The Three Main Strategic Approaches in Human Resource Management

Within the following essay, the three main Strategic approaches in Human Resource Management will be named and explained. Due to its complexity giving a detailed definition of HRM would significantly extend the report. Instead, a rather shallower one by D. Torrington, L. Hall and S. Taylor in the seventh edition of their Human Resource Management (2008): They state that “On the one hand it is used generically to describe the body of management activities” and continue that; “Used in this way HRM is really no more than a more modern and supposedly imposing name for what has long been labelled ‘personnel management’.”. They finally argue that; “On the other hand, the term is equally widely used to denote a particular approach to the management of people which is clearly distinct from ‘personnel management’. Used in this way ‘HRM’ signifies more than an updating of the label; it also suggests a distinctive philosophy towards carrying out people-orientated organizational activities”.

The following step is defining what is meant by the term Human Resource Strategy: “While strategic human resource management has become the major approach to organisational restructuring, and is clearly extremely attractive to senior managers – so much so that this approach dominates current thinking on organisations and change – it has also been criticized on a number of fundamental fronts, most of them concerned with the status and value of strategic human resource management thinking and strategic human resource management ideas” (Christopher Mabey, 1999). Human Resource Strategy is one of the most important topics within HRM, in fact; “Human Resource Strategy should be the priority of the “formulation and implementation of strategic corporate and/or business objectives” (Forburn et al, 1984: 34). The three main strategic approaches to HRM are most commonly known as: the ‘Best Fit’ approach, the ‘Best Practice’ approach, and the ‘Resource-Based’ approach. The ‘Best Fit’ approach to “HR strategy will be more effective when it is appropriately integrated with its specific organizational and environmental context.” (P. Boxall and J. Purcell, 2000).

The ‘Best Practice’ approach can be described in “very simple terms, all firms will see performance improvements if only they identify and implement ‘Best Practice’.” (P. Boxall and J. Purcell, 2000). “The ‘Resource-Based’ view of the firm (Barney 1991) has stimulated attempts to create a resource-based model of strategic HRM (Boxall 1996). The resource-based view of the firm is concerned with the relationships between internal resources (of which human resources is one), strategy and firm performance.” (D. Torrington, L. Hall and S. Taylor, 2008). “Schuler and Jackson (1987) suggest that the adoption and implementation of different competitive strategies requires a unique set of responses from workers, or “needed role behaviours” (for example, team-working, risk-taking, innovation and knowledge-sharing) and consequently a particular Human Resource philosophy as well as strategy, policies, practices and processes to stimulate and reinforce this behaviour” (Nick Wilton, 2011). What Schuler and Jackson are discussing in this extract, is the idea that its not enough to only enforce certain beliefs within the organisational culture. They sustain the position that a strategy is required in order to encourage and motivate employees to contribute to the company’s mission.

In other words; once the company has set a particular goal in a given subject, it’s the Human Resource Management’s department within the company, which is responsible for the commitment the employees have with this goal. This way the HRM department of the company crates a bond between ‘role behaviour’ and ‘organisational culture’. Organisational culture refers to “the norms of conduct, work attitudes, and the values and assumptions about behaviour at the organisation.” (James N. Baron, et al. 1999). The ’Best Fit’ Approach to HRM strategy is also known as the Contingency strategic approach to HRM. According to Nick Wilton (2011), the Contingency approach “advocates a close match between Human Resources and Business strategy and the use of Human Resource policies and practices that are strategically integrated with one another and the goals of the organisation”. This approach is therefore, highly concerned about linking employee role behavior to the organisational objectives of the company, it is however not uniquely focused on this connection.

“The promotion of specific behaviours requires a consistency in the message delivered through Human Resource practices and processes and therefore the emphasis within a best fit approach is on the integration of all Human Resource Management activities in such a way they are mutually supporting and contribute to the achievement of organisational objectives” (Nick Wilton, 2011). The ‘Best Fit’ strategy to HRM is then divided into two sub-groups: The Vertical and the Horizontal Integrations. The Vertical Integration in the Contingency approach strategy, which is defined as; “the alignment of human resource management practice with the strategic management process of the firm” (Schuler & Jackson 1987), (http://rphrm.curtin.edu.au/2006/issue2/strategic.htmlAccessed on 09/12/12), is undisputedly the main part of ‘Best Fit’.

However, the Horizontal Integrations to the Contingency approach must never be ignored. In more detail, we could say that: “In determining the best fit approach between business and human resource strategy and human resource policies and practices, consideration needs to be taken of both vertical integration (or external fit) – human resource activities should be aligned both with competitive strategy and (under particular analyses) the organisations stage of development and context – and horizontal integration (or internal fit) – the need to ensure that individual Human Resource practices and policies are designed to support each other as a coherent set” (Nick Wilton, 2011). In other words, what Nick Wilton sighs here, is that without the Horizontal Integration, the Vertical Integration wouldn’t exist, or make any sense. This is because, despite the Vertical Integration being the one which actually adjusts the ‘Best Fit’ practice with the firm, it is the Horizontal Integration the one that allows each practice to work harmoniously, therefore permitting the Contingency approach to be fully attained.

One of the other strategic approaches to HRM is the ‘Best Practice’ approach; it is however sometimes referred to as the Universalist approach. A deeper definition of ‘Best Practice’ strategy or Universalism (compared to the one previously set at the beginning of this essay) would say that this type of approach to HRM Strategy “advocates enhancing knowledge, skills and competence through effective recruitment, selection and investment in training, motivating and generating desired employee behaviour through financial and non-financial reward and sympathetic job design, and providing opportunities for employees to contribute to organisational decision-making. At the heart of best practice, therefore in the strategic investment in human resources to generate a range of universally desirable organisational and employee outcomes including improved individual and organisational performance, greater organisational adaptability and cost effectiveness, greater employee engagement and commitment, lower levels of employee absenteeism and turnover, and improved job satisfaction.” (Nick Wilton, 2011).

It is therefore obvious that this ‘Best Practice’ strategic approach to HRM highly contrasts with the previous ‘Best Fit’ strategic approach to HRM. The contrast is produced due to ‘Best Fit’ approach modifying their employee ‘role behaviour’ to suit the company’s aims, whilst on the other hand, the ‘Best Practice’ approach alter’s the company’s objectives to match their employees’ ones. In addition, the Universalist approach to HRM strategy constitutes a ‘High-commitment human resource management’. A “High-commitment human resource management comes in many flavors: It is part of total quality management, of open-book management, and of the management style of traditional first-tier Japanese firms” (James N. Baron, et al. 1999). What the constituent behind the idea of a ‘Best Practice’ or Universalist approach to Human Resource Management strategy is that everyone in the company works as a team, including the managers, thus the reference to the term Universalism, defined by thefreedictionary.com as: “a universal feature or characteristic”

(http://www.thefreedictionary.com/universalism Accessed 09/12/2012).

In this particular approach to HRM strategy, advantages to employees are highlighted; therefore no workers will be fired unless it becomes a necessity to do so. Moreover, the concept of both; self-managing teams and production are also profusely encouraged. Other typical characteristics of a company operating in a Universalistic manner include: Job enlargement and enrichment, premium and incentive compensations, socialization and training of multi-task workers, as well as the possibilities for employees to both require any information about the company and suggesting ideas and opinions in order to improve the situation. However the ‘Best Practice’ approach to Human Resource Management strategy has also been criticized; “Pfeffer (1998) argues that firms can generate competitive advantage by addressing several areas of people management: employment security; selective hiring; self-managed teams or team-working; high pay contingent on company performance; extensive training; reduction in status differences (between managers and workers); and information sharing. Pfeffer’s model stresses the importance to corporate performance of cooperative relationships between co-workers and between workers and managers based upon mutual gains of each party.

The framework is underpinned by the premise that if all employees feel valued, are kept informed of organisational developments and receive investment in the form of training and development, they will perform to a high standard, especially where reward is contingent upon this performance.”(Nick Wilton, 2011). The third and last type of approach to Human Resource Management strategy is known as the ‘Resource-Based’ approach. The ‘Resource-Based’ approach is built around the internal content of the organisation. “Under this view, it is the array of a firm’s resources, including it’s workforce, and their organisation that gives a firm its uniqueness and which can be a significant source of sustainable competitive advantage” (Nick Wilton, 2011). It is therefore easy to determine a big clash of ideas compared to both of the previous approaches to Human Resource Management strategy; the ‘Best Fit’ approach, and the ‘Best Practice’ approach. Adopting a ‘Resource-Based’ approach to your company states “that any features of a firm with value-creating properties, for example, in-house knowledge or technology, culture, skilled personnel or networks are considered ‘strategic assets’ which can be a source of advantage if they are scarce, valuable, organisation-specific and difficult to imitate” (Nick Wilton, 2011).

What this implies, is that in a ‘Resource-Based’ approach to HRM creates a unique management strategy, through development of resources, in order to set a bench mark for competitors to try to achieve. It must however be clear that “the question for management in strategy formation is how to develop valuable, firm-specific characteristics, exploit them for strategic purposes and create barriers to their ‘imitation’ or ‘erosion’ by competitors” (Nick Wilton, 2011). The positive outcomes of this strategic approach to HRM include the increment of both human and technological resources, which can only be attained through the application of a unique approach over a given period of time, centred around the company’s internal attributes. On the other hand, the ‘Resource-Based’ approach to strategic HRM has also its disadvantages, the main one being that, due to its exclusiveness, the ‘Resource-Based’ approach faces issues such as: “Organisational routines and processes are deeply embedded in a firm’s emergent ‘social architecture’ and can constitute valuable combinations of human and non-human resources that are difficult to replicate.

Moreover, given the complex interaction between formal and informal, social and technical organisational processes and practices, there is an inevitable ambiguity about what elements contribute to improved performance” (Nick Wilton, 2011).In other words; what Nick Wilton means is that due to this approach to Human Resource Management being so particular and unique to the company, it’s very difficult to define and identify problems. This approach is moreover blurred by external factors, which may interfere indirectly with the process without the managers’ noticing it. Considering all the gathered information throughout the completion of this essay, I conclude that ‘Best Fit’, ‘Best Practice’, and ‘Resource-Based’ approaches to strategic HRM are very different to each other in most topics. “When characterized stereotypically it is not difficult to establish qualitative differences between human resource strategies. This is not comparing like with like. Rather it is distinguishing the normative ideas of strategic human resource management.” (Christopher Mabey, 1999). I finally conclude by stating that, in my opinion, one strategic approach to Human Resource Management is not better than the other, it’s just a matter of which strategic approach to HRM suits better a certain company.

References:

Baron, J. Kreps, D. (1999). Strategic Human Resources. 605 Third Avenue, New York, NY: John Wiley & Sons, Inc. 1-210. Mabey, C. Salaman, G. Storey, J. (1999). Human Resource Management – A Strategic Introduction. 2nd ed. 108 Cowley Road, Oxford OX4 1JF, UK: Blackwell Publishers Inc.. 11-85. Peter Boxall and John Purcell, 2000. Strategic human resource management: where have we come from and where should we be going? [online] The Wiley Online Library. Available at: http://onlinelibrary.wiley.com/doi/10.1111/1468-2370.00037/pdf [Accessed 09/12/12]. Wei, L. (2006). Strategic Human Resource Management: Determinants of Fit. Available:http://rphrm.curtin.edu.au/2006/issue2/strategic.html. Last accessed 09/12/12. The Free Dictionary: Universalism. Available at: http://www.thefreedictionary.com/universalism Last accessed on the 09/12/12. Wilton, N (2011). An Introduction To Human Resource Management. 1 Oliver’s Yard, 55 City Road, London EC1Y 1SP: SAGE Publications Ltd.. 3-58.