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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Please do not quote without prior permission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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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