,treated as human capital, was originally advanced by Beer et al (1984). HRM philosophy, asmentioned by Legge (1995), holds that human resources are valuable and a source of competi-tive advantage. Armstrong and Baron (2002) stated that: People and their collective skills, abilities and experience, coupled with their ability to deploy these in the interests of the employing organization, are now recognized as making a signicant contribution to organizational success and as constituting a major source of competitive advantage.Focus on business valuesThe concept of hard HRM is based on a management- and business-oriented philosophy. It isconcerned with the total interests of the organization the interests of the members of theorganization are recognized but subordinated to those of the enterprise. Hence the impor-tance attached to strategic integration and strong cultures, which ow from top managementsvision and leadership, and which require people who will be committed to the strategy, whowill be adaptable to change and who t the culture.In 1995 Legge noted that HRM policies are adapted to drive business values and are modiedin the light of changing business objectives and conditions. She suggested that evidence indi-cated more support for the hard versions of HRM than the soft version.Organization- versus employee-centred outcomesIn line with labour process theory, Thompson and Harley (2007) asserted that; What is hap-pening is a process of capitalizing on humanity rather than investing in human capital. Theemphasis may have been on the business orientation of HRM but there is a growing body of 38. The Practice of Human Resource Management 11opinion that there is more to HRM than that. This is the employee-centred and ethical dimen-sion of HRM, discussed at the end of the chapter.Grant and Shields (2002) argued that the emphasis typically placed on the business case forHRM suggests a one-sided focus on organizational outcomes at the expense of employees. Itwas noted by Paauwe (2004) that: Added value represents the harsh world of economic rationality, but HRM is also about moral values The yardstick of human resource outcomes is not just economic ration- ality a stakeholder perspective is required, ie develop and maintain sustainable rela- tionships with all the relevant stakeholders, not just customers and shareholders.Kochan (2007) contended that: The HR profession has always had a special professional responsibility to balance the needs of the rm with the needs, aspirations and interests of the workforce and the values and standards society expects to be upheld at work A regime which provides human beings no deep reason to care about one another cannot long preserve its legitimacy.Ulrich and Brockbank (2005a) believe that caring and listening to employees remains a centrepiece of HR work.HRM as a systemAn open systems view of HRM has been developed by Wright and Snell (1998). An opensystem is dependent on the environment for inputs, which are transformed during throughputto produce outputs that are exchanged in the environment. Wright and Snell dened an openHRM system as a competence model of organizations. Skills and abilities are treated as inputsfrom the environment; employee behaviours are treated as throughput; and employee satisfac-tion and performance are treated as outputs.In its traditional form, HRM, as pointed out by Boselie et al (2005), can be viewed as a collec-tion of multiple discrete practices with no explicit or discernible link between them. In con-trast the more strategically minded systems approach views HRM as an integrated andcoherent bundle of mutually reinforcing practices. As Kepes and Delery (2007) comment, adening characteristic of HRM is that HRM systems and not individual HRM practices are thesource of competitive advantage. Coherent and internally aligned systems form powerful con-nections that create positive synergistic effects on organizational outcomes.As illustrated in Figure 1.1 an HRM system brings together HR philosophies that describe theoverarching values and guiding principles adopted in managing people, HR strategies that 39. 12Human Resource Managementdene the direction in which HRM intends to go, HR policies that provide guidelines deninghow these values, principles and the strategies should be applied and implemented in specicareas of HRM, HR processes that comprise the formal procedures and methods used to putHR strategic plans and policies into effect, linked HR practices that consist of the approachesused in managing people, and HR programmes that enable HR strategies, policies and prac-tices to be implemented according to plan. Becker and Gerhart (1996) have classied thesecomponents into three levels: the system architecture (guiding principles), policy alternatives,and processes and practices. HUMAN RESOURCE MANAGEMENTHR philosophies Human capital HR strategies, policies, processes,Corporate social management practices and programmes responsibility OrganizationLearning and Reward EmployeeResourcing development managment relationsDesign Human resource Organizational Job evaluation/ Industrialplanning learningmarket surveys relations Recruitment & IndividualGrade and pay Employee voice Developmentselection learning structuresTalent ManagementContingent pay Communications Job/role designmanagement developmentHealth and Performancesafety managementEmployeebenefits EmployeeKnowledge wellbeing managementHR servicesFigure 1.1 The HRM system 40. The Practice of Human Resource Management 13The development of the concept of HRMThe terms human resource management (HRM) and human resources (HR) have virtuallyreplaced the term personnel management as a description of the processes involved in man-aging people in organizations, although what is now described as HRM is in practice oftensynonymous with what used to be described as personnel management. In the early days ofHRM it was suggested by Armstrong (1987) that: HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel man- agement, but as usually perceived, at least it has the virtue of emphasizing the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufcient attention has been paid to it in many organizations.However, commentators such as Guest (1987) and Storey (1995) regard HRM as a substan-tially different model built on unitarism (employees share the same interests as employers),individualism, high commitment and strategic alignment (integrating HR strategy with thebusiness strategy). It is claimed that HRM is more holistic than traditional personnel manage-ment. HRM has also emphasized the notion that people should be regarded as assets ratherthan variable costs.Origins of the concept of HRMThe concept of HRM was rst dened by Bakke (1966) who wrote that: The general type of activity in any function of management is to use resources effec- tively for an organizational objective The function which is related to the under- standing, maintenance, development, effective employment, and integration of the potential in the resource of people I shall call simply the human resources function.However, HRM did not emerge in a fully edged form until the 1980s in the matching modeland the Harvard framework, described below.The matching model of HRMOne of the rst detailed statements of the HRM concept was made by the Michigan school(Fombrun et al, 1984). They held that HR systems and the organization structure should bemanaged in a way that is congruent with organizational strategy (hence the name matching 41. 14Human Resource Managementmodel). They further explained that there is a human resource cycle that consists of fourgeneric processes or functions that are performed in all organizations: selection, appraisal,rewards and development.The Harvard frameworkThe other pioneers of HRM in the 1980s were the Harvard school of Beer et al (1984) whodeveloped what Boxall (1992) calls the Harvard framework. This framework is based on theirbelief that the problems of historical personnel management can only be solved: when general managers develop a viewpoint of how they wish to see employees involved in and developed by the enterprise, and of what HRM policies and practices may achieve those goals. Without either a central philosophy or a strategic vision which can be provided only by general managers HRM is likely to remain a set of independ- ent activities, each guided by its own practice tradition.Beer and his Harvard colleagues believed that Today, many pressures are demanding a broader,more comprehensive and more strategic perspective with regard to the organizations humanresources. These pressures have created a need for: A longer-term perspective in managingpeople and consideration of people as potential assets rather than merely a variable cost. Theywere the rst to underline the HRM tenet that it belongs to line managers. The Harvard schoolsuggested that HRM had two characteristic features: 1) line managers accept more responsibil-ity for ensuring the alignment of competitive strategy and HR policies, and 2) HR has themission of setting policies that govern how HR activities are developed and implemented inways that make them more mutually reinforcing.Reservations about HRMFor some time HRM was a controversial topic, especially in academic circles. The main reser-vations have been that HRM promises more than it delivers and that its morality is suspect.HRM promises more than it can deliverNoon (1992) has commented that HRM has serious deciencies as a theory: It is built withconcepts and propositions, but the associated variables and hypotheses are not made explicit.It is too comprehensive If HRM is labelled a theory it raises expectations about its abilityto describe and predict.Guest (1991) believed that HRM is an optimistic but ambiguous concept; it is all hype andhope. Mabey et al (1998) followed this up by asserting that the heralded outcomes (of HRM) 42. The Practice of Human Resource Management 15are almost without exception unrealistically high. To put the concept of HRM into practiceinvolves strategic integration, developing a coherent and consistent set of employment poli-cies, and gaining commitment. This requires high levels of determination and competence atall levels of management and a strong and effective HR function staffed by business-orientedpeople. It may be difcult to meet these criteria, especially when the proposed HRM cultureconicts with the established corporate culture and traditional managerial attitudes andbehaviour.Gratton et al (1999) were convinced on the basis of their research that there was a disjunctionbetween rhetoric and reality in the area of human resource management between HRM theoryand HRM practice, between what the HR function says it is doing and that practice as per-ceived by employers, and between what senior management believes to be the role of the HRfunction, and the role it actually plays. In their conclusions they refer to the hyperbole andrhetoric of human resource management.Caldwell (2004) believed that HRM is an unnished project informed by a self-fullling visionof what it should be.The above comments were based on the assumption that there is a single monolithic form ofHRM. This is not the case. HRM comes in all sorts of shapes and sizes. Sometimes, as Armstrong(1987) commented, it is just new wine in old bottles personnel management under anothername. It has to be conceded that many organizations that think they are practising HRM asdescribed earlier are not doing so, at least to the full extent. It is difcult, and it is best not toexpect too much. For example, most of the managements who hurriedly adopted perform-ance-related pay as an HRM device that would act as a lever for change have been sorelydisappointed.However, the research conducted by Guest and Conway (1997) covering a stratied randomsample of 1,000 workers established that a notably high level of HRM was found to be in place.This contradicts the view that management has tended to talk up the adoption of HRM prac-tices. The HRM characteristics covered by the survey included the opportunity to expressgrievances and raise personal concerns on such matters as opportunities for training anddevelopment, communication about business issues, single status, effective systems for dealingwith bullying and harassment at work, making jobs interesting and varied, promotion fromwithin, involvement programmes, no compulsory redundancies, performance-related pay,prot sharing and the use of attitude surveys.The morality of HRMHRM is accused by many academics of being manipulative if not positively immoral. Willmott(1993) remarked that HRM operates as a form of insidious control by compliance when itemphasizes the need for employees to be committed to do what the organization wants themto do. It preaches mutuality but the reality is that behind the rhetoric it exploits workers. It is, 43. 16Human Resource Managementas Keenoy (1990) asserted, a wolf in sheeps clothing. Scott (1994) thought that HRM was aform of deceit, using subtle approaches to incorporate workers in an organizational way ofthinking and in effect brainwashing them to become willing slaves.Legge (1998) pointed out that: Sadly, in a world of intensied competition and scarce resources, it seems inevitable that, as employees are used as means to an end, there will be some who will lose out. They may even be in the majority. For these people, the soft version of HRM may be an irrelevancy, while the hard version is likely to be an uncomfortable experience.The accusation that HRM treats employees as means to an end is often made. However, itcould be argued that if organizations exist to achieve ends, which they obviously do, and ifthose ends can only be achieved through people, which is clearly the case, the concern of man-agement for commitment and performance from those people is not unnatural and is notattributable to the concept of HRM it existed in the good old days of personnel managementbefore HRM was invented. What matters is how management treat people as ends and whatmanagement provide in return.Much of the hostility to HRM expressed by a number of academics is based on the belief thatit is against the interests of workers, ie, that it is managerialist. However, the Guest and Conway(1997) research established that the reports of workers on outcomes showed that a highernumber of HR practices were associated with higher ratings of fairness, trust and manage-ments delivery of their promises. Those experiencing more HR activities also felt more securein and more satised with their jobs. Motivation was signicantly higher for those working inorganizations where more HR practices were in place. In summary, as commented by Guest(1999b), it appears that workers like their experience of HRM. These ndings appear to con-tradict the radical critique view produced by academics such as Mabey et al (1998) and theothers quoted above that HRM has been ineffectual, pernicious (ie managerialist) or both.Some of those who adopt this stance tend to dismiss favourable reports from workers aboutHRM on the grounds that they have been brainwashed by management. But there is no evi-dence to support this view.Moreover, as Armstrong (2000) pointed out: HRM cannot be blamed or given credit for changes that were taking place anyway. For example, it is often alleged to have inspired a move from pluralism to unitarism in industrial relations. But newspaper production was moved from Fleet Street to Wapping by Murdoch, not because he had read a book about HRM but as a means of breaking the print unions control. 44. The Practice of Human Resource Management 17Contradictions in the reservations about HRMGuest (1999b) has suggested that there are two contradictory concerns about HRM. The rstas formulated by Legge (1995, 1998) is that while management rhetoric may express concernfor workers, the reality is harsher. And Keenoy (1997) complained that: The real puzzle aboutHRMism is how, in the face of such apparently overwhelming critical refutation, it has securedsuch inuence and institutional presence.Other writers, however, simply observe that HRM does not work. Scott (1994), for example,stated that both management and workers were captives of their history and found it very dif-cult to let go of their traditional adversarial orientations.But these contentions are contradictory. Guest (1999b) remarked that; It is difcult to treatHRM as a major threat (though what it is a threat to is not always made explicit) deserving ofserious critical analysis while at the same time claiming that it is not practiced or isineffective.The context of HRMHRM processes take place within the context of the internal and external environment of theorganization. HR practitioners will gain credibility and make a greater strategic contributionif they can analyse the impact of external events on company policies and practices. They needto be aware of the fact that what the organization does and what they need to do will dependto a large extent on its external and internal environments. They need to understand contin-gency theory.Contingency theoryContingency theory tells us that denitions of HR aims, policies and strategies, lists of activitiesand analyses of the role of the HR department are valid only if they are related to the situation ofthe organization. Legge (1978) in her inuential book, Power, Innovation and Problem Solving inPersonnel Management was the rst commentator to insist that a contingent approach should beadopted to personnel management, ie, the design and implementation of policy that matches, oris contingent upon specied organizational requirements and circumstances.As Paauwe (2004) explained: Contingency theory states that the relationship between the relevant independent vari- ables (eg HRM policies and practices) and the dependent variable (performance) will vary according to the inuences such as company size, age and technology, capital intensity, degree of unionization, industry/sector ownership and location. 45. 18 Human Resource ManagementContingency theory is associated with the concept of t the need to achieve congruencebetween an organizations HR strategies, policies and practices and its business strategieswithin the context of its external and internal environment.Contextual factorsThe contextual factors that inuence HR policies and practices are the external and internalenvironments of the organization.The external environmentThe external environment consists of social, political, legal and economic developments andcompetitive pressures. Global competition in mature production and service sectors is increas-ing. This is assisted by easily transferable technology and reductions in international trade bar-riers. Customers are demanding more as new standards are reached through internationalcompetition. Organizations are reacting to this competition by becoming customer-focused,speeding up response times, emphasizing quality and continuous improvement, acceleratingthe introduction of new technology, operating more exibly and losing cost. The pressure hasbeen for businesses to become lean and mean, downsizing and cutting out layers of manage-ment and supervision. They are reducing permanent staff to a core of essential workers,increasing the use of peripheral workers (sub-contractors, temporary staff) and outsourcingwork to external service providers.The internal environmentThe following aspects of the internal environment will affect HR policy and practice: the type of business or organization private, public or voluntary sector; manufactur-ing or service; the size of the organization; the age or maturity of the organization; the technology or key activities of the business will determine how work is organized,managed and carried out; the type of people employed, eg professional staff, knowledge workers, technicians,administrators, production workers, sales and customer service staff; the organizations culture the established pattern of values, norms, beliefs, attitudesand assumptions that shape the ways in which people behave and things get done. 46. The Practice of Human Resource Management 19The ethical dimensionAs Boxall et al (2007) point out: While HRM does need to support commercial outcomes(often called the business case), it also exists to serve organizational needs for social legiti-macy. This means exercising social responsibility, ie being concerned for the interests (well-being) of employees and acting ethically with regard to the needs of people in the organizationand the community.Within the organization the requirement is to: treat people equally in terms of the opportunities for employment, learning and devel-opment provided for them; treat people according to the principle of procedural justice (Adams, 1965 and Leventhal,1980), ie the ways in which people are managed are fair, consistent, transparent andproperly consider the views and needs of employees; treat people according to the principles of distributive justice (Adams, 1965 andLeventhal, 1980), ie rewards are distributed to them according to their contributionand they receive what was promised to them; treat people according to the principles of natural justice, ie individuals should knowthe standards they are expected to achieve and the rules to which they are expected toconform, they should be given a clear indication of where they are failing or what ruleshave been broken and, except in cases of gross misconduct, they should be given achance to improve before disciplinary action is taken; avoid treating people as mere factors of production; be concerned with the well-being of employees as well as the pursuit of commercialgain; offer as much security of employment as possible; provide a working environment that protects the health and safety of employees andminimizes stress; act in the interests of providing a reasonable balance for employees between their lifeand their work; protect employees against harmful practices at work, eg bullying, harassment anddiscrimination. 47. 20 Human Resource Management The practice of HRM key learning points The objectives of HRM focus on business values; To ensure that the organization is organization-centred orientation. able to achieve success through How HRM developed as a concept people. To increase organizational effective- Emerged in the 1980s in the form of the ness and capability.Harvard framework and the matching model. To be concerned with the rights and needs of people in organiza-Reservations expressed about HRM tions through the exercise of social promises more than it can deliver; responsibility. manipulative control by compli- The policy goals of HRM (Guest)ance (Willmott); strategic integration; managerialist. high commitment;The context in which HRM operates high quality; HRM practice contingent on the circum- exibility. stances in which the organization operates, The characteristics of HRMie its internal and external environment. diverse (hard and soft);Appreciate the ethical dimensions of strategic;HRM commercial orientation; HRM must exercise social responsibility it focus on mutuality; must be concerned with the interests (well- unitary view; being) of employees and act ethically with people treated as assets or human regard to the needs of people in the organi- capital;zation and the community. 48. The Practice of Human Resource Management 21Questions1. You are head of human resources in a medium-sized manufacturing company. Your new chief executive mentions to you that in her last rm they had a personnel manager and asks you to explain the difference, if any.2. At a meeting of trustees the chief executive of a medium-sized charity proposed that a director of human resources should be appointed. Two trustees protested that the term human resources implied that employees would just be treated as factors of production not as people. How would you respond?3. John Storey wrote in 1995 that: Human resource management is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques. Examine the approach to HRM in your own organization or any other organization known to you and analyse the extent to which Storeys description of HRM applies.4. Your local branch of the CIPD has asked you either to propose or oppose (your choice) a motion to the effect that This house agrees with the statement of Keenoy and Anthony in 1992 that HRM is no more than a rhetoric masking the intensication and commodi- cation of labour. Prepare the case either for or against the motion.5. Harley and Hardy (2004) wrote that Managers can use the language of HRM to estab- lish the legitimacy of their practices, even if the latter bear little resemblance to the former. What is the meaning and signicance of this statement?ReferencesAdams, J S (1965) Injustice in social exchange, in (ed) L Berkowitz, Advances in Experimental Psychology,Academic Press, New YorkAppelbaum, E, Bailey, T, Berg, P and Kalleberg, A L (2000) Manufacturing Advantage: Why highperformance work systems pay off, ILR Press, Ithaca, NYArmstrong, M (1987) Human resource management: a case of the emperors new clothes, PersonnelManagement, August, pp 3035Armstrong, M (2000) The name has changed but has the game remained the same?, Employee Relations,22 (6), pp 57689Armstrong, M and Baron, A (2002) Strategic HRM: The route to improved business performance, CIPD,LondonBailey, T, Berg, P and Sandy, C (2001) The effect of high performance work practices on employeeearnings in the steel, apparel and medical electronics and imaging industries, Industrial and LaborRelations Review, 54 (2A), pp 52543 49. 22 Human Resource ManagementBakke, E W (1966) Bonds of Organization: An appraisal of corporate human relations, Archon, HamdenBarney, J B (1991) Firm resources and sustained competitive advantage, Journal of Management Studies, 17(1), pp 99120Barney, J B (1995) Looking inside for competitive advantage, Academy of Management Executive, 9 (4), pp4961Becker, B E and Gerhart, S (1996) The impact of human resource management on organizationalperformance: progress and prospects, Academy of Management Journal, 39 (4), pp 779801Beer, M, Spector, B, Lawrence, P, Quinn Mills, D and Walton, R (1984) Managing Human Assets, The FreePress, New YorkBoselie, P, Dietz, G and Boon, C (2005) Commonalities and contradictions in HRM and performanceresearch, Human Resource Management Journal, 15 (3), pp 6794Boxall, P F (1992) Strategic HRM: a beginning, a new theoretical direction, Human Resource ManagementJournal, 2 (3) pp 6179Boxall, P F and Purcell, J (2003) Strategy and Human Resource Management, Palgrave Macmillan,BasingstokeBoxall, P F, Purcell J and Wright P (2007) The goals of HRM, in (eds) P Boxall, J Purcell and P Wright,Oxford Handbook of Human Resource Management, Oxford University Press, OxfordCaldwell, R (2004) Rhetoric, facts and self-fullling prophesies: exploring practitioners perceptions ofprogress in implementing HRM, Industrial Relations Journal, 35 (3), pp 196215Dyer, L and Holder, G W (1998) Strategic human resource management and planning, in (ed) L Dyer,Human Resource Management: Evolving roles and responsibilities, Bureau of National Affairs,Washington DCFowler, A (1987) When chief executives discover HRM, Personnel Management, January, p 3Fombrun, C J, Tichy, N M and Devanna, M A (1984) Strategic Human Resource Management, Wiley, New YorkGrant, D and Shields, J (2002) In search of the subject: researching employee reactions to human resourcemanagement, Journal of Industrial Relations, 44 (3), pp 17893Gratton, L A, Hailey, V H, Stiles, P and Truss, C (1999) Strategic Human Resource Management, OxfordUniversity Press, OxfordGrimshaw, D and Rubery, J (2007) Economics and HRM, in (eds) P Boxall, J Purcell and P Wright,Oxford Handbook of Human Resource Management, Oxford University Press, OxfordGuest, D E (1987) Human resource management and industrial relations, Journal of Management Studies,14 (5), pp 50321Guest, D E (1989a) Human resource management: its implications for industrial relations, in (ed) JStorey, New Perspectives in Human Resource Management, Routledge, LondonGuest, D E (1989b) Personnel and HRM: can you tell the difference? Personnel Management, January, pp4851Guest, D E (1991) Personnel management: the end of orthodoxy, British Journal of Industrial Relations,29 (2), pp 14976Guest, D E (1997) Human resource management and performance; a review of the research agenda, TheInternational Journal of Human Resource Management, 8 (3), 26376Guest, D E (1999b) Human resource management: the workers verdict, Human Resource ManagementJournal, 9 (2), pp 525Guest, D E (2002) Human resource management, corporate performance and employee well-being:building the worker into HRM, Journal of Industrial Relations, 44 (3), pp 33558 50. The Practice of Human Resource Management 23Guest, D E and Conway, N (1997) Employee Motivation and the Psychological Contract, IPD, LondonHarley B and Hardy, C (2004) Firing blanks? An analysis of discursive struggle in HRM, Journal of Management Studies, 41 (3), pp 377400Kant, I (1781) Critique of Pure Reason, Dover Publications (2003), Mineola, NYKeenoy, T (1990) HRM: a case of the wolf in sheeps clothing, Personnel Review, 19 (2), pp 39Keenoy, T (1997) HRMism and the images of re-presentation, Journal of Management Studies, 34 (5), pp 82541Keenoy, T and Anthony, P (1992) HRM: metaphor, meaning and morality, in (eds) P Blyton and P Turnbull, Reassessing Human Resource Management, Sage Publications, LondonKepes, S and Delery, J E (2007) HRM systems and the problem of internal t, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford University Press, OxfordKochan, T A (2007) Social legitimacy of the HR profession, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford University Press, OxfordKochan, T A, Katz, H and McKersie, R (1986) The Transformation of American Industrial Relations, Basic Books, New YorkLegge, K (1978) Power, Innovation and Problem Solving in Personnel Management, McGraw-Hill, MaidenheadLegge, K (1989) Human resource management: a critical analysis, in (ed) J Storey, New Perspectives in Human Resource Management, Routledge, LondonLegge, K (1995) Human Resource Management: Rhetorics and realities, Macmillan, LondonLegge, K (1998) The morality of HRM, in (eds) C Mabey, D Skinner and T Clark, Experiencing Human Resource Management, Sage, LondonLeventhal, G S (1980) What should be done with equity theory? in (eds) G K Gergen, M S Greenberg and R H Willis, Social Exchange: Advances in Theory and Research, Plenum, New YorkMabey, C, Skinner, D and Clark, T (1998) Experiencing Human Resource Management, Sage, LondonMayo, E (1933) Human Problems of an Industrial Civilisation, Macmillan, LondonNoon, M (1992) HRM: a map, model or theory?, in (eds) P Blyton and P Turnbull, Reassessing Human Resource Management, Sage Publications, LondonPaauwe, J (2004) HRM and performance: Achieving long term viability, Oxford University Press, OxfordSchuler, R S (1992) Strategic human resource management: linking people with the strategic needs of the business, Organizational Dynamics, 21 (1), pp 1832Scott, A (1994) Willing Slaves: British workers under human resource management, Cambridge University Press, CambridgeSisson, K (1990) Introducing the Human Resource Management Journal, Human Resource Management Journal, 1 (1), pp 111Storey, J (1989) From personnel management to human resource management, in (ed) J Storey, New Perspectives on Human Resource Management, Routledge, LondonStorey, J (ed) (1995) Human Resource Management: A critical text, Routledge, LondonThompson, P and Harley, B (2007) HRM and the worker: labour process perspectives, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford University Press, OxfordTruss, C (1999) Soft and hard models of HRM, in (eds) L Gratton, V H Hailey, P Stiles, and C Truss, Strategic Human Resource Management, Oxford University Press, OxfordUlrich, D and Brockbank, W (2005a) The HR Value Proposition, Harvard Press, Cambridge, MA 51. 24 Human Resource ManagementUlrich, D and Lake, D (1990) Organizational Capability: Competing from the inside out, Wiley, New YorkWalton, R E (1985a) From control to commitment in the workplace, Harvard Business Review, MarchApril, pp 7784Willmott, H (1993) Strength is ignorance, slavery is freedom: Managing culture in modern organizations,Journal of Management Studies, 30 (4), pp 51552Wright, P M and Snell, S A (1998) Towards a unifying framework for exploring t and exibility instrategic human resource management, Academy of Management Review, 23 (4), pp 75672 52. 25 2Strategic Human Resource ManagementKey concepts and terms Best t Resource-based view Best practice Strategic conguration Bundling Strategic t Competitive advantage Strategic HRM Conguration Strategic management Human resource advantage Strategy Lifecycle modelLearning outcomesOn completing this chapter you should be able to dene these key concepts.You should also understand: The conceptual basis of strategic The fundamental characteristicsHRMof strategy How strategy is formulated The aims of strategic HRM The resource-based view and its The three HRM perspectives ofimplications Delery and Doty The signicance of the concepts The signicance of bundlingof best practice and best t The practical implications ofstrategic HRM theory 53. 26 Human Resource ManagementIntroductionAs Baird and Meshoulam (1988) remarked: Business objectives are accomplished when humanresource practices, procedures and systems are developed and implemented based on organi-zational needs, that is, when a strategic perspective to human resource management is adopted.The aim of this chapter is to explore what this involves. It starts with an introduction to thebasis of strategic human resource management (strategic HRM) provided by the concepts ofhuman resource management and strategic management. It then covers a denition of strate-gic human resource management (strategic HRM) and its aims; an analysis of its underpin-ning concepts the resource-based view and strategic t; and a description of how strategicHRM works, namely the universalistic, contingency and congurational perspectives denedby Delery and Doty (1996) and the three approaches associated with those perspectives bestpractice, best t and bundling. The chapter ends with discussions on the reality of strategicHRM and the practical implications of the theories reviewed earlier.The conceptual basis of strategic HRMBoxall (1996) explained that strategic HRM is the interface between HRM and strategic man-agement. It takes the notion of HRM as a strategic, integrated and coherent approach anddevelops that in line with the concept of strategic management. This is an approach to man-agement that involves taking a broad and long-term view of where the business or part of thebusiness is going and managing activities in ways that ensure this strategic thrust ismaintained.As dened by Pearce and Robinson (1988): Strategic management is the set of decisions andactions resulting in the formulation and implementation of strategies designed to achieve theobjectives of an organization. According to Kanter (1984) its purpose is to: elicit the presentactions for the future and become an action vehicle integrating and institutionalizing mech-anisms for change. The concept of strategic management is built on the concept of strategy, asconsidered below.The concept of strategyStrategy is the approach selected to achieve dened goals in the future. According to Chandler(1962) it is: The determination of the long-term goals and objectives of an enterprise, and theadoption of courses of action and the allocation of resources necessary for carrying out thosegoals.Strategy has three fundamental characteristics. First, it is forward looking. It is about decidingwhere you want to go and how you mean to get there. It is concerned with both ends and 54. Strategic Human Resource Management 27means. In this sense a strategy is a declaration of intent: This is what we want to do and this ishow we intend to do it. Strategies dene longer-term goals but they also cover how those goalswill be attained. They guide purposeful action to deliver the required result. A good strategy isone that works, one that in Abells (1993) phrase enables organizations to adapt by masteringthe present and pre-empting the future. As Boxall (1996) explained: Strategy should be under-stood as a framework of critical ends and means.The second characteristic of strategy is that the organizational capability of a rm (its capacityto function effectively) depends on its resource capability (the quality and quantity of itsresources and their potential to deliver results). This is the resource-based view, based on theideas of Penrose (1959) who wrote that: the rm is an administrative organization and a col-lection of productive resources. It was expanded by Wernerfelt (1984) who explained thatstrategy is a balance between the exploitation of existing resources and the development ofnew ones. Resource-based strategy theorists such as Barney (1991, 1995) argued that sustainedcompetitive advantage stemmed from the acquisition and effective use of bundles of distinc-tive resources that competitors cannot imitate. The resource-based view is a major element instrategic HRM, as discussed later in this chapter.The third characteristic of strategy is strategic t the need when developing HR strategies toachieve congruence between them and the organizations business strategies within the contextof its external and internal environment. The focus is upon the organization and the worldaround it. To maximize competitive advantage a rm must match its capabilities and resourcesto the opportunities available in its environment. The concept of t or integration is also amajor feature of strategic HRM.The formulation of strategyThe formulation of corporate strategy is best described as a process for developing a sense ofdirection, making the best use of resources and ensuring strategic t. It has often been describedas a logical, step-by-step affair, the outcome of which is a formal written statement that pro-vides a denitive guide to the organizations intentions. Many people still believe and act as ifthis were the case, but it is a misrepresentation of reality. In practice the formulation of strat-egy can never be as rational and linear a process as some writers describe it or as some manag-ers attempt to make it.The difculty is that strategies are often based on the questionable assumption that the futurewill resemble the past. Some years ago, Heller (1972) had a go at the cult of long-range plan-ning: What goes wrong he wrote, is that sensible anticipation gets converted into foolishnumbers: and their validity always hinges on large loose assumptions.Strategy formulation is not necessarily a deterministic, rational and continuous process, as waspointed out by Mintzberg (