See discussions, stats, and author profiles for this public ation at: https://www .rese archg t/public ation/331541673 Strategic Hu man Resource Management: A Research Overview Book · March 2019 DOI: 10.4324/9780429490217 CITATIONS 11 READS 10,771 3 author s , including: Some of the author s of this public ation are also w orking on these r elated pr ojects: HR Fle xibility Vie w pr oject HRM actions in the T urmoil of Economic Crises Vie w pr oject John St orey The Open Univ ersity (UK) 197 PUBLICA TIONS    7,495 CITATIONS     SEE PROFILE P atrick Wright Univ ersity of South Car olina 193 PUBLICATIONS    27,584 CITATIONS     SEE PROFILE All c ontent f ollowing this p age w as uplo aded by John St orey on 24 A ugust 2020. The user has r equested enhanc ement of the do wnloaded file. Strategic Human Resource Management The field of Strategic Human Resource Management (SHRM) has burgeoned over the past thirty years. Over this time there has been a shift towards a strategic concep- tion which posited workers as ‘assets’ rather than ‘costs’. These ‘human resources’ were reconceptualised as a key source of competitive advantage. As such, these assets were to be treated seriously: selected with care, trained and developed, and above all, induced to offer commitment. The concept of ‘human capital’ came to the fore, and in the decades following these developments, research output has been voluminous. Strategic Human Resource Management: A Research Overview , authored by global research leaders, provides an expert summary of this crucial element of organi – zational performance. This new shortform book develops the argument that one of the crucial elements of organizational performance is the way work is organized in skill and talent packages both within an organization’s boundary and across global competency clusters. Secondly, it focuses on current and emergent challenges. The ‘package’ of HR approaches has changed over time and patterns can be observed. This new volume pays special regard to the HR implications arising from radically altering contexts – economic, social, and technological. This concise volume covers crucial themes of lasting interest, and as such is essential reading for business scholars and professionals. John Storey is Professor of Human Resource Management at The Open University, UK. He has served as Principal Investigator on numerous research council projects concerning strategy, innovation, organizations, and human resource management. Patrick M. Wright is faculty director of the Center for Executive Succession in the Darla Moore School of Business at the University of South Carolina, USA. From 2011 to 2017, he was named by HR magazine as one of the 20 “Most Influential” Thought Leaders in HR. Dave Ulrich is Professor of Business at the Ross School of Business, University of Michigan, USA. He has been ranked by Business Week as the Number 1 manage – ment educator and listed in Forbes as one of the top five business coaches. State of the Art in Business Research Edited by Professor Geoffrey Wood Recent advances in theory, methods, and applied knowledge (alongside structural changes in the global economic ecosystem) have presented researchers with challenges in seeking to stay abreast of their fields and navigate new scholarly terrains.State of the Art in Business Research presents shortform books which provide an expert map to guide readers through new and rapidly evolving areas of research. Each title will provide an overview of the area, a guide to the key literature and theories, and time-saving summaries of how theory interacts with practice. As a collection, these books provide a library of theoretical and concep – tual insights, and exposure to novel research tools and applied knowledge, that aid and facilitate in defining the state of the art, as a foundation stone for a new generation of research. Business Models A Research Overview Christian Nielsen, Morten Lund, Marco Montemari, Francesco Paolone, Maurizio Massaro and John Dumay Mergers and Acquisitions A Research Overview David R. King, Florian Bauer and Svante Schriber Strategic Human Resource Management A Research Overview John Storey, Patrick M. Wright, and Dave Ulrich For more information about this series, please visit: State-of-the-Art-in-Business-Research/book-series/START Strategic Human Resource Management A Research Overview John Storey, Patrick M. Wright, and Dave Ulrich First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business  2019 John Storey, Patrick M. Wright, and Dave Ulrich The right of John Storey, Patrick M. Wright, and Dave Ulrich to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Storey, John, 1947- author. | Ulrich, David, 1953- author. | Wright, Patrick M., author. Title: Strategic human resource management : a research overview / John Storey, Dave Ulrich and Patrick M. Wright. Description: First Edition. | New York : Routledge, 2019. | Series: State of the art in business research | Includes bibliographical references and index. Identifiers: LCCN 2018057137| ISBN 9781138591998 (hardback) | ISBN 9780429490217 (ebook) Subjects: LCSH: Personnel management. | Strategic planning. Classification: LCC HF5549 .S8786 2019 | DDC 658.3/01—dc23 LC record available at ISBN: 978-1-138-59199-8 (hbk) ISBN: 978-0-429-49021-7 (ebk) Typeset in Times New Roman by Swales & Willis Ltd, Exeter, Devon, UK Contents List of figures vi 1 Mapping the field of strategic human resource management 1 2 Strategic human resource management and performance outcomes 15 3 Key practice areas and the key levers 27 4 HR competences and the HR function 43 5 The changing contexts of strategic human resource management 58 6 Fit, flexibility, and agility 71 7 A stock-take and a forward view 82 References 91 Index 109 Figures 3.1 The cycle of HR practices 28 3.2 Idealized model of HR planning 30 3.3 Key elements of a performance management system 34 4.1 HR competency model 50 4.2 Nine dimensions of an effective HR department 53 4.3 Waves of HR value creation 56 1 Mapping the field of strategic human resource management Human Resource Management (HRM) has become the predominant term to describe the theory and practices relating to the way people are managed at work. In previous times (and indeed even now in some places) other terms have been used which, in varying degrees, broadly correspond. These other terms include personnel management, personnel administration, people management, employee relations, human capital management, industrial relations and employment management. Each of these terms reflects the diverse antecedents of HRM and they also reveal aspects of the differ – ent ideologies associated with these approaches. For example, some early forms of personnel management had a ‘welfare’ parentage, others carried traces of a social-psychological ‘human relations movement’ history (Mayo 1949). Each of these traditions reflected a primary focus on individuals and small groups. Conversely, the terms ‘industrial relations’ and ‘employment relations’ reflect the collectivist (pluralist) approach to management-worker relations which, at times and in places, were dominant throughout much of the 20th century in Europe, North America and beyond (Clegg 1979; Dunlop 1958; Flanders 1964; 1970; Fox 1974). This tradition was devel – oped in North America and beyond with ideas about mutual gains and union-management partnerships (Kochan and Osterman 1994). The disci – plinary roots of the field include aspects of labour economics, industrial sociology, psychology and law. The term ‘Strategic Human Resource Management’ (SHRM) is used to emphasise the strategic character of a particular approach to talent and organization management – though some commentators would argue that HRM itself is inherently strategic in nature. Hence, the terms HRM and SHRM are often used interchangeably. The field of HRM/SHRM has burgeoned over the past thirty years. Its roots can be found in American literature of the 1980s, which re-framed people issues away from conceptions that cast people-management as an 2 Mapping the field of SHRM afterthought that could be handled in an ad hoc, reactive way, or managed through formal institutions such as collective bargaining and regulation (Beer et al. 1985). In place of this traditional conceptualisation, there was a shift towards a strategic conception which posited workers as ‘assets’ rather than ‘costs’ (Storey 1992). The workforce was therefore a ‘resource’ and recognised as a key source (arguably the key source) of competitive advantage. As such, these assets were to be treated seri – ously: the composition planned with care, selected with care, trained and developed, and above all, induced to offer commitment. Indeed, the overall shift was memorably described as a journey ‘from control to com – mitment’ (Walton 1985). Alongside all of this, and indeed providing an economics underpinning to it, the concept of ‘human capital’ came to the fore (Becker 1964). This reconceptualization coincided with the emergence of the ‘resource-based view’ in the strategy domain (Wernerfelt 1984; Grant 1991; Peteraf 1993). Emphasis was given to the importance of maintain – ing a link between business strategy and human resource strategy. The human resource approach displaced ‘personnel management’ and gave emphasis to the importance of establishing both vertical and horizontal alignment in HR policies and practices. Influential new models and frameworks were developed including the Harvard Model (Beer 1985), which established a flow from environment to business strategy and to human resource choices and onwards to out – comes. In parallel, important contingency models and frameworks emerged (Fombrun et al. 1984; Kochan and Barocci 1985; Schuler and Jackson 1987), which made links between appropriate HR strategies and a firm’s location in relation to such contingencies as business stages and variations in product/service characteristics (e.g., low cost, innovation or service quality). Empirical research traced how major mainstream companies and public sector organizations were responding to these ideas (Storey 1992). The role of general managers and line mangers alongside human resource and personnel/IR specialists was assessed. This theme of the nature of the HR function’s profile was elaborated and developed by Ulrich in a series of influential publications (Ulrich et al. 1995; 1997; Ulrich et al. 2017). Based on global research, his classification of the HR function into different segments: business partner, shared services and centres of expertise became the dominant model among practitioners. A related development in the field has been the impact of SHRM on firm performance. Ulrich (1997) has also made a significant contribution here, as has Patrick Wright who traced the link between HR resources, capabilities and performance (Wright and Snell 1998). Mapping the field of SHRM 3 A reincarnation of many of the underlying premises of HRM can be found in the influential work of economists investigating the sources of productivity (Bender et al 2018; Bloom and Van Reenen 2007; Bloom et al 2012; Sadun et al 2017). This body of work takes a step back and asks which, if any, ‘management practices’ impact on productivity. They use the World Management Survey which has been administered across thirty-four countries (see They make the case for recognising the vital importance of management competence, central to which, they accept, is competent management of human resources. The key practices are identified as: target setting, the use of incentives, monitoring of performance, and talent management. Achieving managerial competence ‘requires sizable investments in peo – ple and processes’ (Sadun et al 2017, p. 122). This new wave of research and associated practical interventions replays many of the core themes in classic HRM. The above paragraphs give a synoptic view of the emergence and devel – opment of the field. Now we proceed to dig deeper. Defining the field Based on a review of SHRM theorizing and research, Wright and McMahan (1992) defined SHRM as ‘the pattern of planned human resource deploy – ments and activities intended to enable an organization to achieve its goals,’ (p. 298). They noted that this entails vertically linking the strategic manage – ment process to HRM practices, and horizontally creating coordination and congruence among those HRM practices. They then noted that the major variables of concern in SHRM are the determinants of decisions about human resource practices, the composition of the human capital resource pool (i.e., skills and abili – ties), the specification of required human resource behaviors, and the effectiveness of these decisions given various business strategies and/ or competitive situations. (pp. 298–299) It is important to emphasise that currently the term ‘Human Resource Management’ is used in two different ways. In one usage, which we can term the generic , it is used to encompass all of the forms of employment management in its infinite variety. In this first sense it is just a new label for personnel management or employment management in general. But there is a second usage. In its second form the term has at times denoted 4 Mapping the field of SHRM a particular approach to employment management. Thus, the term in this second sense refers to one of the many ways of managing labour and is used to demarcate it from other ways. Not surprisingly, the existence of two different usages has caused considerable confusion in the academic literature with commentators often talking at cross-purposes. So, what is this second, more specific and narrow meaning? In this particular sense it has been defined as follows: Human resource management is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques . (Storey 2007, p. 7) The Chartered Institute of Personnel and Development (CIPD) the UK-based professional body for HR practitioners, appears to reflect these same ideas in its own definition: Strategic human resource management (strategic HRM, or SHRM) may be regarded as an approach to the management of human resources that provides a strategic framework to support long-term business goals and outcomes. The approach is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commit – ment and matching resources to future need. (CIPD Factsheet 2013) The key elements in both these definitions are: long-term focus, a strong link with business goals and a concern with ‘macro’ issues such as culture and values. Notably, apart from the reference to business goals, there is no specific mention of contextual issues such as changes in product market conditions, labour markets, regulation, innovations in technology or social changes. This may or may not imply a one-best way or universalist approach. As noted, it is an approach which openly seeks to secure a ‘competi – tive advantage’. This declared objective is not to every ideological taste. This element alone indicates that the approach shares a similar stance as American strategy theorists such as Michael Porter (Porter 1980). Many critics of HRM have been, and are, uncomfortable with this first element. They posit the idea that economic activity does not to have to be quite so single-mindedly dedicated to free market competition. They also contend that even within a capitalist framework, collaboration as well as com – petition can operate and that other objectives in addition to competitive Mapping the field of SHRM 5 advantage such as wellbeing, equity and multiple stakeholder interests could be pursued. And they are of course correct. But some of these critics have failed to recognise that an identification and description of a movement and an idea should not be confused with an endorsement of that idea. Second, the definition points to the distinctive means through which the objective will be sought. These include, crucially, the element of a ‘strategic’ approach. This means that the management of people and of the workforce in general is approached not in an ad hoc, tactical and merely reactive way but in a manner which regards this aspect of management as of central impor – tance. HRM practices helped deliver strategic objectives. Different strategies require different employee skills. As with other aspects of the definition, the interesting features are in noting not only what this form of HRM is, but also what the meaning suggests HRM is not. The counterfactual is important. For the HRM debate and the emergence of HRM only makes sense when it is recognised as part of the history of its time. HRM emerged at a time when labour management, in broad characteri- sation, might be described as a secondary, Cinderella-like, management practice (‘Personnel Management’ was often described in these terms). Markets were defined, finance arranged, production plans drawn up – and only then was the request for certain units of labour issued, often at short notice. Similarly, as industrial conflict was of concern in the post-second world war period, the skills in subduing and ‘managing conflict’ were to the fore in the then field of personnel/IR management. It was into this climate when western product markets were coming up against international competition – and often losing out – that this ‘new’ approach to managing labour emerged and presented a challenge to existing assumptions and practices. Third, the definition refers to the deployment of a ‘highly committed and capable workforce’. This is an important feature of the distinctive approach. As we know, very large sections of the economy operate on very differ – ent principles. The high commitment approach is relatively unusual in large swathes of the employment scene. Hire and fire, short-term contracts, even zero-hour contracts, outsourcing, agency work and many other such methods to treat labour as a mere transaction are relatively commonplace. Recent talk of ‘employee engagement’ or ‘employee experience’ can be seen as a latter-day attempt to (re)capture some of that high commitment agenda. The distinctive high commitment mode of HRM equates with what is termed the ‘High Road’ approach to employment management. The ‘Low Road’ approach relates to the precarious forms of employment (Osterman 2018). The links between high pay/high productivity versus low pay/low productivity models have been explored in the disciplines of economics (Abowd et al. 1999) 6 Mapping the field of SHRM and employment relations (Holzer et al. 2004). HRM, in the distinctive sense, is expressive of the High Road approach. This high road/high com – mitment perspective is likewise integral to the theory of High Performance Workplaces (Appelbaum et al. 2000) Fourth, the ‘array of cultural, structural and personnel techniques’ refers to the mutually-reinforcing ways in which a truly thought-out strategic approach can deploy a wide range of methods which would have internal ‘fit’ and would complement each other (a further instance of the strate – gic nature of the idea). These techniques include attempts to: ‘win hearts and minds’ rather than merely enforce a contract; to de-emphasise custom and practice in favour of instilling values and mission; pluralism is also downplayed in favour of an implied unitary perspective where employers, managers and employees are seen to share at least one similar interest: to keep the enterprise in business. Thus, a set of beliefs and assumptions underpin this distinctive form of HRM. Other dimensions stress the role of strategy in that the business plan becomes pertinent to the way that employees and workers in general are managed; and an emphasis on the role of line managers as crucial to the practice and experience of HR poli – cies. Then there is a set of key levers such as serious attention to selection (in place of hire and fire), performance related pay, an attempt to move from ‘temporary truces’ in labour negotiations to management through cul – ture and shared goals. When viewed holistically, is this package to be regarded as a ‘soft’, ‘human relations’, approach with employee welfare at its core? There are facets such as an emphasis on training and development and the winning of hearts and minds that might lean in that direction. But there are also ‘hard’ aspects to this model of HRM (Storey 2007). Labour is seen as a strategic resource. As such it is to be planned-for, measured carefully, and used as an asset. HRM sits alongside the resource-based view of the firm as strategic perspective on how to manage the employment relationship (Storey 1992; 2007). What about practice? While the HRM label has become so ubiquitous and has, in the main, replaced personnel management in many organizations (contrary to expectations and indeed contrary to empirical evidence dur – ing its early days – as revealed by the WERS surveys 1), the management of work has, over the past couple of decades, not been a steady journey to the wider diffusion of the best practice HRM model. In the wider, generic sense, Human Resource Management continues, but the nature of its practice is very varied. This variation is reflected in terms such as ‘High Road and Low Road’ practices, ‘polarized work’ and in the metaphor of the ‘hourglass economy’. These variations might seem to suggest the degree of strategic choice fac – ing HR professionals. Yet, research across major economies indicates that, Mapping the field of SHRM 7 for many workers, the erstwhile trend towards good practice has shifted into reverse (Kalleberg 2013; 2018). Theory and practice As currently conceived, HRM is constituted by both research and practice. These two are related but they are not the same. It is a truism that practice often differs from theory in the sense that everyday practices do not always live up to some theoretically-derived prescription of an ideal or a ‘best’ way. But the practice-research distinction can be exaggerated. Much research in human resource management is simply the identification and cataloguing of practice. For example, they include statistical and descriptive summa – ries of the state of play with regard to what human resource specialists do, how they are distributed, what influence they exercise, and so on, which are research-based mirrors of practice. The same can be said for those examples of HR research which draw a picture of recruitment and selection practices, appraisal methods, reward systems and the like. This type of research reflects practice. It is descriptive. But, there is another type of research which seeks to identify ‘good practice’ and even ‘best practice’. This type tries to identify the causal links between context, practices and outcomes. For example, this goes beyond describing what HR professionals do and moves on to study the impact of what they do on key outcomes such as employee well-being or business performance. Theory then, explains why these outcomes might occur by building conceptual frameworks. As a result, it follows that in many instances, actual practice will often differ from ‘theory’. Yet additionally, many practitioners pay regard to research when seeking to develop their practice and so theory and practice can become closer as a consequence. Thus, the question ‘what is HRM?’ can then be answered in terms of both theory and practice. The nature of strategy in HRM A strategic approach to HR could normally be expected to include ele – ments such as: a longer-term perspective; a concern with big issues that go beyond operational detail; an approach which scans, and factors-in, relevant information about the environment and about changes within it; the construction of policies which seek to align HR practices to the needs of the business often expressed as mission, vision, strategy or goals; and the construction of HR policies which bring each of the elements of HR into mutual, reinforcing, alignment. Thus, decisions in relation to recruitment 8 Mapping the field of SHRM and selection priorities should be consistent with priorities in the areas of goal-setting, performance management, reward, training and development, and promotion and exit. So, whereas an operational decision might be confined to a one-off interaction with an employee (for example, how to handle a particular appraisal interview) and may require some tactical skill, SHRM is con – cerned with the wider issues and usually involves making choices about matters which will have longer-term consequences and will affect the success or otherwise of the business. The alignment of HR components has been termed ‘internal fit’, while the alignment of HR with business strategy and the wider business environment has been termed ‘external fit’. Strategic HR should aspire to both types of fit (Miles and Snow 1994). SHRM is concerned with both policies and practices. Ideally, these work in tandem, but appropriate policies can be undermined by poor prac – tices, and conversely, good practice may, to some extent, compensate for defective policies. It is a field which comprises practice, prescription and empirical study. Although one might desire and assume a strong connec – tion between these, in reality, there is sometimes a considerable disconnect between these three elements. An important question is who generates HR strategy? It might be a specialist HR Director and team but not all organisations have these. Even if the senior business team have created a separate HR function (in the form of a unit or department), it is possible that they may not necessar – ily devolve all big decisions in this area to that department. Indeed, the choices about whether to have such an HR department can be seen as one of the strategic decisions we are talking about here. Research evidence suggests that key integrated business decisions (which include HR and finance and marketing strategies) are formulated by executive groups (not Boards) and that the members of these groups multitask and are most effective when they adopt a business orientation and not a functional orientation. A business orientation ‘makes strategic deci – sion makers comfortable to deal with issues outside their business function’ (Kelly and Gennard 2007, p. 114). Classic definitions include the idea that ‘business strategy’ is: The determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for those goals. (Chandler 1962, p. 13) Mapping the field of SHRM 9 Thus, from one perspective, strategy requires systematic rational assessment of contexts and resources. Some approaches to doing strategy focus mainly on finding the optimal space or location in a market. So, these approaches tend to look outwards to the characteristic features of a market such as price, quality and the distinctiveness of offers for goods or services. A business strategy (and by extension an HR strategy) that focuses more on utilising internal resources than on locating the best market position is known as ‘the resource-based view’ (RBV). This was advanced most fully by Prahalad and Hamel (1990) and Grant (1991). These analysts were mainly talking about business strategy but their approach has profound implications for HR. The re-focusing on internal resources is an approach which is closely aligned to the idea of an HRM strategy because it gives emphasis to the importance of leveraging resources to gain a competitive advantage. As noted above, it regards labour as assets rather than in the conventional accounting view as costs. And, of course, one implication of this is that one tends to invest in and to nurture assets, whereas one nor – mally tends to try to cut costs. This idea of the workforce as assets gets to the heart of many approaches to SHRM. It involves seeking to build human capability and to gain competitive advantage from workforce skills, crea – tivity and commitment. Strategy as plan? Another issue that has been central to debates in business strategy and also has much relevance to HR strategy, is whether a ‘strategic approach’ requires a formal plan. There is often a tendency to think about strategy as requiring the compilation of information and as a formal process of decision making that culminates in a series of plans. But there is another view; the view that suggests strategy can be inferred from a pattern that emerges from a long series of decisions, even in the absence of a formal written plan or strategy document. This could be termed a ‘de facto strategy’. This idea of an ‘emergent strategy’ is normally associated with Henry Mintzberg (1978). So, an enterprise may have no formal strategy document and yet still have a de facto emergent strategy. Or it may even be that an enterprise has a formal and lengthy strategy document which is largely ignored in practice while a different de facto strategy is pursued. A de facto strategy which has been built up incrementally and found to ‘work’ (in the sense that the organisation has proved to be sustainable and no major chronic problems are occurring) may add up to a coherent strategy. 10 Mapping the field of SHRM But not all ad hoc approaches have such optimal outcomes. ‘ Ad hocery ’ may result in a lack of forethought, inconsistencies, short-term thinking, and waste and can be very costly and lead to an uncompetitive position (e.g., paying redundancies as a reaction to economic downturn and then facing recruitment difficulties and training costs when upturn occurs). The word ‘rudderless’ is sometimes used to describe this kind of drift and lack of direction. Hence, this particular approach would be considered as non-strategic. So, what would an approach to HR look like if it was not ad hoc, rudderless and reactive? The implied alternative is some kind of strategic approach – that is, one which: • tries to build a big picture • has a sense of direction of travel • has some coherence and consistency • has mutually reinforcing elements Coherence is about fit and integration. In other words, it suggests that the parts or elements fit together smoothly rather than contradict each other or lean in different directions. A classic example of HR decisions which tend towards contradiction is where ‘team focus’ is urged and policies are put in place to promote that, but where the remuneration system is based on individual performance-related pay. But, in addition to alignment and coherence, HR strategy design requires attention to contexts – that is, the inner and outer contexts as outlined in the previous unit. The nature of the design, and the range of factors to be taken into account when attempting this design, is a matter of some debate. The skill involved in making these decisions may be a matter of good judgement – an essential quality for a competent strategist in HR. Some analysts rec – ommend an approach which amounts to a ‘design’ or ‘decision science’ (Boudreau and Ramstad 2009) with an associated emphasis on systematic concepts, frameworks and measurement, while others lean more towards an approach based on aspects of leadership and social intelligence. Why is SHRM important? The arguments relating to the importance of SHRM tend to be constructed around the claim that ‘people make the difference’. The point being made here is that other resources are available and purchasable (capital, new plant, and new equipment, etc.) on a relatively open market, but it is the Mapping the field of SHRM 11 creative utilisation of these resources and ideas by people (singularly and in combination) which lies at the root of creating a competitive advantage. These arguments are in some ways similar to those that stress the importance of the resource-based view or of the role of knowledge and the importance of organization capability (Ulrich 1997; Ulrich and Smallwood 2004) or ‘dynamic capability’ (Teece et al. 1997). Dynamic capability was defined by Teece et al. as a ‘firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments’ (1997, p. 516). It suggests that intangible assets, including the knowledge and skills of the workforce, can be configured so that traditional routines do not hamper responses to rapidly changing environments. Instead, more flex – ible, meta-routines can be created which enable organisations to be capable of a higher state of responsiveness to inherently unpredictable forces. Failure to attract, retain and motivate the right numbers and right kinds of people mean that opportunities are missed and that other resources are wasted. In general, the available studies appear to reveal impressive evidence of robust impacts and outcomes (for example, Huselid 1995; Becker and Gerhart 1996; Ichniowski et al. 1997; Becker and Huselid 1998; Ichniowski and Shaw 1999). An influential idea has been that appropriate ‘bundles’ of HR practices make the real difference (MacDuffie 1995). These classic studies were mainly conducted in the USA and in the mid-1990s. They sug – gest that those firms which used ‘bundles’ of HR interventions were more likely, on a statistical basis, to enjoy better financial performance. This issue of the links between policies and performance outcomes are explored more fully in Chapter 2. The importance of dynamic capabilities and a strategic mind-set in an innovation-oriented economy heightens the need to attend to the man – agement of human resources and other intangible assets (Davenport and Leibold 2006). And resource-based theories suggest that sustainable com – petitive advantage stems from unique bundles of resources that competitors cannot, or find extremely hard to, imitate (Wernerfelt 1984; Barney 1991). Ironically, it has tended to be economists and others who have argued the case that human assets in particular can fulfil this criterion (Polanyi 1966; Davenport and Leibold 2006; Teece et al. 1997). Such accumulating evi – dence has helped advance the idea of ‘human capital’ management. Contingency models and frameworks In contrast to the best practice models considered in the previous sec – tion, contingency models of SHRM are based on the premise that what is required is a skilful alignment between HR policies and various 12 Mapping the field of SHRM organisational and contextual characteristics. Thus, best fit approaches can be located within this category. The word ‘contingency’ here refers to those theories which explain organisational behaviours and outcomes as highly dependent on some inner or outer environmental variable such as country, technology, organisational size or industry type or the fit with a particular business strategy. In some versions of contingency theory (the more deterministic ones) the interpretation would seem to chal – lenge the idea of strategic choice. In less deterministic versions, strategic choice occurs when HR policies and practices uniquely align to a particular business strategy. Types of contingency frameworks Below we summarise three main types of contingency model which link HR strategy to different ways of thinking about context (environment). The three types are: linking SHRM to business strategy; linking SHRM to busi – ness life-cycle; linking SHRM to strategy and structure. Linking SHRM to business strategy It is sometimes argued that an HR approach is only ‘strategic’ if it ‘fits’ with the organisation’s product–market strategy and if it is proactive in this regard. Most of the theorists in this category draw on Porter’s distinction between innovation, quality-enhancement or cost-reduction strategies (e.g., Schuler and Jackson 1987, or Miles and Snow 1984). For example, Schuler and Jackson (1987) suggest that where a firm has opted for innovation as a means to gain competitive advantage, this sets up certain predictable required patterns of behaviour. Prime among these req – uisite ‘role behaviours’ are creativity, a capacity and willingness to focus on longer-term goals, a relatively high level of collaborative action, a high tolerance of ambiguity and a high degree of readiness to take risks. Linking SHRM to business life-cycle The business life-cycle approach essentially seeks to tailor human resource policy choices to the varying requirements of a firm at different stages of its life-cycle, i.e., from business start-up, through early growth and maturity, and eventually on to business decline. At each stage a busi – ness might be hypothesised to have different priorities. These different priorities, in turn, require their own appropriate human resource strate – gies. There are a number of examples of the life cycle or ‘stages’ approach Mapping the field of SHRM 13 (Lengnick-Hall and Lengnick-Hall 1988; Kochan and Barocci 1985; Baird and Meshoulam 1988). Kochan and Barocci (1985) and others suggest that, at the start-up stage, new enterprises require recruitment and selection strategies that quickly attract the best talent; reward strategies that support this by paying highly competitive rates; training and development strategies that build the foundations for the future; and employee relations strategies that draw the basic architecture and put in place the underlying philosophy for the new business. Under mature conditions, the emphasis in HRM is upon control and maintenance of costs and resources. Hence, the recruitment and selection stance might be geared to a gradual introduction of new blood into vacant positions created by retirements. There might also be a policy of encour – aging enough labour turnover so as to minimise the need for compulsory lay-offs. Meanwhile, the pay and benefits policy is likely to be geared to a keen control over costs. Training and development might be expected to have the maintenance of flexibility and the adequate provision of skill levels in an ageing workforce as their priority. Linking SHRM to organizational strategy and structure The most noted example of the strategy/structure linkage of contingency theory is the work of Fombrun et al. (1984). Their model shows a range of ‘appropriate’ HR choices suited to five different strategy/structure types, ranging from single product businesses with functional structures, through diversified product strategies allied to multi-divisional organisational forms, and on to multi-product companies operating globally. For each of the five types of situation, the key HR policy choices in the spheres of selection, appraisal, reward and development, are delineated. For instance, the HRM strategy of a company following a single-product strategy with an associated functional structure is likely to be traditional in appearance. Selection and appraisal may well be conducted in a subjective fashion, and reward and development practices may veer to the unsystem – atic and paternalistic. By way of contrast, a company pursuing a diversification strategy and operating with a multi-divisional structure, is likely to be characterised by a HR strategy driven by impersonal, systematic devices which are adaptable to the different parts of the organisation. Reward systems are likely to be formula-based with a tendency towards a focus on return on investment and profitability. Selection, and even appraisal, may be found to vary between the different constituent business divisions. 14 Mapping the field of SHRM Summary This chapter has summarised the key aspects of strategic human resource management: • What is it and what does it look like? • What were its antecedents? • Why is it important? • What kind of performance outcomes have been found? • What are the main theories and frameworks? Key issues include: • That strategy can be emergent as well as planned. Either way, it can be assessed and evaluated in terms of its efficacy and appropriateness to labour and product market conditions. • Ad hoc decisions and responses which lack consistency may risk inef – ficiencies and waste. • HR strategy normally has to validate itself in terms of its contribution to the wider organisational mission. This does not necessarily mean simply following in an unquestioning way the lead taken by other directors in operations and marketing – it may be that a resource-based approach requires a HR strategy which is distinctive. In the next chapter we assess the body of research which has tried to clarify the performance outcomes arising from the deployment of strategic human resource practices. These outcomes may be behavioural in the sense, for example, of higher employee commitment or firm outcomes in the shape of higher productivity or even higher profitability. 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