Strategic Human Resource Management

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Strategic Human ResourceManagementThe field of Strategic Human Resource Management (SHRM) has burgeoned overthe past thirty years. Over this time there has been a shift towards a strategic conception which posited workers as ‘assets’ rather than ‘costs’. These ‘human resources’were reconceptualised as a key source of competitive advantage. As such, these assetswere 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, andin the decades following these developments, research output has been voluminous.Strategic Human Resource Management: A Research Overview, authored byglobal research leaders, provides an expert summary of this crucial element of organizational performance. This new shortform book develops the argument that one ofthe crucial elements of organizational performance is the way work is organized inskill and talent packages both within an organization’s boundary and across globalcompetency clusters. Secondly, it focuses on current and emergent challenges. The‘package’ of HR approaches has changed over time and patterns can be observed. Thisnew volume pays special regard to the HR implications arising from radically alteringcontexts – economic, social, and technological.This concise volume covers crucial themes of lasting interest, and as such isessential 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 projectsconcerning strategy, innovation, organizations, and human resource management.Dave Ulrich is Professor of Business at the Ross School of Business, University ofMichigan, USA. He has been ranked by Business Week as the Number 1 management educator and listed in Forbes as one of the top five business coaches.Patrick M. Wright is faculty director of the Center for Executive Succession in theDarla Moore School of Business at the University of South Carolina, USA. From2011 to 2017, he was named by HR magazine as one of the 20 “Most Influential”Thought Leaders in HR.

State of the Art in Business ResearchEdited by Professor Geoffrey WoodRecent advances in theory, methods, and applied knowledge (alongsidestructural changes in the global economic ecosystem) have presentedresearchers with challenges in seeking to stay abreast of their fields andnavigate new scholarly terrains.State of the Art in Business Research presents shortform books whichprovide an expert map to guide readers through new and rapidly evolvingareas of research. Each title will provide an overview of the area, a guide tothe key literature and theories, and time-saving summaries of how theoryinteracts with practice.As a collection, these books provide a library of theoretical and conceptual insights, and exposure to novel research tools and applied knowledge,that aid and facilitate in defining the state of the art, as a foundation stonefor a new generation of research.Business ModelsA Research OverviewChristian Nielsen, Morten Lund, Marco Montemari, Francesco Paolone,Maurizio Massaro and John DumayMergers and AcquisitionsA Research OverviewDavid R. King, Florian Bauer and Svante SchriberStrategic Human Resource ManagementA Research OverviewJohn Storey, Dave Ulrich, and Patrick M. WrightFor more information about this series, please visit: earch/book-series/START

Strategic Human ResourceManagementA Research OverviewJohn Storey, Dave Ulrich, andPatrick M. Wright

First published 2019by Routledge2 Park Square, Milton Park, Abingdon, Oxon OX14 4RNand by Routledge52 Vanderbilt Avenue, New York, NY 10017Routledge is an imprint of the Taylor & Francis Group, an informa business 2019 John Storey, Dave Ulrich, and Patrick M. WrightThe right of John Storey, Dave Ulrich, and Patrick M. Wright to beidentified as authors of this work has been asserted by them in accordancewith 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 orutilised in any form or by any electronic, mechanical, or other means, nowknown or hereafter invented, including photocopying and recording, or inany information storage or retrieval system, without permission in writingfrom the publishers.Trademark notice: Product or corporate names may be trademarks orregistered trademarks, and are used only for identification and explanationwithout intent to infringe.British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British LibraryLibrary of Congress Cataloging-in-Publication DataNames: Storey, John, 1947- author. Ulrich, David, 1953- author. Wright,Patrick M., author.Title: Strategic human resource management : a research overview / JohnStorey, Dave Ulrich and Patrick M. Wright.Description: First Edition. New York : Routledge, 2019. Series: Stateof the art in business research Includes bibliographical referencesand index.Identifiers: LCCN 2018057137 ISBN 9781138591998 (hardback) ISBN9780429490217 (ebook)Subjects: LCSH: Personnel management. Strategic planning.Classification: LCC HF5549 .S8786 2019 DDC 658.3/01—dc23LC record available at https://lccn.loc.gov/2018057137ISBN: 978-1-138-59199-8 (hbk)ISBN: 978-0-429-49021-7 (ebk)Typeset in Times New Romanby Swales & Willis Ltd, Exeter, Devon, UK

ContentsList of figuresvi1Mapping the field of strategic humanresource management2Strategic human resource managementand performance outcomes153Key practice areas and the key levers274HR competences and the HR function435The changing contexts of strategic humanresource management586Fit, flexibility, and agility717A stock-take and a forward view82ReferencesIndex191109

Figures3.13.23.34.14.24.3The cycle of HR practicesIdealized model of HR planningKey elements of a performance management systemHR competency modelNine dimensions of an effective HR departmentWaves of HR value creation283034505356

1Mapping the field of strategichuman resource managementHuman Resource Management (HRM) has become the predominant term todescribe the theory and practices relating to the way people are managed atwork. In previous times (and indeed even now in some places) other termshave been used which, in varying degrees, broadly correspond. These otherterms include personnel management, personnel administration, peoplemanagement, employee relations, human capital management, industrialrelations and employment management. Each of these terms reflects thediverse antecedents of HRM and they also reveal aspects of the different ideologies associated with these approaches. For example, some earlyforms of personnel management had a ‘welfare’ parentage, others carriedtraces of a social-psychological ‘human relations movement’ history (Mayo1949). Each of these traditions reflected a primary focus on individuals andsmall groups. Conversely, the terms ‘industrial relations’ and ‘employmentrelations’ reflect the collectivist (pluralist) approach to management-workerrelations which, at times and in places, were dominant throughout muchof the 20th century in Europe, North America and beyond (Clegg 1979;Dunlop 1958; Flanders 1964; 1970; Fox 1974). This tradition was developed in North America and beyond with ideas about mutual gains andunion-management partnerships (Kochan and Osterman 1994). The disciplinary roots of the field include aspects of labour economics, industrialsociology, psychology and law.The term ‘Strategic Human Resource Management’ (SHRM) is usedto emphasise the strategic character of a particular approach to talent andorganization management – though some commentators would argue thatHRM itself is inherently strategic in nature. Hence, the terms HRM andSHRM are often used interchangeably.The field of HRM/SHRM has burgeoned over the past thirty years. Itsroots can be found in American literature of the 1980s, which re-framedpeople issues away from conceptions that cast people-management as an

2Mapping the field of SHRMafterthought that could be handled in an ad hoc, reactive way, or managedthrough formal institutions such as collective bargaining and regulation(Beer et al. 1985). In place of this traditional conceptualisation, therewas a shift towards a strategic conception which posited workers as‘assets’ rather than ‘costs’ (Storey 1992). The workforce was thereforea ‘resource’ and recognised as a key source (arguably the key source)of competitive advantage. As such, these assets were to be treated seriously: the composition planned with care, selected with care, trainedand developed, and above all, induced to offer commitment. Indeed, theoverall shift was memorably described as a journey ‘from control to commitment’ (Walton 1985). Alongside all of this, and indeed providing aneconomics underpinning to it, the concept of ‘human capital’ came to thefore (Becker 1964).This reconceptualization coincided with the emergence of the‘resource-based view’ in the strategy domain (Wernerfelt 1984; Grant1991; Peteraf 1993). Emphasis was given to the importance of maintaining a link between business strategy and human resource strategy. Thehuman resource approach displaced ‘personnel management’ and gaveemphasis to the importance of establishing both vertical and horizontalalignment in HR policies and practices.Influential new models and frameworks were developed including theHarvard Model (Beer 1985), which established a flow from environmentto business strategy and to human resource choices and onwards to outcomes. In parallel, important contingency models and frameworks emerged(Fombrun et al. 1984; Kochan and Barocci 1985; Schuler and Jackson1987), which made links between appropriate HR strategies and a firm’slocation in relation to such contingencies as business stages and variationsin product/service characteristics (e.g., low cost, innovation or servicequality). Empirical research traced how major mainstream companies andpublic sector organizations were responding to these ideas (Storey 1992).The role of general managers and line mangers alongside human resourceand personnel/IR specialists was assessed.This theme of the nature of the HR function’s profile was elaboratedand developed by Ulrich in a series of influential publications (Ulrich et al.1995; 1997; Ulrich et al. 2017). Based on global research, his classificationof the HR function into different segments: business partner, shared servicesand centres of expertise became the dominant model among practitioners.A related development in the field has been the impact of SHRM on firmperformance. Ulrich (1997) has also made a significant contribution here, ashas Patrick Wright who traced the link between HR resources, capabilitiesand performance (Wright and Snell 1998).

Mapping the field of SHRM 3A reincarnation of many of the underlying premises of HRM can befound in the influential work of economists investigating the sources ofproductivity (Bender et al 2018; Bloom and Van Reenen 2007; Bloomet al 2012; Sadun et al 2017). This body of work takes a step back andasks which, if any, ‘management practices’ impact on productivity.They use the World Management Survey which has been administeredacross thirty-four countries (see https://worldmanagementsurvey.org/).They make the case for recognising the vital importance of managementcompetence, central to which, they accept, is competent management ofhuman resources. The key practices are identified as: target setting, theuse of incentives, monitoring of performance, and talent management.Achieving managerial competence ‘requires sizable investments in people and processes’ (Sadun et al 2017, p. 122). This new wave of researchand associated practical interventions replays many of the core themes inclassic HRM.The above paragraphs give a synoptic view of the emergence and development of the field. Now we proceed to dig deeper.Defining the fieldBased on a review of SHRM theorizing and research, Wright and McMahan(1992) defined SHRM as ‘the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals,’(p. 298). They noted that this entails vertically linking the strategic management process to HRM practices, and horizontally creating coordination andcongruence among those HRM practices. They then noted that the majorvariables of concern in SHRM arethe determinants of decisions about human resource practices, thecomposition of the human capital resource pool (i.e., skills and abilities), the specification of required human resource behaviors, and theeffectiveness of these decisions given various business strategies and/or competitive situations.(pp. 298–299)It is important to emphasise that currently the term ‘Human ResourceManagement’ is used in two different ways. In one usage, which we canterm the generic, it is used to encompass all of the forms of employmentmanagement in its infinite variety. In this first sense it is just a new labelfor personnel management or employment management in general. Butthere is a second usage. In its second form the term has at times denoted

4Mapping the field of SHRMa particular approach to employment management. Thus, the term in thissecond sense refers to one of the many ways of managing labour and isused to demarcate it from other ways. Not surprisingly, the existence oftwo different usages has caused considerable confusion in the academicliterature with commentators often talking at cross-purposes.So, what is this second, more specific and narrow meaning? In this particularsense it has been defined as follows:Human resource management is a distinctive approach to employmentmanagement which seeks to achieve competitive advantage throughthe strategic deployment of a highly committed and capable workforceusing an array of cultural, structural and personnel techniques.(Storey 2007, p. 7)The Chartered Institute of Personnel and Development (CIPD) the UK-basedprofessional body for HR practitioners, appears to reflect these same ideas inits own definition:Strategic human resource management (strategic HRM, or SHRM) maybe regarded as an approach to the management of human resources thatprovides a strategic framework to support long-term business goals andoutcomes. The approach is concerned with longer-term people issuesand macro-concerns about structure, quality, culture, values, commitment and matching resources to future need.(CIPD Factsheet 2013)The key elements in both these definitions are: long-term focus, a strong linkwith business goals and a concern with ‘macro’ issues such as culture andvalues. Notably, apart from the reference to business goals, there is no specificmention of contextual issues such as changes in product market conditions,labour markets, regulation, innovations in technology or social changes. Thismay or may not imply a one-best way or universalist approach.As noted, it is an approach which openly seeks to secure a ‘competitive advantage’. This declared objective is not to every ideological taste.This element alone indicates that the approach shares a similar stance asAmerican strategy theorists such as Michael Porter (Porter 1980). Manycritics 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 sosingle-mindedly dedicated to free market competition. They also contendthat even within a capitalist framework, collaboration as well as competition can operate and that other objectives in addition to competitive

Mapping the field of SHRM 5advantage such as wellbeing, equity and multiple stakeholder interestscould be pursued. And they are of course correct. But some of thesecritics have failed to recognise that an identification and description ofa movement and an idea should not be confused with an endorsement ofthat idea.Second, the definition points to the distinctive means through which theobjective will be sought. These include, crucially, the element of a ‘strategic’approach. This means that the management of people and of the workforcein general is approached not in an ad hoc, tactical and merely reactive waybut in a manner which regards this aspect of management as of central importance. HRM practices helped deliver strategic objectives. Different strategiesrequire different employee skills. As with other aspects of the definition, theinteresting features are in noting not only what this form of HRM is, but alsowhat the meaning suggests HRM is not. The counterfactual is important. Forthe HRM debate and the emergence of HRM only makes sense when it isrecognised 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 weredefined, finance arranged, production plans drawn up – and only then wasthe 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, theskills in subduing and ‘managing conflict’ were to the fore in the then fieldof personnel/IR management. It was into this climate when western productmarkets were coming up against international competition – and oftenlosing out – that this ‘new’ approach to managing labour emerged and presenteda challenge to existing assumptions and practices.Third, the definition refers to the deployment of a ‘highly committed andcapable workforce’. This is an important feature of the distinctive approach.As we know, very large sections of the economy operate on very different principles. The high commitment approach is relatively unusual in largeswathes of the employment scene. Hire and fire, short-term contracts, evenzero-hour contracts, outsourcing, agency work and many other such methodsto treat labour as a mere transaction are relatively commonplace. Recent talk of‘employee engagement’ or ‘employee experience’ can be seen as a latter-dayattempt to (re)capture some of that high commitment agenda. The distinctivehigh commitment mode of HRM equates with what is termed the ‘High Road’approach to employment management. The ‘Low Road’ approach relates tothe precarious forms of employment (Osterman 2018). The links betweenhigh pay/high productivity versus low pay/low productivity modelshave been explored in the disciplines of economics (Abowd et al. 1999)

6Mapping the field of SHRMand employment relations (Holzer et al. 2004). HRM, in the distinctivesense, is expressive of the High Road approach. This high road/high commitment perspective is likewise integral to the theory of High PerformanceWorkplaces (Appelbaum et al. 2000)Fourth, the ‘array of cultural, structural and personnel techniques’ refersto the mutually-reinforcing ways in which a truly thought-out strategicapproach can deploy a wide range of methods which would have internal‘fit’ and would complement each other (a further instance of the strategic nature of the idea). These techniques include attempts to: ‘win heartsand minds’ rather than merely enforce a contract; to de-emphasise customand practice in favour of instilling values and mission; pluralism is alsodownplayed 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 assumptionsunderpin this distinctive form of HRM. Other dimensions stress the roleof strategy in that the business plan becomes pertinent to the way thatemployees and workers in general are managed; and an emphasis on therole of line managers as crucial to the practice and experience of HR policies. Then there is a set of key levers such as serious attention to selection(in place of hire and fir

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