Human Resource Management came about as a result of the weakening of Trade Unions in the 1980’s. This was due to globalisation and the changes in employment law under the Conservative government. Individuals were given more rights and no longer needed to be part of a union to exercise them. Cole (2002) discusses that after all the changes, personnel managers found themselves suddenly able to concentrate on working in harmony with their staff as opposed to before when they were constantly threatened with strikes.
Human Resource Management differs from Personnel Management on a number of issues. When making broad comparisons of the two one could call HR the ‘soft, intangible’ approach to management and PM the ‘hard, tangible’ approach (Rosenfeld 1999). This refers to approach and results of using HRM or PM to manage.
The HRM soft and intangible approach can be compared to the PM hard and tangible approach by discussing their attitudes towards managing people and in specific areas of management. Storey (1992) shows that the HRM’s managerial role is to be ‘nurturing’. This shows that HRM want to look after employees and help them in whatever way they can to achieve the best outcome for the employee and the business. PM’s managerial role is to ‘monitor’. This is suggesting that the manager is there to watch in a ‘big brother’ sense, which is less working with the employee and is also seemingly waiting for the employee to make a wrong move or slip up. This is in the interest of the business as poor effort and mistakes can cost a business time and money. However it also an attitude which is not encouraging working together. Nurturing employees makes them feel wanted and part of a team therefore boosting their motivation. PM management is less about individual relationships between line-managers and employees and more about the legalistic contracts where the employees are there to do their job and the line managers are there to oversee or ‘monitor’ their work to make sure everybody is sticking to the rules.
This would be a good time to show the two attitudes to managing by each method in practice within the service sector.
The HRM attitude to management was described by Storey as ‘nurturing’. To nurture is “to support and encourage, as during the period of training or development” (Dictionary.com 2007). Nurturing may not be a tangible benefit that an employee can hold in their hand like a bonus, but it is something which will make them feel more valued and therefore motivated to work well for their organisation. Organisations can take an HRM approach to managing by offering intangible benefits like these and receiving tangible benefits back in the form of increased profits through harder work by employees. A strong example of this would be within a company who invests a lot of time and support in its employees and in turn has reaped the benefits from increased profits.
Starbucks Coffee started off as a small coffee shop in Seattle, Washington State in the 1970’s. It now has over 12,000 shops worldwide (This Is Money 2006) and last year’s sales were $244.2 million in the UK alone ( Is Money 2006). According to the companies founder Howard Shultz, “Our only sustainable competitive advantage is the quality of our workforce. We’re building a national retail company by creating pride in – and providing a stake in – the outcome of our labour (Sandeland 1997. p.136)”. The article details Starbucks’ comprehensive benefit and training package for their employees which includes health care, stock options, career counselling and product discounts. Schultz believes that without taking the time and effort to make sure employees are looked after, happy and being rewarded for their hard work, be it tangible or intangible, they will not feel “…financially or spiritually tied to their job” Sandeland. 1997. p.136). Starbucks has succeeded not just on the popularity of their coffee, but on the service customers receive by the employees - a direct result of the nurturing involved in an HRM approach to management. Starbucks Head of Human Resources best sums up their attitude in the comment “We are in the people-development business almost as much as the coffee business”.
The PM ‘monitoring’ attitude to management sat well during the times of Trade Unions when a Personnel Managers main responsibility was to ensure workers were only doing what was set out in their contract terms. There was no striving for improving customer relations through change as this could risk discontent and strikes by Unions. However as the Trade Union power weakened and the focus could turn to increased productivity through change and studies were carried out to find the best way to achieve maximum output from employees.
The Hawthorne studies were carried out in the early 19th century by Sir Elton Mayo and were originally set up to discover what working conditions encouraged better production rates (Bloisi 2006). Whilst carrying out the studies on a selected group of employees, the results showed that no matter what element of the work they changed, be it temperature or brightness in the room, the productivity always increased. This became known as the ‘Hawthorne Effect’. The study discovered a fundamental concept that would seem obvious today. They found that workplaces are social environments and within them, people are motivated by much more than economic self-interest. The employees worked harder because they knew they were being treated differently and were not being seen as workers but as individuals.. This became knows as the ‘someone upstairs cares’ principal (accel-team 2007).
Another two differing approaches to management by HRM and PM is the way in which they deal with business goals. According to Cole (2002) PM focuses on how a business goal will affect employees before it is challenged, but HRM has a total commitment to business goals. Previously, restrictive Trade Unions meant business goals had to come second to keeping employees happy. Of course this all changed. The 1990’s became known as the ‘decade of the consumer’ which meant that employees concerns now came second to customer needs. These attitudes light up another significant difference in the two methods, how they deal with change. PM will support change but unlike HRM it will not encourage it. Change is becoming increasing important for today’s businesses. Rosenfeld and Wilson (1999) note customer’s demand changes constantly and a business needs to adapt quickly if it is going to stay competitive.
As mentioned previously by Boella (2001), the service sector is an ever growing industry which contributes hugely to the UK’s economy every year. With over 10 million employees in the sector and the majority of them coming face to face with customers as part of their job, it is essential that they convey the best image possible of the organisation. As mentioned before, Mound (2001) describes the strongest resource an organisation has is its human resources and when managed well can have the largest impact on an organisations success. One company’s who takes great pride in their image by looking after their employees, is John Lewis.
John Lewis is major UK department store with 23 shops across the country. An article entitled ‘The ethical route to service quality at John Lewis Partnership’ by Dandy (1996) discusses the company and its high level of customer satisfaction. Its employees deliver exceptionally high standards of service which is largely due to the fact the John Lewis is a good manager of its people. The article thinks this is true because John Lewis follows the authors view of good human resource management to achieve the best customer service which is quoted below:
“…To achieve a consistent high level of quality and customer service it is essential that all staff feel valued, that they are well treated, well trained and given a sense of confidence and responsibility. It is no good just saying that either – money does matter. Unless you have a fair wages policy and do not build resentment by only giving the cream to the already fat cats, then forget it“ (Dandy, J. 1996. p17)
John Lewis meets all these criteria. Firstly, it is offers excellent tangible benefits to its employees. It is a public limited company which means all its employees are shareholders in the company. This means that not only do the staff feel valued, but they receive hard tangible benefits in the form of shares which are essentially money. Essentially, the employees are having shares given to them, but this also means that how hard they work is directly responsible for how much their shares are worth. For example, a Guardian online article (The Guardian 2007) noted that 68,000 John Lewis employees received the equivalent of 8 weeks pay as a bonus for the back of a leap in profits. Also, the company offered employees a pension scheme and medical care. Going back to Starbuck’s Howard Shultz’s theory, if employees do not feel valued they will not feel financially or spiritually tied to their job. So far John Lewis has made sure its employees feel financially tied to their job through the public limited company and tangible benefits, but it still has to tackle the ‘spiritual side’ with intangible benefits.
Boella (2000) discusses that due to nature of the service industry, there are many intrinsic problems that are unavoidable such as working evenings and working over holidays. These are factors which can contribute to high staff turnover and increased absence. However employees at John Lewis receive flexible working hours and flexible leave which contributes to employee motivation and low staff turnover ( Lewis Partnership 2007).
Offering competitive salaries and benefits is extremely important for holding onto and attracting the best employees for an organisation (Rosenfeld 1999). Personnel Management do this internally, by assessing what has been offered within the company and trying to match it. However, the Human Resource Management method of competing is out with the organisation against external competitors. A modern approach to competing for staff is to offer more than other similar companies would offer . John Lewis have adopted this approach by offering employees a pension scheme which is now unique in retail and a strong contributory factor to recruiting and retaining employees.
With all these factors combined, John Lewis could be said to be at the forefront of people management and have exactly the right method in place to look after their employees and hold onto them as well as their customers. As discussed before, good people management means motivated staff and in turn, happier customers. John Lewis have done this an as a result, have loyal customers who will continue to provide business for the years to come. An example of how customers feel about the level of service at John Lewis is shown in this quote from the Scotsman Newspaper’s website in response to the announcements of further profits this year by the company:
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“…I do believe that John Lewis gives value and good customer service…on the whole they are happy to answer questions/tell you about a product without being pushy. They are also good on the after sale as if you have a problem they accept it and deal with while others tell you to contact manufacturer. I've shopped there for years and will continue to do so. While you want the best price I feel they charge a fair price but include good customer service especially in the white goods department…Well done Id say to them on good sales...... and to people thinking about value for money.” (Scotsman 2007)
According to the article (Dandy 1996) John Lewis sticks to the same principals as it first started which is “…Treat the staff right, and they – in turn – will treat the customers right (Dandy, J. 1996. p.19).” However not all major companies like John Lewis stick to these principals like they would be expected to.
An article about the major UK supermarket ASDA by Clement (2005) discusses how the company cut employees discount on everything other than food right before Christmas. Employees were entitled to a 20 percent discount previously to everything in the store which they would make use of, however ASDA decided to withdraw this liberty and reduce the discount to just ten percent. The article also notes that around 30,000 ASDA employees were not shopping for their own food at the store and Unions claimed that “staff morale was at an all time low” (The Independent 2005). Reducing the discount upset employees and therefore would reduce their feeling of any loyalty to the company and their motivation to work hard especially at the busiest time of the year for the supermarket. This is why the HRM approach of nurturing staff and working in harmony with them for the better of the company is the best approach.
Many academics who write about the arguments between Personnel Management and Human Resource Management have noted significant difference between the two approaches. This essay was in turn, to compare and contrast the two methods and ultimately decide upon the better of the two. However, after looking into the two methods in details and in practice, the ideal that they are much of the same thing, interchangeable and indistinguishable (Cole 2002) has many supporting reasons.
In truth, the terms ‘Personnel Management’ and ‘Human Resource Management’ could very easily be used to describe any kind of Human Resources Department and not be accused of being used incorrectly, apart from in America where HRM is the official name for human resources. Many organisations who are seen as using a HRM approach to management , such as John Lewis, still call their human resources division the ‘Personnel Department’. As mentioned at the beginning of this essay many organisations either advertise for Personnel Managers or Human Resource Managers, but this does not mean they expect somebody who will manage in a hard and legalistic way as opposed to a soft, nurturing way or vice versa. Managing people in organisations has had to change with the times and the transition from using one term less frequently has come naturally as a way of showing a widespread acknowledgment of change.
The only main reason for any difference in Personnel Management and Human Resource Management is the different working environments in which they were used in and how effective they are within them. Personnel Management was, at the time, the most appropriate method of management. Political issues such as Trade Unions and the lack of employment law for individuals meant that the basic features of Personnel Management such as recruitment, selection, mediation and dismissal were all that was needed for human resources within a company. The basic functions of Personnel were enough to ensure the smooth running of an organisation at a time when organisational goals and customer satisfaction were not at the forefront of managerial responsibilities.
Human Resource Management is a way managers manage in the climate where they are now able to focus on business goals and customer satisfaction. Changes in employment law means individuals are protected by law and there is less need for Trade Unions. This means managers can focus on working with employees for the better of the organisation and build less legalistic relationships by using good training, offering competitive benefits, putting more focus on teamwork and like John Lewis has done, making them feel part of the organisation and less like somebody who is just working for it.
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