Human Resource Management works well in theory but not in practice

Human Resource Management is concerned with the way in which organizations manage their people (Redman and Wilkinson 2001: 1). It covers a wide range of ideas, approaches, and techniques for managing and improving relationships and performance in organizations. However, much of this is criticized for working in theory but not in practice. Due to the vast scale of the human resource management theory, this essay mainly aims to discuss this argument with reference to a key and topical contemporary aspect of HRM, the strategic human resource management.

Strategic Human Resource Management Theory Review

More recently, human resource management has expended its breadth of study beyond the staple concerns of recruitment, selection, training reward and appraisal, etc. in particular, one stream of research, strategic human resource management (SHRM) has emerged as being highly influential in this respect (Wilkinson A et al., 2001:10). SHRM points that an organization’s human resource assets are potentially the sole source of sustainable competitive edge and much of the work in this area stems from the resource-based theory (RBT) of the firm (Barney, 1991, 1995). The resource-based theory provides conceptual basis for asserting that HR resources are key to firms’ competitive and comparative advantage. Miller argue that operational linkages between the business strategy and the policy towards employees are the key, or in his words, the ‘fit of HRM with the strategic thrust of the organizations’ (Wilkinson A et al., 2001:10) and he gives his definition of SHRM:

Those decisions and actions which concern the management of employees at all levels in the business and which are directed towards creating and sustaining competitive advantage. (Miller, 1987:352)

Theorists regard HRM as being focused, unified and driven by strategy:

A strategic orientation is a vital ingredient in human resource management. It provides the framework within which a coherent approach can be developed to the creation and installation of HRM policies, systems and practices. […] The aim of strategic human resource management is to ensure that the culture, style and structure of the organization, and the quality, commitment and motivation of its employees, contributes fully to the achievement of business objective. (Armstrong M., 1992:47)

The concern with strategy, which emphasizes on integrating policy with organizational strategy, taking a long-term perspective and resource rather than cost (see Cheyne A, Lecturer notes, week 1/2003), distinguishes HRM from personal management. It is claimed that personal management is substaintially reactive, however HRM, exemplified by strategy, is proactive. For example, Guest differentiates traditional personal management from HRM ‘by virtue of the way in which the former ignored, but the latter embraces strategy’ (1993:213). SHRM takes a proactive way towards the competitiveness and efficiency of the organization instead of reactive day-to-day oriented personal management.

Strategic literatures stress the internal resource of a business as the source of competitive edge, which can be maintained by the following aspects:

They must add value to the organization activities

They must be rare, unique

They must be unable to be replaced by technology

The competition should have difficulty in copying them / nonimitable

These criteria of HRM appear in the form of skills, expertise and experience

(Storey 1995: 4)

The assumption of a close link between business strategy and HRM policies is based on contingency theory, which holds that HRM policies are selected according to the type of competitive strategy adopted by businesses. Moreover, it assumes that companies that closely reconcile their business strategy and HRM policies achieve better performance than companies that do not. Contingency theory (Miles and Snow, 1984; Porter, 1985; Schuler and Jackson, 1987a) tells us, HRM strategies must be gelled with specific business competitive strategies if they are to promote organization performance. The notion of “fit” facilitates the close linkage between HRM strategies and business strategies in order to help retain and motivate employees. A firm implementing HRM practices that encourage employee behavior consistent with its business strategy is able to achieve superior performance (Delery and Doty, 1996). In addition, the application of the ‘fit’ helps companies to manage their resources more efficiently, so that they can reduce operational costs and respond effectively to environmental restraints and new opportunities (Bird and Beechler, 1995). Therefore, effective linkage between business strategies and HRM strategies may well reinforce organizational performance.

Competitive strategy implies a series of systematic and related decisions that give a business a competitive advantage relative to other businesses (Schuler and Jackson, 1987a; Dowling and Schuler, 1990). The concept of business competitive strategy stems primarily from Porter’s (1980, 1985) classifications of generic strategies: cost leadership, differentiation, and focus. And Miles and Snow (1984) classified business strategies into three types: defender, prospector, and analyzer. Schuler and Jackson (1987a) used the terms trivially different from that of Porter to classify business competitive strategies into three types: cost reduction, innovation, and quality enhancement. They also identify different kinds of employee behavior and HRM policies, which are fitted to each competitive strategy.

Firstly, cost-reduction strategy includes reinforcing competitive edge by lowering the prices of products or services. This strategy promotes production efficiency and reduces expenses through employing new technology, expanding the sizes of production, or re-organizing production process, whereby a company can launch its products or services at a lower price in order to gain more market shares. Secondly, innovation strategy stresses the development of products or services, which are unique, nonimitable or different from those of the competition. Finally, the goal of quality enhancement strategy is to achieve success by providing a quality that excels that of other products or services. Honda in Ohio provides a good example of how competitive advantage can be gained by high-quality products (Schuler and Jackson, 1987a).

The Reality of Strategic Human Resource Management

However, it is difficult to identify the relationship between human resource management and strategy and it appears to be easier in theory than in practice. Marginson et al. (1998) found that 80 percent of senior managers in HRM claimed that they have overall HRM strategies but few can describe what the strategies are! In effect, both academics and practitioners have found it hard to appreciate the meaning of strategic human resource management in practice. Hendry (1994b) concedes that strategy is the dominant theme in HRM but also a misunderstood concept and ‘the perspective writers on HRM offer on strategy is often glib and lacking in sophistication’ (1994b: 2) Perhaps the problem is compounded by lacking of case studies, which enable us have a insight look into the strategy in practice. For practitioner part, the stress of SHRM in theory has led to great interest from senior management team but fail to fit the lower-level managers. We will discuss this in the later part of the article.

In fact, just like Guest (1987) described in his book, human resource strategy may only unproblematic in the ideal conditions and Price (1997) concludes that:

It should take place within a purpose- built modern location, a green field site employing care fully selected ‘green’ labour. Such stuff would have no previous experience of the industry in which the company operates and therefore would be untarnished by an ‘undesirable’ industrial subculture. They would not be hide-bound by traditional but outmoded ways of doing things.

The organization requires highly professional management, preferably Japanese and American.

Employees should be given intrinsically rewarding work rather than uninteresting functions for which pay is the sole motivation.

Workers should have security of employment and not be constantly in fear of losing their jobs.

Guest concedes that these conditions are difficult to achieve in practice because most organizations have pre-existing staff, buildings and equipment that cannot be discarded. They bring with them with patterns of power and behaviors, which may be contrary to the HR philosophy.

In addition, the formalities of strategic planning are vast different specific to different companies and the documents seem to be the done thing to have one. Some organizations develop a detailed several hundred pages document while some use an unwritten guidance. However, neat theoretical approaches with successive phrases of analysis, choice and implementation are rarely seen in practice. On the other hand, many senior managers convey the business goals to their employees by the mission statement, hoping this practice can lead to a high commitment from everyone in the company, since high commitment is seen to be crucial for competitive edge.

To some extent, such policy does work for the mission statement tells the employees the essence of what an organization is about: why it exists, what kind of business it intends to be, and who its intended customers are etc. However, it has to acknowledge that many organizations develop a mission statement merely because it is the done thing to have one. The mission statement is locked into the company’s first-order strategies and these are major decisions on its long-term aims and the scope of its activities (Purcell 1995: 67)

The main characteristics of strategic HRM is its integration with business strategy, the idea being that HR policies and practices should support the goals of a business (Redman and Wilkinson, 2002). Storey’s research (1992) concludes that such integration is rare in British organizations. His project focused on 40 large employing organizations and involved 350 interviews with managers at all levels, in which approximately 80% were line and general managers. He concluded that: ‘human resource management type initiatives had been “bolted on” to the embedded system’ (Storey, 1992). The management change was very slow and uncertain process. There seemed to be lack of integration between employment practices, both individual and collective, and wider business strategy.

In conclusion, while it works well in theory surrounding the issue of SHRM, human resource management seems to be problematic in practice. Based on the discussion above, we have to admit that strategic human resource thinking, which provides a framework for HR requirements over a period, has its basis on rational thinking but in practice personnel managers have a variety of difficulties in appreciating and implementing the strategy. Some of the problems people face include developing new initiatives, restructuring, changing and retaining for new skills. And more difficulties come from cultural and behavioural change and so on.

Strategic human resource management stresses numbers, quantitative statements, attitudes, behavior and commitment while uses harder ‘matching’ models of HRM (Price 1997: 184), but the implementation is problematic particularly when the responsibilities pass to the line managers. In practice, there are both objective and subjective factors relating to line managers and supervisors that lead to several blocks and obstacles to the integration between HRM strategy and organization strategy and the implementation of strategy. In summary, it is fair to say that human resource management theory works well in theory but not in practice.

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