3. The approaches to HR strategy
There are various approaches to developing a HR strategy; I will look at the Harvard model, The Michigan model and the Guest model. The Harvard approach sees employees as resources. However they are viewed as being fundamentally different to other resources as they cannot be managed in the same way. The emphasis is on the people as human resources. The Harvard Map as it is known in various literature outlines four HR policy areas:
- Human resource flows – recruitment, selection, placement, promotion, appraisal and assessment, promotion and termination.
- Reward Systems – reward and pay systems, motivation etc
- Employee Influence – delegated levels of authority, responsibility and power.
- Work systems – definition/design of work and alignment of work.
This model suggests that these HR policy choices are more superior to others. These policy choices will be influenced by Stakeholders and situational factors e.g. Labour market. It is management’s task to make strategic policy choices in light of these factors. If appropriate choices are made then it will lead to beneficial HR outcomes. These are the “ four C’s”, commitment, congruence, and competence and cost effectiveness. The Harvard model is an example of “ soft” HRM. This model sees employees as valued assets, its strengths are that it draws on the human relations aspect, it emphasises communication, teamwork and the utilisation of individual talents.
The Michigan model has a harder less humanistic edge and comes under the “hard” HRM approach. It has a more strategic approach and a unitary outlook, which endorses management views. It proposes that employees are resources in the same way as any other business resources. It states that they must be obtained as cheaply as possible and used sparingly. It also states that they must be developed and exploited as much as possible. This model has the view that Human beings are “matched” to the business needs.
Guest draws on the Harvard model and the Michigan model, he acknowledges the differences between these approaches, but he also incorporates both together into the normative HRM model. Guest explains the underlying interconnections between a particular set of policy choices and a desired set of outcomes such as quality and choice (See fig 1). The concept of normative HRM has been adopted by many organisations and has two common themes. The first being, HR policies should be integrated with strategic business planning and used to reinforce or change appropriate organisational culture. Secondly, human resources are valuable and a source of competitive advantage and are tapped most effectively through policies that promote commitment. The Guest model is concerned with communication and motivation.
Fig 1.
4. Steps an organisation might take to develop HR strategy
There are many different methods by which an organisation can develop a HR strategy. To start off an organisation needs to look at its business strategy and aim to align its HR strategy with it. The organisation needs to review its business environment and review the resources available such as staff and capital. They can do this by conducting an internal and external environmental analysis of strengths, weaknesses, opportunities and threats and a PEST analysis. Then these resources need to be changed or managed to meet the business strategy or the company’s mission statement.
If we take the example of McDonalds (see appendix) who are rebranding their food and undertaking a massive skills programme, called “ Friendliness First”. The aim is to train restaurant management in hospitality, and provide them with training material to use on the crewmembers. Although McDonalds has built its success on speed and value for money, what consumers now want is hospitality. McDonalds competitors have got better and now it is attempting to use its people to meet the company’s strategy of rebranding and changing its image.
5. Strategy as contingent on organisation/management decisions
There is a lot of research on the contingency approach to HR strategy( Ackermann, K.F). This is the relationship between the HR practices and the organisations strategy. However to give a clearer understanding of the link between HR and Strategy I will discuss the three theoretical perspectives which include contingency, universalistic, and configurational. The universalistic perspective suggests there is a “ best practice” approach to HR strategy, with a set of HR policies to be identified which will improve performance. These “ best practice” policies may be embodied in a variety of concrete and detailed HR techniques or practices.
The configurational approach is concerned with “the pattern of planned human resource deployments and activities intended to enable an organisation to achieve its goals”(Wright &McMahon, 1992). This approach suggests that an organisation must develop HR as a system so that both horizontal and vertical fit can be achieved.
The contingency approach argues that to be effective organisation HR policies must be consistent with other aspects of the organisation.
“HR strategy becomes more effective when it is designed to fit certain critical contingencies in the firms specific context”, (Boxall.P &Purcell.J, 2000)
The organisations strategy is generally considered the primary contingency factor. Human resource policies and practices must be consistent with the organisations strategy (Miles &Snow, 1978). The contingency approach states that the context in which an organisation/management makes strategy decisions will be limited and depends on the organisations size, technology and stability. I feel this approach is more practical than the other two as HR strategy has to fit the different parts of an organisation such as sub cultures or climates. Many organisations have subcultures or an organisational culture, which may clash with the HR strategies. Sub cultures play a significant role influencing the degree to which Hr strategies are successfully translated into HR practice. If we take the example of Marks & Spencer, they used to have a hierarchical culture, which made it difficult to recruit “new blood”. However when their organisation strategy changed they recruited George Davies for his new clothing range “per una”, so they aligned their HR strategy with that of the company. Organisations could benefit from designing HR strategies that recognise and accommodate different sub cultures.
6. Contrasting strategies depending on the fit to the choices involved
In this section, I will assess how the case studies McDonalds and Venture Pressings fit into the models discussed earlier in the text. McDonalds organisation strategy is the rebranding of food to put McDonalds back on track as the worlds leading fast food giant. Due to food scares and a more health conscious public McDonalds has had to change its strategy in an attempt to bring back customers. As well as this, customers also want more hospitality rather than just a quick service. McDonald’s looks to its training and HR function to put together a massive skills training programme to align its HR strategy with the organisational strategy. In service organisations, it can be argued that the need to align approaches to HR with business strategy is even more crucial, because of the role employees, particularly those who interface directly with
customers, have in determining service quality. The practices and policies used by McDonald’s include hospitality training and development of existing staff, training for new recruits and more experienced staff to take on the role as “mentor” to new recruits. A well-trained and motivated workforce may cut the costs of supervision, as they possess the skills to take charge of their own work. I consider McDonalds to fit the Harvard model as it emphasises the human resource aspect especially communication and teamwork.
Venture Pressings company objective is to develop and maintain and prosperity of the company for the benefits of all employees and the shareholders. The companies HR practices are in accordance with the Guest model of HRM. The practice and policies used are staff planning, recruitment and selection, learning and development and Performance management. The outcome for the organisation is high productivity and quality and an integrated HR strategy to meet their organisation strategy.
7. Critical appreciation of the HRM models
The report has discussed the different approaches to HR strategy and provided examples of how real organisations fit the models. This section discusses the limitations of the models in practice. Some authors have suggested that there inherent contradictions with the Guest model (normative model). As Keenoy (1990) states
“The goals of quality, flexibility, commitment and integration presented in Guests (1987) soft model of HRM may well not be mutually compatible and in practice may be difficult to achieve”.
Firstly, normative HRM proposes that there is a simple linear relationship between strategy and HRM. However there are problems in the integration of HRM policy with business strategy as evidence suggests HR is more ad hoc than strategic. Secondly the unitary framework of the normative model, which elicits that what is good for the organisation, is good for employees, is a problem, as the needs of the business do not always coincide with the best interests of the workforce (Kennoy, 1990). Thirdly within this single concept of normative HRM are embedded two models of HRM that communicate the two opposites sets of assumptions of “hard” and “soft” HRM. The assumption that committed workers are necessarily more productive has not been proved.
The Michigan model or “hard” HRM places an emphasis on the “resource” aspect and stresses that HRM focuses on the crucial importance of the close integration of human resource policies, systems and activities with the business strategy. From this point of view, human resources are largely a factor of production, an expense of doing business rather than the only resource capable of turning inanimate factors in to wealth for the organisation. Human resources are viewed as passive only to be used as numbers and skills at the right time and price.
In contrast, the Harvard model or “ soft” HRM places an emphasis on “ human” and is associated with the human relations school of Herzberg and McGregor (Storey, 1987). This model emphasises the importance of integrating HR policies with Business objectives, it focuses on treating employees as valued assets and a source of competitive advantage through their commitment, adaptability and high quality skill and performance. Employees are proactive rather than passive.
8. Conclusion
Developing a HR strategy is imperative for organisations in today’s competitive business environment. The various approaches to HRM strategy outlined in the report are not always practical as in reality it is very difficult to have a “one size fits all” HR theory, and this means that there can never really be a “one size fits all” HR strategy. In reality when organisations are developing a HR strategy they will fit somewhere between the “hard” and “soft” approach. Another point is that contingencies need to be considered, as HR, strategies need to be contingent with the organisations subcultures. The following concepts need to be considered if the HR strategy an organisation adopts is to be effective
- Different human resource practices should be coherent and complement each other.
- There should be a fit between the coherent sets of human resource practices and other systems within the organisation.
- The human resource systems should be in line with the business or competitive strategy of the organisation.
- The human resource system adopted by the organisation should be compatible with its operating environment.
