Readings in strategic human resource management

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MAN A\G E M E N T

Edited by Alan R Nankervis Robert L Compton

Digitized by the Internet Archive in

2010

http://www.archive.org/details/readingsinstrateOOnank

Readings

in Strategic

Human

Resource Management

Edited by Alan R Nankervis Robert L Compton

esource MAN a\g E M E N T

Nelson

An

International

Thomson

Publishing

Company

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Thomas Nelson Australia 102 Dodds Street South Melbourne 3205

I(t)P Thomas Nelson Australia Publishing

is

an International Thomson

company

First published

1994

10 9 8 76543 2 1 99 98 97 96 95 94 Copyright © Alan R Nankervis

&

Robert L Compton 1994

COPYRIGHT or fair dealing for the purposes of study, research criticism part of review, or as permitted under Part VB of the Copyright Act, no without permission. this book may be reproduced by any process

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take legal action against a person who infringes through unauthorised copying. Enquiries should be

may

directed to the publisher.

National Library of Australia Cataloguing-in-Publication data Nankervis, Alan R. Readings in strategic human resource management. ISBN 17 009039 6. 1. Personnel management. 2. Personnel management

-

Australia. 3. Industrial relations. 4. Industrial relations Australia.

I.

Compton, R.

L.

II.

-

Title.

658.3

Designed by Terminal Design Cover designed by Tony Palmer Typeset in Perpetua 10/12 pt by Eclipse Graphics Printed in Australia by McPherson's Printing Group

Nelson Australia Pty Limited ACN 004 603 454 (incorporated Victoria) trading as Thomas Nelson Australia.

The I(T)P trademark

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used under licence.

Within the publishing process Thomas Nelson Australia uses resources, technology and suppliers that are as environmentally friendly as possible.

1

1

Contents

Preface

vii

Acknowiedgements

viii

of contributors

ix

List

Introduction

Part

1

1

Strategic perspectives of human resource

1

Human

2

The

3

Managerial strategic choice and

resource management: a

management

9

critical analysis

Karen Le^e

1

strategic contributions of the

personnel function

35

Roger Collins

the

4

management of human

resources

Yaw Debrah The impact of corporate strategy on

49

human

resource

management 57

John Purcell 5

6

Part 2 7

Beyond

traditional paternalistic

and developmental approaches

to organisational change and human resource strategies Doug Stace and Dexter Dunphy Strategic human resource management: theory and practice Robin Kramar

105

The environment for strategic human resource management

125

Managing change

environment

in a challenging

127

Russell Lansbury

8

Collective

employment

contracts

new working time arrangements Raymond Harbridge and David 9

New Zealand

in

143

Tolich

management in Australian and New Zealand companies: some emerging themes and issues Dawson and

Human

resource

Gill

training or preparation for Alan Nankervis

Human

resource

Resources

157

Palmer

management education:

skill

1

and

Total quality

Patrick

10

87

management and

Institute: the profession

John Smart and Michael Pontijex

175

life?

the Australian

and

its

Human

professional

body 185

vi

Contents

Part 3 Issues in strategic

human resource management

12

Human

13

Psychological testing: does

14

Personality or performance?

Robert

207

resource planning in a changing environment

Kane and Susan Stanton it

209

work?

Kevin Chandler

The

235

case against personality testing in

management

Robert Spillane

239

—

249

16

Credendalism on the diploma treadmill Tony Biion and Robert Compton Human resource managers and training: a peek into the future Peter Hosie

259

17

A challenge

15

to career

management

practice

Alan Fish andJack Wood

279

18

Future directions in remuneration

19

Mick Bennett Catch the new wave in

management 291

human

resources:

human value management Jac Fitz-enz

301

Part 4 International perspectives of strategic

human resource management human resource management issues for

20

International

21

International

305 the 1990s

Wayne Cascio in Australian

Peter Bowling

307

human

resource

management

companies and Denice Welch

327

22

Personnel management in Hong Kong: a review of current issues Paul Kirkbiide and Sara Tang

23

Human

resource

David Tai Wai Wan, Thomas and Ho Beng Chia

Wyatt,

Anthony Tsai-Pen Tseng

367

Part 5 Looking to the future

383

24

Hilmer discusses the future for Australians

25

The shape of the new organisation: implications for human resource management

Frederick

at

work

Hilmer

David Limerick

351

management in Singapore: an overview

385

395

Preface

Human Resource Management supplements our earlier text, Management and is designed to provide academics, practitioners and students with an updated reference for the exploration of contemporary Readings in Strategic Strategic Resource

human

resource

management (HRM)

issues.

Incorporating the opinions and research findings of some of the most

prominent

HRM

academics and practitioners from the US, the

UK and

Australasian region, the readings represent the state of the art in strategic

the

HRM.

HRM and strategic HRM models environments of Australasia, the US and the UK and discuss many of the critical issues in contemporary theory and practice. Readings in Strategic Human Resource Management may be used as a companion to Contributing authors examine the application of to the diverse

existing

HRM

texts, for

reference and research purposes. Critical analysis of the

models and the views presented subsequent practice of all

will

who aspire

undoubtedly enhance the learning and

to

become Alan

effective

HRM professionals.

R Nankervis

University of Western Sydney,

Robert

L Compton

Nepean

In common with all such compilations, this book depended on the co-operation and enthusiasm of its contributing authors. Their assistance is acknowledged with considerable gratitude. Neva Gregory for her initial word processing and the editorial and production staff of Thomas Nelson Australia, in particular Britta Christiansen, Jill Brown, Meg O'Hanlon and Lee Walker, also deserve our warm

appreciation.

The

editors

and publisher would

also like to

thank the following for permission

Asia Pacific Journal of Human Resources, (reading 2, 6, 10, 11, 12, 15, 16, 18, 20, 22, 23, 25); Australian Graduate School of Management,

to

reproduce

articles:

New South Wales (reading 21); International Journal of Career Management (reading 17); InternationalJournal ofEmployment Studies (reading 3, 4);

University of

The Human Resources Professional (reading

19).

List of contributors

Mick Bennett Cullen Egan Dell

Tony Buon Industrial Program Service (New South Wales) Professor Wayne Cascio Universit)^ of

Colorado, Denver

Kevin Chandler

Chandler

8c

MacLeod

Ho Beng Chia National University of Singapore Professor Roger Collins University of New South Wales

Robert Compton University of Western Sydney,

Professor Patrick

Nepean

Dawson

University of Adelaide

DrYawDebrah Nanyang Technological

University

Professor Peter Dowling University of Tasmania, Launceston

Professor Dexter

Dunphy

University of New South Wales

Alan Fish Charles Sturt University

Dr Jac

Fitz-enz

Saratoga Institute, California Associate Professor

Raymond Harbridge

Victoria University, Wellington

Professor Frederick Hilmer University of New South Wales

Peter Hosie

Ngee Ann

Polytechnic, Singapore

Associate Professor Robert

Kane

University of Technology, Sydney

Dr Paul

Kirkbride

Ashridge Management College, United Kingdom

X

List

of contributors

Dr Robyn Kramar Macquarie University Professor Russell Lansbury Sydney University

Dr Karen Legge Imperial College, Oxford Professor David Limerick Griffith University

Alan Nankerxis University of Western Sydney, Nepean Professor Gill Palmer University of Wollongong

Michael Pontifex

& Associates

Pontifex

Professor John Purcell

Templeton College, Oxford Associate Professor John Smart

Deakin University Professor Robert Spillane

Macquarie University

Dr Doug

Stace

University of New South Wales

Susan Stanton Kentucky Fried Chicken Sara Tang

Mass Transit Railway Corporation, David Tolich

Dr Anthony Tseng-Pen National University of Singapore

Dr David Wan National University of Singapore

Denice Welch

Monash

University

Professor Jack

Wood

University of Sydney

Dr Thomas Wyatt National University of Singapore

Hong Konj

Human resource management (HRM), as a concept and a framework for practice, last decade from academics and practiMore recendy, the notion of strategic HRM, which involves the alignment of HRM and overall organisational objectives and strategies, has become popular with human resource (HR) professionals. HRM and strategic HRM supersede earlier personnel management theories and derive from the writings of a small number of influential US academics (eg Beer et al 1985; Cascio 1989; Nkomo 1980; Buder Ferris & Napier 1991; Walker 1992). Principal features of these new concepts in management include a

has gained broad acceptance during the tioners across the Australasian region.

managerial focus; the perception of employees as organisational 'resources', the integration of

HR functions with each other and towards organisational goals

all

and a long-term planning of the strategic

Critics

orientation.

HRM model suggest that

it

reflects

its

US context with

an essentially unitarian perspective which may not be applicable in other environments. Others (eg Boxall & Bowling 1990) discern two different strands of strategic HRM the soft and hard versions ^which focus on either employee and union consultation and participation strategies or, alternatively, management control and the exclusion of unions from the workplace. From their empirical research, other critics conclude that few organisations actually implement strategic

—

—

HRM practices. Nevertheless,

and

activities

HRM and strategic HRM have significantiy influenced the views

of academics and practitioners throughout Australasia and there

evidence that strategic (eg

HRM approaches are increasing in Australian

CCH Australia Limited

is

companies

1989; Korn/Ferry Survey 1993). Most professional

now bear HRM nomenclature, whether in Australia, New Zealand, Singapore, Hong Kong, Malaysia or Thailand. The Australian professional associ-

courses

ation has

become

conferences are

the Australian

common in

Human Resources Institute

HRM HRM tides.

(AHRI), strategic

the region and few practitioners eschew

In this context, the challenge for HR specialists is not to reject the dominant US paradigm, but to construct a model (or models) and a framework for practice which more accurately reflects and contributes to the development of their own diverse and unique environments. A model of HRM or strategic HRM in Australia

and New Zealand would need

to incorporate the institutionalised

and often

adversarial nature of industrial relations systems, the plethora of social legislation

employment opportunity, affirmative action, occupational health and and the consultative approaches inherent in award restructuring and enterprise bargaining processes. In contrast, the paternalistic management styles prevalent in many companies in Hong Kong, Singapore and Malaysia may lend themselves to a more unitarian approach. Such strategic HRM models will need to be also sufficientiy flexible to incorporate different social, cultural, economic and legislative conditions between countries of the region (eg Bumiputera preferences in Malaysia, laissez-faire (eg equal

safety)

— 2 Readings in

strategic

human

resource

governmental policies in

may

management

Hong Kong versus

also require modification according to

high regulation in Singapore). They

changes

in industrial relations condi-

tions (eg the Employment Contracts Act 1991 (Cwlth) of New Zealand).

Thus models of HRM and

strategic

HRM within Australasia may be based upon

those developed in the US, but they require substantial and sensitive modification to

ensure their applicability to the countries in

this region.

Readings in Strategic

Management aims to stimulate discussion on the relevance and Human existing models and provides ideas for their modification to adequacy of accommodate different en\ironments. It is divided into five major sections strategic perspectives, industry and organisational en\ironments, strategic and functional issues, international dimensions and future challenges. Resource

Strategic perspectives of

human

resource management

The readings in this section explore the broad notions of organisational strategy, strategic management and strategic HRM. A number of models is proposed and critiqued, along with their practical implications.

Legge's seminal reading,

'Human

resource management: a cridcal

analysis',

examines the internal contradictions of the dominant US model of strategic HRM, suggesting that a more relevant model for UK, Australian and New Zealand practice would incorporate pluralist ('mutuality') and flexible rather than unitarian and rigid perspectives. is also the theme of Collins' reading, 'The personnel function', which presents a model to optimise the appropriate 'fit' between strategic HRM and organisational strategies in changing national and industry en\aronments.

Flexibility rather

than prescription

strategic contributions of the

Following a review of the literature on the notion of strategy from

its

military

more recent management and HRM applications, Debrah's reading, 'Managerial strategic choice and the management of human resources', explores Kochan, McKersie and Cappelli's (1984) 'strategic choice' model of the linkage between HRM and organisational objectives and outcomes. His conclusions suggest that not only should a model of strategic HRM be flexible, it should also be proactive rather than reactive. His article parallels the work of Gardner and Palmer (1992). Purcell's reading, 'The impact of corporate strategy on human resource management', is based on an empirical study in the UK and pro\ides some sobering findings on the practical relationship between strategic HRM and corporate strategy, concluding that 'current trends in corporate strategy in many origins to

its

companies render the ideals of human resource management... Australian companies appear to have progressed further in direction, although Kramar ('Strategic human resource management: theory

large diversified

unobtainable'. this

and

Some

practice') cautions that

on the

basis of a series of case study analyses,

it is

imperative that senior managers support such relationships and that line managers are convinced of their importance.

A broader study of Australian service industries by Dunphy and Stace in their reading 'Beyond traditional paternalistic and developmental approaches to organi-

Introduction 3

sational

change and human resource

'universalist solutions in

hard or

soft) are

human

strategies', leads

them

to

conclude that

resource strategy and practice (whether they be is needed is a contingency framematching management processes to the

probably inappropriate: what

work of management

process, to help in

changing business needs of the organisation'. The Dunphy and Stace typology of change strategies model is helpful in guiding the alignment of styles of manage-

ment with

desired scales of change.

The environment for strategic human resom'ce management Two schools of thought predominate the debates concerning

HRM and

relationships

economic and industry environments. The first, expressed by writers such as Pascale (in Walker 1992) and Kochan (1986), suggest that strategy formulation is 'the result of a conscious and rational process of planning' and is both possible, and indeed crucial, to ensure organisational effectiveness. While acknowledging its difficulties Mintzberg (1989) suggests that 'to manage strategy... is to craft thought and action, control and learning, stability and change'. The second view, supported by contingency theorists, argues that environmental pressures severely constrain, if not prohibit, the development of organisational strategies, and consequentiy strategic HRM. This section explores contemporary environmental pressures on strategic HRM and their implications for its theory and practice. Lansbury's reading, 'Managing change in a challenging environment', examines the issues of social and organisational change and focuses on the most effective strategies for dealing with organisational adaptation and flexibility within turbulent Australasian environments. His focus is on the need for continual 'learning' within organisations, achieved through comprehensive training and development programs. The flexibility of between

strategic

its

national, social,

organisational structures, especially through the devolution of

HRM functions,

is

essential to ensure the attainment of organisational objectives.

Harbridge and Tolich in 'Collective employment contracts and new working New Zealand', explore the impact of three flexible work schedules (ie the modification of the working week, the rescheduling of hours of work and changes to overtime and penal payments) on productivity and effectiveness within several New Zealand companies as a consequence of the Employment Contracts Act 1991 (Cwlth). time arrangements in

Dawson and Palmer

in 'Total quality

management

in Australian

and New

Zealand companies: some emerging themes and issues', critique the influence of current change programs in a selection of Australasian companies. Their conclusions suggest that total quality

management (TQM), concentrating on individual may result in significant employee

rather than collective employee involvement,

'empowerment', but that

it

requires substantial adaptation to be effective in

culturally diverse workforces.

The two remaining

readings in this section explore the roles of tertiary edu-

and the professional association in equipping practitioners with the attitudes, knowledge and skills necessary to ensure that their organisations successfully cation

4 Readings

in strategic

human

resource

management

adapt to environmental pressures. In his reading 'Human resource management education: skill training or preparation for life?', Nankervis questions the content of present

HRM courses and their inherent problems. He suggests that future pracHRM but will also need

titioners will not only require traditional functional skills in

an understanding of the broad ideological perspectives of emplover-employee relationships in order to define their own sense of professionalism. Pontifex and Smart conclude this section with a brief history of the professional association and its change from the Institute of Personnel Management (IPMA) to the Australian Human Resources Institute (AHRI). They suggest that HRM is not yet a fully-fledged profession, but that many of its members can be considered professionals in their approaches and practices. There appears to be some consensus that strategic HRM is beginning to come of age in a uniquely Australasian manner, but that a truly strategic approach will require the resolution of the internal and external environments.

Issues in strategic

human resource management

This section seeks to explore

how

HRM acti\ities are

changing

in

response to

external pressures, internal strategies and the developing perspectives of practitioners.

Kane and Stanton

in

'Human

resource planning in a changing en\ironment',

HR planning, an area fundamental to the HRM in Australian organisations. In their ovsai words, 'HR planning holds out the promise of integrating the various HR functions and

present their research on the state of

development of strategic

of involving the practitioners more closely in the development and implementation of corporate level strategy and plans'. WTiile their results are not greatly encouraging, they reflect the transitional and multi-faceted nature of

HRM

practices in this function.

Chandler and Spillane in separate articles, 'Psychological testing: does it work?' and 'PersonaHty or performance? The case against personalit)' testing in

management', debate the merits of psychological acti\ities

with particular reference to

its

testing

used in a number of HR development of stable,

effectiveness in the

Chandler argues clearly that psychological assessment can be seen as a factor in distinguishing high fi^om low performing organisations,

yet creative staffing. WTiile

Spillane

is

scathing in his attack

In a similar vein,

on

\vhat

Buon and Compton

he

calls

'management by

personalitN''.

in their reading 'Credentialism

— on the

diploma treadmill', question the escalation of credentials required for jobs at all levels and pro\ide some constructive suggestions for the better management of recruitment and selection processes. Their arguments seem all the more rele\'ant as Australian organisations place greater emphasis on competency management. Wliere competencies are not validly determined, the danger of 'creeping credentialism' will be ever-present. In his reading,

'Human

resource managers and training: a peek into the

Hosie continues to stress the strategic nature of contemporarv HRM, exploring the training and development issues likely to arise for HR managers. As future',

Introduction 5

training activities are increasingly scrutinised, HR professionals must be able to demonstrate that expenditure on training is a necessary business investment. This will not be the case where there is no proven correlation between training and

performance improvement. Hosie's article is complemented by Fish and Wood in 'A challenge to career management practice', in which they examine the strategic issues relevant to career

management. With organisation right-sizing and delayering, traditional approaches and models are becoming out-of-date. At the same time, career management tends to be forgotten, ignored or seen as too difficult to implement in an ever-changing environment.

Bennett introduces the issue of remuneration management and identifies which organisations will need to put in place to maintain consistency with microeconomic reform and to provide flexibility to meet broad family obligations. To conclude this section, Jac Fitz-enz completes the cycle of strategic HRM with a discussion of 'human value management', a move away from the traditional expense centre image of HR management to a view of HR as a value adding strategies

business unit.

International perspectives of strategic

human resource management

As Australasian organisations strive to expand globally, their strategies will be heavily influenced by the social, economic, political

and

industrial conditions of

neighbouring countries. International approaches to business and commerce inevitably require more flexible and more complex staffing strategies, often with significant differences in employee conditions between home and host countries. Comparisons between HRM practices in different countries of the region provide opportunities for the revision of

all

HR functions,

including recruitment,

HR

development, performance management and remuneration. This section contains a selection of readings which explore

all

of these aspects.

human resource management based on an empirical study of multinational companies in the US, the Middle East, Asia, Europe and Australia. He suggests that the major issues of international expansion concern strategic staffing practices. Expatriate management, diversity management and the global development of managerial talent present complex but crucial challenges for HR specialists involved in such Cascio's introductory reading 'International

issues for the 1990s',

is

multinational operations. This view

resource

is

echoed by Bowling in 'International human

management in Australian companies', which examines

the strategies of

Australian companies in attempting to prevent or redress high expatriate failure rates.

Like Cascio, Bowling suggests that creative contingency strategies are

management of international ventures. two readings explore the different social, economic, political and industrial relations systems of Hong Kong and Singapore and the impact of these essential to ensure the successful

The

last

conditions on the development of strategic

and Tang current

in their reading, 'Personnel

issues',

report

on the

HRM models and practices. Kirkbride

management

results of a survey

in

Hong Kong: a review of in Hong Kong during

conducted

6 Readings in

1989.

It is

strategic

human

resource

management

evident that a 'sophisticated paternalist' approach to the

HRM

management

Chinese-owned of employees is corporations appear contemporary multinational to adopt whereas companies, of absence governmental regulation in Hong relative models. The US and UK Kong and economic prosperity coupled with labour scarcity may enable signifipervasive in current

cantly

more

HRM practices in the future.

flexible

In contrast,

Wan

et al in

'Human resource management

overview', explore the effects of a

HRM

models and

practice, especially in

practices. Like

in Singapore:

more regulated economic system on

Hong Kong,

an

strategic

Singapore has limited natural

unemployment and similar cultural conditions. Its human resource priorities include a focus on increasing labour productivity, improving employee flexibility and adapting to change common themes throughout the resources, negligible

—

Australasian region.

Looking to the future

The

readings in the concluding section discuss the recurrent theme of 'change'

and

its

impact on organisations and the

HR profession.

Hilmer's reading, 'Hilmer discusses the future for Australians at work', examines Australia's

managers

required

we

if

in relation to their overseas counterparts

are to catch

up

to

some of our regional and

addresses the need for an urgent review of

HR

and the reforms

global competitors.

tertiary

He

education and the

knowledge and experience HR professionals will need for future success. Building on Hilmer's theme. Limerick discusses the new organisation and the demands that this will place on managers in terms of mindsets, skills and competencies. Specifically, Limerick analyses the impact the new organisation will have

on the HR profession. To conclude, a quotation from this reading seems appropriate: 'We must break the chain of the old mindset if we are to grapple successfully with the task of managing adaptive organisations. .the enemy within ourselves is the old mindset'. .

References Beer,

M, Spector,

B,

Lawrence, P R, Quinn

Mills,

D 8c Walton, A E

1984,

Human Assets, The Free Press, New York Boxall, P &: DowUng P 1990, 'Human resource management and

Managing

the industrial

and Industry, vol 3, no 2 & 3 Napier, N 1991, Strategy and Human Resources Management,

relations tradition'. Labour Butler, J, Ferris,

G

&:

South-Western Publishing Co, Cincinatti, Ohio

Wayne F 1989, Managing Human Resources: Productivity, Quality of Work Life, and Profits, 2nd edn, McGraw-Hill Inc, New York CCH Australia Limited 1989, Personnel Management, CCH Australia Limited, Sydney Gardner, M & Palmer, G 1992, Employment Relations: Industrial Relations and Human Resource Management in Australia, Macmillan Education Australia, Melbourne Cascio,

Introduction 7

Kochan,

T A, McKersie, R B & Cappelli, P 'Strategic choice and industrial relations

theory', Industrial Relations, vol 23,

Kochan,

T A,

Katz,

HC&

no

Industrial Relations, Basic Books,

Korn/Ferry Survey 1993, 'HR winning claims',

Mintzberg, S

M

The Free

battle to

pp 16-39

The Transformation of American

be key

member

Press,

Our

of team, survey

Strange World of

New York

1980, 'Stage three in personnel administration: Strategic

resource management', Walker, J

Winter,

HR Monthly, November 1993, pp 12-13 H 1989, Mintzberg on Management: Inside

Organisations,

Nkomo,

1,

R B 1986, New York

McKersie,

pp 69-77 McGraw-Hill Inc, New York

Pi^rsonn^/, July-August,

W 1992, Human Resource

Strategy,

human

Strategic perspectives

of

human

resource

management

—

Reading

1

Human resource management;

a

critical analysis

Kam Le^ Introduction In recent years, in both the UK and USA, as companies have been confronted by Japanese competition and employment stereotypes, struggled with recession and searched for excellence, the vocabulary for managing their workforces has tended to human resource management or, better Nor is this shift exclusively confined to commercial management consultants. It may be

to change. Personnel management is giving still,

to strategic

human

resource

those followers of fashion, the

charted

first

in the writings of

Foulkes 1986; Tichy

way

management.

US

academics and managers (eg Beer et al 1985; 1982; Walton 8c Lawrence 1985), but

Fombrun & Devanna

has now been recognised by both managers (eg Armstrong 1987; Fowler 1987) and academics (eg Guest 1987; Hendry &: Pettigrew 1986; Miller 1987; Storey 1987b; Torrington & Hall 1987) in the UK. Of course this is hardly the first time that the language of management has changed: the shift over the years away from traditional manufacturing industries towards process industry, high-tech manufacturing and service sectors, with accompanying changes in occupational and employment structures, had already been mirrored in managers' increasing

tendency to refer to 'employee' rather than

'industrial'

relations, well before the perceived slackening in trade

—

let

alone 'labour'

union pressure

in the

politico-economic environment of the 1980s. But whereas that shift reflected

some

changes in the practice of management (eg moves towards staff status in process industries), can the same be said of this latest shift in vocabulary? Is HRM different in substance or emphasis from personnel management? If so, in what ways and what might such a shift signify? In this reading I propose to critically consider this question. In doing, so I wish to examine not only the similarities and differences between personnel management and human resource management, but to explore the potential contradictions and paradoxes that might be embedded in both approaches. The question will also be posed as to whether HRM offers a new approach that might resolve the contradictions embedded in personnel management (Watson 1977, 1983) or whether it is merely a new rhetoric aimed at masking old contradictions in the language of today.

Personnel management and is

hmnan resom'ce management:

there a difference?

Both managers and academics, particularly in the UK, have recognised the problem of identifying clear differences between personnel management and

12 Readings

in strategic

HRM. Fowler inHRM:

human

(1987,

p

resource

3),

management

for example, argues that substantively there

What's neiu [personnel managers will ask] about the concept that personnel

is the business' (to

competition of yesteryear). best luhen they are treated

quote the theme of a Personnel

What

is

new about

'the

as responsible adults ?

could indeed be no more

and no

less

business of

Management

Haven

't

essay

these been at the heart of is,

of course,

Such words are echoed by Armstrong's (1987, p 32) comment

management,

new

the view that employees give of their

good personnel practice for decades? To which the answer

It

is little

yes.

that:

than another name for personnel it has tlie virtue of emphasising the

but, as usually perceived, at least

people as a key resource, the management of which is the direct concern management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufficient attention has been paid to it in many organisations. The new bottle or label can help to overcome this deficiency.

need

to treat

of top

Nor is Armstrong alone in suggesting a re-labelling process. Guest (1987, p 506) number of personnel departments have become human resource departments vAihout any obvious change in roles, just as the new editions of several

points out that a

long-standing textbooks have changed tide but litde

being

else.

human

Scepticism about there

management and management is further reinforced by the practice, particuthe US, of using human resource management 2is a generic term and one inter-

little

substantive difference between

resource

traditional personnel larly in

changeable with personnel management. In order to identify possible differences between personnel

human

resource management,

we can

take two approaches.

management and we can ask

Firstly,

whether their normative models differ; secondly, whether descriptively their respective practices differ. As Guest (1987, p 507) suggests, we cannot really ask what human resource management looks like in practice unless we have a model about what it should constitute. Otherwise we run the danger of accepting as HRM any practices so labelled, even if indistinguishable from what a few years ago we would have termed personnel management. In theory, once a normative model of HRM is established and empirical research undertaken, several outcomes are logically possible: the normative models of personnel management and HRM might be similar but their practices differ; their normative models might differ, but their practices be similar; both their respective normative models and respective practices might be similar, or both, respectively might differ. It is in the final case that we might be most confident that HRM and personnel management really are different approaches to managing employees. Examining the normative models is amenable to conceptual analysis of published statements, but identifying similarities or differences in the practice of

personnel management and HRM is a matter of empirical observation. Unfortunately at the time of writing, while empirical research is being conducted,

human

Strategic perspectives of

resource

management 13

notably by researchers in the School of Industrial and Business Studies, University

of Warwick, and

Templeton College, Oxford, few detailed published

at

regard to the

exist, particularly in

studies

UK context. This has given rise to the danger that

—

some commentators may be comparing like with unlike that is, comparing descriptive, empirically grounded models of personnel management (such as those of Legge 1978; Mackay & Torrington 1986; Tyson

with normative models (eg Walton 1985) of

of these considerations,

it

seems sensible

& Fell

1986;

Watson 1977)

HRM (Guest 1987, p 507). In the light

initially to

normative models of personnel management and

focus

on a comparison of the

HRM.

Normative models of persomiel management It

may be

useful to start with several conventional definitions of what the function

of personnel

management ideally should be. (Relatively lengthy quotations management and HRM from a normative perspective are

defining personnel

presented here in order to provide a data base to support and

illustrate

subsequent

observations.) First

some American

definitions:

management aims at getting effective results with people, personnel adminisis a basic management function or activity permeating all levels of management in any organization. Personnel administration is. organizing and

Since

tration

.

treating individuals at work so that they their intrinsic abilities, thus attaining

group,

and

luill

maximum efficiency for themselves and their

thereby giving the enterprise of luhich they are

competitive advantage

and

its

optimum

a part

daily operations.

that each

.

.

& Myers 1969)

most significant aspect ofpersonnel management

through the direction

determining

its

results.

(Pigors

It is believed that the

.

get the greatest possible realization of

and control of the human

is to

befound

resources of an otganization in

its

the successful performance of the personnel function necessitates

manager orient himself within

his total business

help achieve the various organizational programs

environment in order

to

and objectives. (Megginson 1972)

Basically personnel

is

concerned

luith the

be done to achieve the organisation

!$

matching of people

to the jobs that

must

goals.

(Glueck 1974)

is defined here as follows: The field of management which do with planning, organizing, directing and controlling the functions of

Personnel management

has

to

procuring developing, maintaining and utilising a labor force, such

that:

14 Readings

a

in strategic

human

Objectives for

resource

management

which the company

is

established are attained economically

and

effectively.

b

Objectives of all levels ofpersonnel are served to the highest degree,

c

Objectives of society are duly considered

and served. (Jucius

These may be contrasted with some Personnel management

a

is

British definitions:

responsibility

as being a description of the work of those

part of management which

is

1975)

of all those

who

who manage people, as

are employed as specialists.

concerned with people at work

and with

It is

well that

their rela-

an enterprise. Personnel management aims to achieve both and justice, neither of which can be pursued successfully unthout the other. It seeks to bring together and develop in an effective organization the men and women who make up an enterprise, enabling each to make his own best contribution to its success both as an individual and as a member of a working group. It seeks to provide fair terms and conditions of employment, and satisfying work for tionships within

efficiency

those employed. (Institute of Personnel

Personnel management

is

Management 1 963)

concerned with obtaining the best possible stafffor an

organization and, having got them, looking after them so that they will want to stay

and give of their best

to theirjobs.

(Cuming 1975)

Personnel management

and

their

is

a

series

employing organisations

of activities which: first enable working people to

agree about the objectives

and nature of their

working relationship and, secondly, ensures that the agreement

is fulfilled.

(Torrington &f

HaU 1987)

common themes emerge. It would appear about selecting, developing, rewarding, and directing employees in such a way that not only will they achieve satisfaction and 'give of their best' at work, but by so doing enable the employing organisation to Analysing these statements, some

that personnel

management

achieve

Furthermore, personnel management

its

goals.

is

not just of personnel specialists alone. differences are implicit

The American

when comparing

If

is

these are

the American

the task of all managers,

common themes some and

British definitions.

assume a unitary frame of reference: achieving the 'greatest possible realisation of [employees'] intrinsic abilities' is assumed to be not only perfectly compatible with 'attaining the maximum efficiency for themselves and their group', but a precondition of the organisation's achieving its 'optimum results'. The British definitions, in contrast, adopt a pluralist perspective: efficiency and justice are contrasted in the IPM definition, although their ultimate definitions clearly

Strategic perspectives of

human

resource

management 15

is assumed possible; Cuming's definition recognises that employees' and commitment is problematic and conditional; above all, Torrington and Hall assert that the employment relationship should be rightiy the subject ofjoint negotiation, agreement and regulation.

reconciliation loyalty

Normative models of hmnan resom-ce management

How do

such definitions of personnel management differ from normative

statements about

HRM? Again, let us start with some American definitions:

We have come to believe that the transformation we are observing amounts than a subtle

new

shift in the traditional practices

to

more

of personnel or the substitution of

amounts

terms for uruhanging practices. Instead the transformation

to

a new

model regarding the management of human resources in organizations. Although the model is still emerging, and inconsistencies in its practice are often seen, we believe that

that

a

set

of basic assumptions can be identified that underlie the policies

we have observed to be part of the

HRM transformation.

The new assumptions

are: •

proactive, system-wide interventions, with emphasis strategic planning cultural

on fit, linking

change (cfold assumption:

reactive,

HRM with

piecemeal inter-

ventions in response to specific problems) •

people are social capital capable of development (cfpeople as variable cost)

•

coincidence of interest between stakeholders can be developed (cf self interest

•

seeks

dominates, conflict betioeen stakeholders)

power equalization for trust and collaboration

(cf seeks

power advantages

for bargaining and confrontation) •

open channels of communication to build trust, commitment (cf control of information floiv to enhance efficiency, poiuer)

•

goal orientation (cf relationship orientation)

•

participation

and informed

choice (cf controlfrom top)

(Beer

The new goals,

HRM model

mutual

The theory

is

is

influence,

&Spectar 1985)

composed of policies that promote mutuality

mutual

respect,

mutual rewards, mutual

that policies of mutuality will

yield both better economic performance

—mutual

responsibility.

commitment which in turn

elicit

and greater human

will

development.

(Walton 1985)

Effective

human

resources

management

have a tendency

to create

and function

vacuum but must be many personnel managers

does not exist in a

related to the overall strategy of the organization.

in their

their primary valve is helping to realise top

and

.

.

Too

own little luorlds, forgetting management goals.

that

line

(Foulkes 1986)

16 Readings in

The

strategic

human

resource

management

may be

British definitions again

contrasted with the American:

HRM

What, from a review of the existing literature does 'strategic appear to mean ? We start out by noting that there are two themes which overlap one another: the first

contained in the term

'human

resources

'.

The

'strategic

',

'

the second in the idea, or philosophy, of

latter suggests people are

a valued

a

resource,

critical

an organisation 's current performance andfuture growth. The term in this context has both established and new connotations [these are]

investment in 'strategic'.

1

.

.

the use of planning;

2 a

coherent approach to the design

and management ofpersonnel systems based

on an employment policy and manpower strategy, and 'philosophy

underpinned by a

';

3 matching HRM activities and policies 4 seeing

often

some explicit business strategy; and

to

the people of the organization as

a

'strategic resource' for

achieving

'competitive advantage'.

(Hendry &' Pettigrew 1986)

The main dimensions of if line

HRM [involve] the goal of integration [ie if human

can be integrated into

resources

strategic plans, if human resource policies cohere,

managers have internalised

reflected in their

company 's

behaviour

strategic

and

plans are

the importance of human resources

if employees identify

likely to

this is

be more successfully implemented], the goal

of employed commitment, the goal offlexibility/adaptability functionalflexibility], the goal of quality

and public

and

with the company, then the

[ie quality

ofstaff,

[ie

organic structures,

performance, standards

image].

(Guest 1987)

Human resources management is directed mainly at management needs for human resources (not necessarily employees) to be provided

emphasis on planning, monitoring, and

and

deployed. There

control, rather

is

greater

than on problem solving

and mediation. It is totally identified with management interests, being a general management activity and is relatively distant from the workforce as a whole. Underpinning personnel management are the twin ideas that people have a to proper

treatment as dignified

right

human beings while at work, and that they are only

effective

as employees wfien theirjob-related personal needs are met. Undetpinning

human

resources

much right

the

management is the idea that management of human resources is same as any other aspect of management, and getting the deployment of

numbers and skills at the

right place

is

more important than interfering with

people's personal affairs.

(Torrington

common themes stand out: that resources policies should be integrated with strategic business planning

In the majority of these definitions several

human

& Hall 1987)

Strategic perspectives of

and used

to reinforce

human

resource

management 17

an appropriate (or change an inappropriate) organisational

human resources are valuable and a source of competitive advantage, may be tapped most effectively by mutually consistent policies that

culture, that

that they

promote commitment and which, employees

as a

consequence, foster a willingness in

to act flexibly in the interests of the 'adaptive organisation's pursuit of

excellence'. However, again, some differences may be observed between the American and British models. The American models of HRM, in a similar manner to their models of personnel management, assume a unitary frame of reference: that 'there is a long-run coincidence of interests between all the various stakeholders of the organisation', as Beer and Spector (1985, p 283) would put it. Even where potential union problems are recognised, co-optation is identified as the way forward: 'odier managers have decided to actively promote more co-operative relations with their existing unions.

.

.

[concluding] that they could not successfully

management strategy without the active support of the unions' (Walton 1985, p 61). The British models adopt a rather different position. While Armstrong's 'revised' model (1987) merely makes some gestures in the transform their workforce

direction of a pluralistic stance, other commentators, in recognising that the

HRM

model

might

essentially unitaristic,

is

and marginalises the

role that trade unions

play in organisations, find this a source either of logical inconsistency within the

model or of practical (1987, p 3) asks

'Is it

infeasibility in

its

really possible to

full

day the employer can decide unilaterally to close else?',

while,

on the

other,

unitaristic implications

an appeal following a

on the one hand, Fowler when at the end of the the company or sell it to someone

execution. Thus,

claim

mutuality

Guest (1987, p 520) suggests that

'for

many, the

of human resource

management could only begin to have much more radical shift of ownership and control in

industry'.

Most

HRM

models, whether British or American, assert that employees are

valued assets and, with the emphasis on commitment, adaptability and employees as a source

of competitive advantage, the image might equally be presented as

and Fell (1986, p 135) point out, human resource may be understood in a completely different sense, as a factor of production, along 'resourceful humans'. But as Tyson

with land and capital, and an 'expense of doing business' rather than 'the only

resource capable of turning inanimate factors of production into wealth'. This perception of 'resource' appears to underlie Torrington and Hall's model of HRM, with

its

emphasis on appropriate factors of production ('numbers' and

'skills')

the 'right' (implicitiy the 'lowest possible') price. In their model, too, the

at

human

resources appear passive ('to be provided and deployed') rather than (to quote Tyson and Fell) 'the source of creative energy in any direction the organisation dictates and fosters'. Indeed Torrington and Hall's description of the conception of employees in a personnel management model appears to have far more in common with most models of HRM, than their own conception of human resources in their HRM model. It is partly on the basis of these different conceptions of human resources that Storey (1987, p 6) draws a distinction between what he terms the harddinA 5q/?versions of HRM. The former emphasises the 'quantitative, calculative, and business strategic aspects of managing the head-count resource in as "rational"

18 Readings

in strategic

human

resource

management

a way as for any other economic factor' and the latter emphasises 'communication, motivation and leadership'. Put differendy, the /lard version might be said to

emphasise the management aspect, and the soft version, the human resource aspect of HRM. This disdnction may also be seen as echoing an earlier one made by Legge (1978) between the conformist (management) and 'deviant' (human resource) innovation in personnel management.

The normative models compared

A close

examination of commentators' normative statements about personnel HRM suggest there are clear similarities between the two.

management and 1

Both models emphasise the importance of integrating personnel/HRM American commentators, it cannot even be said that the language has changed Pigors and Myers (1969) speak of 'determining competitive advantage' and Megginson practices with organisational goals. Particularly in the case of the

—

(1972) of 'orienting to the total business environment'.

2 Both models vest

personnel/HRM

firmly in line

management.

3 Both models, in the majority of instances, emphasise the importance of individuals fully developing their abilities for their

and

to

make

own

personal satisfaction

their 'best contribution' to organisational success.

The

similarity

underlined when comparing Torrington and Hall's model of personnel management with the other commentators' models of HRM. For their conception of the ideas underlying personnel of the two models in

management

'that

this respect

is

people have a right to proper treatment

as dignified

beings while at work, and they are only effective as employees related personal needs are met'

version

is

when

identical to the values underlying

human

their joball

the

soft

HRM models. Furthermore, their statement elaborating this position,

that speaks of the desirability of 'mutuality' and 'reciprocal dependence' between employer and employee in order for the employer to obtain 'commitment to organisational objectives that is needed for organisational success' (Torrington & Hall 1987, p 11) uses the same language as Walton's

(1985, p 36)

HRM model: 'the new management strategy involves policies that

promote mutuality in order to elicit commitment, which in turn can generate increased economic effectiveness and human development'. 4 Both models identify placing the 'right' people into the 'right' jobs as an important means of integrating personnel/HRM practice with organisational goals, including individual development. Glueck's (1974) and Cuming's (1975) statements about personnel management's function in this respect are virtually p 51) that an 'essential process' of strategic one of matching available human resources to

identical to that of Tichy et al (1982,

human

resource

management

'is

The recognition that this matching process is neverdynamic one given the rate of environmental and organisational change, and that employees really should be selected and developed in ways that enhance their adaptability and flexibility is common to both HRM models and to what might be termed the deviant innovation model of personnel

jobs in the organisation'. theless a

Strategic perspectives of human resource

management and So,

as

management 19

embracing organisational development (OD) value systems p 514-15; Legge 1978, p 87-9).

practice (cf Guest 1987,

is

HRM and those of And, indeed, the sharp comparison of what he terms

there any difference between the normative models of

personnel management?

One is tempted

to say 'not a

contrasts that Guest (1987, Table 1) elicits in his

lot'.

human resource management 'stereotypes', in spite much to an implicit comparison of the descriptive practice of personnel management with the normative aspirations of HRM, rather personnel management and

of his disclaimers, appear to owe than comparing

like with like.

However, both stark comparisons and assumptions

of similarities should be treated with caution. Even at the level of normative neither personnel management nor analysis let alone empirical observation

—

—

HRM

is

a singular model, but each

is

conceptualised in a variety of guises. Perhaps

the sharpest contrasts may be found in comparing British personnel management models with US HRM models, or paradoxically, the hard and soft versions of the HRM model. However, I think some general differences can be detected, even if these are largely of meaning and emphasis rather than substance. Firstly, many statements about personnel management, when placed in the context of the texts from which they are derived, seem to see it as a management activity which is largely aimed at non-managers. Apart from management develop-

ment

(often treated as a separate activity or function) personnel

management

appears to be something performed on subordinates by managers rather than something that the latter experience themselves other than as a set of rules and

—

procedures that may constrain their freedom in managing their subordinates as they think fit. HRM, on the other hand, not only emphasises the importance of employee development, but focuses particularly on development of the management team (see, for example, the interviews with Bob Beck, Alan Lafley and Clifford J Erlich in Foulkes 1986). This other differences.

shift

of emphasis appears related to two

management and HRM highlight the role of management, the focus is different. In the personnel management models, line's role is very much an expression of the view that all managers manage people, so all managers in a sense carry out personnel management. It also carries the recognition that most specialist personnel work still has to be implemented within line management's departments where the workforce is physically located (see for example Legge 1978, pp 22-S). In the HRM models, HRM is vested in line management as business managers responsible for co-ordinating and directing all resources in the business unit in pursuit of bottom line results. Not only does the bottom line appear to be specified more precisely than in the personnel management models, with much emphasis on quality of product or service (see for example, Storey 1987, p 16; Upton 1987), but a clear relationship is drawn between the achievement of these results and the line's appropriate and Secondly, while both personnel

line

proactive use of the

human

resources in the business unit. Personnel policies are

not passively integrated with business

strategy, in the sense

of flowing from

are an integral part of strategy in the sense that they underlie

pursuit of a desired strategy.

and

it,

but

facilitate

the

20 Readings

in strategic

human

resource

management

The third difference is that most HRM models emphasise the management of the management. Although the models of the 1970s proclaimed a similar message, these were not fully integrated with the run-of-the-mill normative personnel management models of the 1970s. OD was always seen as standing slighdy apart from 'mainstream' personnel management and, in fact, was generally kept separate in a formal institutional sense, with separate OD consultants, not always with a background in, or located within the personnel department (see Pettigrew 1985). Above all, it was often presented as a fringe activity, an initiative that was 'nice to have' but essentially the gilt on the gingerbread, to be dispensed \sdth at the first hint of financial cutbacks (along with training!). Peters and Waterman's (1982) linking of strong cultures vAth financial success (however spurious), along with American management's fascination with the linkages between a stereotyped 'Japanese' employment culture and Japanese economic strength, has raised the development and management of an appropriate organisation's culture as the central activity for senior

OD

culture as the strategic or 'transformational' leadership

a sense of purpose and involvement to integrated

and

all

internally consistent set of

selection, training, sation's core values

activity,

organisational

that gives direction,

members.

HR policies in

It is

through an

relation to recruitment,

development, rewarding and communications, that the organican best be conveyed, according to the normative HRM models.

—

HRM

is a doubly important issue not just integration of but the internal integration and consistency of policies themselves to enact a coherent 'strong' culture. The normative personnel management models do not present personnel policies as senior management's

Integration, therefore,

HRM

policies with strategy,

instrument for reinforcing or changing organisational values in a manner consistent with preferred business strategy.

These three differences

more

in

emphasis

all

point to

HRM,

in theory,

being

management task than personnel management in that it is experienced by managers, as the most \^ued company resource to be managed, it concerns them in the achievement of business goals and it expresses senior management's preferred organisational values. From this perspective it is essentially a

central strategic

HRM

not surprising that Fowler (1987, p 3) identifies the real difference between as 'not what it is, but who is saying it. In a nutshell

and personnel management

HRM represents the discovery of personnel management by chief executives'. this

is

so,

what are the problematic

Contradictions in

human

issues in

resource

HRM

It will

be argued here that

level,

the value of integration that

is

its

management

problematic at two it

If

enactment?

levels. Firsdy, at

promotes contains a

the surface

logical contradiction,

given the dual usage of the concept of integration. Integration appears to have two

meanings: integration or 'fit' with business strategy and the integration or complementarity and consistency of 'mutuality' employment policies aimed at generating

employee commitment, flexibility, quality, and the like. This double meaning of integration has been referred to also as the external and internal fit of HRM policies (Baird & Meshoulam 1988). The problem is that while 'fit' with strategy would

Strategic perspectives of

argue a contingent design of HRM

employment

to the design of

that

to

management 21

— —^would argue an

at least with the

absolutist

Can this contradiction be the meaning of HRM as a distinct at a deeper level, it may be suggested

policy.

reconciled without stretching to the limit

approach

resource

policy, internal consistency

50^ human resource values associated with 'mutuality'

approach

human

managing employees? Secondly,

HRM, no less than personnel management, is confronted by a contradiction

of capitalism: that is, responsibility for accommodating the dilemma the 'labour commodity'

groups in

a

is

capitalist society,

major means

it is

liable to subvert those interests

HRM

have the potential to cope more effectively with traditional approaches to personnel management?

Does

that,

to further the interests of

although

dominant

(Watson 1977). than

this tension

The problem of integration of HRM to argue for the matching, even the tight meshing, of HRM policies with business strategy. Various approaches have been proposed. Perhaps the most popular to suggest that HRM policies— in particular those

A characteristic

is

is

related to recruitment

rewards

—should

'fit'

and

selection, training

and development,

appraisal

and

the stage of development at which the organisation has

arrived in pursuing growth. Typically the organisation's stage of development

is

characterised in terms of product or geographical diversity (eg single product; single product, vertically integrated;

growth by acquisition of unrelated businesses;

related diversification of product lines through internal growth

and

acquisition;

form owner manager/ agency; functional; separate self-contained businesses; multidivisional; mixed forms; global organisation). See, for example, Baird and Meshoulam (1988), Smith (1982), Tichy et al (1982). multiple products in multiple countries)

and by the

associated organisational

(eg

A similar approach, but leaving aside explicit assumptions about organisational growth,

is

Miles

and Snow's (1984)

identification of three basic types of strategic

behaviour and supporting organisational characteristics, which they term prospector 2Lnd analyser.

defender,

A defender strategy is characterised by a narrow and relatively

product-market domain, single, capital-intensive technology; a functional and skills in production efficiency, process engineering and cost control. Miles and Snow cite Lincoln Electric as a typical example. A prospector strategy is typified by the continual search for new product and market opportunities and experimentation with potential responses to emerging environmental trends. Prospector characteristics include a diverse product line; multiple technologies; a product or geographically divisionalised structure, and skills in product research and development, market research and development engineering. Hewlett Packard

stable

structure;

is

identified as a typical prospector. Analysers, according to Miles

in two differing types of product

market domains

— one

and Snow operate

relatively stable, the

other

changing. Given different market demands analysers enact a diversity of behaviours.

Thus they

are characterised by a limited basic product line; search for a small

number of related product and/or market opportunities; cost-efficient technology for stable products and project technologies for new products; mixed (frequentiy

22 Readings

in strategic

human

matrix) structure; and

marketing. Miles and

resource

skills in

Snow

management

production efficiency, process engineering and

identify Texas Instruments as a typical analyser.

logic of these different strategies

depending on

differ,

strategy.

is

that the organisations'

HRM

policies

The

should

For example, Miles and Snow suggest that the basic

HRM strategy of defenders will be to 'build' human resources, that of prospectors to human resources and that of analysers to 'allocate' human resources. These different approaches to HRM in theory have very different implications for choice of policy. If we take the examples of selection and development, for instance, Miles and Snow suggest that a defender company should typically engage in litde recruiting above entry level, with selection based on 'weeding out undesirable employees', while training and development should involve extensive, formal skills-building programs (ie the make approach). In contrast, prospectors should seek to 'buy in' talent a strategy that should involve sophisticated recruiting at all levels, with selection involving pre-employment psychological testing, training being limited, the emphasis being on skills-requirement identification and their acquisition in the labour market. By implication Miles and Snow suggest that analyser companies should match recruitment, selection, and development strategies to the nature of the product (stable, innovative) and the stage of the product life-cycle and thus engage in make (stable product, 'cash cow') 'acquire'

—

or buy

HRM

policies (innovative product, 'rising star') as appropriate to the

market domains. Miles and Snow's analysis

different

attempting to achieve external strategy. Firstiy,

of

is it

raises fit

two potentially problematic issues

or the integration of

when

HRM policies with business

possible to have a corporation-wide, mutually reinforcing set

HRM policies, if the organisation operates in highly diversified product markets,

and,

if

not, does

it

matter in terms of organisational effectiveness? Secondly,

if

HRM policies, will some strategies most normative HRM models—fail to emphasise

business strategy should dictate the choice of

—unlike

dictate policies that

commitment, flexibility and quality? If these questions are relevant to an organisation with market diversity in Miles and Snow's terms, they are writ large for conglomerates operating not only in different markets in one industry, but in a range of industries.

Taking the first point, if a highly diversified corporation is to match its HRM wide range of very different product-market requirements then clearly the logic of such a position is that different policies would emerge in

policies to a

different divisions or subsidiaries. Conversely, Miller (1987) does well to

draw to pursuing company-wide, internally consistent HRM policies for example, Hewlett Packard or Marks and Spencer are notable for low levels of business, (as opposed to product) diversification, of 'sticking to the knitting'. However, whether the pursuit of different sets of HRM policy in a diversified corporation 'matters' is another question, assuming such an organisation sought integration only at the financial level and allowed its business units a high level of autonomy. All that would then be required for congruence would be that each unit adopts policies that were our attention that many of the companies generally recognised

—

consistent with

its

as

—

—irrespective of

own business strategy and mutually reinforcing

Strategic perspectives of

the extent to which they contradicted

human

resource

management 23

HRM poHcies pursued in other business

units elsewhere in the corporation. While, as a consequence,

no organisation-wide

would not be necessary as integration at operating level and, hence, of personnel. Then not only would the difficulty of merging distinct sub-cultures be likely, but perceptions of potential inequalities and inconsistencies between erstwhile autonomous units' HRM policies might undermine the trust and commitment that is supposed to develop from perceptions of congruence. In relation to this question Miller (1987) makes a further interesting observation. To suggest that to achieve competitive advantage each business unit strong culture

would be

likely to develop,

arguably

this

its HRM policies being pursued elsewhere assume that the business units are market driven. While

in a diversified corporation should tailor in the corporation, this

may be

is

to

true of individual units within the corporation,

it is

not necessarily so

of the corporation as a whole. As Miller points out, the success criteria of diversified

conglomerates are defined in financial terms and largely sought through the manipulation of corporate assets. 'The success of Hanson Trust will depend not on building competitive advantage in the businesses within the portfolio... but by acquired growth' (Miller 1987, pp 359-60). Such a corporate strategy though may not lead to organisational effectiveness as broadly understood 'and, indeed, there is a creeping criticism that these businesses, as a result of their failure to engage world markets, are bad for the economy' (Miller 1987, p 359). If a multi-business conglomerate's success is sought through acquisition, asset stripping

and attention

—

to

its

price-earnings ration

—may

on the

stock markets,

its

HRM

compulsory redundancy, reward based on short-term performance results) which, although consistent with business strategy, are unlikely to generate employee commitment. Even where a company does seek competitive advantage in the market for its products or services, patterns of demand and cost structures may argue that, at least at the level of non-managerial employees, flexibility is more effectively achieved through Tayloristic work organisation, treating labour as a variable input, and exploiting the secondary labour market rather than through enhancing the skills and quality of the workforce. This would appear to be the chosen strategy of much of the High Street, whether fast food chains or a large part of the retail sector. In cases such as these, the hard version of human resource management appears more relevant than the 50^ version of human re^owrc^ management. In other words, matching HRM policies to business strategy calls for minimising labour costs, rather than treating employees as a resource whose value may be enhanced, in terms of Guest's model, by increasing their commitment, functional flexibility, and quality. Furthermore where such cost-minimisation policies are pursued in relation to direct employees, lack of integration may occur at another level. It may 'policies'

be

in

staff,

if not

entirely pragmatic

such companies that

soft

version

logically call for actions (eg

HRM policies are followed for

resulting in a lack of internal consistency

which may

ftirther

managerial

undermine the

commitment of direct employees. Attempts to reconcile strategy (external

fit)

this

may

contradiction

—

that

matching HRM policy

involve the denial of internal

fit

to business

with core soft

HRM

.

24 Readings

in strategic

human

—have taken two forms.

First

values

the two forms of integration

treatment

management

resource

is

is

the argument that the lack of consistency in

illusory.

may appear

Actions that

of individuals as a \-ariable cost, rather

to epitomise the

than resource, in the interests of

wood whose performance

business strategy, eg chopping out dead

not up to

is

standard, t)dng rewards closely to individual performance, transferring employees to other jobs and parts of the organisation in the light of business requirements,

an opportunity for employees to develop their resourcefulness If some employees prove unequal to the challenge and have to competences. and or if business circumstances dictate that some have to be dispensed with', be sacrificed in the interests of the organisation as a whole, this is really an example of tough love, or 'care which does not shy away from tough decisions' (Barham, is

in fact providing

Eraser

&:

The

Heath 1988, p

28; Peters

& Waterman

1982,

96, 240).

pp

use of tough love as a rhetorical device to mediate this contradiction

may

bv quotations from two managers, cited in Barham, Fraser and Heath (1988) and Foulkes (1986) respectively. First, in a booklet setting out its management principles, an insurance company's chief executive asserts:

be

illustrated

The needs of our business company's

be most effectively attained if the needs of the people

are met. If people are in poor shape, the

objectives are unlikely to be achieved. Yet the needs

comefirst. People need with

ivill

and meaning,

for fulfilment, success,

'soft care',

to be developed,

of the business

still

but this will not be achieved by treating them

by alloiuing issues to be

smoothed over luithout being properly

addressed. To treat people without care will cause them and, therefore the business, to

diminish. Experience su^ests that the needs ofpeople

met

if we treat ourselves

management, which

with 'tough

love'.

..This

is

basically does not involve care.

Respect for the individual does not

and the business will be best

very different from 'macho'

Tough

mean pandering to the

love requires courage.

individual's weaknesses

or even unsfies. Involving people through tough love to secure both their development

and good performance

managers

requires

People, of course, are far and

But

they are not

develop pecfple

more than

and

away

tfie

to take initiatives.

that. It is very easy to forget

to care for

them,

.

most important resource in any company.

and even

to love

when endeavouring

them, that

tfie

business must come first. Without that, there can be no lasting security.

paradise in which

effort is

to

needs of the

A fool's

concentrated only on the present well-being of the staff

without regard for the future, will eventually disintegrate

and

it

may

well be

tfie

staff that suffer most.

(Barham, Fraser &" Heath 1988,

p 28)

Note here that 'putting the needs of the business first', is presented as an tough love, and that 'love', as opposed to 'soft care' or even 'pandering to the individual's wishes', is a question of sometimes being 'cruel to be kind'. Without toughness the staff may be the ones to 'suffer most'. 'Care' for

—

intrinsic part of

the individual appears essentially as respect for employees'

woman) enough

to take

it'

abilitv'

to

be 'developed'

deems appropriate and, implicidy, to be 'man (or if personal sacrifice for the good of the organisation is

in ways that the organisation

Strategic perspectives of

human

resource

management 25

required. Indeed the very denial that tough love is at all like 'macho' management only serves to reinforce the suspicion that in its manifestation to unfortunate employees exhibiting 'individual weaknesses' it may appear indistinguishable. The assumptions of paternalism and a unitary frame of reference which

pervade the quotation above are echoed in the words of a vice-president of ITT, cited in Foulkes (1986, p 382): The positive fact

is

that the removal of a marginal, unproductive or unnecessary

surplus employee, provided

improves

the people the

employee

with

to

and ethically handled, almost always and above-average employees, who are, after all,

legally

it's

the morale of the average

company most wants

to retain. It is

observe a fellow worker who

is

demoralising to a good, productive

consistently

—and

dogging it

getting away

it.

It is the

to see that the level of employee always as high as possible, even when the

personnel manager's responsibility

performance and productivity

is

achievement of that objective requires the unilateral removal of unsatisfactory employees.

and certainly in rhetoric, glosses the and commitment to soft HRM values. Development, flexibility and adaptability are defined by the organisation and are in its own interests. The company's interests and those of its employees are equated. If an individual's abilities and performance are defined as inappropriate by the company, given the identification of employee and organisational interests, that person must inevitably be redefined as no longer an employee, and a tough decision may have to be made in loving concern for the employees the company wishes to retain, who depend on its survival growth.

Tough

love, then, possibly in substance,

potential tensions between external

An alternative approach to

changes where,

in sectors

fit

to reconciling these potential contradictions

is

to point

Thus, the argument has been presented that even cost-minimisation has been the order of the day (eg

in business strategy. traditionally,

mass production, supermarket retailing), given the levels of cost-effectiveness achieved by enhancing the quality of the product or service. Hence commitment must be generated in employees directly manufacturing the product or at the customer interface whether through participative structures and policies of employee involvement or through training and development. Austin Rover's Working with Pride program of quality circles and employee involvement (Storey 1987) and Bejam's training programs (Upton 1987) have been cited as typical senior management initiatives to improve quality, although we await systematic research on the workings of these policies in practice. Again it is difficult to know where rhetoric ends and the extent to which compliance with the normative soft in

—

HRM model is really sought or achieved on the shop floor. Certainly the managers Storey (1987, p 17) cites, suggest a gap between 'espoused theory' and 'theory in use'. Furthermore, this line of argument comes close to suggesting a higher degree of homogeneity in business strategy among organisations than the commentators cited earlier perhaps would suggest.

version

— 26 Readings

in strategic

human

Is the

human

resource

management

resource

management model

internally consistent'^

Leaving aside potential contradictions between integration of HRM policy with and the ability to achieve an integrated company-wide HRM policy; between policy matched to business strategy and the soft HRM model,

business strategy

indeed between the hard and

soft versions

of the model

itself,

contradictions

may

be found in the goals of commitment, flexibility and quality, and of 'strong' culture sought bv die soft version of the model. Firsdy, there seems to be some confusion over the concept of commitment. Guest (1987, p 513) in querying 'commitment to what?', identifies 'multiple and perhaps competing commitments' to organisation, career, job, union, work group, and familv. If we assume that HRM emphasises high standards of performance 'the excellent companies are measurement-happy and performance-oriented... borne of mutually high expectations and peer review' (Peters 8c Waterman 1982, p 240) and quality of product/service, individuals' job commitment would seem important, along with their desire to develop their skills and competences. But the

—

higher the level of commitment to a particular set of skills, arguably, there may occur a decrease in an employee's preparedness to be flexible as between jobs, or willing to accept a redefinition of a job that might diminish elements to which a

commitment has been made. Hendry and Pettigrew (1988, p 43) suggest an

interesting sidelight

potential conflict in their discussion of multi-skilling at

Retraining itself has unforeseen consequences.

changes attitudes

to production.

the particular interest then

interesting

when

lies

One effect is the belief that it adversely and the job is only really managing director put it: 'we

in the exercise of these skills,

As

the

taught them everything but the importance of the production to the

this

Learning to overcome equipmentfaults means that

the machine breaks down.

hear them saying

on

Hardy Spicer:

machine

''break

down, break down

ethic.

You could almost

"'.

HRM

appears torn between preaching the virtues of individualism At first sight most commentators, observing its backgrounding of collective, union-based employee relations and its highlighting of individual skills and development, assert that it is individualistic rather than collectivist in orientation (see, for example. Guest 1987; Storey 1987). In this they are supported Secondly,

and

by

collectivism.

much management At

BMW there

far as

is

we can a

rhetoric.

For example, according to a manager

a new concentration on the individual. self-organising

and

this

means

at

BMW^:

We have got to achieve as much more

that there has to be

individual responsibility.

(Barham, Fraser

iff

Heath

1

988,

p 54)

But, at the same time, there is a parallel emphasis on team work, whether in the form of quality circles or functional flexibilit)', and above all, on the individuals in it, but rather as an organic entity with an interest in survival. The potential conflict between emphasising the importance of the individual on the one hand and the

— Strategic perspectives of

desirability of co-operative

sation values.

on the

other,

is

human

resource

team work and employee commitment

management 27

to the organi-

glossed over through the general assumption of unitaristic

For example, from Norsk Data comes the observation:

Norsk Data

is

made up of individuals like yourself. We have the

Ifyou 'II be yourself and use your whole personality in yourjob, will stand behind you

'Norsk Data Spirit the rest of the

'.

team

and your efforts. (Barham, Fraser

This quotation also points to

why

—not only does

& Heath 1988, p 30)

HRM stresses the development of a strong

give direction to an organisation, but it mediates the tension between individualism and collectivism, as individuals socialised into a strong culture are subject to unobtrusive collective controls on

corporate culture

attitudes

it

and behaviour

However,

thirdly,

there exists a potential tension between the development of a

strong corporate culture and employees' ability to respond flexibly and adaptively.

Following Brunsson's (1982) arguments, o^'^c^iw ideologies (defined as ideas shared

by all organisational members), when conclusive (that is, in

one sense

—speed of response—can promote

decisions can be

made

clear,

narrow and consistent) is because

adaptability. This

—read strong culture

quickly as the conclusive ideology

on the acceptability of an action, eliminating lengthy discussion while generating commitment to implementing it. But this 'adaptability' is only when the action required involves no radical departure from the tenets of acts as

an

effective filter

the strong culture, as conclusive ideologies rule out changes that challenge their

assumptions. Leaving aside the strong bureaucratic cultures that inhibit risk-taking

and innovation per se (Golzen 1988), the development of a culture congruent with and supportive of a particular business strategy can act as a block to employees adopting different behaviours in response to changing market demand. A much quoted example is that of IBM whose narrow ideology of 'IBM is service' contained particular assumptions about the nature of product and service (mainframe, customised systems, salesmen as management consultants to customer-as-end-user, seeking quality of product and service) which were inappropriate when strategy dictated an entry into the personal computers market (standardised product, cost

competition, dealer as customer) (Mercer 1987). ethic in

a

its

traditional markets inhibited

The very success of the IBM service

an adaptive response from employees to

new market. Yet conclusive ideologies, reflecting strong cultures, Brunsson argues, in the

long term may be more amenable to radical shifts than the broad, ambiguous ideologies, often taken as symptomatic of a weak culture. Superficially, while the latter might appear to allow more flexible responses on the part of the employee, their very vagueness fails to generate the necessary

commitment

for effective

action. Nevertheless, such ideologies tend to survive as they are difficult to

disconfirm, being apparentiy applicable to a wide range of situations. In contrast

the very precision of conclusive ideologies allows their disconfirmation as individuals' own experience of changed circumstances cannot be reconciled with

— 28 Readings

in strategic

human

resource

management

and justifications. In these circumstances the

their unequivocal prescriptions

ideology (culture) is likely to be questioned and replaced. Until a new ideology is in place, Brunsson suggests, it will be impossible for the organisation to take effective action as the period of transition will

be marked by

tainties that will inhibit individuals' willingness to

make

a

conflicts and uncercommitment to any one

course of action and hinder co-ordination.

Hence it could be said that the relationship between strong cultures, employee commitment, and adaptability contains a series of paradoxes. Strong cultures allow for a rapid response to familiar conditions, but inhibit immediate flexibility in response to the unfamiliar, because of the propriate ideology.

Weak

commitment generated to a (now) inaf>when equated with ambiguous

cultures, in contrast,

ideologies, allow flexibility in response to the unfamiliar, but cannot generate

commitment to action. Yet strong cultures, through disconfirmation and eventual ideological shift may prove ultimately more adaptive to change, assuming the emergence of a new strong yet appropriate culture. This may be at the cost of a transitional period when ability to generate commitment to any course of action new or old is minimal.

—

Human resource management and the Underlying the contradictions contradiction

embedded

in

in the

HRM

'contradictions of capitalism'

outlined above

is,

of course, the major

management of employees

in capitalist systems

committed to the production, realisation, and accumulation of surplus value. As Watson (1983, p 25) points out, industrial capitalism depends 'on the institution of the employment and rational organisation of free labour'. But while the principle of control of employees is implicit in ideas of employment and rational organisation, that of freedom and autonomy is implied in the notion of formally free labour. In buying employees; capacity to work, organisations are buying the

right to control people's work, but in return they have to

consequence of employees developing a reward bargain. This

'calculative' orientation

of labour to 'think for themselves' and to

cope with the

'calculative' orientation to their effortis

equally a product of the 'freedom'

move between employers,

a requisite of

notionally unconstrained labour markets. Although buying the right to control

employees' work, employers cannot prescribe tasks in

detail, particularly

when

highly complex. Furthermore, in the interests of flexible response to variances in day-to-day operational processes, neither would they wish

to.

Employers may buy

the right to control their employees' work, but because in practice they must

surrender on a daily basis the means of production to the 'control' of workers for their use in the production process, they

must

operation to ensure that their discretion

exercised for rather than against the

is

also seek their employees' co-

employers' interests.

Hence as Buroway to achieve control

(1979) put

it,

there exists the need

on the part of the employer

by 'manufacturing consent', rather than by exclusively exercising

coercion. But, as already discussed, while the exercise of control through coercion carries the

problem of provoking employee non-co-operation and

resistance, the

— Strategic perspectives of

human

resource

management 29

commitment to the job carries the potential danger of generating employee inflexibility and conservatism. Furthermore, as Hyman (1987, pp 43-4) creation of

points out, in attempting to walk this tightrope, employers are faced with another

dilemma. Efficient labour and administrative processes often

call for

cohesive

and standardisation of their terms and conditions of employment, negotiated through representatives accountable to and for groups of employees. Yet such cohesion and standardisation is likely to generate a collective relations within a workforce

solidarity

which employees may use against the employer's

interests.

HRM

Following Hyman 's (1987, pp 42-3) argument, it might be suggested that just as much as traditional personnel management is confronted by the problem

of mediating these contradictions. But the logic of the soft version HRM model would argue a rather different approach to traditional personnel management. Traditional personnel management emerged at a time when most direct labour was treated as a variable rather than fixed cost. The consequent frequent hiring and firing not only made it sensible to have a specialist function perform this and related 'terms and conditions of employment' activities, but by doing so, enabled a dissociation between the sale of labour power and the performance of the labour process, thereby obscuring the commodity status of labour. Apart from performing this function, personnel specialists also had to cope with and ameliorate the consequences of coercive direct control, often employing the masking activities of 'welfare' to disguise the application of rational techniques to counter the problems created by other rational techniques. Not surprisingly, then, the personnel specialist traditionally has been identified as the 'man in the middle', a buffer and potential scapegoat for the actions of the rest of management (Watson 1977, pp 175-7; Watson 1983, p 34). (In a similar vein Purcell in Marginson et al (1988) interprets correlational evidence from the Warwick Company Level Survey to suggest that large corporate personnel departments perform a gatekeeper function to divorce trade unions from strategic management considerations but at the cost of becoming isolated from strategic decision-making.) Soft version HRM, on the other hand, insofar as it advocates the treating of labour as a fixed cost, has less need to separate the sale of labour power from its application in production into different management activities. Instead 'terms and conditions of employment' can be linked to work organisation as part of an integrated management responsibility. For, in emphasising the importance of quality (skills), flexibility (with its potential implication for the need to exercise discretion) and commitment in employees, it has opted to obscure the commodity status of labour by adopting strategies of co-optation through the development of 'responsible autonomy' rather than attempting to exercise 'direct control'

—

(Friedman 1977). Furthermore, in

its

emphasis on strong culture, in theory

HRM

is

able to

achieve a cohesive workforce but without the attendant dilemma of creating potentially dysfunctional solidarity. For a strong culture

employees through a shared 'service',

set of managerially

aimed

at uniting ('quality',

assume an identification of employee and Such co-optation through cultural management, of course

'innovation', etc), that

employer interests.

is

sanctioned values

—

30 Readings

in strategic

human

resource

reinforces the intention that

management's If

it

management

autonomy

will

be exercised

'responsibly', ie in

interests.

was possible to apply consistently the soft version HRM model, it might it mediates the contradictions of capitalism more effectively

well be argued that

than traditional personnel management, as the implied rejection of

direct control

more complete 'securing and obscuring of the commodity (Hyman 1987, p 42). But, as argued earlier, if HRM, in theory,

strategies allows a status of labour'

demands the integration of employment policies with business strategy, and hence, in some circumstances, to treat labour as a variable input, consistent adherence to the soft version model will come under pressure as 'employers require workers to be both dependable anrf disposable' (Hyman 1987, p 42). The tensions this may cause are illustrated by the problems that face computer companies when simultaneously confronted by recession and growing market maturity. Companies such as IBM and Hewlett Packard were caught between commitment to 'no redundancy'

in the light

model and the need

of their very public adherence to the soft version

and

HRM

While the adoption of retraining strategies was consistent witli the model, the problem in achieving a lower headcount overall is illustrated by the dubious masking strategies of compulsory unpaid leave days and offers of 'early' retirement incentives no doubt illustrations of tough love in action (Sparrow & Pettigrew 1988). for fewer people

different

skills.

—

This reading has argued that while normative models of personnel and resource

management

are not dissimilar,

some

human

significant differences in focus

While these differences point to HRM being a more central management management, at least in theory, the contradictions embedded within the wu/i/fl/z/)' model and the tensions between the hard and soft versions of the model, call into question whether its enactment will realise its aspirations. Furthermore, the model's contradictions both reflect and are reinforced by the deeper contradictions of capitalism. It will be most interesting to identify from presently ongoing empirical research the extent to which companies are able to enact the soft version mutuality model and, at the same time, achieve external fit with business strateg)'. It will be interesting too to discover whether even the most 'transformational' leader attempts to do so. Indeed, how often, and in what circumstances \vas the normative model of personnel management ever fully enacted? Clearly, we need to know more about the organisational and market circumstances that facilitate the adoption of the mutuality model, and how widely within an organisation it can be applied. Are there circumstances in which the soft version model to direct employees on a greenfield site, goes hand in hand with the implementation of a hard version on traditional sites? Is such soft version implementation often preceded by a hard version plant closure program and enforced redundancies? Certainly, reading between the lines, this seems to have been the case of Norsk Hydro (Fox 1988). exist.

task than personnel

Strategic perspectives of

It

may be suggested approach

contradicts

its

is

to

fit

(for a contingent

HRM)

management 31

approach) and of internal

will inevitably give rise to

avowedly strategic approach.

research by Purcell

resource

that the tensions generated by the potentially conflicting

requirements of external absolutist

human

and Ahlstrand

It is

fit

(for

an

a pragmatism which

not surprising then that recent

in multi-divisional

companies suggests that there

and employee relations practice own interests and protect their own

often a lack of fit between strategic restructuring

as different

managerial groups pursue their

domains (Ahlstrand

& Purcell

& Ahlstrand

1988; Purcell

some of the apparent implementations of HRM

1987).

It

may well be

that

involve the adoption of particular

'Japanese' techniques, but opportunistically rather than strategically.

Given these problems it might well be asked why the language of HRM has gained the currency it appears to have not least among management groups themselves. After all, as has been argued, there is litde real difference between normative HRM and personnel management models and, in practice, it is

—

probable that managing employee relations in the vast majority of companies remains a pragmatic activity, whether labelled personnel management or HRM. Furthermore, many of the techniques of HRM can be found in any personnel

management textbook of a decade ago. I would suggest that, in many cases, the than a reflection of the

rise

of the new right

use of the new

label is

no more or

less

—^whether in the UK or USA. In Britain

do-gooding specialists trying to constrain managers, of weakly kowtowing to militant unions, of both lacking power and possessing too much power. Our new enterprise culture demands a different language, one that asserts management's right to manipulate, and ability to

personnel management evokes images of line

The dual usage of the concept resource, with its simultaneous passive and proactive connotations, and its hard and soft version models, is very useful here. While the language and policies of the hard version model can be used on employees peripheral to the organisation, those of generate and develop resources.

HRM

the soft version

model can be used

to reassure

and secure

'core'

employees whose

deemed essential for the achievement of competitive advantage. The language of tough love seeks to co-opt the assent of both those who may suffer as well as those who may benefit from its effects. Ironically, it is the contradictions embedded in HRM that have facilitated the development of this rhetoric even if resourcefulness

is

they simultaneously render strategic action problematic.

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B & Purcell, J

1988, 'Employee relations strategy in the multi-divisional

company', Personnel Management, vol

Armstrong,

M 1987,

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L & Meshoulam, 1 1988, 'Managing the two fits of strategic human resource management', Academy of Management Review, vol 13, no 1

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Heath, L 1988, Management for the Future, Ashridge College and Foundation for Management Education,

Fraser, J

Management

Berkhamsted &: London Beer, M, Spector, B, Lawrence,

D&

Human Resources New York Management: A Beer, M 8c Spector, B 1985, Corpora tewide Transformations in Human Resource Management', in Walton, R E & Lawrence, P R eds. Human Resource P, Mills,

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Walton,

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Reading 2

The

strategic contributioiis

of the personnel function

Ro^fT Collins

Over the past decade many managers have been pressured into rethinking the most fundamental aspects of their organisations and their activities. Sources of pressure have included major shifts in the world marketplace, the international

and local economies, social values, demographic characteristics, and rapid developments in technology. These developments, both overseas and in Australia, have been well documented (for example, see Wheeler 8c Hunger 1983, Fombrun, Tichy & Devanna 1984, Johnson &: Scholes 1984, and Hilmer 1985). Management's responses to these developments have attracted increasing attention from writers, researchers and educators (Chandler 1962; Porter 1980 & 1985; Easterby-Smith &: Davies 1983). One response has been the rise of strategic management, a concern for answering such questions as 'what business are we in?' and 'how will we compete?' Senior managers in many Australian public and private sector organisations have been confronted with the need to review and often reshape their organisation's mission, corporate objectives,

strategies, plans, infor-

mation systems, financing, technology and employee management practices. The ability to review and develop such fundamental aspects of the firm is referred to as a strategic management capability (Houlden 1986). Over the past two decades the development of this strategic management capability has occurred at two levels. Firstiy, the body of knowledge about strategic management was initially built around the concerns of production, marketing, finance and distribution. Implementing strategy in general and deciding whether the firm has, or could recruit or develop, people willing and able to carry it out have more recently become central concerns (Galbraith & Nathanson 1978; Miles & Snow 1978; Fombrun Tichy & Devanna 1984; Hrebiniak & Joyce 1984). Secondly, these developments reflect a fundamental shift at another level: within the firm senior managers have had to enhance their capacity to manage strategically rather than operationally (Collins 1986). This shift necessitates that senior managers develop new competencies and adopt a different way of looking at and thinking about their organisation and its environment. During more stable, less competitive times, senior managers were heavily engaged in managing their organisations operationally. They often developed what I call an 'operational mindset', which is something characterised by short-term horizons and a stabilising and reactive orientation. By contrast, strategic management involves new competencies and a mindset that:

whole rather than the parts and constraints both within and without the oi^nisation characterised by a desire to win, to create or shape the future

•

sees the

•

identifies opportunities

•

is

36 Readings

in strategic

human

resource

management

on just those organisational issues that will make the difference between success and mediocrity or failure enables the manager to move freely between short- and long-term time horizons, and selects and implements configurations in organisational design, resources and

•

focuses

•

•

functioning which ensure that the firm succeeds in

As we now consider the

strategic contributions

its

chosen environment.

of the personnel function to

we will need to adopt a strategic way of looking at and thinking about the management of people. This approach contrasts sharply with the more traditional one which has often failed to consider the management of

organisation performance,

people either as a whole or in relation to other aspects of organisational design

and function

(Collins 1982).

A strategic

approach manages people and their

contributions such that they provide the firm with a distinctive competitive advantage.

What

tew are we

in?

Corporate level strategy In identifying the contributions of the personnel function to organisational success it is

important to distinguish between business and corporate

level strategy.

how a business unit will compete in a particular market strategy is concerned with, among other things, the most

Business strategy deals with

place. Corporate level fundamental question that managers and indeed all employees must ask about their organisation: 'What business are we in?' There is a risk that managers and employees consider that this is a trite question. For example, it would have been

easy for Ansett to consider that

Post could think that

and

it

was in the airline business. Similarly, Australia of receiving, sorting and delivering mail

in the business

parcels. In the relatively stable

Australia in the 1950s as

it is

and

and

less

competitive times that characterised

1960s, these sorts of simplistic answers sufficed. However,

managers of railway systems

in the

United States discovered

in the 1970s,

considering themselves in the railways rather than transportation business proved

many to be a fatal

mistake. For the answer to the question 'what business are we concern for ends rather than means. The selection and development of corporate level strategy is based on establishing a match or alignment between an organisation and its environment such for

in?'

must

reflect a

that the organisation has a distinctive competitive advantage.

The

organisation's

environment presents both opportunities and constraints. Opportunities include expansion by growth, acquisition or diversification; constraints may be in the form of high barriers to entry, aggressive competition, tight labour markets or environ-

mental considerations. For an organisation to be successful, managers must an external fit between these environmental considerations and

establish first

organisational resources fit

and competencies; second they must establish an

between the organisation's design and

return later in this reading.

its

internal

—a point to which we

functioning

will

Strategic perspectives of

In

making decisions which are directed

human

resource

at establishing external

management 37

fit,

managers

have had a tendency to focus on financial and physical/technological resources. People and their current and potential contributions have often been overlooked

number of reasons.

Hilmer (1986) argues, wealth in Australia has which people have not been seen as a key success factor (Ohmae 1982). Our wealth has been derived from low cost production (gold, wheat, wool, minerals, etc) or artificially protected industries (finance, airlines, the media, etc). However Hilmer contends that new wealth can be created primarily in industries in which the employees' contributions are central to the success of the business. These include the service sector (which now employs more than 65% of our workforce) and new high-tech industries. A second consideration which flows on from the first is that many managers have not had the values, skills or information that would enable them to inject people considerations into their strategic decision making formulae. In sum, employees were not considered as either important opportunities or constraints in the formulation of corporate strategy. The consequences have often been very cosdy. Attempts by some Australian manufacturing organisations to diversify, for example into mining and oil, and some financial institutions to diversify into new businesses have been marred in part by the failure of senior management to consider whether they had or could attract managers and employees who understood the new businesses. By contrast, strategic initiatives to turn around the Rod and Bar Division of BHP Steel International Group at Newcasde have been characterised by a concern for the people element in the very first stages of corporate for a

been created

First, as

in industries in

strategy reformulation

and implementation.

Corporate level strategy and the personnel function

The

specific contributions of the

strategy therefore centre nities

on the

personnel function to issues of corporate level and management of the opportu-

identification

and constraints presented by the organisation's workforce, and by related

personnel issues inside and external to the organisation. Let us issues in

more

now consider these

detail.

Opportunities can be created by the workforce or a strategically critical workforce segment that offer the firm a distinctive competitive advantage over its competitors. For the competitive edge of a successful firm that is most difficult to copy is that provided by its people. Examples of such workforce segments include the investment advisers and foreign exchange dealers in financial institutions, and the customer contact staff in service industries. A powerful example is Scandinavian Airlines. In this organisation the chief executive, Jan Carlsson, has been able to differentiate SAS on the basis of service to a specific customer segment: business passengers. Given the current and projected growth in the service sector in Australia, a strategic approach to the management of people represents a unique opportunity for managers and personnel specialists to develop a competitive edge through their employees' behaviour and contributions. For in the service sector people are the product, in contrast to the manufacturing sector in which people maheXhs. product (Saul 1987).

38 Readings

An

in strategic

human

resource

management

organisation's workforce can also present major constraints to an existing

strategy or a

proposed

strategic initiative.

At the

collective level

such constraints can

be illustrated by the issues of industrial relations and corporate culture. Unions can resist

changes that affect their members'

interests. Australia Post in its

recent attempts

to decentralise mail sorting from Redfern Central Mail Exchange to regional sorting

centres represents a case in point. Qantas Airways experienced considerable

from cabin crew to the introduction of non-stop flights from Los Angeles However, an organisation's culture perhaps presents a more pervasive and elusive source of potential resistance to the implementation of strategy. For example, in the airline and finance industries there has been, and will continue to be, a need to balance the new values of customer service and responsiveness with the more traditional values of prudence, technical excellence and conformity if resistance

to Sydney.

are to be implemented successfully and corporate objectives met. At the level of special groups of employees and individuals, constraints may derive from their inability and/or unwillingness to learn new skills or adopt new attitudes and work practices that enable, for example, a service oriented strategy to be implemented. These issues represent major concerns for the finance industry which in the medium term will undergo major rationalisation and restructuring

new strategies

of its service delivery systems. In

summary, organisational success

is

in part a function of the

degree of

alignment of the organisation's capabilities with the opportimities and constraints that characterise

its

environment. Increasingly people issues represent a funda-

mental input into the quest for alignment Successful alignment depends in part

on management's

ability to attract, retain

and develop people who are willing and

capable of capitalising on environmental opportimities. Workforce competencies and values must fit the corporate strategy. Furthermore, it is necessary to recognise that people individually and collectively can present constraints that must be considered in the formulation and implementation of corporate strategy. To take these factors into account senior managers may need to change their own values and skills to accept that, along with finance marketing production and distribution, personnel management can be a key factor of success. Furthermore, these managers will need access to personnel related information from their environment (for example, impending changes in legislation), and information about their organisation's culture and the competencies, attitudes and potential of their people. Such a shift in the strategic behaviour of our senior managers will not be achieved without a commensurate change in the competencies, priorities and activities of personnel practitioners (Collins 1985).

What business

are a;e in?

Finally, the issues

introduced in

this section raise for

personnel practitioners the

question: 'What business are ive\n?' Unless we are able to formulate a valid response to this question, then

than ends.

our

efforts

may be misdirected

as

we

focus

on means rather

Strategic perspectives of

One way of defining our business We

human

resource

management 39

is:

and

are in the business of contributing to the development, implementation

evaluation o/'influence processes, to shape individual anrf collective behaviour

and outputs

that contribute to the attainment of our organisation

's

objectives.

need to be highlighted. Firstiy, that we contribute and evaluation of influence processes recognises that as personnel specialists we have shared accountability with all managers for the management of people rather than some exclusive right. Secondly, we are in the influence business, not in that of producing manuals or running training programs. Thirdly, we need to recognise that there are multiple ways of influencing behaviour and outputs and more often than not we will need to use multiple mechanisms or leverage points to shape behaviour. Thus we need managers and specialists who can integrate training, appraisal and recognition, so that systematically, they signal desired behaviours and outputs, and help shape and reinforce these outcomes. Finally, we are in the business of shaping both individual and collective behaviour. This implies that we should not only use traditional micro influence mechanisms such as training and position descriptions, but we should also seek to influence collective behaviour through careful development of such macro influence mechanisms as the organisation's mission statement, structure and culture (Schein 1985) and its corporate leadership (Tichy & Ulrich 1984). Effective influence can be exercised when each of these mechanisms is carefully aligned on the basis of a widely accepted set of objectives and performance indicators. This alignment ensures congruence and therefore synergy between the Several aspects of this statement

to development, implementation

informational cues that their behaviour

and

we provide

for

our employees in our attempts

to

shape

outputs.

we now turn our attention. Firstiy, we will consider the and the need to ensure tight fit between corporate objectives, strategies, structure and culture. Secondly, we will focus on the fit that can be achieved between all of an organisation's personnel policies and It is

broad

to these issues that

issues of organisation design

practices so as to ensure consistency in the signals that employees receive as to

how

they are expected to behave and/or what they are expected to contribute.

Business level Strategy Business level strategy focuses on the question: at this level

is

capital resources with the strategy in fully. Firstly,

How will we compete? The concern

with developing the organisation's capacity to match

such a way that

it

its

human and

can be implemented success-

the major strategic options available to an organisation will be

considered. Secondly, the need for alignment between the preferred strategy and the capacity of the organisation's workforce to implement at collective

and

and sustain the

strategy

individual levels will be considered in detail.

Strategic Options Miller (1986), on the basis of an extensive review of the literature, identified four broad categories or dimensions that reflect important competitive strategies. His

40 Readings

in strategic

human

resource

management

four types of strategic orientation are: differentiation, cost leadership, focus, and asset parsimony. Differentiators aim to deliver a product or service that is uniquely

performance of organisations that two subtypes. Innovating differentiators continually create new products and technologies; they emphasise research and development and entrepreneurship, can charge premium prices and out-compete attractive. Successful

adopt

marketing

is

central to the

this strategy. Miller identifies

other firms through their responsiveness and rapid innovation. The publishing CCH Australia Limited is an example of a firm that has successfully

company

implemented this strategy. Marketing differentiators offer attractive packages, good service, convenient locations and high reliability. They are forceful marketers but are rarely the first out with new products or service. IBM Australia Limited and Dick Smith Electronics

illustrate the application

of this

strategy.

produce goods or services more cheaply than their competitors. Emphasis is on process research and development (R & D), backward vertical integration and automation rather than on product R&D, services, selling and advertising. The food chains Franklins and Jewel and the electrical welding products company Lincoln Electric have successfully pursued this strategy. Organisations \h2^. focus use a niche strategy that concentrates on a specific type of customer, product or geographic area. They rely on cost leadership or differentiation, or some combination of both and focus on a specialised part of the industry. The cosmetics firm Avon Products illustrates this strategy, having been particularly successftil in the direct marketing of its merchandise to people in their homes. The fourth dimension is asset parsimony. At one extreme is the organisation that is extremely capital intensive. This presents high barriers to entry and may enable high levels of efficiency, but it does reduce flexibility to respond to changes in technology and the market place. The Steel International Division of BHP illustrates this position. At the other extreme is the organisation that uses few assets or has asset flexibility to produce considerable outputs. Merchant banks provide an example of this strategy. Cost leaders strive to

The concept of organisational

fit

In the search for explanations of organisational success, the concept of

emerged (Miles

as a key factor in

many organisation and management research

fit

has

findings

& Snow 1984). These findings indicate that successful organisations are not

only matched to or closely aligned with the opportunities and constraints in their

environment, but also support their strategies with internal configurations in organisational design and management systems that are highly congruent and synergistic. These configurations comprise patterns in an organisation's strategy, structure, technology, culture, size and dispersion, products and services, management systems and workforce characteristics. None of these features by themselves can be used to explain success. Rather, organisational success is a function of careful design of each element and the integration of these elements into a purposeful and mutually reinforcing whole which equips and motivates people to work toward common and agreed objectives. The implication of the concept of fit

Strategic perspectives of

human

resource

management 41

that there are only a limited number of compatible configurations between the elements that can produce tight fit within the configuration. is

The design of the organisation's structure, its culture, the definition of its mission and objectives, its personnel policies and practices and managerial behaviour all serve to signal to employees how they are expected to behave and what they are expected to contribute. Unless all these components are thought through and interemployees receive informational cues that are at best confusing Tight fit can be established only when senior managers have a clear and shared understanding of where they want to lead the organisation and how they will achieve their objectives. This enables the configurations to be nally congruent,

and

at worst contradictory.

developed, communicated and implemented in ways that influence individual and

behaviour toward the accomplishment of corporate objectives. Furthermore, within the personnel function there is a need to ensure tight fit or congruence between all of the organisation's management and personnel collective

and practices. For these are implemented with the purpose of influencing and collective behaviour to support strategy. Thus within the personnel function we need to establish a clear vision and logic that guides the development and implementation of each personnel policy and practice so as to ensure congruence in the cues that employees receive. In summary, we need to understand the need for establishing fit at three levels: policies

individual

between the organisation's capabilities and opportunities and constraints in its environment (external fit) 2 between the macro features of the organisation: its mission, strategy, structure, technology, products and services, culture and workforce characteristics 1

(internal

3

fit),

and

between the various components of the personnel function, eg recruitment and selection criteria, induction, training, appraisal and rewards such that they all influence behaviour in mutually consistent ways that enable the strategy to be

implemented

The

(a

component of internal

fit).

components that make up the configuration that will be used in this and the relationship between these and the organisation's environment and performance are illustrated in Figure 2.1. Previous attempts to conceptualise these configurations have focused on the relationships between strategy structure and management systems (eg Chandler 1962; Mintzberg 1979 8c Miller 1986). Wliile these approaches have been useful, they omit such considerations as the organisation's culture and workforce characteristics. Thus they have limited utility for managers charged with developing personnel policies and systems that will equip and motivate employees to successfully implement their organisation's strategy. basic

reading,

Business strategy, the personnel function and internal

Our understanding stage

and

fit

of organisations and their performance has

where we can begin

to

draw out links between

now reached

a

specific business level strategies

tight fitting configurations in the organisation's structure, technology, culture.

42 Readings

Figure

in strategic

A

2.1

human

management

resource

framework depicting selected aspects of organisation

design, the

personnel function and organisational performance

THE ENVIRONMENT •

Opportunities

•

Constraints

^ r

PERSONNEL

MISSION i

Corporate objeaives

ORGANISATIONAL POLICIES

POLICIES

1

1

1

and

and

PRACTICES

PRACTICES

1

1

•^

•

'' 1

.r

Recruitment

•

Profitability

•

Market share

•

Product quality

and selection

STRATEGY

^— •

k

•

^-^

Induction Training and

development

-

•

Workforce r-i

*

Corporate image, and

characteristics

•

l-n

Performance

innovation

^

appraisal • •

Productivity

Recognition

morale,

and rewards

turnover

etc

etc

•^

STRUCTURE

i

— A

CULTURE

4-

k

Feeidb.ick

-4-

workforce characteristics and management and personnel systems.

Two of Miller's

mil be used to broad terms the concept of internal fit and the contribution of the personnel function to organisational performance. (1986) strategic types, innovative

differentiators SLnd low cost producers

illustrate in

The

innovative differentiator

The

success of this strategy depends

create

new products or services

for

on the organisadon's capacity to continually is a need or for which a need can

which there

Strategic perspectives of

human

resource

management 43

be created. Senior managers must have competencies (for example, planning and marketing) and values (for example, risk taking) consistent with entrepreneurship

and constant innovation.

Miller (1986,

pp 245-6)

describes the major features

and dynamics of these

firms:

Typically,

groups of highly trained specialists from a variety of areas work together and produce complex and rapidly changing products.

intensively to design

Representativesfrom to face,

R (^ D marketing and production departments collaborateface

via mutual adjustment.

.

.

in order to co-ordinate their contributions.

degree of differentiation prevails as people luith different

work

together. .Frequent meetings, integrating personnel, .

liaison devices are used to ensure effective collaboration.

much

of it resides with the technocrats

Authority

is

thus situational

and scientists

and based on

.

A high

and time horizons committees, and other

goals

skills,

.Power is decentralised as

responsible for innovation.

expertise.

.

.

There are feio bureau-

cratic rules or standard procedures since these are too confining

and would in any

event rapidly become obsolete. Sensitive information gathering systems are developed

for analysing the environment,

and

vertical

open and frequent. ..The environment

is

and

horizontal communications are

dynamic, uncertain and moderately

competitive.

The

innovative differentiator strategy requires a responsive

structure.

The

and

organisational structure would be typical of Burns

differentiated

and

(1961) organic form, or Mintzberg's (1979) Simple Structure,

when

firm

adhocracy

is

small. In larger innovative differentiators, Mintzberg's

Stalker's

the size of the is

a

more

appropriate way of describing the organisational structure. In these organisations culture will also play a critical part in successful perfor-

mance. In

fact

it

may be

that the organisation's culture

is

more important than

its

formal structure as an influence on employee behaviour because of its pervasiveness

and subdety. Most of the organisation's workforce may prefer low

levels

of

formal structure and be attracted to the organisation because of the nature of its

espoused values. Values that will be emphasised include: teamwork, information sharing, risk taking, experimentation and tolerance of non-critical mistakes, tolerance of ambiguity and uncertainty, and a strong orientation towards the

market place and clients. Thus the culture must encourage and support individual and collective behaviour that maintains innovation, sustains differentiation and ensures strong integration.

Production technology may vary from high levels of automation (in the custom manufacture (in the aerospace industry). Products and services may be diverse; their dominant characteristic is the short length of their product life-cycles. Once these contextual features and organisational dynamics are understood, it is easier to specify the characteristics of the workforce that match the desired design and functioning of this type of firm. Some segments of the workforce will be more critical to the successful implementation of the strategy than others. These critical electronics industry) to

44 Readings

in strategic

human

resource

management

workforce groups include: the top management team (which provides leadership and ensures adequate integration), marketers (who create or sense opportunities

and ensure

development and

successful product

ment groups, and

integrators, such as

delivery), research

and develop-

who strive

to create the

product managers,

and meets deadlines, need to be focused on the

integration that balances the high levels of differentiation

budgets and customer needs. Special attention will management of these strategically critical workforce segments. Employees in the primary operating areas of these firms will have to have a relatively high tolerance for ambiguity and uncertainty as task priorities change

They are more likely to have relatively lower needs for structure and stability and higher needs for challenge and autonomy (Hunt 1981 These characteristics make them more typical of Gouldner's (1958) 'cosmopolitans' rather than 'locals'. rapidly.

).

Initially, at least,

their loyalty will

be to themselves rather than their employer.

New recruits to the innovative differentiator will be drawn from universities and other competitors. Selection

will

emphasise exposure

to the organisation,

its

and multiple interviews with current managers and specialists), and strong reliance on self-selection. Induction will focus on internalising corporate objectives and values which will enable the employees to be more self-directed in their work. These firms place strong reliance on internal and external technical/professional training to maintain the relevance of their highly skilled workforce. The managerial demands of this type of organisation are high, and on and off the job development is a critical factor in mainfunctioning and values (perhaps through

visits

taining the quality of these managers.

Appraisal and performance

management

are

more

likely to

processes rather than annual events. Performance reviews

be considered

may be

linked to the

and the end of, specific projects; team performance reviews may better serve the need to review the performance of work groups as well as individuals. Performance appraisal will focus on those competencies that will facilitate implementation of the organisation's chosen strategy: teamwork, meeting client needs, experimentation and innovation, and responsiveness to rapid changes in turning points

in,

priorities. critical aspect of performance managewhich use an innovative differentiator strategy. All three aspects of remuneration market competitiveness, internal equity and reward for contribution need to be carefully managed. In many areas recognition and rewards need to be linked to critical behaviours and competencies, for example teamwork and information sharing, as well as performance outputs. The organisation's human resource data base also has an important role for it provides the information which enables managers to link their production needs

Recognition and reward systems are a

ment

in organisations

—

—

to the best available people.

In these organisations the personnel specialist plays an innovative develop-

mental

role,

enabling line managers to manage their

own

people.

The

critical

contributions of line managers involve attracting, retaining and developing the best available people, as people are widely recognised as a key success factor in

these dynamic organisations.

The Lend Lease Corporation provides

a very

Strategic perspectives of

human

resource

management 45

and the

successful illustration of an organisation that has used this strategy

good

associated personnel practices to

The low

effect.

cost producer

Organisations that adopt cost leadership strategies are in sharp contrast with our preceding description of the innovative differentiator. Miller (1986, pp 239-43) describes the major features and dynamics of these firms:

produce goods and services more cheaply than competitors.

this firm. ..strives to

stresses efficient scale facilities, the

R

expenses of product

supply a standard, innovation.

.

.

&' D

.

services, selling

The structures are extremely

information systems are well developed output. is

.

.

the structure

behaviour

The

is fairly

.

.

There

form in

& his

.

do very

they

—but mainly for

little

product

to efficiency.

reporting on cost

.

.

the

and

is

hands of the top

very

little

is

effected

executives

mainly through these

and

the designers of

uncertainty since competition

and customer

predictable.

more mechanistic form of organisaand Mintzberg (1979) provides the best analysis of description of the machine bureaucracy. A divisional form is often

cost leader strategy

tion (Burns

.

and geared

only moderately differentiated as the emphasis throughout

rests in the

workflow processes.

advertising. Cost leaders try to

inflexible

on following programs and plans. Integration

programs. Power

this

is

and

high volume product.

no-frills

It

pursuit of cost reductions. .minimisation of

is

best suited to a

Stalker 1961),

used to group several of these businesses together. hi these organisations the culture can play a powerful supporting role to the

form of organisation the culture has become and few can articulate the elements of the culture or why it has developed this way. Strong emphasis is often placed on conformity, predictability, authority, productivity and careful innovation in processes rather than products. These values fit the demands of its routinised,

structure (Schein 1985). As a mature

institutionalised into formal systems

unsophisticated technology (Mintzberg 1979).

The dominant

feature of the workforce

more

closely resembles Gouldner's

and dependence on the organisation. The workforce is characterised by higher needs for structure and stability and relatively lower needs for autonomy and challenge (Hunt 1981). Recruits are sought from local schools and universities, are selected and inducted into long career paths, and often have a lifetime commitment to the organisation. Rail authorities, large retail stores, the taxation office, soap and detergent manufacturers, and airlines often represent this organisational form. McDonald's Family Restaurants understands and uses this strategy and many of the related manage(1958)

'local'

employee: stronger

loyalty to,

ment practices very successfully. Induction plays an important part in mentally programming the employee into is used to skill people, to

the organisation's way of doing things. Internal training

46 Readings

in strategic

human

resource

management

predictability into their behaviour, and to reinforce corporate values and norms. Appraisal and rewards are more mechanistic and in these organisations highly structured remuneration systems such as that developed by Hay Associates have been effective. Rewards in these organisations have traditionally comprised security of tenure, slow but sure promotion and superannuation; recognition often instil

takes the

form of tides and

extrinsic symbols.

Given top management's choice of strategy technology and structure, work is likely to be routinised; consequendy behavioural and industrial relations problems

may lock personnel specialists into curative fire fighting roles aimed at maintaining the status

quo rather than

initiating

widespread and constant change.

In sum, the low cost producer represents the traditional personnel function: a clear distinction role, relatively

between

line

and

staff,

a maintenance rather than developmental

lower status and positive influence for the personnel

specialist,

culture in which people are subordinate to the organisation's structure

technology.

The challenge

in these organisations

is

to

and and

counterbalance the

behavioural effects of their structure and technology in ways that humanise the

workplace and build in commitment to the high

levels

of productivity that can

ensure the success of the strategic choice.

Conclusion

Over the past two decades we have observed the rise of strategic management, a managerial response to a more turbulent and competitive world. Our consideration of people as both a key factor in strategic decision-making and the recipients of the impact of these major changes has arisen more from trial and error than an understanding of the complexity of the issues involved. Notwithstanding, growing recognition that the future of Australia's organisations depends more heavily than ever before on the quality of the management of our people. In this reading we have addressed the need to establish alignment between an organisation's mission, strategy, structure, culture, workforce characteristics and personnel policies and practices. The attainment of tight fit is very difficult in a dynamic world. However, many Australian organisations are under-performing because of incongruencies between their strategies and structure, and particularly between their culture and workforce competencies and attitudes. To remedy this situation senior managers and personnel specialists need to adopt a strategic view in order to conceptualise the issues and to identify appropriate action. The remedies are not in the 'quick fix' category. Improvements in the strategic management of people in many Australian organisations require a commitment to sustained long-term action. Our current difficulties are the result of decades rather than years of neglect. Therefore skill, patience, and courage will be required to hold in place the necessary initiatives which will improve the contribution of the personnel function to organisational and national success. insightful

there

is

Strategic perspectives of

human

resource

management 47

References Burns,

T 8c Stalker, G W 1 96 1

,

The Management ofInnovation, Tavistock Publications,

London Chandler,

A 1962, Strategy and Structure: Chapters in the History ofAmerican Industrial

Enterprise,

Collins,

RR

MIT

Management Collins,

Press,

Cambridge, Massachusetts

1982, 'Resuscitating personnel management', Australian Personnel

R R

,

CCH Australia Limited, Sydney, ff 35, 068-35, 079 A case for the occupational

1985, 'Evolution of the species:

development of personnel practitioners through education'. Management Australia, vol 23, no 2, 1985: pp 14—22 Collins,

RR

Human Resource

1986, 'The strategic contributions of human resources development',

Unpublished paper delivered to the Australian Institute of Training and Development National Conference, Hobart, April Easterby-Smith, M & Davies, J 1983, 'Developing strategic thinking', Long Range Planning, vol 16, no 4, pp 39-48 Fombrun, C J, Tichy, N M & Devanna, M A 1984, Strategic Human Resource Managem£nt, ]ohn Wiley & Sons, New York Galbraith, J 8c Nathanson, D 1978, Strategy Implementation: The Role of Structure and Process, West Publishing, St Paul Gouldner, A 1958, 'Cosmopolitans and locals: Toward an analysis of latent social roles', Administrative Science Quarterly, vol 2, March, pp 444—80 Hilmer, F G 1985, When the Luck Runs Out, Harper 8c Row, Sydney Hilmer, F G 1986, 'The new wealth', Unpublished paper, McKinsey 8c Co Inc,

W

Sydney, 1986 Houlden, B T 1986, 'Developing a company's strategic management capability'. Long Range Planning, vol 19, no 5, pp 89-93 Hrebiniak, L G & Joyce, 1984, Implementing Strategy, Macmillan Publishers, New York Hunt, J 1981, Managing People at Work, Pan Macmillan, London Johnson, G & Scholes, K 1984, Exploring Corporate Strategy, Prentice Hall, NewJersey Miles, R E & Snow, C C 1984, 'Designing strategic human resource systems' Organisational Dynamics, Summer, pp 36-52 Miles, R E & Snow, C C 1978, Organisational Strategy, Structure and Process, McGrawHill Inc, Tokyo Miller, D 1986, 'Configurations of strategy and structure: Towards a synthesis'. Strategic Management fournal, vol 7, no 2, pp 233—49

WF

W

Mintzberg,

H

Ohmae, K

1982, The

Porter, Porter,

New Jersey New York

1979, The Structuring of Organisations, Prentice Hall,

Mind of the Strategist, McGraw-Hill

Inc,

M 1980, Competitive Strategy, Free Press, New York M 1985, Competitive Advantage: Creating and Sustaining Superior Performance,

Free Press,

New York

P 1987, 'Change: The strategic human resource management challenges'. Human Resource Management Australia, vol 25, no 1, pp 80-9 Schein, E H 1985, Organizational Culture and Leadership, Jossey-Bsiss Inc Publishers, San Francisco Saul,

Reading 3 Managerial strategic choice and the management of

human

resom-ces

YmDM htroduction It is

now fairly clear

environments

to

that

managers need

to

be more aware of their organisational

enable them to determine the opportunities and threats facing

their organisations

and

to find out

whether the surrounding developments match

the planned strategy. In this respect, environmental scanning can play an

important role in formulating an organisation's strategic choice. In order to be able to formulate strategies, however, managers need to understand the concepts of managerial strategy and strategic choice and how to apply them, in particular to the management of human resources.

This reading, thus, focuses on three main

issues.

Section one presents a review

of the concept of strategy and strategic choice as they have been used in the

human

management (HRM) literature. The discussion in section two emphasises in particular Kochan, Katz and McKersies' (1986) strategic choice framework for managing human resources in an organisation, and section three discusses the resource

significance of the strategic choice framework.

The concept of Strategy In recent years,

human

some

HRM researchers have focused on managerial strategy and

resource policy. These writers have considered the various mianagerial

approaches to strategies

HRM. Some

and

have traced the development of various managerial employees and have subsequently

strategic choices towards

developed frameworks for explaining management's approach to HRM. Similarly, a number of writers have argued for the need to study the links between managerial strategies and HRM practices (see Kochan, McKersie &: Cappelli 1984;

Gospel 1983a; 1983b; Thurley 1983). As indicated earlier, in order to understand the effects of strategic managerial decisions on HRM there is a need to explain the concepts of strategy and strategic choice. In spite of the amount of literature on managerial strategy, the concept of strategy is still vaguely defined and remains ambiguous. According to Hyman (1987), the notion of strategy has become increasingly popular in the management literature but

its

meaning

is

often elusive and imprecise.

What, then, is meant by the concept of strategy? The term is derived from the Greek word strategia, which denotes the role of a military commander or general. However, as Hyman humorously puts it, the word is used to imply the planning

50 Readings

in strategic

human

resource

management

and organisation of a campaign; therefore, it is contrasted with tactics, which means, literally, the arrangement of forces of a single batde. Hyman raises the question of

how

the categories of ancient warfare are to be translated into the

context of modem business management.

A translation is provided in the work of Chandler (1962). Chandler, in acknowledging the importance of strategy in the management of the modern business enterprise, differentiates between strategic decision and tactical decision. The former is concerned with the long-term health of the enterprise, while the latter deals with the day-to-day activities necessary for its efficient (1962, p 16), thus, defines strategy

the determination of the basic long-run

the adoption of courses of action

and smooth operation. Chandler

as:

and

^als and

objectives

of an enterprise,

and

the allocation of resources necessary for

carrying out these goals.

In their discussion of strategy, Thurley and Wood (1983) make passing reference to the military origins of the concept. According to them, many writers dealing with managerial business decision-making have used the term strategy to describe a particular set of choices made over time for a given objective. In an organisational setting, this implies that there

is

a hierarchy of choices, so that one

memorandum of guidelines laying down policy to direct the decisions taken by operational managers who have to deal with a

decision will result in a

more

specific

myriad of short-term problems and issues. A strategy means a consistent approach over time which is intended to yield results in the medium and long term for a specific problem. According to this perspective a strategic approach assumes that it is possible to review the overall situation facing decision-makers in the way that a general reviews a battle situation before actual hostilities break out. tactical decisions will

that decisions

on

have to be

made

When

they do break out,

for temporary advantage, but

overall strategy will help prevent short-term decisions

it is

hoped

made in

the

heat of the batde fi-om determining the course of the battie. Thurley and Wood explain that the idea of a strategy does seem to imply an external force or forces which must be anticipated and dealt with; strategic thinking thus arises from the need to cope with such pressures.

HRM strategies

are also developed as an integral part of corporate strategy to cope with external pressures.

Kochan, McKersie and Cappelli (1984), among others, view strategy and consciously articulated plan. According to this view, all organisations consciously develop strategies to deal with external forces and come to terms with them. That is, instead of adopting a reactive short-term approach to environmental factors, managers adopt a strategic long-term approach. In view of the often overwhelming effects of environmental or external factors on organisations, one is tempted to ask: What is the relevance of managerial strategy Similarly,

as a rationally

when the direction of the organisation is constrained by its environment? Those who downplay the importance of managerial strategy argue that management has

Strategic perspectives of

no choice and cannot formulate

strategies

human

resource

management 51

when economic

minants of organisational direction. This view

is

laws are prime deterespoused by the contingency

theorists.

There is a contrary view, however, that strategy can play an important role in determining the course of action in organisations. The exponents of this view are the managerial strategy theorists such as Child (1985). These theorists have incorporated the concept of strategic choice in their analysis. Aldrich (1979), in tracing the entry of strategic choice into managerial strategy literature, maintains that: Organization theorizing and research in the past decade has, more or less by default, gradually reduced the role of persons as significant decision makers in organizations.

Various external constraints have been identified as sharply limiting the role

that participants play in selecting organizational structures

Organization

size

and

and

activities.

technology treated as imposing structural imperatives on

organizations, joined environmental constraints as a trilogy offorces hypothesized to

circumscribe prospects for purposively directed change. Child's (1972) ringing

rebuttal to these pessimistic arguments, drafted in 1 970, defended the concept of

choice

and

According

introduced a

new term

—

—

strategic choice

into the literature.

major arguments to counter an overwhelming constraint on the ability of participants to influence the course of organisational change. These arguments are:(l) decision-makers have more autonomy than inferred by those arguing for dominance of environmental, technological or other forces, (2) organisations occasionally have the power to manipulate and control their environments; and (3) perceptions and evaluations of events are an important intervening link between environments and organisational actions (Aldrich 1979, to this view, strategic choice raises three

the claim that environmental influence

p

is

138).

In Child's (1985) view then, strategic choice stresses

may be

an element of choice that

management in shaping organisational objectives and policies and in adapting to external forces. Child focuses on the decision-making within organisations that has determined why a particular structure was adopted. He also available to

examines patterns of association among contextual and organisational According to Child (1985), models which have been derived from this association depict organisational structure as determined primarily by economic constraints which contextual variables impose. He argues that such models lack adequate explanations since they do not take into consideration the process by which managers within organisations decide upon courses of strategic action. Similarly, Chandler (1962) uses the concept of strategy to refer to the exercise of choice by a dominant coalition as the major source of organisational variation. critically

variables.

Strategic choice

is

thus a critical variable in organisation theory.

Sethi (1986) similarly view strategic choice as the process

Dimmock and

whereby a decision-maker

proceeds to plan, shape and/or exploit (either systematically or opportunistically) circumstances or events within the organisation's environment in ways that are perceived as bringing the organisation nearer to its aim. The element of choice

52 Readings

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human

resource

management

determining what circumstances or events to exploit. Thus the shifting of HRM behaviour by reference to its source rather than its supposed consequences. The notion of strategy as a conscious managerial activity also implies the lies in

attention towards the role of choice leads to the explanation of

systematic planning of

HRM in organisations and the injecting of HRM concerns

into executive managerial decisions covering

organisational decisions are often

made

all

aspects of the organisation.

Such

within the overall framework of the

organisation's corporate strategy. According to this view, corporate strategy rationally

connected

and the prevailing

enterprise.

The

social, political,

HRM.

organisation's overall strategy often incorporates a policy stating the

strategy

which guides management

in the operation of the organisation. This

strategy defines the organisation's long-term objectives with regard to

resource issues. its

It

forms an integral part of the

business objectives.

The

mentation of this strategy Katz 8c McKersie 1986).

The

is

such as product or market

latter includes

sub-strategies such as

An

factors,

and economic pressures on the government policy and legislation. The environoften influence the link between corporate strategy and other

objectives,

mental factors

environmental

to certain

strategic choice

role of

is

shown

total strategy

management

with which

it

HR HR

human pursues

and impleframework (Kochan,

in the formulation

in the strategic choice

framework

and McKersie (1986) observe that a more realistic model of HRM should recognise the active role played by management in shaping HRM, as opposed to the traditional view which sees management as reactive, responding to trade union and other environmental pressures. They report on changes in managerial values and strategies in the US which have in turn resulted In this framework, Kochan, Katz

in

changes in the

The

HR function.

framework (see Figure 3.1) is considered as a new framework which focuses primarily on management, and which in recent years has made the most important strategic decisions. The framework incorporates the roles of government, values, business strategies, institutional structures, and the history of the organisation in the analysis of HRM processes and outcomes. The essence of the framework is to help managers gain a better strategic choice

theoretical

understanding of institutional interaction in formulating policies at various levels an organisation. According to this framework, external (environmental) factors exert pressures

in

HR in the organisation. It is suggested that in order to prevent these pressures from determining the course of the organisation, managers should anticipate them by taking into consideration the history, current on the management of

and managerial values of the organisation to develop an overall longterm organisational strategy. Once the overall strategy is developed, there is a need to develop the organisational HR strategy. Effective and efficient HRM requires the integration of the two strategies.

structures

Strategic perspectives of

Figure

3.1

A modified Kochan, Katz and McKersie HRM issues in an organisation

human

resource

framework for

management 53

analysing

interaction of

Environmental 1

for

HR

Government (public) policies

Managerial

strategy

values

2 Technology 3

Outcomes

corporate strategy and human resource strategy

External

Labour markets

1

Management

2 Employees

i

3 Trade unions

4 Workforce

T

characteristics

4

HR functions

History

and values

Corporate

and 5 Product markets

current stuctures

strategy

The following quotation from Kochan, Katz and McKersie

(1986,

p

12) captures

the essence of their model:

Our model

starts xvith consideration of the relevant forces in the external

environment that

affect

employment relationships. Changes in the external

environment induce employers strategies.

and

to

make adjustments

in their competitive business

In making these adjustynents, the range of options considered

constrained so as to be consistent with the values,

beliefs,

is filtered

or philosophies

ingrained in the minds of key decision makers.

Just as managerial strategic choice plays an important role in explaining HRM outcomes, so too do the values and strategies that influence the behaviour and policies of unions and governments. The framework shows that HRM processes and outcomes are determined by a continuously evolving interaction of environ(ie choice and discretion) of employers, unions, and governments. This interaction influences management's strategic choice in the management of HR.

mental pressures and the response

The

significance of the managerial strategic choice

framework

Thurley and Wood (1983) have noted the importance of the concept of managerial strategy in management research. Firstly, the introduction of the managerial strategic choice framework organises people's perception and understanding of HRM processes and outcomes. Secondly, it points to a new perspective

54 Readings

in

in strategic

human

resource

management

HRM by indicating that management has a choice in making changes in HRM

practices in organisations.

The framework

play a crucial role in the formulation to

changes

and

in the organisation's

constraints of the external

points out that managerial initiatives

and implementation of strategies

in response environment; so as to cope with the opportunities

emironment.

The managerial strategic choice approach poses a challenge that management reacts to environmental pressures. In a sense,

to the it

argument

points out that

perhaps organisations do notjust respond to en\ironmental pressures, but rather that HRM practices and outcomes are influenced by the interaction of environmental pressure with managerial values and strategies. Seen along these lines, choice and discretion on the part of management affect the practice of HRM. Thirdly, the framework shows the necessity to link organisational strategies with

HR strategies in order to achieve desirable HRM outcomes at the workplace. Such an approach can change the practice of HRM in organisations and also create a conducive atmosphere for the gro\vth of HRM initiatives, such as quality circles and other employee commitment programs. Fourthly, the strategic choice framework makes it possible to compare the different strategies developed by different firms in the same industry in response to similar en\ironmental constraints.

Strategic choice involves

an element of choice exercised by the management of an and implementing decisions to cope with environ-

organisation in formulating

mental pressures. Strategic choice theorists argue that in the face of environmental constraints there is often a diversity of possible strategies for an organisation at any particular point in time. The element of choice lies in managers determining which circumstances or events to exploit.

The advocates of the strategic choice perspective

emphasise the element of choice that may be at the disposal of the management in shaping organisational objectives and policies and in adapting to external pressures. The successful manipulation and control of the external pressures depend on the manager's perception and evaluation of events. Managerial strategy

and

strategic choice, then, essentiallv carry the

managers

to formulate

and implement

same message: the power of

strategic decisions in the face of environ-

mental constraints.

References Aldrich,

H E,

1979, Organizations

and Environment, Prentice Hall, Englewood Cliffs,

New Jersey Chandler,

AD

and Structure, Anchor Books, New York and performance: The role Sociology, vol 6, no 1 pp 1-22

1962, Strategy

Child, J 1985, 'Organizational structure, environment

of strategic choice'.

Dimmock, SJ & theory:

Sethi,

,

A

S,

1986, 'The role of ideology

Some fundamental

Relations, vol 41,

no

4,

and power

in systems

shortcomings'. Relations Industrielles/Industrial

pp 738-55

Strategic perspectives of human resource

management 55

H 1983a, 'New managerial approaches to industrial relations: Major paradigms and historical perspectives', /owmaZ of Industrial Relations, vol 25, no 2, June, pp 162-76

Gospel,

Gospel,

H

1983b, 'Managerial Structure and Strategies:

Gospel,

H

8c Littler,

CR

eds. Managerial Strategies

An

and

Introduction', in

Industrial Relations,

Heinemann, London, pp 1-24, Hyman, R 1987, 'Strategy or structure: Capital, labour and Employment and Society, vol 1, no 1, March, pp 25—55 Kochan,

T A,

Katz,

HC&

Kochan,

T A,

McKersie,

R B, 1986, New York

McKersie,

Industrial Relations, Basic Books,

RB&

Cappelli,

P,

Work,

The Transformation of American

and industrial pp 16-39

1984, 'Strategic choice

no and

relations theory'. Industrial Relations, vol 23,

Thurley,

control'

1,

Winter,

K & Wood, S 1983, 'Business Strategy Industrial Relations Strategy', K & Wood, S eds. Industrial Relations and Management Strategy,

in Thurley,

Cambridge University Press, London, pp 195-224

Reading 4

The impact of corporate

strategy

on human resource management jokPurci

The particular concern of this reading is the impact of corporate strategy on the management of human resources. The focus is the large multi-divisional company. Such enterprises often trade in a number of markets, are multi-product and multiplant, usually own many subsidiary companies and increasingly are multinational. The corporate office of such firms is usually powerful. The development of internal capital markets gives substantial choice to corporate executives in the

they expose subsidiary companies to capital demands.

production or operations from one

site to

The

another, and the very size of the

corporation provides considerable power in the labour market. nature of the firm and

its

way

ability to switch

portfolio of business allows

it

to exit

The

diversified

and enter

certain

The ability to dominate some product markets in terms of market share and through segmentation and niche strategies allows it to manage some of the variations in the product market and, to a degree, to determine price markets with

relative ease.

structures in an oligopolistic or monopolistic way.

The economic power of these companies is associated with political and social power such that business leaders are, to a degree, able to influence the external environment by supporting political parties, lobbying federal, central and local governments and courting political favour through investment strategies. The very largest companies have sales revenues in excess of the GNP of many nation states in Europe as well as the third world (Morgan 1986, p 300). In short, they are capable of exercising strategic choices over a much greater range of issues and with considerably more discretion and power than traditional firms. It seems sensible to ask how the behaviour of these firms influences the management of people at work by the corporate strategies they adopt, and by the controls they exercise on the behaviour of business units and subsidiary companies. The corporate office in many enterprises has four major roles: (1) the development and execution of corporate strategies; (2) the monitoring of divisional and operational subsidiaries performance; (3) the allocation of internal capital; and (4) the treasury function managing relations with the external capital and money markets. All four to a greater or lesser extent, impact on the management of human

resources, as this reading seeks to illustrate. In the

section consideration

given to the position of large enterprises in the British

is

first

economy, indicating a concentration of economic power in excess of that found in many other industrialised nations. A model of corporate strategy is developed in the second section derived from the well-known distinction between strategy

58 Readings

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in strategic

human

resource

management

structure developed by Chandler (1962). Here, three levels of strategy are

and the scope of activities constitute ^n< model, direcdy affect and lead to decisions order strategy. These, in the normative achieve its goals structured to what is termed second on the way the enterprise is second order strategy provide the critical context Both first order and order strategy. identified. Decisions

on long-run

goals

—

in

which functional

human

strategies are developed.

Our concern is with

those to

do with

resource management, what are termed third order strategies.

The term

used throughout to indicate that the focus is on those on the behaviour of the firm (Hickson et al 1986) as opposed to day-to-day operating decisions. The rest of the chapter attempts to trace the effect first and second order strategies have on human resource management. In first order strategies, attention is focused on portfolio planning methods and their derivatives. Second order strategies are closely influenced by the adoption of these methods of corporate analysis and strategy is

decisions which have a major long-term effect

control, as discussed in the fourth section. Here, attention

is

focused on internal

operating procedures.

The term

multi-divisional

company

examined

is

generic and considerable variations exist

by looking at variations in the way the activities of subsidiaries following the work of Goold and Campbell (1987). The influence of the capital market is noted here. The chapter ends by observing that the extent of diversification also within this tide. This

is

first

corporate office seeks to influence the

varies

and

this in

turn influences the type of control structures utilised and the

parameters in which decisions on

The term human

resource

human resource management are (HRM) is used throughout

management

alongside other descriptive terms such as employee relations

taken.

the chapter

personnel and industrial

relations,

management.

A critical question, which is sometimes overlooked is the category of employee receiving the benefit of human resource that

human

and

professional

staff.

when

the prime function of human resource

main concern of

management. There

growing evidence managers Some authorities on corporate strategy consider this to be

resource management,

this reading,

it is

applied,

management

however,

is

with the

is

is

restricted to

(Porter 1985, pp 405-9). The management of subordinate

non-managerial employees. Here, as the chapter seeks to argue, the evidence for human resource management, if that means a long-rtm strategic view of the role

and place of employees

The

in the firm as a critical resource,

is

much harder to

find.

multi-divisional firm in Britain

Estimates of the size of diversified companies are surprisingly difficult to obtain,

on the British manufacturing 1985 half of the employed workforce in the sector worked for 560 enterprises, each with 1000 or more employees; a third worked for 104 enterprises with 5000 or more people; and a quarter in the 48 firms of 10 000 or more employees. These enterprises were even more important in the sector when their contribution to gross output was examined and especially when one looked at their especially in the service sector. Table 4.1 focuses sector. In

2

Strategic perspectives of human resource

proportion of the

total

wages and

salaries bill in

lishment nature of these large firms

on

average, the

is

clearly

number of employees per

manufacturing.

shown

in the table,

management 59

The

multi-estab-

and the fact that,

establishment increases as enterprises

economic importance of large firms and franchising. In the late 1970s, before the major recession of the early 1980s, there were more large firms in manufacturing and their share of employment was even greater. The substantial decline in manufacturing employment, of around 40% between 1978 and 1986, was especially marked in large enterprises and large grow in size. Even these

figures understate the

given the growth in joint ventures, sub-contracting

establishments. Table 4.2 shows, however, that the average

ments owned employed have

number of establishnumbers

by large firms has continued to increase so that, while fallen, the accumulation of establishments

enterprises has continued

to rise.

This

is

owned by

pace of mergers and acquisitions and the investment in greenfield

Table

4.

1

Enterprise size

in

UK

over

2000 and over

5000 and over

560

273

7101

Enterprise size

1000

and

of enterprises

Number owned

of establishments

sites.

manufacturing

(number of employees)

Number

large

probably a reflection of the increasing

10 000

20 000

and

and

over

over

104

48

24

5546

3860

2247

1446

356

383

422

735

616

52

44

34

25

18

60

51

39

30

22

55

51

38

27

19

Average number of employees per establishment Percentage of employees

manufacturing working

in

in

these enterprises

Percentage of wages and salaries paid in

manufacturing

by these enterprises Percentage of gross output in

manufacturing contributed

by these enterprises Source Report of the

1

985 Census of Production, Her Majesty's Stationery Office, Table

1

2

60 Readings

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human

resource

management

Table 4.2 Average number of establishments owned by in UK manufacturing 1958-1985 2000 and over

Enterprise size

(number of employees)

5000 and over

%

%

1958

12

1978

19

1985

20

Source 1958

Historical

large enterprises

10 000 and over

20 000 and over

%

%

21

30

44

29

42

56

37

40

60

Record of Census of Production 1907-1970

Report of the 1978 Census of Production, Her Majesty's

1978

Stationery Office 1981, Table 12

Report of the 1985 Census of Production, Her Majesty's

1985

Stationery Office

1

988, Table

1

The concentration of employment in manufacturing is not yet the whole story. Table 4.3 shows the changing sectorial composition of the workplace in Britain including projections for 1995. The decline in manufacturing from 34.7% in 1954 an expected share of 19.2% by 1995 is especially marked. It is not surprising to many firms in the manufacturing sector have been diversifying into the service sector Table 4.1 showed there to be 24 enterprises with 20 000 or more employees in manufacturing. The Times list of the largest 100 industrial companies in Britain, according to company annual reports in 1986, revealed that 79 employed over 20 000 people. Not all of these employees worked in the UK but we can assume that well over half, and probably over three-quarters did so. The Times 100 list excludes the banking, insurance and finance sector where the dominance of a few large firms is evident in any High street. to

find that

Table 4.3 Employment by sector

in

the

UK

1954

1954-1995 1975

1986

1995 (forecast)

%

%

%

%

Manufacturing

34.7

30.5

22.2

(19.2)

Distribution, transport etc

24.7

24.9

27.1

(27.0)

Non-marketed services

14.9

19.6

20.2

(19.6)

Primary and

10.6

5.5

4.6

miscellaneous services

9.1

12.8

19.7

Construction

6.1

6.5

6.1

utilities

(

3.9)

Business and

Source Institute of

Employment Research 1987

(23.9) (

6.4)

Strategic perspectives of human resource

management 61

Table 4.4 gives further detaik of the largest industrial companies in the UK. The 5.3 million

employees working for the top 100

is

equivalent to approximately

25%

of the working population in employment in the UK, while the top 20 companies

10% of the employed and concentration are difficult to

have nearly two million employees (equivalent to just under population). Comparisons of industrial structure

make but it has often been noted

that concentration of ownership

UK than in other mjijor industrialised nations Table 4.4 Top

UK

industrial

(George

of employees

Top 20 enterprises Top 50 enterprises Top 00 enterprises 1

The Times

UK

1

1

986

(£ billion)

1.98

17.97

3.78

26.53

5.30

34.22

987

registered companies includes public sector trading companies (post, steel,

coal and gas) and excludes banking, insurance, finance and

Employment

management

services.

includes overseas employees. Billion equals thousand million.

Not all of these large enterprises are divisional structure

tion have

greater in the

Turnover

(million)

Notes

is

1975).

companies: employment and turnover

Number

Source

Ward

&:

but the evidence

is

diversified

and not all of them have a multiand divisionalisa-

clear that diversification

been growing rapidly and are likely to continue

the changing structure of the top 200

and conglomerate most noticeable.

enterprises

to grow. Figure 4.1

shows

UK enterprises. The rise of 'related' business

and the concomitant decline

in single businesses

is

Since the collection of these data the substantial merger and acquisition wave

of the mid-1980s is likely to have altered the picture with a probable further growth in 'related'

and

especially 'conglomerate businesses' seen in the rapid

of firms like Hanson with the acquisition of the Imperial Group,

and the

emergence

London

Brick

UDS Group.

The more

diversified the enterprise the

more

likely

it is

that the internal

change and a form of multi-divisional structure will be adopted. Functionally organised firms are inevitably centralised and experience difficulty in developing decision-making in increasingly diverse and complex businesses. One solution has been the development of the holding company where the centre plays the role of friendly banker leaving wholly-owned businesses free to determine their own strategy, retain profits and control investments and performance. This loose relationship sheltered subsidiaries from the rigours of the capital market and, if supported in loss making, from the consequences of poor performances in the product market. It did litde to spur improved performance; monitoring and control proved difficult, and the reallocation of resources between subsidiaries was hard to achieve. operating procedures

will

62 Readings

Figure

4.

human

in strategic

1

resource

management

Diversification strategy of top

200

UK

corporations

(% distribution by number of companies)

Conglomerate business

1950

I960 Single business

'

95%

than

less

from one

1970

- not

Related business - sales

of sales

distributed

than

95%

but

a series

Conglomerate business - sales distributed amongst a series of unrelated conglomerate businesses such that no one accounts for

more

70% of sales from one major business than

70% Source

amongst

of related businesses such that no one accounts 70% of sales

basic business

Dominant business less

1980

of sales

Channon 1982

The

multi-divisional firm

managing

emerged

diversified business,

in the

combining

USA

as the

most

effective

way of

tight control over the financial perfor-

mance of subsidiaries,

restructuring of the firm to meet product market needs through the creation of product market related divisions, and the centralisation of

resource allocation and strategic planning.

commonly seen

as 'a superior organisational

The

multi-divisional structure

form since

it

is

separates strategic from

It makes visible the contribution of each division to profitability and hence increases the probability of optimising resource allocation within the

operating decisions.

organisation' (Hill 8c Pickering 1986).

The authors cite a variety of studies, all finding

that multi-divisionals are generally associated with superior profitability in the

While the picture

is

more mixed in

and Thompson (1981)

82%

USA.

the UK, recent studies by Steer and Cable (1978)

give evidence of better

performance

in profit terms.

of the 144 large enterprises studied by Hill and Pickering in 1982 were

organised along multi-division

lines.

They observed, however,

that there

were a

Strategic perspectives of

human

resource

management 63

and practices within the generic descriptive term. Multican have quite complex structures with each division organised into strategic business units (SBUs) and with a number of operating subsidiaries,

variety of structures divisional firms

wholly-owned companies and establishments. The extent to which head offices and divisional headquarters are involved in operational management varies considerably. This variety within the multi-divisional firm will be discussed at the

end of the reading since importance

management of human term

and styles are of substantial impact of the multi-divisional company on the relations, but first we must consider the meaning of the variations in structures

in assessing the

strategy,

especially in relation to the role of the corporate office.

Strategy

The terms

and strategic management are widely used in descriptive and management texts. Strategy presupposes importance and, in the words of the Oxford dictionary, 'generalship'. Thus strategy is associated with the longrun decision-taking and is distinguished from operational activities. While it is strategy

prescriptive

generally true in multi-divisional companies that the corporate office

is

concerned

with strategy and business units with operations, this can be misleading.

An

important part of the activity of head office is the control and monitoring of business unit performance, ensuring that budgets and performance standards are met. This can lead to a situation where corporate managers are actively involved in operational day-to-day activities. At the same time, divisions and business units may be given responsibility for the formulation of their own business strategies, such as new product development, major investment proposals and even takeovers,

and disposals. A simple hierarchical view of strategy is thus unhelpful. A more fruitful approach is to look at the attributes of management decisions

acquisitions

terms of importance or 'bigness' and the different nature of the decisionmaking process in terms of complexity or simplicity. In reviewing the literature on strategic decisions in management, Johnson (1987, p 4) suggests that they are likely to be concerned with some of the following: in

1

long-term direction of the organisation

2

scope of the organisation's

activities

matching of organisational activities to the environment 4 matching of the organisation's activities to its resource capability. 3

Strategic decisions are thus 'likely to have

major resource implications for an

organisation'.

The

distinctive feature

of multi-divisional firms

is

that their internal operating

procedures are more refined and differentiated than those found in fimctional or holding companies.

The decision

to

move

to a multi-divisional structure, firom say, a

centralised functional firm, or to adapt the configuration to emphasise local profit centres,

is

employee

a strategic decision of substantial importance in relations.

The

its

consequences for

decision to reorganise might have been triggered by

strategic decisions taken earlier, for

example, to

guishing between types of strategic decisions

is

diversify.

One

way of distinand downstream.

useful

in terms of upstream

64 Readings

human

in strategic

Upstream, first

resource

management

decisions are concerned with the long-term direction of the

order,

enterprise or the scope of its

activities.

Clearly these decisions will have implications

for the type of people employed, the size of the firm,

and technology required.

If an

upstream decision is made to acquire a going concern, a second set of considerations apply concerning the extent to which the new firm is to be kept apart from, or

and about the nature of the acquired firm's new owner. These can be classified as more downstream, or second

integrated with, existing operations, relationship with

its

decisions. This is similar to Chandler's (1962) distinction between and structuredcad his often quoted dictum that follows (ie is downstream from) strategy. The difference here is that decisions on strategy (the type of business undertaken now and in the future) and on structures (how the firm is organised to meet its order, strategic

strategy

goals) are

both of strategic importance

in that they

have long-run implications for

and commit and money to their attainment. It is in the context of downstream strategic decisions on organisational structure that choices on human resource structures and approaches come to be made. These choices are strategic since they establish the basic parameters of employee relations management in the firm, but are likely to be deeply influenced by first order and second order decisions as well as by environmental factors of law, trade and external labour markets. Choices on human resource structures and approaches are termed organisational behaviour, are taken in conditions of uncertainty,

resources of people, time

third orcfer strategic decisions.

Figure

4.2.

strategies,

The concern of

Therefore, three levels of strategy are evident as seen in this

reading primarily

is

with

not with strategies luithin^WM. (see Ahlstrand

first

and second order

& Purcell 1988)

or with

tlie

outcomes, or the environmental forces which provide the context in which strategies are formulated

and implemented. The actual conduct of HRM, let alone employee is influenced by an enormous variety of environmental forces

relations behaviour,

Figure 4.2 Three

levels of strategic

decision-making

Upstream First

order

1

2

E

Capital

N

Product market

Scope of

V

Technology

activities,

markets, locations, etc

Second order

Internal operating procedures,

relationship

Third order

market

Long-term direction of the firm of the firm

between parts

1

R

O

of the firm

N M

human resource management

E

Strategic choice in

N T

Downstream Outcomes:

style, structure,

conduct of human resource

management

Labour markets

Workforce Characteristics

and values Public policy law

Strategic perspectives of

interacting in a

complex and dynamic

way.

human

resource

The purpose of the

management 65

character

is

to

draw

attention to the impact of corporate strategies which, with a few exceptions (Thurley

& Wood 1983; Batstone, Femer & Terry 1984)

have been largely ignored.

HRM is determined in order long-run decisions on the direction and scope of the and purpose (location, technology, skill requirements, etc). Second

In theory in this idealised, normative model, strategy in

the context of firms activities

first

order decisions are

made on

procedures

of authority, control systems, profit centres,

(levels

the structure of the firm seen in

its

internal operating etc).

What actually

happens in employee relations will be determined by decisions at all three levels, and by the willingness and ability of local management to do what is intended in the context of specific environmental conditions and forces. One principle objection needs to be raised on the nature of the model. Like many such models it implies rationally in the process of decision-making: a carefully planned series of decisions where HRM is designed to mesh with organisational structures which, in turn, derive from first order strategy. But strategic decisions are characterised by the need to cope with uncertainty, to integrate management activity in various fields, and are concerned with change. A political process model to strategic decisions

is

more appropriate.

'Strategic decisions',

writes Johnson, 'are characterised by the political hurly-burly of organisational

life

with a high incidence of bargaining, a trading off of costs and benefits of one

group against another, all within a notable lack of clarit)' in terms of environmental influences and objectives' (Johnson 1987, p 21). The process is especially complicated in the area of HRM. What is the purpose of HRM? Since it is difficult to determine the ends and the means to achieve these uncertain ends, it is also difficult to measure whether the firm is successful in its personnel or interest

human resources policies. One of the problems with

the rational, normative model of strategy formulation and prescribed by many books on corporate strategy is that it tends to depersonalise and reduce analysis to a common currency of figures and hard data of markets, shares, discounted cash flows and rates of return. Questions of values or purpose beyond the 'bottom line' are acutely uncomfortable to strategic decision-makers. In the rational model, phenomena which cannot be reduced to as described

figures suck as 'motivation', 'good industrial relations' or 'good

employment

discounted or ignored. If it were possible to prove that 'enlightened' or 'progressive' approaches to the management of people at work were invariably associated with higher productivity, lower unit costs and improved standards'

profit,

and

is

easily

that exploitative, coercive systems failed,

researcher and

human

life

for the social science

resource executive would be easier. As

it is, little

can be

and the impossibility the relevant dynamics and relations. If some

conclusively proved because of the complexity of variables

of monitoring and measuring

'proof

is

all

obtained over a short period of time in specific circumstances,

it is

often

ambiguity in HRM, and the relative weakness of the function in the corporate corridor of power (Hegarty &: Hoffman 1987), often leads to a situation where decisions on first and second order strategy are taken without consideration of their effects on the conduct of HRM. Third

found

to

be impossible

to replicate. This

66 Readings

in strategic

human

resource

management

order strategy concerned with the management of people

is

increasingly required

and structures of the firm, especially as countervailing requirements in the en\dronment (trade union power, industrial democracy proposals, income policy and labour law) appear to have receded in the 1980s. It is more than it was a decade ago. difficult to argue 'we can't do that because. We need now to consider how trends in first order and second order strategy, especially toward diversification and decentralisation, affect the management of human resources. Firsdy, our concern is to trace the logical consequence which flow from first order strategies on the scope of the enterprise activities for employee relations. This \vi\\ entail an examination of portfolio planning to

fit

the strategies

.

.

'

techniques. Secondly, within the multi-divisional firm, the critical question

is

second order strategy concerning the relationship between parts of the business

and the management of interrelationships. This will take us into a discussion on different types of multi-divisional companies seen in terms of integration or separation of divisions and centralisation or decentralisation within divisions. We will also consider the evidence for profitability and effectiveness and the link with employee relations. Thirdly, there is a need to consider the relationship between the corporate office and business units. How are different styles and approaches likely to impact on HRM?

First

order strategy: portfolio planning

We noted earlier the growing tendency for large companies to become diversified. One of the critical issues facing the corporate office, especially the chief executive officer

(CEO)

is

and and outside for possible developed as a means of identifying

the allocation of capital to the various parts of the business

the identification of growth areas within the portfolio acquisition.

The use of portfolio planning w2ls

the attractiveness of various parts of the portfolio of business as an aid to capital allocation

and

to

determine the appropriate mix of business held by the enterprise. is based on two premises.

Portfolio planning

Firstly, there is an experience curve: 'average costs will decline as the accumulated experience associated with selling, producing, engineering and financing (a) product increases' (Hamermesh 1986, p 10). Among the most common reasons for this proven relationship are

and and process improvements.

economies of scales (or scope) in manufacturing, marketing, engineering financing; labour efficiencies; product standardisation

The

strategic implications.

.

.

are that the

experience can have the lower costs

and early

to

and

company with the most accumulated a company should invest rapidly

therefore

accumulate experience.

(plO)

The experience curve

is

associated with market share. In theory, the

with the highest market share the lowest cost

will

company

have the greatest accumulated experience and

and therefore generate the most

profit.

Strategic perspectives of

Secondly, market growth

is

human

resource

management 67

not constant. Eventually, and the time scale can vary state of slow growth

enormously, most markets for a given product reach a mature

and may then decline. Firms with a dominant share of a mature market are likely to want to diversify by switching cash from the mature business into new markets with growth potential and gain early experience to build market share and invest heavily to

keep

it.

Portfolio planning

is

defined by

Hamermesh

as

those analytic techniques that aid in the classification of a firm's businesses for resource allocation purposes

and for selecting a

competitive strategy on the basis of

the growth potential of each business and of the financial resources that mill be either

consum£d or produced by

the business.

(plO)

It

was estimated in 1982 that half of the Fortune 500 companies in the

USA use

Goold and Campbell (1987) in their study of 16 major British diversified companies showed that while the formal statistical use of the techniques was not widespread, the thinking behind

some form of portfolio planning(Haspeslagh

1982).

portfolio planning was often employed.

The most well known system (1970; Hedley 1977)

if only

is

Group mnemonic qualities: cash cow, star, dog and

that developed by the Boston Consulting

because of its

Figure 4.3 Portfolio planning grovvth-share matrix Market share (relative

High

High

Market growth (business

growth

rate)

Low

competition postion)

Low

68 Readings

in strategic

human

resource

wild cat (or question mark) as

management

shown

in Figure 4.3.

The purpose of the model

is

to

help the strategic planners classify the various business units in the portfolio in terms of their potential for cash generation or cash usage. High market share businesses,

assuming the experience curve,

will

have lower costs than their competitors with more profit. Market growth indicates

smaller shares and should be able to generate

demands for investment. When there is high growth there will be demands for investment in terms of new plant equipment and technical innovation. Low growth markets require less investment. The model combines the two axes and leads to generalisation about corporate and business strategy. the likely

substantial

Stars (high share,

high growth) are in an advantageous position. While they

reqiure high levels of investment their dominant position in the market often allows

them

produce

to

sufficient profits to finance further growth.

Cash cows (high share, low growth) produce large profits and positive cash flows. They require modest amounts of capital to maintain their market share, renewal of equipment and keep in step with technological change. to finance the stars

where necessary and

The

cash surplus

particularly to help develop

ventures in growth markets; the wild cat or question

mark

used

is

new business

business.

Wild cat/question mark (low share, high growth) businesses compete in rapidly

growing markets with the aim of moving up the experience curve ahead of the competition. Market growth in new market is difficult to predict and the gaining of expeiience and efficiency in siaiations of uncertainty also can be difficult. These businesses are therefore uncertain and require substantial investment in excess of their

own

profitability.

much profit and are not worth Two options exist; either divest the business or act to pair costs down minimum to squeeze out the surplus value.

Dogs (low share, low growth) do not produce investing in. to the

A slighdy more sophisticated version of the portfolio planning model is the nine Company in the USA. Industry attractiveness includes market growth by covering other factors such as industry profitability and market potential and size. Market share is included as box ynatrix originally developed by the General Electric

one of the

factors in business unit position but this will include

the unit's technological base, actual profitability

& Majluf 1983).

and

size (for

an assessment of

more details see Hax

Figure 4.4 indicates what are called the strategic mandates which

flow from the nine

box

matrix. In both

the purpose of the strategic

mandates

models is to

whereby a business receives funding early in

create its life

a pattern of capital spending so that it achieves a strong (ie

profitable) competitive position. Then, as its market matures, the business luill

produce the cashfloxu that luillfund facilitate the creation

funds are

yiearly

other,

more rapidly groxuing businesses.

of a portfolio of businesses in which the sources

and

.

.

(and)

uses of

balanced.

(Hamermesh 1986, p 16) It is not our concern to debate the strengths and weaknesses of portfolio planning for strategic management (see Hamermesh 1986 for a useful analysis and

Strategic perspectives of human resource

Figure 4.4 Portfolio planning

strategic mandates:

management 69

company

position/industry attractiveness screen

Strategic

Build

mandates

Hold

Harvest

The question of concern here is the implications that second order strategies and third order human resource matters. At a general level the most important implication is that the enterprise is seen not as a unified business but a collection of businesses. Portfolio planning says nothing about long-term aims or purpose of the firm and by its analytical methods finds no place for history, tradition or cultures. Firms excessively committed to portfolio planning tend to ignore or find difficulty with that aspect of corporate strategy which determines 'the kind of economic and human organisation it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities' more recently, Porter flow from

it

1987a).

in terms of

(Andrews 1980, p 18). Hamermesh refers to this as institutional strategy, others use terms such as goals, values and missions. In employee relations we refer to it as management sty leheing the preferred way of managing employees, seen for example, in corporate philosophy statements (Purcell 1987). Portfolio planning tends to

70 Readings

in strategic

human

resource

management

down, questions of st\'le and non-economic issues and encourages different approaches to employee relations in different segmentsof the business. (Schuler & Jackson 1987). This comes about in two ways. Firsdy, the identification of business units as the prime unit of analysis (sometimes referred to as SBUs) is a critical feature in the drive out, or at least drive positively

creation of the multi-di\isional company. Secondly, business unit managers are

given responsibilit)' for the determination of their success within the confines of

the strategic mandate. Corporate office rules

and regulations which

limit unit

managers' freedom of action come to be resented, are seen as an unnecessary cost and are often too general to be applied in detail in each unit. Thus, what may be

termed the

administrative control system of

head

office rules

and

regulations,

HRM by the personnel manual, can tend to be out of place, and be

svTnbolised in

resented or ignored by profit-responsible unit managers facing different circumstances. If centralised rules

cannot be applied and

if,

in their place, there

is

no

guiding logic or set of standards on appropriate employee relations management,

than the requirements of the financial targets set by corporate headquarters

will

dominate unit management behariour. This performance control system (Mintzberg 1979) establishes, through annual budgeting and monthly reporting (often reinforced by incentive pay and stock options for unit managers), appropriate financial targets for the unit within an agreed mandate for capital expenditure.

How the

unit

manager achieves

this

is

up

to

him or

her.

We will

look at the effect

Here we note the implication of separating tiie enteiprise into quasi-independent units and a tendency' for central standards on non-economic conduct to be weakened or abandoned altogether There is nothing inherentiy wrong in separation and decentralisation and there are many advantages to be gained from avoiding over-centralised, bureaucratic systems, allo\ving unit managers to design their own employee relations strategies for their circimistances. There are two difficulties however Firsdy, the implication is that inter-unit comparisons drawn by trade unions and employees themselves are to be avoided or minimised. Secondly, employee involvement in strategic affairs through corpoi~ate consultative committees and colIecti\'e bargaining, employee U'ustees in pension funds, and employee share ownership schemes are out of place. of different tvpes of performance control systems

If

the logic of portfolio planning

is

later.

a separation of business units (second order

employee relations similarly needs to be separated and decentralised. Employees and the unions which represent them must, from a management point of view, adopt a unit perspective and be concerned with the parochial needs of the imit, not the su~ategic thrust of the enteiprise. This in turn will form a distinctive approach in the way industrial relations is structured in the enteiprise. The need for boundary maintenance becomes critical if the enterprise seeks to implement the logical consequences of portfolio planning for its human resource strategies. This is not simply because unit managers are given responsibility for profit generation and business strategies in their unit but because the type of employee relations needs are likelv to differ substantiallv between different segments of the matrix. This is hardly ever discussed in die analysis of portfolio planning methods. One small exception came from Arthur D Litde, the major

strategy) then

Strategic perspectives of

human

resource

management 71

American consulting firm in their development of the concept of strategy centres. They suggest that the wild cat requires an 'entrepreneur' with a free form or task force structure and an informal or tailor-made communication system. Stars need a sophisticated manager, managing a semi-permanent task force or product divisional structure with more formal, tailor-made communication systems. Cash Cows place emphasis on administration within a business divisional structure and with a formal or uniform communication system. The dog has a manager who is an 'opportunist milker' in a paired-down division. The communication system is 'litde or none, command system' (Brown &: O'Connor 1974, p 21 ). In their review of corporate planning. Brown and O'Connor are even more explicit, suggesting that 'dog businesses should be run by tough, hard-bitter individuals who are prepared to liquidate people and facilities' (p 16). This might seem the ultimate self-sacrifice for the manager if his or her job is to go also. However, 'as a practical matter, it takes some time, perhaps two or three years to liquidate a dog business. At the end of this period there will undoubtedly be other opportunities in the organisation for its manager and his staff (p 16). That's alright then. of

Clearly, the type if,

as

is

HRM

v\ill

vary considerably. This variety

is

likely to

be greater

probable, the size of the business units varies according to the product

market life-cv'cle and the

unit's share

stable units; wild cats small

of the market. Cash cows are

and experimental;

stars

medium

likely to

to large

be large

and growing;

dogs medium-sized and declining. It is likely

that

luild cat business

units will wish to avoid

associated with larger, stable firms. WTiat

is

required

is

most of the

rigidities

a flexible operation v\ith

v\illing and able to work in a variety of areas and with broad skills. Overhead costs associated with personnel departments, formal job grading schemes and work study are expensive for small units in growing markets when change is likely to be both continuous and unpredictable. (For a further exploration of these issues in high technology firms see Kochan & ChalykofF 1987.) Star businesses fzce the problem of managing larger and growing units. It is likely

employees

that there will

be a growth

clerical, technical

in occupational differentiation with skilled, semi-skilled,

and professional

staff,

because of the adoption in some

businesses of sophisticated, technically advanced dedicated technolog)'. At the

same time the high rates of investment and technical change require continued flexibility and co-operation in the management of change. As demand grows the need for continuous operations is likely to develop in order both to meet market need and to utilise capital equipment as effectively as possible. The free form structure of the wild cat is likely to be replaced with more formal strucmred systems with the growth of sophisticated HRM designed by professional staff, implemented and managed by line managers. If

there

is

strategic thinking in HRA'I these units are likely to wish to

develop

on high individualism paying above market rates to recruit and retain the best labour, careful selection and recruitment systems to ensure high quality and skill potential. Emphasis will be placed on internal training schemes to develop potential for further growth, payment systems designed to reward individual performance and co-operation, performance and appraisal employee

relations policies based

72 Readings

reviews,

in strategic

human

resource

management

and on team work and communications. As

in

many

greenfield

sites,

and it is here in new plants (implying heavy capital investment typical of stars) that we might find single union deals, pendulum arbitration and new forms of employee representation. In short, technical and capital investment is matched by human resource careful consideration will be given to questions of unionisation

investments, at times reaching near the ideals of HRM.

future

is

The assumption is

good for star businesses provided the market continues

to

that the

grow and

their

share of it continues to be high.

Market maturity and the management of cash cows brings a need for order, and predictability: in short, structured systems of collective bargaining, job evaluation, work study and the adoption of a modem sophisticated method of managing a highly unionised workforce. Effective management will ensure continued high rates of return on investment sufficient to meet the corporate need stability

Depending on the performance control system and profit requirements of head office, cash cows can, however, sometimes slip into forms of indulgency patterns (Gouldner 1954) or management slack in discretionary behaviour (Williamson 1975). Here there is tolerance of over staffing, restrictive practices and general inefficiency, and since the unit is profitable, there is litde pressure for change. Costs associated with removing these customs and practices might also be deemed too high. Given the size of the unit and the fact that it has been in business for a for profit generation for use elsewhere in the enterprise.

tightness of the

number of years or decades, it is also likely that various overhead costs linked to employee relations will exist, such as sports and social clubs, subsidised canteens, employee discount shops and various welfare services. We might expect to find elements of paternalism. Other costs might well be seen in office facilities and time-off arrangements for shop stewards, especially full-time shop stewards and convenors and a sizeable personnel department. These are affordable because of high profits, are likely to have grown up over a period of time and are justified on the grounds of their contribution to labour peace and harmonious labour relations. The requirement is for management to maintain the cash cow, not to be innovative and entrepreneurial, or bring costs down to such an extent that there is a hostile reaction while earning high profits. At the same time, given market maturity, profit improvements are less likely to come from marketing and sales expenditure than from improved efficiency and resource usage, especially labour productivity (Macmillan, Hambrick &: Day 1982). Clearly such business units are vulnerable to the market changes and they may slip into a dog mode. Either they lose market share because of better performance by competitors, perhaps triggered by entry into the market by overseas companies or technical or product innovations developed elsewhere for example Japanese competition or they are caught by a general decline and instability in the market as in the recession of the early 1980s. While 'occasionally it is possible to restore a dog to viability by a creative business segmentation strategy, rationalising and

—

—

specialising into a small niche. .(usually) the only prospect for obtaining a return .

from a dog

is

to

manage

(Hedley 1977, pp 11-12).

it

for cash, cutting off

all

investment in the business'

Strategic perspectives of

Brown and O'Conner are,

again, rather

more

possible such

a dog;

if not,

a business should be sold it

to

to

resource

management 73

explicit:

for dog businesses an early demise in the appropriate

should receive no investment, not even

human

policy. Needless to say, they

repair a leaking roof in the factory. If

an

organisation that does not realise

it is

p

16)

should be abandoned. (1974,

Action

required to 'harvest' as

is

matrix, through a

it is

euphemistically called in the nine box

management acting as an

'opportunist milker', the term used by Arthur D Litde. Since there is litde prospect of increasing market share, attention is turned to the business unit itself to cut costs in order to improved margins. This might require the use of a 'command system' of communications (another Artliur

D

Litde term) where vigorous efforts are made to improve productivity; not through investment but by work intensification, reduction of 'surplus' labour, and cutting overhead costs, like welfare benefits and concession bargaining. Turnaround

management can emphasise employee involvement as a means of achieving productivity

improvements without investment. The

alternative

is

to sell or liquidate the

business (and a hostile reaction by the workforce to cost cutting measures accelerate the closure). This

may in any case be

is

likely to

the obvious course of action, even

and productivity improve, since a better price can be gained for a going concern and rationalisation costs, such as redundancy payments can be offset if profitability

on corporation tax. The most important consideration is to ensure no form of cross-subsidy to the dog from the cash cow either in investment, corporate subsidy in loss making or 'artificially' supported rates of pay. It may well be appropriate to allow earnings to rise in the star and cash cow but dogs need to be treated as an independent, stand alone unit where pay movements are linked to ability to pay, and ability to pay is a function of cost reduction, not price improvement. This separation of units is one way to reduce the size of the exit barrier (Harrigan 1980). It has also been noted that 'a sense of obligation to workers in plants which would be closed by liquidation of a dog business may also seem as a barrier to exit' (Christiansen, Cooper & Dekluyver 1982). against profit that there

is

In sum, different businesses in the portfolio require different types of employee

and must thus be treated as separate units. This differentiation and the emphasis on market share tends to drive out corporate institutional strategies concerned with non-economic matters such as values, standards and social responrelations

sibility.

The management of human resources becomes an operational responsibility

and brings with union

Second order

The

it

the

need

interest in strategic

to

weaken or

inhibit cross-unit

strategy: internal operating

procedures

firstly in the need to develop a segments of the product market life-cycles and the need to manage these differentiy, according to market need and

implication of portfolio planning was seen

variety of businesses in different

secondly, in

comparisons and trade

management while developing local, unit based loyalties.

74 Readings

in strategic

human

resource

management

on second order strategies concerning the structuring of the enterprise, in the preference for performance control systems and difficulty in imposing administrative controls and institutional strategy. One of the difficulties associated with product portfolio systems is the position. Portfolio planning has considerable influence

definition of the business unit.

serve?

The term

What exactiy is the market the unit is designed to company portrays an image of relatively large

multi-divisional

organisational structures designed to trade in general markets. Hill

noted

divisional form, the

Each per

and Pickering

144 British companies that while most had opted for the

in their study of

tendency was for the number of divisions to be relatively small. number of operating subsidiaries (on average 10.4

division was likely to have a

division). It

was therefore by no means valid to assume that there was a 'direct

one-to-one relationship between a division, one distinct business and one end market' (1986, p 31). They go on to note that 'as companies have become more diverse, rather than increasing the

number of

activities

existence of large,

number of divisions

within each division' (p 33).

complex

It

they have increased the

could be argued that the

divisional structures inhibits the full logic of portfolio

planning, since within each division there are likely to be a variety of businesses within the various segments of the portfolio grid.

A further difficulty

that these large divisions were liable, by their very size, to

is

and economic power at the corporate level. They 'had become so powerful that they restricted the power of head office, limiting its ability to impose exert political

&

strict financial discipline' (Hill

advantages of portfolio planning generally,

were not being

Pickering 1986, specifically,

fully realised either in

pp

and

35-6). Thus, the critical

multi-divisional

companies

the structuring of business units

management

(especially capital allocation and from operational management at unit level. A growing response to these difficulties discussed by Hill and Pickering has been a further twist in the internal operating procedures to decentralise and reduce the power of the divisional tier.

or in the separation of strategic financial control) at

Several companies

mattered as a

head

office

had moved away from a

mnnagement unit.

.

.

structure where the divisional tier

towards one where

(it)

only

had a minor role. This

downgrading of the divisional tier xoas accompanied by a further decentralisation of short-run decision-making power strate^c functions

to subsidiaries xvithin divisions. ..ivhile

(Hill

Hill

long-term

and financial controlfunctions were centralised at head office.

and Pickering asked

&> Pickering 1986, pp 35-6)

their corporate office respondents to indicate a range

of decisions, and which level in the enterprise had responsibility for decision-

making. At head office ities

level a

reasonably clear picture emerged with responsibil-

for legal functions, relations with financial institutions, long-term planning,

investment decisions and acquisitions largely placed in the corporate offices often

decisions

on

were involved

in,

office.

but shared the responsibility with lower

financial control, public relations,

Head

levels,

management development and

personnel. They were rarely involved in marketing, production, buying or industrial relations matters.

Strategic perspectives of

human

resource

management 75

The responsibilities of operating subsidiaries was the reverse of head offices witii prime responsibiUty for marketing, production, buying and industrial relations and a shared responsibility for personnel and management development, financial development, financial control, public relations and investment. Divisional offices were in a curious position:

No decision

taking area was identified where, overall,

head office had the main

responsibility.

appropriate role of divisional head

design

is

not so

much about

.

.

it

could be said the divisional

This does perhaps raise questions about the

offices.

.

.

and ivhether the issue in organisational

divisionalisation as about decentralisation (Hill

& Pickering 1986, p 39)

The authors go on to note that there is a tendency for divisional head offices to be over-involved in the operating affairs of subsidiary companies and that this is associated with slow decision-making, intraorganisational conflict and a lack of accountability

The

and

control.

implication of Hill

divisionalisation,

strategic

is

and

Pickering's study

is

firsdy,

that decentralisation, not

the key attribute of diversified firms with a clear separation of

from operational

responsibilities. Secondly, strong divisional offices

and rigidity both upward through interference with and downward through involvement in operating subsidiary affairs. Thirdly, and of particular interest here, industrial relations and, to a lesser extent personnel, is defined in most multi-divisional companies as an operational responsibility. This takes on particular significance in looking at the effect of these factors on profits ineasured by rate of return on sales. Companies which allowed a stronger head office involvement in operating decisions tended to be less profitable. Similarly, companies that involved their divisional head office in operating decisions also tended to be less profitable. These appear

to increase complexity

strategy

findings suggest that for

decentralised

down

optimum performance, operating

functions should be

to the level of the operating subsidiaries. This view received

support from the evidence of a positive relationship between the responsibility of operating subsidiaries and profit in the case of buying, industrial relations and personnel decisions but, surprisingly, not in the case of production and marketing

where no

statistically significant

relationship was found, but the sign of the

coefficient in each case was positive, as expected (Hill

The data reported here

& Pickering

1986,

related to the years 1978-80. Since then a

p

47).

number

of

remove or significandy weaken the divisional tier, for example, Tube Investments and GKN (Marginson et al 1988), and restructure into smaller business units and operating subsidiaries. Some centralised firms have moved to create divisional structures and business units like the British Aviation Authority and British Telecom. At the same time there is evidence of further decentralisation in collective bargaining to the local level, the break up of corporate wide job evaluation systems and a reduction in the size and role of corporate personnel departments. If further testing shows Hill and Pickering's findings to be largely correct (some caveats must be noted, such as a response of only 28.8% from the enterprises have reorganised to

76 Readings

in strategic

human

resource

management

sample of The Times 500 companies) then

it is

likely

not only that large firms

will

seek to create a multi-divisional structure, but that further reorganisation and restructuring will proceed to push for decentralisation. This change in second order strategies and the link between decentralised employee relations and profitability has profound implications for third order human resource strategies in large firms.

DiveRitiesmsecond order stntegies we have assumed that multi-divisional firms will be generally similar in and approach. Two further issues need to be addressed indicating variety and choice. The first of these relates to the approach taken by the corporate office in managing business units; what is termed by Goold and Campbell (1987) as strategy and style. The second looks more closely at the relationship between business units. The assumption of portfolio planning is that units can be managed Thus

far

their behaviour

though they are unrelated to each other except in an ownership sense. We saw growth of the multi-divisional firm has been particularly marked in related areas of business and this has been argued by Porter (1987) as a more appropriate growth strategy than a collection of unrelated businesses managed in the portfolio method. Once units are related and are to a greater or lesser extent dependent on each other for the provision of goods and services (ie vertically integrated) then the pure logic of portfolio planning is harder to implement and may well be inappropriate. This in turn will have implications for third order employee relations strategies. as

earlier that the

Corporate office control

The question asked by Goold and Campbell in their study of 16 British owned diversified companies was how does the corporate office manage its relationship is added to the unit's performance. In their model they identified two critical features of the process. First is the extent to which the corporate office had planning influence. This 'concerns the centre's efforts to shape strategies as they emerge and before decisions are taken... It is

with business units to ensure that value research

through planning influence that the centre seeks to improve the quality of thinking that surrounds major decisions' (1987, p 36). The second was the control influence which 'concerns the way in which the centre reacts to results achieved... Control influence arises from the targets that the centre agrees with its business units, the way the centre reacts to poor performance, and the frequency with which the centre monitors results' (p 36). Three t^es of control influence were identified: flexible strategic control, tight strategic control and tight financial control. The critical differences are the amount of attention given to annual budget targets and monthly monitoring of results ie the strength of the performance control system and the extent to which there are penalties for failure and rewards for success in

—

target attainment.

Strategic perspectives of

human

resource

management 77

These two dimensions are combined to produce three main categories which Goold & Campbell (1987, p 10) summarise as follows: Strategic planning companies

push for maximum

competitive advantage in the

businesses in their portfolio. They seek to build their portfolios

around a small

number of 'core' businesses, often with coordinated global strategies. The styles lead to a wide search for the best strategy options, and tenacious pursuit of ambitious long-term goals. But decisions tend to be slower, reaction to poor performance unit

level.

is less

decisive

and there is less ownership of strategy

Financial performance

is

typically strong

at the business

with fast organic growth, but,

from tim£ to tim£, setbacks are encountered. Companies with BP, Cadbury Schweppes, Lex, STC and UB.

this style

were

BOC,

Financial control companies focus more on financial performance than competitive position. They

expand

their portfolios

more through acquisitions than through

market share. The style provides clear success

criteria, timely

reaction to events,

and

strong motivation at the business level resulting in strong profit performance. But it

can cause

risk aversion,

reduce concern for underlying competitive advantage,

and limit investment where the payoff is long-term. Although financial performance in these companies had been excellent, with rapid share price growth, there has been less long-term organic business building. Companies with this style were BTR, Forewent, Hanson Trust and Tarmac. Strategic control companies balance competitive

and financial

ambitions. They

support growth in strategically sound and profitable businesses, but rationalise their portfolios by closing

down

or divesting other businesses. The style focuses on the

quality of thinking about strategy, permits businesses to adopt long-term strategies,

and fuels

the motivation of business unit managers.

But

there

is

a danger that

and bureaucratic, and that ambiguous objectives can cause confusion, risk aversion and political' manoeuvring. Strategic Control companies have achieved profitability improvement and share price recovery, but have seen less groivth and fewer major initiatives. Companies with this style were Courtaulds, ICI, Imperial, Plessey and Vickers.

planning processes can become

superficial

The importance of strategy and style was vividly illustrated in the winter of 1986-7 in the hostile bid by BTR (a financial control company) for Pilkingtons (a strategic planning company). Pilkington is the world's leading glass maker which invented float glass in the 1950s and continues to invest heavily in research and development,

developing global strategies and making investments for strategic reasons even

if

the

might be uncertain: a strategic planning approach. Interestingly, the trade unions, and the St Helens community, the hometown of Pilkington in North West England, were active in defence of Pilkington and eventually, after the share price rose substantially BTR withdrew their bid. What the unions and community feared was that if BTR were successful it would impose its particular management philosophy on Pilkington which would involve reducing costs and pushing up rate of return

'

78 Readings

in strategic

human

.

.

.

resource

.

management

margins for the benefit of the shareholder (BTR outperformed all but two of the quoted UK companies in terms of return to shareholders in the period 1974—86) but at the expense ofjobs, community investment and long-term development^ The critical question is not whether the firm is maximising profit but over what time period profits are expected or required to be achieved, and more contentiously,

who

gains from the profits.

that the only purpose

is

Much

of the literature on corporate strategy assumes

to service the

needs of the shareholder. Other stakeholders;

employees, communities, dependent suppliers and customers are irrelevant. Not all companies take this view. In particular, the strategic planners with long-term aims

and objectives are the firms most likely to have a defined sense of purpose. In Hamermesh's terms these are the firms most likely to have an institutional strategy which includes non-economic values and benefits. This is not to imply that they are soft companies or poorly managed, unable to take firm action when necessary, but their approach to managing unit management is likely to be more benign and their capacity to design and inculcate a management style or corporate culture greater than other companies. Guest has suggested that only strategic planning companies

HRM (1987, p 518). Goold and Campbell, like so many authors in corporate strategy, say virtually nothing about HRM, assuming it to be an operational responsibility of unit managers. But the way these managers are themselves managed and motivated, and the freedom they have within financial targets, is likely to influence their approach to employees and the extent to which they can invest in HR programs. The authors provide some fascinating insights here aided by quotes from their respondents. The two extremes, strategic planning and financial control, are contrasted. have the capacity and commitment to develop

Strategic planning

companies

The centre acts as a

sort

from

of buffer to the capital market, protecting the business units

the need to satisfy the short-term

investor This alloius business

performance

managers

to

criteria

applied by the outside

concentrate on building their business

making half year earnings and clear internal targets. can mean

rather than trimming their sales with a view to targets.

.

.

But lacking both market

that flexibility becomes tolerance

Although

and

.

.

that

managers luho failed

imminent danger of serious

reprisals

.

tolerance becomes looseness

there are ultimate sanctions for

impression.

One

disciplines

.

(pp 198-9)

more non-performers, we did not get the to hit their targets

were in any way in

(p 68)

of the features of these companies

is

their willingness to support subsidiaries

that produce poor performance over long periods (p 160)

Quoting Sir Hector Laing, identify with

CEO of United Biscuits,

management and help them

out.

At

'if things

are going wrongyou

these times control should get

more

friendly not more fierce' (p 68).

UB does

not reward

would jar with individual

UB

effort

's

managers with performance bonuses. Bonuses of that sort culture which values family feeling and workingfor UB above its

(p 68)

.

.

Strategic perspectives of

.

human

resource

management 79

Financial control companies There

no attempt

is

profits.

.

.

to buffer the businesses from the

requirements for short-term

by exposing all individual investments to this

test,

it

much further

goes

than the capital market in applying tough standards (p 207) These companies have no formal planning systems, are concerned mainly with the

financial

results, control only

(2-4 year) pay back

criteria to

against

annual

targets

and

apply

strict

They are willing

to act speedily to exit from the businesses that are

or do not fit (p

26)

1

.

. .

(and) are quicker

pressure through the monitoring process

acclaiming good performance (p 132)

managers

(and

to

no wholly

GEC

not performing

managers, fiercer in applying

and more

Taken

.

effective in recognising

and

extremes the style can encourage

to

and

we peer at

risk aversion,

limit investment

the business through

20 managers who

means of ensuring this does not happen

satisfactory

can cause

style

competitive advantage

are

to replace

milk their businesses by cutting back too far on investments (p 202)

the centre) has

(p 138). The

In

short-term

investment decisions (p 111).

reduce concern for underlying

where the payoff is long-term (p 10)

numbers' (p 118). In any one year there

leave the budget review shaking in their shoes (p 132)

asked Malcolm Bates of GEC budget before expecting

tongue in cheek: 'How

how many

to lose his job.

years a

manager could fail

His response

luas telling

many years ? You mean how many

and

to

We

only partly

He

months.

.

meet his

might

last

for six months or he might not' (p 129)

A

quote from Tarmec: 'A division chief executive can only downwards if he goes through some personal trauma. We can

sional.

.

.

if they

have failed

don

tfiemselves

The authors go on

stand the confes-

deliver they should feel very bad. They should feel that they

't

will feel like winners.

revise his budget 't

and that

life is

On the other hand if they succeed they And they are rewarded. (p 131).

awful.

They will be basking.

to claim that financial control

.

.

companies 'generate high

of motivation and satisfaction in their management' (p 136) but offer no evidence for this. At the heart of this is a fundamental clash of values between long-

levels

term integrated 'family feeling' management teams and aggressive, short-run financially motivated managers (as in 'if you succeed, you are rewarded. If you don't you are out' (p 132)). Presumably 'those who are out' or 'leave a review meeting shaking in their shoes' do not feel highly motivated or rather they feel the motivation of fear. In many ways financial control companies adopt the logic of portfolio planning in that interdependencies between businesses are ignored and each business unit is given substantial independence within the confines of tight financial control. But the management style adopted within the unit is likely to be analogous to that found in the dog companies where cost cutting is emphasised, margins are pushed up and investment avoided unless there are clear

—

paybacks over short periods. It is

understandable that in periods of financial stringency and market

pressure

is

instability

placed on firms to improve performance by decentralising to business

80 Readings

units,

in strategic

human

resource

management

applying demanding performance standards and closing

emphasis

units. In effect,

is

placed more on control and

less

down

loss-making

on planning

(Hill &:

Hoskisson 1987). This in turn encourages further decentralisation, especially in terms of the administrative control system. Strategic shifts toward performance control are associated with structural shifts in internal operating procedures

HRM

toward further decentralisation, leading to similar trends in strategies. But tight financial systems and short-term investment payback requirements also tend to drive

out long-term employee relations investment at the unit level and destroy as part of corporate strategy.

the basis of

HRM

when they gain abundant cash, do not appear to move back to the strategic planning style (Hill & Hoskisson 1987, p 235) and once a financial control style is in place it is applied to all units, irrespective of their market position, and is unlikely to change until forced to by shareholders. However, the capital markets approve strongly of financial control companies for Financial control companies, even

a good reason. They produced the

best all

round financial performance. They

substantially out

perform the industrial average. They have high profitability ratios (achieved by acquisitions). Their asset growth (4 per cent per year)

of strategic planning

main weakness

has been

companies (1

less

is

and growth

in organic growth, where fixed

than inflation and

less

than half that

per cent per year).

(HiU&' Hoskisson 1987, p 161) In short, financial control companies produce excellent results for the share-

and many disposed of through rationalisation and companies with strong sales growth have created more jobs and, by their willingness to support subsidiaries with poor results over long periods, have disposed of fewer jobs in the recession than might have otherwise been the case. The returns to the shareholder, however, have been reduced since 'strategic planning companies have the lowest stock growth... and earnings per share growth has been less satisfactory' (p 160). It is this that makes such firms more liable than others to hostile bids and acquisition battles like Pilkington with BTR. Financial control companies, and increasingly, pure finance companies and merchant banks like Merril Lynch and Morgan Stanly find it easy to raise the equity to engage in leverage buy outs even after the stockmarket crash in the Autumn of holder, but few jobs are created

restructuring. In contrast, strategic planning

1987. According to Fortune mdigazine (February 1988) these financial buyers

have moved into control of corporations because turing isn

't

cost

on

cutting divesting

their

thinking about today. as

an

.

.

.

but.

.

.

and getting

their

money

Growth

the financiers

out, they are expert in

much about the company encouraging innovation and preserving 'core

the financiers seldom care

(and are poor) at Most financiers insist that

institution '. .

record cash flows.

minds and neither are capital expenditures. ..Because

are obsessed with reducing debt

skills

they see opportunities for restruc-

—and for squ£ezing out

the efficiency they

're

injecting into these

Strategic perspectives of

companies utility is

is

not

a

social good.

why

They are generally frank

Money

they got into this business.

to

human

resource

management 81

admit, however, that social

is.

(Fortune 1988, pp 16-32)

Before we leave strategic styles it is worth noting that international comparisons provided by Goold and Campbell indicate that institutional strategy is not inevitably driven out. They argue that the Japanese giant enterprise, Matsushita, is in

most respects a

financial control

finance, personnel exist to

company but

and training are allfrilly

centralised. ..Personnel

create 'harmony '...In other words the central

to help build and maintain

the

Matsushita

culture.

.

.

role

of these

and training

two frnctions

is

(In this enterprise) people are

seen as the critical resource.

(Goold &' Campbell 1987,

p 283)

Looking at all the overseas companies they cite (IBM, Hewlett Packard,

GE and

Matsushita) they conclude, in analysing their success, that perhaps most importantly, there are a

series

of things concerned with corporate

and culture that seem to matter. Agreement on basic directionsfor the longterm development of the business, and on how to treat people within the firm, are perhaps the mx)st essential common features of these companies. objectives

(p281) This is a critical part of first order strategy but for reasons they do not analyse not widespread in Britain or the USA. Here, stockmarket emphasis on shortterm financial results makes the adoption of non-economic values as part of

is

corporate strategy

less likely.

In such circumstances, professional

HRM

comes

under increasing pressure. important to note that the well-known examples of sophisticated HRM in corporate strategy (IBM, Hewlett Packard, Marks and Spencer) are exceptions which prove the rule. In these companies the values and approach of the founders of the company are much in evidence (as is the case in Matsushita) and they tend not to have deviated much from their core businesses. By 'sticking to the knitting' (Peters & Waterman 1982) and growing organically they have been It is

embedded

able to maintain critical

and

articulate core values as part of their strategy. This raises the

question of the distinction between diversified and undiversified, or critical

function firms.

Related businesses, vertical integration and diversification

One factor which makes it more likely that a strategic planning style exists, and for corporate value statements to have meaning, integration

is

and extent of vertical and Hoskisson (1987)

the relatedness

and interdependence of business

units. Hill

82 Readings

in strategic

human

resource

management

and vertical economies in the way multieconomies are found when superior allocative properties of the internal capital market are maximised by choice of style and strategy. These enterprises are likely to diversify into unrelated or loosely related activities and take on the attributes of financially controlled, and to a degree strategically controlled, companies. They are likely, out of choice, to ignore the interdependencies which happen to exist between parts of the enterprise (Goold & Campbell 1987, p 118). For example, subsidiaries are not required to trade with distinguish between financial, synergistic

divisional firms are structured. Financial

other parts of the enterprise, nor to offer preferential terms. Synergistic economies exist where common techniques, skills or market knowledge are utilised across a range of products. These companies are capable of organising around a core activity or critical business and are usually concerned that acquisitions match and enhance their business mission and core philosophies. Vertically integrated is where a closely co-ordinated and integrated chain of activities fi"om raw material sourcing to final distribution allow for vertical economies to be realised. Banking and multiple retailing companies exhibit some of these properties. Computer companies like IBM and Hewlett Packard are also organised around base skills and integration mechanisms. Such companies can emphasise administrative co-ordination. They can be decentralised in the sense of giving substantial responsibility to unit managers for the implementation of strategies

and

policy for profits but in the context of co-ordinated integrating structures.

Internal labour markets can be organised across the firm, not just within the unit

They are more likely to have well organised personnel departments in the corporate office (Sisson 8c Scullion 1985) than others and are capable of emphasising core values in the way in which employees, customers and suppliers are to be treated. In the language of Peters and Waterman (1982) these firms have 'stuck to their knitting'. They are much more capable than others of being 'value driven', of 'respecting the individual', of 'viewing themselves as an extended family' and of following the dictum that 'customer relations simply mirrors employee relations'.

The important point here companies. This

is

This type of firm

Channon and

is

that the potential for strategic

not to imply that the potential is,

is

HRM

is

greater in such

realised.

however, becoming rarer, at least

among large enterprises.

has observed that the pattern of diversification has grown substantially

'today large companies tend in the

main

be highly diversified both by range many of the organisations engaged in related businesses which seemed likely to make them unrelated concerns in the fixture' (1982, p 79). There is some counter evidence to this as some firms like BET, Cadbury Schweppes and Dalgety have sought to divest business which do fit a slimmed down version of the portfolio organised around a broad core business. However, there is littie evidence to suggest that these firms have at the same time changed the nature of their internal control structures. The dominance of performance control systems appears to remain in tact. to

of business and by geography. ..Diversification was continuing amongst

Strategic perspectives of

human

resource

management 83

Conclusion

and Hoskisson have hypothesised 'as firms grow by vertical integration or become increasingly constrained by information processing requirements to focus on attaining financial economies. (And that) under conditions of either high or increasing uncertainty, vertically integrated firms will focus on realising financial economies' (1987, pp 338, 340). The 1980s have been marked by uncertainty in product markets and, as we have seen, shortHill

related diversification, they will

run pressures in the capital market have generated unprecedented uncertainty even for the largest firms. In these conditions, corporate strategy increasingly is focussed on ways of realising financial economies. Firms which emphasise the achievement of financial economies are 'characterised by relatively high degrees of decentralisation of decisions to divisions, decomposition between divisions, and consequendy, high accountability for divisional

profits' (p 334). It

is

these firms

which emphasise the performance control system; which often examine their businesses along the lines suggested by portfolio planning principles, and which tend toward financial control, reducing the emphasis on long-run strategic planning.

These types of first order strategy and second order strategy decisions on the come to exert a strong influence on third order HRM policies. It becomes harder to develop integrated and meaningful institutional strategies or management style at the corporate level, and to the degree that short-run rates of return on investment, emphasis on margin improvement and tight financial controls are imposed on unit managers, harder at the unit level to develop and maintain long-run human resource policies. structuring of internal operating procedures

The pessimistic conclusion

is

difficult to avoid. It

that current trends in corporate strategy in

is

many

the contention of this reading large diversified

companies

render the ideals of HRM, as specified by Guest (1987), unobtainable. There is nothing new in this. Herman, in his study of corporate power concluded that 'The present state of evolution in economic freedom has produced an environment dominated by vast impersonal organisations that pride themselves on their ruthlessness and respond only to material incentives' (1981, p 32). Mintzberg noted that 'the control system of the divisionalised (company) drives it to act, at best, socially unresponsively, at worst socially irresponsibly. Forced to concentrate on the economic consequences of his decisions, the divisional manager comes to ignore their social consequences' (Mintzberg 1979, p 424). The criticism of diversified companies is not restricted to their economic power and damaging social consequences. Porter (1985; 1987a) has attacked portfolio planning and argued forcibly for a renewed emphasis on interrelationships between units and horizontal strategy. Piore and Sabel (1984) have argued that

and their search for multinational had damaging consequences for the US economy. The criticism of diversified, multi-divisional companies on employee relations

the economic consequences of conglomerates diversification has

of the effects

another

presented here

is

wave of interest

in

HRM

of personnel practice

is

twist

of a familiar

story. It

and implies

is

odd, then, that the current

major reconsideration underway. The belief is that corporate executives and line is

so optimistic

that a

84 Readings

in strategic

human

resource

management

managers have discovered die need to encourage employee involvement, team work and integrated rewards systems (ideas which have been around for a long time) as a crucial element of their corporate and business unit strategies. Changes are, of course, taking place and there is much experimentation, some very exciting, as the old order crumbles. But in many diversified firms, in Britain at least, the material conditions for these to be translated into long-run strategic decisions placing HRM as the, or even a, critical function in corporate strategy, do not exist. What ought to happen, as prescribed by the burgeoning literature, is a long way from being realised. I am grateful to Paul Marginson for perceptive and useful comments on the

The

earlier draft.

Purcell

analysis provided here

is

being developed more

fully in John

& Bruce Ahlstrand 1994, Human Resource Management in the Multi-Divisional

Company, Oxford University Press, London.

Notes 1

Hanson

Trust, a very similar

company to BTR, has cut on average 25% of labour

out of acquired companies (Porter 1987b). 2 BTR, through a subsidiary company, acquired the major Australian firm ACI in costs

1988. Within three months the whole of the human resource planning department at head office was closed down. No opportunity was given to the

Director of Human Resource Planning to present a

human

resource strategy.

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limits',

Harvard Business Review,

January-February Hax, A C & Majlup, N S 1983, 'The use of the industry attractiveness - business strength matrix in strategic planning'. Interfaces, April, pp 54-71 Hedley,

no

B

1977, 'Strategy

and the business

portfolio'.

Long Range Planning,

vol 10,

1

W H & Hoffman, R G 1987, 'Who influences strategic decisions?' Long

Hegarty,

Range Planning, vol 20, no 2 Herman, E S 1981, Corporate Control, Corporate Power, Cambridge University

Press,

Cambridge Hickson, DJ, Buder, RJ, Cray, D, Mallory, Strategic Decision

Hill,

CWL&

Making in

Hoskisson,

RE

G R & Wilson D G

Organisations, Blackwell,

1987, 'Strategy

and

1986, Top Decisions:

Oxford

structure in the multiproduct

Academy of Management Review, vol 12, no 2 Hill, C L &: Pickering, J F 1986, 'Divisionalisation, decentralisation and performance of large United Kingdom companies', /owrwfl/ of Management firm'.

W

Studies, vol 23,

no

1

Employment Research 1987, Review of the Economy and Employment, Institute of Employment Research, University of Warwick

Institute of

Johnson, G 1987, Strategic Change and the Management Process, Blackwell, Oxford Kochan, T A & Chalykoff,J B 1987, 'Human Resource Management and Business Life Cycles: Some Preliminary Propositions', in Kleingartner, A & Anderson, C S eds. Human Resource Management in High Technology Firms, Lexington Books, Lexington, Massachusetts

Macmillan,

C, Hamrick, D C & Day, D L 1982, 'The product portfolio and prof- a PIMS based analysis of industrial-product businesses'. Academy of

I

itability

Managem£nt fournal, Marginson,

P,

Edwards,

Blackwell,

vol 25,

P,

no 4

Martin, R, Purcell, J

& Sisson K 1988, Beyond the Workplace,

Oxford

Mintzberg,J 1979, The Struxturing of Organisations, Prentice Hall,

Morgan,

TJ

Peters,

Piore,

G

8c

Waterman,

RH

M J & Sabel, C F 1984,

Basic Books, Porter,

New Jersey

1986, Images of Organisation, Sage, Beverly Hill

1982, In Search of Excellence, Harper

The Second Industrial Divide:

8c

Row,

New York

Possibilities for Prosperity,

New York

M E 1985, Competitive Advantage: Creating and Sustaining Superior Performance,

The Free Press, New York M E 1987a, 'From competitive advantage to corporate strategy', Harvard Business Review, May-June, pp 43-59 Porter, M E 1987b, 'The Harvard view of Hanson', The Economist

Porter,

86 Readings

in strategic

human

resource

Purcell,J 1987, 'Mapping

Management

management

management

Studies, vol 24,

styles in

employee

relations', /oMTTia/

o/"

no 5

R S & Jackson, S E 1987, 'Organisational strategy and organisational level determinants of human resource management practices', Human Resource

Schuler, as

Planning, vol 10,

no 3

K &: Scullion, H

Sisson,

1985, 'Putting the corporate personnel department in

December, pp 36-9 Cable, J 1978, 'Internal organisation and profit:

its

place'. Personnel Management,

Steer,

P

&

Journal of Industrial Economics, vol 30, no 1 Thompson, R S 1981, 'Internal organisation and proht Economies, vol 30,

pp

An

empirical analysis',

A note', Journal ofIndustrial

173—99,

K & Wood, S 1983, 'Business Strategy and Industrial Relations Strategy', Thurley, K & Wood, S eds. Industrial Relations and Management Strategy,

Thurley, in

Cambridge University Press, Cambridge O E 1975, Markets and Hierarchies, Free

Williamson,

Press,

New York

Reading 5

Beyond

traditional paternalistic

to organisational change

Strategic

critical

and human resom'ce

strategies

human resource management:

integrating the hard

A

and developmental approaches

and

soft approaches

determinant of success in the repositioning of an organisation's

corporate and business strategies

implement change through an

is

the internal capability of the organisation to

effective

management process.

Successful strategic

repositioning often requires radical organisational change

and powerful

confrontation of entrenched interest groups. Yet until recentiy,

much

of the

management process literature, particularly in the fields of organisational development (OD) and human resource management (HRM), has been dominated by an ideology of tender-mindedness, advocating incremental and collaborative micro-interventions such as team building, interpersonal skills training and communication strategies. Writers in the OD area representative of this and participative tradition include Golembiewski (1979), Sashkin (1986) and Kanter in her earlier work (1983). More recentiy, writers such as Tushman, Newman and Romanelli (1986), Miller and Friesen (1984) and Nord and Tucker (1987), have developed valuable frameworks for understanding the processes of large scale, transformative change which have been evident in many organisations during the past decade. However, writers on organisational change such as Beer, Eisenstadt and Spector (1989) still appear to espouse an incrementalist, soft version of change. The tender-minded, incremental approach contrasts strongly with the tough-minded strategic orientation of most of those who advocate effective

incrementalist

radical change.

A similar conceptual critical

dichotomy has also recentiy been canvassed in (1989, p 8) has contrasted the hard approaches to HRM. He characterises the hard approach as

reviews of the

and the

soft

hard-soft

HRM literature. Storey

emphasising the quantitative, calculative and strategic aspects of managing personnel numbers in as rational a way as for any other economic factor. By contrast, the soft version emphases communication, motivation and leadership. Other writers make similar distinctions. For example, Legge (1989), citing Barham (1988) and Foulkes (1986), uses the terms tough love2ind soft care, Hendry and Pettigrew (1990) describe and contrast a similar dichotomy in their description of the situational-contingency and the developmental humanist frameworks. The situational contingency framework refers to the hard HRM policies which are advocated in the strategic management and some of the strategic HRM literature;

88 Readings

by contrast the is

human

in strategic

soft

resource

management

HRM policies derive from human

directed primarily to

the

human

relations school

fulfilment rather than productivity

and

which

profit.

A strategic view of management process Our recent research

has shown that these two apparently disparate approaches are not necessarily mutually exclusive. They can be reconciled through a contingency framework which provides guidance on the positioning of an organisation's HR

change strategy, and ultimately its and practices may need to be quite organisations which not only run different business strategies but

strategies as part of the organisation's overall

business strategy. different for

HR

strategy directions

which also effect change by radically different means. For instance, the HR strategy for Rupert Murdoch's News Limited will probably need to be distinct from the HR strategy of a major law partnership, not only because their business strategies are quite distinct, but because their approach to corporate change may be equally distinct. Universalist solutions in HR strategy and practice (whether they be hard or soft) are probably inappropriate: what is needed is a contingency framework of management process, to help in matching management processes to the changing business needs of the organisation. During 1988-89 we conducted a major research study in the Australian service industry sector to explore the links between business strategy repositioning and

management process strategies. The study had several aims:

first,

to see if linkages

between business, change and HR strategies exist in practice; second, to explore whether changes in an organisation's business strategy affect its organisational change strategies and HR strategies; and third, to examine whether the nature of such links affect organisational performance. 13 Australian organisations, five in banking/finance, five in insurance, two in aviation,

and one

in international

telecommunications were included in a compremedium and low performers were included in

hensive field research study. High, the sample, based

market

analysts.

executives

on independent performance rankings by a panel of industry

The

research involved structured interviews with over 450

and managers, 2500 pages of pro-forma

450 pages of typed case

field notes

studies. Executive interviewees

several forced-choice instruments

on change

strategy

and responses, and

were asked

and

to

respond to

HR practices.

A new concept of change strategies The

research provided confirmation and extension of the earlier theoretical contingency model of change developed by the authors (Dunphy & Stace 1988). This model of change strategies (Figure 5.1) sought to develop a situational model of organisational change strategies.

proposed that, in environments undergoing would choose situationally-based rather than universalist, prescriptive change strategies as a means of maintaining their strategic fit with the environment. The implication was that the change strategies It

differing degrees of change, organisations

of participative evolution and charismatic transformation, widely advocated in the

OD

Strategic perspectives of

human

resource

management 89

and HRM literatures, may be appropriate strategies for corporate change for some organisations. However, in a more volatile business environment it was likely that more directive and even coercive change management strategies would increasingly be used at the corporate level. Where radical change is needed to return an organisation to environmental 'fit', there may be major conflicts between external stakeholders and/or internal interest groups which make maintaining an ideology of collaboration and participation in the planning of change impossible. In such situations, directive or coercive change leadership may be essential for the organisation to achieve

ends). In

some

its

business objectives (though

situations

it

may therefore be

it

will

not necessarily achieve these

impossible or inadvisable to use soft

care as an approach to change or even to integrate soft care with tough love. A major organisational restructuring might only be achieved in some situations by a hard approach, utilised for a short, concentrated period to refocus the business. The results of our research demonstrate that, in practice, executives of firms which maintain medium to high levels of corporate performance successfully use

Figure

Typology of change strategies and conditions for their use

5.1

Incremental

Transformative

change strategies

change strategies

Participative evolution

1

2

Charismatic

change strategies Use when organisation Collaborative/ consultative

modes

in

'fit'

is

but needs minor

adjustment, or

but time

is

is

out of 'fit',

available

Use when organisation of 'fit', there

and key

is little

is

support for radical

change within the

change.

organisation.

Forced evolution

out

extensive participation but

there

interest groups factor

3

is

time for

4

Dictatorial

transformation

Use when organisation Directive/

coercive

modes

'fit'

is in

but needs minor

adjustment, or

but time

is

interest groups

change.

is

out of 'fit'

available,

Use when

organisation

out of 'fit', there

but key

oppose

is

is

no time

for extensive participation

and no support within the organisation for radical

change, but radical change vital

is

to organisational survival

and fulfilment of basic mission.

))

90 Readings

in strategic

human

resource

management

OD

approach. a variety of approaches to change, rather than a universalist soft Dunphy &: Stace 1990a and 1990b) also Stace 1989; research evidence (see The proNided the basis on which our original simpler model of organisational change strategies (Figure 5.2) was refined to cover four scales of change, and four styles of change leadership. Scale of change (the characteristics of change): •

Fine tuning

(scale

•

Incremental adjustment

(scale

•

Modular

(scale

•

Corporate transformation

(divisional) transformation

(scale

Collaborative

(style

•

Consultative

(style

•

Directive

(style

•

Coercive

(style

Type Type Type Type

•

and

style

1

2) 3) 4)

management of change):

Style of change leadership/ management (the

In matrix form, the scale

Type Type Type Type

1

2) 3)

4)

dimensions of change form a four by four

contingency model. This is shown in Figure

5.2.

Overlaid on

it

are the percentages

Figure 5.2 Change matrix positioning of Australian service corporations

Style of

Fine

Incremental

change

tuning

adjustment

Corporate

Modular

transformation transformation

management 0%

Collaborative

Type

Consultative

8%

Directive

4%

Type 2

1

Participative

Charismatic

evolution

transformation

;

Type

2%

12%

8%

26%

1

,

32%

i

22%

60%

Type 4

3

Forced evolution

Dictatorial

transformation

4%

Coercive

12% Note

Figures given are based

24%

4%

38%

on modal responses of senior executives

and have been converted to percentages

26% in

8%

100%

each organisation,

Strategic perspectives of

human

resource

of organisational responses indicating the areas on the matrix

management 91

'utilised'

by the

These scores were based on the

sample organisations for their change

strategies.

resf>onses of executive interviewees in

each organisation to research instruments

on the

and style of change characteristic of their organisations in two time The modal score was utilised as the means of measuring central tendency

scale

periods.

in each organisation.

Overall, the research evidence shows that at a corporate level of analysis: •

The lower performing

organisations in the sample used fine tuning change,

and even timid approach to change. No organisation overall, nor any of the 450 interviewees rated indicating a careful,

•

using a collaborative change •

One

organisation used a combination of coercive change style

transformational change as a

•

its

executives as

style.

means of regaining

'fit'

and corporate became

(the organisation

one of the highest performers in its industry within three years of this type of change intervention). 1 1 of the 13 organisations had utilised a directive change style, associated with corj>orate transformational change for periods of 12-24 months in the previous three to five years.

Our research therefore demonstrates that more differentiated change strategies than are often portrayed in management literature, and the

exist in practice

predominant approach

to corporate

or charismatic transformation as illustrates that

medium

to high

is

change

is

not that of participative evolution

widely advocated in the

OD

literature.

This

performance can be maintained by leading the

corporation with either a consultative or directive

management style. However, in management and leader-

the current business environment a directive corporate

dominant in Australian financial and service organisations. Fine tuning be a non-viable change strategy, as it is unable to deliver enough adjustment for the organisation to sustain high performance in a turbulent

ship style

is

also appears to

business environment.

Examples of different corporate change strategies are plentiful. A change one organisation where it will not elsewhere. The critical point for success of a change strategy is that it must be integrated with the business needs of the corporation. It must be capable of delivering sufficient structural systems and cultural change to meet the emerging business imperatives of the organisation. Traditionally, organisations like IBM have been able to achieve this by our change strategy Type 1 participative evolution, but IBM has now adopted more transformative change strategies (probably a mix between change strategy Type 2 charismatic transformation and change strategy Type 4 directive transformation). In Australia the transformation of Westpac Banking Corporation in the early 1980s under its Managing Director, Bob White could best be described as change strategy Type 2 charismatic transformation. The transformation of Honeywell Information Systems in the US under James Renier is similarly an example of a Type 2 change strategy (Renier 1987). Westpac's change strategy involved a major revolution in the business, but the process was assisted by organisationstrategy will succeed in

—

—

—

—

92 Readings

in strategic

human

resource

management

wide team building, internal communication and new MBO-type performance management strategies. Westpac's approach to change in the early 1980s, because of widespread workforce support, became a hallmark for transformative change by consultation. Recent business events have, however, led to an alteration in corporate change strategies \vithin Westpac: a considerably more directive approach is now used. However, as if by way of contrast with Westpac's earlier approach, the directive, results-oriented approach in Australia's Lend Lease Corporation, under Stuart Hornery, has been utilised for nearly 20 years and is characteristic of change forced evolution. By contrast Rupert Murdoch, the international strategy Type 3 media tycoon, has chosen change strategy Type 4 dictatorial transformation, with demonstrated success, at critical periods in the life of News Corporation. The celebrated case of the introduction of new technology at Murdoch's new Wapping Plant and breaking the power of the Fleet Street unions, illustrates the success of this type of change strategy (Harris 1987). Murdoch's approach was similar to that used by Jack Welch in General Electric resulting in the retrenchment of 140 000 of GE's workers. All of these strategies have been successful, in business terms, in their time, and yet some are quite contrary to the dominant approaches advocated in much of the change and HRM literature. In fact, we would go so far as saying that the advocacy of participative forms of leadership and management as a universalist approach has left many executives confused and ill-equipped to handle the demands of leadership in a difficult business environment. We do not, however, suggest that participation or consultation should not be used; the key issue is under what circumstances should these leadership styles be used. Our research has shown the following patterns of change leadership/management most typically emerge in medium to high performing organisations, at two different levels in the organisation:

—

•

Predominantly directive at corporate level. While some executive groups espoused a corporate value system of consultation and appeared to practise it, there was only one organisation in our sample where executives and supervisors/ managers agreed that the top group effectively used a consultative change

management style •

—

as a

means of effecting coiporate change.

Consultative between managers and employees at the business unit level. This

was true for all but two organisations. In one of these cases a directive approach

appeared

to

be an attempt by business unit managers

to

cope with a lack of

direction from above because of a consultative style of executive leadership; in

the other case, the directive approach at the business unit level appeared to stem from a tough results-oriented philosophy consistendy maintained at all levels in the organisation.

While these are the predominant trends from our research, we do not, however, espouse them as a universalist position. In fact one of the highest performers in our

sample, Macquarie Bank

—a small, high value-added niche bank, had

incremental adjustment by consultation (change strategy Type corporate change strategy, with demonstrated success. While the rest of the

medium

to high

performers

in the sample,

it

1 )

this

as

its

utilised

dominant

was not typical of

suggests that change

Strategic perspectives of human resource

strategies

might be best chosen for

management 93

their situational specificity rather than their

universalist appeal.

Change agents (internal or external) should therefore select the most effective and style of change, rather than reflexively relying on a change strategy style compatible with their own personal values. An implication is that most and OD and HR practitioners v^U need more knowledge of charismatic and coercive strategies, and more competence in using emotion and symbolism and engaging in politically-based interventions. Similarly, financial and corporate strategy consultants need to develop more appreciation of the role that participative methods of change can play, particularly at the business unit level, in securing the strategy

implementation of their recommendations as well recommendations.

as

improving the quality of their

IMii^ human resource strategies to the change ^game plan' Some writers (for example, Miles & Snow 1984; Smith 1982; Tichy, Fombrun & Devanna 1982) have attempted

to trace a direct correspondence between the an organisation and its HR strategies, but this search for a direct business strategy/human resource link can often neglect the vital role that an organisational change program has on HR strategies. In our view, HR strategy is most strongly affected by the kind of 'game plan' being run by management in moving the organisation back into strategic fit. We can therefore predict more about which HR strategies should be used fi"om knowing the degree of change and type of change leadership being exercised than we can by knowing the corporate or business strategies being pursued by the management of an oi^nisation. It is the degree of internal change and repositioning required which makes the most powerful impact on which HR strategies will be chosen. So change theory is the missing link in the business strategy/HRM model. Business strategy has potential to affect HR strategy, but the organisational change program is the important strategic direction of

intervening variable that modifies the relationship.

Using the 'change strategy positioning' of each of our sample organisations, we made a detailed analysis of the HR practices of each organisation in our study. The sources for compiling detailed descriptions were: then

•

structured interviews conducted with between 22 to 30 executives, managers

and supervisors •

in

each of the 13 organisations

HR policy documents, including Executive Committee and Board papers and minutes, and

•

printed materials such as staff newsletters, annual reports to

memoranda

relating to

We compared what organisations were

HR practices

staff,

and

internal

HR policies, systems and practices.

(see Table 5.1)

and then

doing

in

each of the 12 major areas of

carefully analysed the similarities

differences between the overall pattern or 'gestalt' of

and

HRM practices of the organi-

Two broad sets of phenomena were identified. The first was that across all medium to high performing organisations in our sample, there emerged

sations.

the

several strong

common

trends in

HRM irrespective of their business or change

94 Readings

in strategic

strategies.

human

resource

The second phenomenon was

variations in the 'flavour' of different parts of the

Table

•

•

HR

Training

•

Interpersonal

restructuring

•

Supervisory and management training

Future workforce needs analysis

Corporate image as a

Review of selection techniques

means of tracking

PM

•

Employee attitude surveys

Team

•

Employee communication (newsletters,

Employee Iindustrial

staff

Counselling discipline, grievance

•

Consultative mechanisms/

•

Appeals procedures

procedures

procedures with

Systematic job analysis as a basis for equitable compensation practice

Performance-based compensation

HR

intrinsic (eg job satisfaction)

industrial unions

legislation

employment opportunity

•

Equal

•

Occupational health and safety

•

Worker's compensation

systems

rewards based on both tangible and

days, video networks)

relations

•

as a basis for determining

Rewards and compensation

•

building

commencement

as a basis for rewarding

employee training/development needs

•

Cross functional appointments/

•

goal achievement

and compensating

Development programs for future

Organisation development

Performance management (PM)

PM

training

transfers/multiskilling

Appointments policy

as a

training for present job

skills

Career development

•

•

PM

skills

skills/jobs

•

•

development

Functional

prospective employer

•

skills

•

•

•

and

work practices Workgroup or organisational

Job design,

Recruitment and selection

•

rewards Workplace productivity programs

Severance/exit practices •

Outplacement counselling

•

Early retirement

•

informa^on systems

Manual or mechanised

HR

record systems •

Interactive

computer-based

HR

information systems •

Link or

HR

information systems with

other corporate planning systems

management

•

Quality

•

Workskill enhancement

•

Service quality

De-hiring, retrenchments

•

HR

distinct

activities

based on business plans

•

some

organisations positioned

on

change matrix. Both of these phenomena are explored below.

Workforce planning •

that there were also

HR strategies between

Clusters of related

5.1

management

Strategic perspectives of

human

Common trends in human resource management trends in HR management common to all the medium

The

resource

management 95

to high

performing

organisations in our sample were: •

•

A decentralisation of operational HR functions to divisions/business units, away from centralist HR departments. A trend for organisations to adopt, at the corporate level, a more strategic approach

to

HR policy and its links into

the business planning process of the

organisation. This was evidenced in the reporting of the most senior

HR

Executive direcdy to the Chief Executive, and by the strategic importance of

•

human capital issues to the business planning process. This was occuring concurrendy with the decentralisation of operational HR functions. The development of comprehensive performance management systems as an integrated approach to MBO-type goal setting, appraisal, development and reward structures. This trend was strongly in evidence in all but two lower performing organisations in the sample.

decade ago, none of the above trends would have been observed personnel departments were highly centralised; personnel policy was precedent-based rather than strategically focused, and performance management systems were either control-based (ie an appraisal rather than an appraisal-training-reward orientation), or non-existent. This suggests that an organisation's HR strategies vis-a-vis another organisation may be partially a function of broader changes in the general culture of management (eg the current emphasis on devolution, downsizing, and flatter structures). Thus the type of change in the functional field of human resources is similar to the transition from a functional to strategic orientation in other fields (eg sales to marketing, and accounting to finance) in recent years. Such changes reflect the general trend for more rapid and less predictable environmental change and represent for HRM strategists and managers a common response to handling such problems.

As

littie

as a

in the majority of Australian organisations, as

A contingency model of human resource strategies Apart from these common trends, we also found some important differences between organisations in the overall orientation of their HR strategies. For example, two large banks in our sample had aggressive but different business strategies, and distincdy different change strategies. However, the question remained as to whether both organisations would also have distinctive differences in HR strategies. They did. Intuitively, a major initial difference appeared to be among those organisations which were developmentally oriented, and those which tended to use radical structural solutions in HR strategies as a means of maintaining or regaining strategic fit (see also Curtain & Mathews 1990). The former organisations appeared to emphasise team concepts, and to be more oriented toward staff training and development, career development, internal appointments, and culture development. The latter organisations appeared to be more aggressively

96 Readings

in strategic

managed,

less

restructuring

human

resource

management

team-oriented and more reliant on organisational and workplace and use of external rather than any internal labour market for

recruitment. This

initially

suggested two distinct types of HR strategy with different

and structuralist approaches, based on the tough care and soft love traditions referred to earlier. But if these distinctions existed, were they complementary or mutually self exclusive? It is possible that by displaying tough love toward some difficult employees means showing soft care to the balance of the workforce: philosophical roots; ie developriiental

The positive fact

is

that the removal of a marginal, unproductive or unnecessary it 5 legally and ethically handled, almost always improves and above-average employees, who are, after all, the people

surplus employee, provided the morale of the average the

company most wants to retain.

to observe

a fellow worker loho

is

It is

demoralising to a good, productive employee

consistently

—

do^ng it and getting away with (Foulkes 1986,

it.

p 382)

A rigorous process of analysis was undertaken to test our initial perception of a two-part contingency model: developmental

{soft)

and

structural {hard)

HR

We systematically checked to see if organisations with similar organisachange strategies also had similar profiles of HR practices. We found that

strategies.

tional

organisations sharing similar change strategies did exhibit similar approaches to

HR management; however, we identified not two, but four different and distinct HR strategies, as outiined in detail in Table 5.2. They cover the following four HR strategy types: • task focused HR strategies • developmental HR strategies • turnaround HR strategies • paternalistic HR strategies. The task focused HR strategy type was characteristic of the majority of organisations in the sample and represents one of the two new emergent HR strategies in the current business environment. The basic HR orientation of these organisaapproaches to HR, which we refer to as

tions

appeared

functional

skills

to heavily

emphasise business

unit,

training; lateral recruitment as a

work-team and job redesign;

norm rather than

the exception,

emphasis developing HR strategies for business units than for the corporation as a whole. The approach appeared more oriented to

and a greater

relative

structural solutions, role definition

concerned

and technical

skill

development and

less

involvement of employees in planning personal, profesorganisational change. In all cases, this type of HR strategy

to create the

sional or corporate level was associated with a directive inanagement style at the corporate level. The second type, the developmental HR strategy, appears compatible with the central thrust of much of the relatively recent (1960s to 1980s) HRM and OD literature, and was characteristic of two of the 1 1 medium to high performing

organisations in the sample. These organisations placed strong emphasis on personal development, management development, career management and culture

management

(internal marketing, culture surveys,

employee communi-

—

——

— Strategic perspectives of

Table 5.2 Four

HR

strategy types

Developmental*

HR

strategies

HR

strategy

is

jointly

actioned by the corporate

HR

unit

human

resource

management 97

and the business units

Features •

Emphasis on developing the

•

Internal recruitment,

where

individual,

and the team

possible

•

Extensive developmental programs

•

Use of 'intrinsic' rev^ards Corporate organisational development given Strong emphasis on corporate culture

• •

Task/Focused*

HR

strategy

is

HR

high priority

strategies

strongly focused

on the business

unit

Features •

Strong bottom

•

Emphasis on workforce planning, job re-design and work practice reviews

•

Focus on tangible reward structures

•

Internal

•

Functional

•

Formalised IR/ER procedures

•

Strong business unit culture

line orientation

or external recruitment skills

training

and formalised

multi-skilling

*Both of the above give high priority to performance management systems

Paternalistic

HR

HR

centrally administered

practice

is

practices

Features •

Centralist personnel orientation

•

Emphasis on procedures, precedent and uniformity

•

Organisation and methods studies

•

Inflexible internal

•

Emphasis on operational and supervisory training

•

Industrial

awards and agreements set the

Turnaround

HR

strategy

appointments policy

is

HR

HR

framework

strategies

driven for a short period by the executive leadership, characterised by

challenging, restructuring

or abolishing

HR

systems, structures and methodologies

Features •

Major structural changes

•

Downsizing, retrenchments

•

Lateral recruitment of key executives

•

Executive team building, creating a

•

Breaking with the

'old'

affecting the total organisation

from outside

new

'mindset'

culture

cation strategies). In each case this type of tative style

and career structure

HR strategy was associated with a consul-

of corporate change leadership.

However, the research also demonstrated that the task focused and developmental HR strategies were not entirely discrete categories: organisations with a dominandy task focused HR orientadon would often include some developmental

98 Readings

in strategic

human

resource

management

HR strategies. Similarly, organisations with a HR orientation would often include some task focused HR practices in their overall HR strategies. Thus the task focused and developmental HR strategies did not represent absolute differences in HR practice, but HR

practices in their overall

dominantly developmental

rather a difference in balance of emphasis.

pursuing a highly task focused

HR strategy,

The implication is that even when some culture building and manage-

will also be necessary. Similarly, a strong developmental HR most likely include some emphasis on workforce and job restruc-

ment development strategy will also

turing, but these elements will not

Two

other

dominate.

HR types were also identified. The

turnaround HR strategy type was

a newly emerging type characteristic of six of the organisations in the period three years prior to the study; a time

when

these organisations were undergoing a period

of radical business redefinition and corporate transformation. These organisations

had substantially downsized, redefined or abolished their central HR departments; were in the process of radically reviewing their HR systems and policies; were effecting voluntary or forced retrenchments, and had opened out their recruitment to outside appointees at key, executive and other levels. These moves were all aimed at radically changing the 'old' culture of the organisation. The final HR strategic type, paternalistic, was associated with the lower performing organisations effecting change by fine tuning. A paternalistic HR strategy exemplifies the traditional mechanistic strongly influenced by scientific practice,

and a

HR policies of the

management, standard

desire to maintain the status quo. This

1950s and 1960s.

It is

industrial relations

HR type featured a strong

an emphasis in HRM based on procedures and precedents, heavy reliance on productivity work studies as a form of personnel/control, and formalistic employer-employee industrial relationships which had the effect of centralist

HR role,

setting the

HR agenda. HR strategy types superimposed on the change model of change strategies to HR strategies. shows that HR strategies were altered subsequent to

Figure 5.3 shows the four

and

The

illustrates the systematic relationship

research evidence

change strategies, which indicates that an organisadetermine its HR strategy rather than vice versa. This is a rather more complex model than has been advanced by previous authors, alterations in organisational tion's

change

but we believe

There

is

strategy tends to

it is

a

more

realistic

and

useful one.

conceptual consistency between our four

HR strategies and some HR

categories recendy developed by Frenkel (1991). Frenkel has advanced the notion that HR practice and positioning is a product of the economic and business environment and has gone through the following three phases.

The

traditional internal system

This system

is

common

to large organisations

employing unionised labour;

it is

and employee rights won by unions through collective bargaining under a redundant 'craft' employment system. Such a system is suited to mass production for stable markets and it is 'control' rather characterised by promotion on seniority

than change oriented.

Strategic perspectives of

HR

Figure 5.3

human

resource

management 99

strategies and organisational change

Scale of change Style of

Fine

Incremental

change

tuning

adjustment

Modular

Corporate

transformation transformation

management Collaborative

Developmental Consultative

HR

Paternalistic

strategies

HR

•

Directive

Task

/

focused

^

strategies

^

/

/

HR

•

strategies

Turnaround

HR strategies

Coercive

The high commitment system This system it is

designed to develop broadly trained, highly motivated employees;

is

characterised by an emphasis

on job

security,

career advancement within the

harmony and organisational and strong corporate culture. Such a system is suited to growth markets, the need for functional flexibility.

corporation, employee/commitment, industrial flexibility,

and

to

The 'new

craft'

This system

is

system

increasingly

common as organisations delayer and downsize, and the

focus for adding value moves from the corporate centre to organisational business/ units; there is a strong emphasis on subcontracting and networking rather than in-house resources; a frequentjob redesign and work restructuring. Employees are highly skilled and earn high wages and unions play a protective rather than a

work

lead role in collective bargaining.

and

The system

is

well suited to flexible specialisa-

high value-added niche markets. Frenkel observes that the traditional internal system is now redundant (although, we would add, still practised by some organisations) the high commitment internal tion,

is

most suitable for firms serving

in

;

labour market system

and

flexibility

is

increasingly less able to provide the structural flexibility

of workforce numbers and resourcing required for niche market

100 Readings

in strategic

strategies; while the

human

resource

management

New Craft System provides a flexible HR solution

to business

turbulence, and the need for strategic re-orientation in high value-added markets.

The similarities between our HR strategies, in the article,

and Frenkel's

stages can

Table 5.3 The positioning of

HR

be

HR emphases

HR

(Storey,

&

HR emphasis referred to earlier

strategies

Stace and Duriphy strategies

the

illustrated as follows.

Frenkel

HR

stages

Legge

Foulkes)

Paternalistic

-

Developmental

Soft care

Task focused

-

Turnaround

Tough love

Traditional internal

High commitment The new craft system -

Unlike Frenkel and possibly other writers, however, we see the positioning of HR strategies as a

contingency in organisational process rather than as a discrete series of

historical stages or

mutually exclusive categories. In fact three of our four

strategies (developmental, task focused

and turnaround) could be

HR

equally applic-

able according to different market conditions, while the fourth (paternalistic) could

have some hmited applicability volatile business

in a

monopolistic situation, even in the current

environment. In Table 5.4 we oudine the characteristics of our four

HR strategies, and the conditions imder which they might be applicable. The dominant HR strategies foimd in our research therefore were task focused and turnaround, reflecting the association of

relative

absence of stable or growth markets, and the

HR strategies with the radical change strategies required to produce

greater business

flexibility,

more work unit autonomy and less centralism (of both The two low performers in

the 'old' paternalistic or the 'new' developmental kind).

our study were following paternalistic HR strategies, both having previously held near monopolistic and/or highly protected positions in their industries. Of the remaining two organisations following developmental HR strategies (one small and one large bank), only one is still doing so two years after the research study. In this latter case, the organisation is positioned in a high valued-added segment of its industry, and is the product-market innovator in the indtistry. The other has dramatically repositioned

more

radical

its

Strategic implementation:

Our

HR sUategies over the

past two years to align with a

approach to corporate change which has now been adopted.

an integrated approach

research has identified a scheme for describing differences in

which

relate to a

contingency model of strategic change

HR strategies

strategies.

Figure 5.4 juxtaposes the two process models and indicates

how tiieir positioning

performance. Note that both task focused and developmental HR strategies are associated with medium to high performing organisations; turnaround HR relates to

Strategic perspectives of human resource

Table 5.4

HR

Stace/Dunphy

Type

strategies

HR

management 101

and conditions for their use

strategy

A

Conditions for use Use when markets/products/services are undergoing major changes and

Task focused

are prevalent.

HR

strategies

'niche' strategies

must

deliver the

capacity for rapid structural systems, cultural changes. Strong

unity autonomy,

skill

and

emphasis on business

maximum

devolution, rightsizing

(continuous redeployment), and outsourcing of labour.

Type B Developmental

Use when markets are growing and product/market innovation

desired.

is

HR

strategies

must create

cross-organisational synergy, and a market leader culture. Strong emphasis

on

individual

development,

corporate culture management, developing a strong internal labour

and team

Type C Turnaround

market (promotions/appointments),

skills

Use when the business environment changes dramatically; its

when the organisation is not in fit with when the business strategy of

environment, and

the organisation radically changes.

must break and abolish redundant structures and redefine a

new

systems, and radical

strategies practices,

culture. Strong

emphasis on forced downsizing,

new HR

HR HR

lateral

work and

recruitment, job

restructuring.

Type

D

Use only in very limited mass production situations where the organisation has an absolute monopoly on stable markets/products. HR strategies are used

Paternalistic

as devices for 'control' and uniformity of

procedure/operations. Strong emphasis on formal detailed job descriptions, formalistic

employer-employee

industrial relationships,

and

industrial awards.

attempting to regain fit either because of the need to radically adjust to a rapidly because their performance changing environment. Paternalistic HR strategies are associated with lower performing organisations or with monopolistic ownership. An organisation's change

strategies are associated with organisations is

strategy

is

low, or

therefore a powerful determinant of its

HR strategies.

The model advances our understanding of how change

strategies

aimed

at

actioning an organisation's business strategies are typically integrated with a comple-

mentary set of HR strategies. In

practice, business

are often actioned by senior executives while

mental

level

and

strategic

change

strategies

HR policies are actioned at the depart-

by managers, and formulated by personnel departments. In our view

— 102 Readings

in strategic

human

resource

management

Figure 5.4 The relationship between performance, change and

Style of

change

Scale of change Modular

Incremental

Fine tuning

adjustment

transformation

HR

strategies

Corporate transformation

management Collaborative

Consultative

Maintaining

ftt

medium

Lower performers

to high

performers

Directive

Regaining

fit

by corporate

turnaround Coercive

Style of

change

Scale of change Modular

Incremental adjustment

Fine tuning

transformation

Corporate transformation

management Collaborative

Consultative

''

Developmental

•

HR

^\Task

Paternalistic

^ ^ strategies^ '

HR

^

strategies

,

focused

HR

Directive

^ *

strategies

Turnaround

HR strategies

Coercive

there

is

a critical need for an integrated view, such as that advanced here, of

different choices about man^ement process relate to each other. This

important for organisational change and

is

how

particularly

HR sU^tegies, both of which are currently

being translated into a wide range of interventions in organisations, sometimes in

non-complementary ways. For instance, we see frequent use of major organisational restructuring interventions as part of an overall business and change strateg)' instituted by senior managements. Typically, however, some in-house trainers will try to distance themselves from such draconian measures. They prefer to focus on interventions such as interpersonal skills training, whether or not that form of intervention represents the most appropriate and focused use of the organisation's

Strategic perspectives of

human

resource

management 103

resources in actioning its business strategies at that particular stage of the business cycle.

The opposite may also apply if a major structural intervention is utilised by when a more appropriate team development intervention

corporate strategists

should be used. We conclude, therefore, that contingent rather than universalis! solutions are required in developing strategic organisational change and HR strategies. In practical terms, the soft and hard approaches to organisation change and HRM are not irreconcilable: they are rather parts of a broader set of contingent choices available to managers,

implement business

change agents and organisational stakeholders as they designed to maximise corporate performance.

strategies

References Fraser, J & Heath, L 1988, Management into the Future, Ashridge Management College and Faculty for Management Education, Berkliamsted, London Beer M, Eisenstadt, R A, & Spector, B 1990, The Critical Path to Corporate Renewal,

Barham, K,

Harvard University Press, Boston, Massachusetts P 1990, 'Recent developments in human resource management: The good, The bad and the ugly'. International Journal of Human Resource Management, vol 1, no l,June, pp 45-59

Blunt,

Curtain,

R&

Mathews, J 1990, 'Two models of award restructuring in 3, no 1 pp 58-75

Labour and Industry, vol

Australia',

,

Dunphy, D C & Stace, D A 1988, 'Transformational and coercive strategies for planned organisational change: Beyond the OD model', Organisation Studies, vol9, no3, pp317-44 Dunphy, D C & Stace, D A 1990a, 'Transformational and coercive strategies for planned organisational change: Beyond the OD model', in Massarik, F ed. Advances in Organisational DeveUrpment, Ablex Publishing, Norwood, New Jersey, pp 85-104 Dunphy, D C & Stace, D A 1990b, Under New Management: Australian Organisations in Transition, McGraw-Hill Book Company, Sydney Foulkes, F

K 1986,

Strategic

Human Resource Management: A

Guidefor Effective Practice,

Englewood Cliffs, New Jersey Frenkel, SJ 1991, 'Increasing work commitment through HRM strategies: An international perspective', unpublished paper prepared for the Conference on Prentice Hall,

Human

Resources, 25-26 January, Taipei

and change of organisational cultures: A Studies, vol 7, no 2, pp 117-34 'Macro-Level Interventions and Change-Agent Strategies',

Gagliardi, P 1986, 'The creation

conceptual framework'. Organisation Golembiewski,

RT 1979, RT ed, Approaches to Planned Change; Part lA, Marcel Dekker,

Golembiewski New York

in

Harris,

R

1987, 'Rupert

Murdoch: Media tycoon, strikebreaker and

world'. The Listener, 27 January,

p7

citizen of the

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C

in strategic

Hendry,

8c

human

Pettigrew,

resource

A

1990,

management

'Human

resource management:

An agenda

the 1990s', Intemationaljoumal of Human Resource Management, vol Kanter,

RM

K 1989,

A'i?jx'

Levy,

A

,

no

1

,

for

p 21

Chan^ Masters: Innovation and Entrepreneurship in the American Simon and Schuster, New York 'Human resource management: A critical analysis', in Storey, J ed,

1983, The

Corporation,

Legge,

1

Perspectives

on

Human Resource Management, Roudedge, London

1986, 'Second-order planned change', Organizational Dynamics,

pp 4-23 Miles, R E & Snow, C C 1978,

New York R E & Snow, C C

Organisational Strategy, Structure

Summer,

and Process, McGraw-

Hill Inc,

Miles,

1984, 'Designing strategic

human

resources systems',

Summer, pp 36-52 1986, 'Configurations of strategy and

Organizational Dynamics,

D

structure: Towards a synthesis'. Management Journal, vol 7, pp 233-49 Miller, D & Friesen, P H 1984, Organizations: A Quantum View, Prentice Hall, Englewood Cliffs, New Jersey Nord, R & Tucker, S 1987, Implementing Routine and Radical Innovations, University of Kentucky Press, Lexington, Kentucky Sashkin, 1986, 'Participative management remains an ethical imperative'. Organizational Dynamics, Spring, pp 62-75 Smith, E C 1982, 'Strategic business planning and human resources', Personnel Journal, Part I, no 61 &: II, no 89, pp 606-10, 680-2 Stace, D A 1987, 'The value-added organisation: Trends in human resource management'. Human Resource Management Australia, vol 25, no 3, pp 52-63 Stace, D A 1989, Strategic Change and Human Resource Policy in Australian Service Industries, unpublished PhD Thesis, University of New South Wales Stace, D A &: Dunphy, D C 1990, 'A New Paradigm: Human Resource Strategies and Organisatioucd Transitioning in Australian Service Industries', in Research in Personnel and Human Resources Management, supplement 2, JAI Press, Miller,

Strategic

W

M

Connecticut Storey, J 1989,

'From Personnel Management

in Storey J ed,

New

Perspectives

on

to

Human

Human

Resource Management'

Resource Management, Routledge,

London

M

M

N Fombrun, C J & Devanna, A 1982, 'Strategic human resource management', Shan Management Review, Winter, pp 47-61 Tushman, M L Newman, H & Romanelli, E 1986, 'Convergence and upheaval: Managing the unsteady pace of organisational evolution', Califomia Management Review, vol 29, no 1, pp 29-44 Tichy,

W

Reading 6 Strategic

human

resource management: theory and practice

MinKrmar

During the 1980s and eariy 1990s attention was paid

to the

development

of employment strategies and policies which served to promote the achievement of organisational objectives. Many Australian organisations

sought to make changes to their corporate

and human resource management indicate that

strategies, structures, culture

policies.

However, numerous studies

much organisational life and interaction is not direcdy related

achievement of organisational objecdves. This reading examines the features of the formal human resource management strategies of three organisations and identifies how they changed during the 1980s. It is particularly concerned with examining those factors which inhibited the implementation of these strategies. Firstly, policy was not always implemented because managers either continued to apply their personal to

main

social values

or the standards and criteria associated with previous policies.

Secondly, social relationships between managers, their colleagues and their staff,

the

new

and perceptions about the support of senior management

policies influenced policy implementation. Thirdly, there

inconsistencies

for

were

and tensions between human resource policies in the three

organisations, reflecting the maintenance of policies associated with a

previous

During the

management approach.

last

organisational

10 years the important contribution of employees to improved

and labour market performance has been

edged by trade unions, employers,

industrial tribunals

explicitly acknowl-

and governments.

Decisions of the Industrial Relations Commission which provide for the

re-

evaluation of career paths, training and job classifications through the Structural Efficiency Principle (SEP)

and the

striking of enterprise

agreements

provide for the implementation of policies seeking to improve the efficiency of

employees and reduce turnover. Initiatives taken by the Commonwealth government, such as the enactment of the Training Guarantee Act and the funding of reforms sponsored by the Department of Education, Employment and Training, Department of Industry, Technology and Commerce and the Department of Industrial Relations through schemes such as the Best Practice Demonstration Program, Workplace Language and Literacy Program and the Workplace Reform Program, also seek to improve the productivity of employees and employer commitment to employee development and training. Employers have also unilaterally taken initiatives to improve employee performance and reduce employee turnover. One method for doing this has been the adoption

106 Readings

in strategic

of a strategic

human

human

resource

resource

management

management (HRM) approach

to

employee

management. The strategic

HRM approach has a number of key dimensions. It requires HRM be integrated with corporate strategic issues. This integration has implications for the involvement of different parties in shaping the framework in which HRM policies are developed. As Miller (1991, p 25) points out, decisions made at the most senior levels of the organisation shape the corporate and HRM strategies and to

policies of lower levels of the organisation. It is

argued that

achieve strategic

fit

strategic

HRM

is

one of the ways organisations can attempt to and Snow (1984, p 14)

with their market environment. Miles

claim corporate excellence

is

the result of organisational characteristics, such as

and services. A number of Gospel Kochan, Katz writers (Miles &: Snow 1984; 1983; & McKersie 1986) have highlighted the importance of the relationship between corporate strategy, organiorganisational structure, technology, culture, products

HRM strategy and the structures providing for the delivery of HR policies in creating a 'tight Strategic HRM provides the means of developing

sational structure, the

fit'.

by motivating and equipping employees so they are able to work towards the achievement of the organisation's objectives (Collins 1988; Guest 1987). Strategic HRM is contextually sensitive. It has been argued that HRM practices fit

should seek to develop and implement

HR policies which are consistent with the

management strategy (Miles & Snow 1984, pp 36-52; Kerr 1982, pp 58-65; Ferris, Schallenberg & Zammuto 1985, pp 381-94; Miller &: Norburn 1981) and competitive strategies (Dowling 8c Schuler 1991, pp 139—44). Certain employee behaviours are assumed to be instrumental organisation's product life-cycle stage or business

in the

implementation of these competitive

strategies (Schuler

& Jackson

1987;

Dowhng &

Schuler 1991, p 133; Schuler 1987, pp 1-19). These behaviours can be encouraged by implementing a package of consistent HR policies and practices.

Table 6.1

sets

out three competitive strategies and the

HRM practices necessary

and reinforcing the behaviour required for the achievement of these competitive strategies. Dowling and Schuler (1991, p 143) identif)' a model which fits particular HRM practices with different competitive strategies. They identify three competitive strategies: the cost reduction, quality enhancement and innovation strategies; the appropriate employee role behaviours; and HRM for encouraging

strategies required to achieve these strategies.

Dowling and Schuler (1991, pp 144—6) argue that the appropriateness of competitive strategies are influenced by the life-cycle stage of the firm. They identify three stages: the entrepreneurial/growth stage; mature/decline stage;

and

the turnaround stage. During the entrepreneurial/growth stage, the strategy stresses innovation

and new product development and

is

facilitated

who are

innovative, co-operative, longer-term oriented, risk-taking,

assume

responsibility. In

by employees

and willing

to

comparison, during the mature/decline stage the emphasis of the strategy 'is taking away as much profit as possible from the existing product... emphasis is on increased production runs and cost cutting, the real HRM challenge is attracting and retaining capable employees' (Dowling 8c Schuler 1991, p 146). Finally, in the turnaround stage, organisational survival is stressed

Strategic perspectives of

human

resource

management 107

through cost cutting. This can occur by reducing the number of employees and by enhancing the quality of products.

Table

Consistent packages of

6.1

HRM

practices

and competitive strategies

Quality-enhancement strategy and l^

>

^

so

rt

>f

-D

>

a: .E

-8 .S (u-P rt

W

*J

>. c c v 3 « _Si o rt

O

v

T3

0) I-

l/f

I/)

O

""to « o

O

^

E

i_

(J

£

C

1 Q.

o Q. OJ O >

L.

OJ

3

(U

0)

Q_ T3

1/)

c

i/l

C O 1-

C 3 o

V o -^

^^ 10 1_ «->

O S O -n

T?

'15)

2

International perspectives of strategic

human

resource

management 329

Staffing issues

The international staffing process is of considerable importance

to a multinational

company. As Duerr (1968, p 43) has pointed out: virtually

any

type of international problem, in thefinal analysis,

is

either created by

people or must be solved by people. Hence, having the right people in the right place at the right time emerges as the key to

a company

5 international groioth. If

successful in solving that problem, I am confident

To

we can cope loith

date, three issues in international staffing have

we

are

all others.

been considered by and predictors

researchers: executive nationality policies, expatriate failure rates,

of expatriate success.

With regard to executive nationality policies, a multinational company can choose from five options: (1) ethnocentric, (2) polycentric, (3) geocentric, (4) mixed, and (5) ad hoc or patchwork (Robinson 1978; Heenan & Perimutter 1979; Robock & Simmonds 1983). These options are described in Table 21.1. It is important to consider these policies in some detail because each option has important implications for a multinational organisation's staffing practices.

Ethnocentric all key positions in a multinational company by parent country nationals, (PCNs). This practice is common in the

This approach to staffing results in

being

filled

early stage of internationalisation

where a company

is

setting

up a new

process or product in another country and prior experience essential.

Other reasons for pursuing an ethnocentric

is

business,

considered

staffing policy are a

perceived lack of qualified host country nationals (HCNs), and the need to

maintain good communication links with corporate headquarters. However, an

number of disadvantages. number of major problems:

ethnocentric policy also has a identified a •

An

ethnocentric staffing policy limits the promotion opportunities of

•

•

HCNs.

reduced productivity and increased turnover among HCNs. The adaptation of expatriate managers to a host country can be a long process. During this time, PCNs often make mistakes and take poor decisions. Serious compensation equity issues often arise when PCN and HCN compensation packages are compared. The often considerable income gap in favour of PCNs is viewed by HCNs as unjustified. For many expatriates a key overseas position means new status, authority and an increase in standard of living. Zeira (1976) states that these changes 'tend to dull expatriates' sensitivity to the needs and expectations of their host country subordinates and is not conducive in objective self-evaluation.

This •

Zeira (1976, p 36) has

may lead

to

330 Readings

human

in strategic

resource

management

Polycentric

A polycentric staffing policy is one where HCNs are recruited own country and PCNs occupy positions

aries in their

There are four main advantages 1

to

manage

subsidi-

in corporate headquarters.

to this approach:

Employing HCNs eliminates language barriers, the adjustment problems of managers and their families, and removes the need for expensive

expatriate

training programs.

2

Employment of local

nationals allows a multinational

company to

take a lower

Robinson (1978) has noted that a dubious reason for employing local managers is to insulate parent company personnel from direct involvement in making extra legal payments to local government officials. It is difficult to evaluate the extent to which this factor may influence staffing decisions, but clearly, in some countries this may well be the case. 3 The employment of local nationals is generally less expensive, even if a profile in sensitive political situations. Related to this point,

premium 4

is

paid to attract high quality local applicants.

A polycentric policy gives continuity' to the management of foreign subsidiaries.

While a number of these advantages address some of the shortcomings of an number of disadvantages which may develop from a polycentric policy. Perhaps the major difficulty is that of bridging the gap between local national subsidiary managers and the parent country managers at corporate headquarters. Language barriers, conflicting national loyalties, and a range of cultural differences (eg personal value differences and differences in ethnocentric policy, there are also a

attitudes to business)

may leave

from the various foreign firm could

become a

move

to

The end

result

may be

that a multinational

'federation' of independent national units with

to corporate headquarters. as a

the corporate headquarters staff relatively isolated

subsidiaries.

nominal links Such a situation would make major strategic shifts, such

production sharing, very

difficult to achieve.

A second

major problem associated with this type of staffing policy concerns the career paths of HCN and PCN managers. HCN managers have limited opportunities to gain experience outside of their own country and cannot progress beyond the senior positions in their own subsidiary. PCN managers also have limited opportunities to gain overseas experience. Since executive positions at headquarters are only held by PCNs, this

means

that the senior corporate

management group

responsible for resource allocation decisions between subsidiaries and overall strategic

planning will have litde overseas work experience to draw on. In an increas-

ingly competitive international environment, this lack of experience

Such a

situation also tends to reinforce a cynical view

among PCNs as

is

a

liability.

to the value

of overseas experience in terms of career advancement (Smith 1975).

Geocentric

The

third

approach

to international staffing

is

the geocentric policy where the best

people are sought for keyjobs throughout the organisation, regardless of nationality.

International perspectives of strategic

human

resource

management 331

There are two main advantages to this approach. Firstly, it enables a multinational firm to develop an international executive cadre. Secondly, it reduces the tendency of national identification of managers with units of the organisation. However, there are a number of difficulties in implementing a geocentric policy: •

employ their citizens and utilise employment of local nationals if adequate numbers and skills are available. Most Western countries require companies to provide extensive documentation if they wish to hire a foreign national instead of a local national. This can be a time-consuming, expensive, and at times futile process. This approach can be expensive to implement because of increased training and relocation costs and the need to have a compensation structure with standardised international base pay which may be higher than national levels in Most host countries want foreign

subsidiaries to

their immigration laws to achieve this goal by requiring the

•

many •

countries.

To successfully implement a geocentric staffing policy, longer lead times and more centralised control of the staffing process are required. This necessarily reduces the independence of subsidiary management in these issues and this loss of autonomy may be resisted.

Mixed

A fourth approach to international staffing is to adopt a mixed policy with regard The best example of a mixed policy is a regiocentric The specific mix will vary with the nature of a firm's business and product strategy. Robock and Simmonds (1983) give three examples of how the nature of a business or product strategy influences staffing policies. to executive nationality.

approach

(see Table 21.1).

is important (eg consumer goods and/or need for PCNs will be low, relative to the need for experienced HCNs and third country nationals (TCNs). A second example would be where product expertise is important and/or industrial markets are being served. In such a situation PCNs would be used more frequentiy because of the need for quick access to parent country sources of supply and technical information. A third example is that of service industries such as banking which tend to use relatively large numbers of PCNs, particularly where a firm is serving

Firstly, if

regional or area expertise

limited product lines) then the

parent country multinationals in foreign locations.

Ad hoc/Patchwork This final staffing option default.

is,

in a sense, a

misnomer because

A better descriptor may be corporate inertia.

succincdy summarised

The danger in foreign

is

how an ad hoc approach

it is in fact a policy by Robinson (1978, p 297) has

often develops:

that the firm will opt for a policy of using parent country nationals

management

positions by default, that

is,

simply as

extension of domestic policy, rather than deliberately seeking

of management

skills.

an automatic

optimum

utilization

332 Readings

in strategic

human

resource

management

A multinational firm that would be described as following an ad hoc staffing approach will clearly have difficulty developing a consistent organisational HR strategy which fits with the overall business strategy of the enterprise. Consequently, it will often be poorly placed to either anticipate threats or profit fi-om opportunities.

Expatriate failure rates

A

predominant issue in the international staffing literature is that of expatriate which may be defined as the premature return of an expatriate manager Thus, an expatriate failure represents a false positive selection error (Heneman et al 1986). The costs of a false positive selection error are both direct and indirect. In the case of expatriate recalls, the direct costs include salary, training costs, and travel and relocation expenses. Mendenhall and Oddou (1985) state that the average cost per failure to the parent company ranges between US$55 000 and US$80 000, depending on currency exchange rates and location of assignment. failure,

The importance of indirect or invisible costs rises with the level of position being many expatriate positions, these indirect costs may be consider-

considered. For

For example, an expatriate head of a foreign subsidiary who subsequendy this job may damage relations with the host country government and other local organisations and customers. This may result in various outcomes such as loss of market share, difficulties with host government officials, and demands that PCNs be replaced with HCNs. Zeira and Banai (1984) argue that multinational corporations should consider these factors as the real costs of failure of international executives rather than direct expenses such as able.

proves to be unsuitable for

salary

and

The

repatriation costs.

international literature also indicates that expatriate failure

is

a persistent

and recurring problem with failure rates remaining relatively high. Mendenhall and Oddou (1985) report that the estimated expatriate failure rate from 1965 to the present has fluctuated between 25% and 40%. Desatnick and Bennett (1978)

70% in developing countries. One of the few empirical studies on expatriate failure rates is reported by Tung (1982) who surveyed a number of US, European and Japanese multinationals. Her results showed US companies as having both higher expatriate failure rates and a higher percentage of companies reporting recall rates of 10% or more, than

state that this figure rises to

European or Japanese multinationals. However, these national differences should not obscure the

fact that all multinationals in

Tung's sample reported a significant

no data available which compare international and domestic false positive selection error rates, it would seem reasonable to assume that few companies would report domestic error rates of the relative magnitude shown in Tung's study. An indication of some of the differences between domestic and international

expatriate failure problem. While there are

selection

is

apparent when reasons for expatriate failure are examined. Tung

(1982) asked her sample of multinational managers to indicate reasons for expatriate failure in their companies (see Table 21.2).

International perspectives of strategic

Table 2

Reasons for expatriate

.2

1

(in

The

management 333

failure

Japanese

of spouse to adjust

ability

resource

descending order of importance)

American 1

human

1

Inability

to cope with larger

overseas responsibility 2

Manager's

3

Other

4

Manager's personal or

to adjust

inability

family

emotional maturity 5

Inability

new environment

2

Difficulties

3

Personal or emotional problems

4

Lack of technical competence

5

Inability

with

problems

to cope with

of spouse to adjust

larger overseas responsibility

European

of spouse to adjust' only consistent reason given by respondents

'Inability

Source Tung 1982

Tung notes that the finding that inability of spouse for failure for

to adjust was a major reason but a relatively minor reason for not surprising given the role and status to which Japanese

US and European companies

Japanese companies

is

society relegates the spouse.

As with false positive selection error rates, there are no data available which compare reasons for international and domestic false positive selection errors, but it is a plausible hypothesis that relational and environmental adjustment difficulties would not be the major reasons for explaining failure of domestic managers as they are for international

managers.

Predictors of expatriate success

There are two important papers which have examined the expatriate success. practices of 80

An

empirical study by

Tung

US multinational companies.

expatriate success,

issue of predictors of

(1981) focused on the selection

Based on a review of the

literature

on

Tung grouped the variables that contribute to expatriate success

into four general areas: (1) technical

competence on the job;

(2) personality traits

Each respondent (the Vice President of Foreign Operations) was asked to indicate whether these criteria were used in their organisations. Using categories reported by Hays (1974), overseas job assignments were classified as: (1) chief executive officer; (2) functional head; (3) troubleshooter; and (4) operative, h appeared that for each job category some selection criteria were judged to be more important than others. For example, 'communicative ability' was less important for technical jobs (troubleshooter) than for a CEO, while 'knowledge of host country language' was important for functional head and operative jobs. Presumably, individuals in these latter job categories have limited access to translators or are more likely to work with HCNs who do not speak English. or relational

abilities; (3)

environmental variables; and

(4) family situation.

334 Readings

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human

resource

Tung also asked respondents assess criteria

management

to indicate the

used for selection of overseas

—

procedures used by each firm to staff. Few companies formally

competence a predictable result since most expatriates are ample documentation of technical competence is generally available from performance appraisal data and personnel records. With regard to assessing family situation, for management positions 52% of companies interviewed both candidate and spouse while for technical positions, 40% of companies interviewed both candidate and spouse. Only one percent of firms conducted no interviews with either the candidate or spouse. While these figures for interviews with candidate and spouse are relatively high, they are less impressive when one considers the fact that inability of spouse to adjust is the most frequentiy cited reason for expatriate failure. The most surprising result from Tung's study was for assessment of relational ability. Although most companies indicated that relational abilities were important, assessed technical

internal recruits

—and

only

five percent of firms assessed a candidate's relational ability through a formal procedure, such as judgement by seniors, or psychological appraisal. Given the

research available (eg Hays 1974) which shows that relational abilities are positively is an obvious deficiency in the expatriate selection procedures of most of the companies in this study. A final aspect of Tung's paper which warrants discussion is her selection and training model. The issue of executive nationality is raised by the model as it requires information as to whether the position could be filled by a HCN. As well,

related to expatriate success, this

the model follows a non-compensatory selection strategy which Newman, Bahl and Gutteridge (1978) note is a lower risk strategy with regard to selecting expatriates. Also, Tung's model takes a contingency approach to selection and training by recognising firsdy that different expatriate jobs involve variations in extent of interaction with local nationals and duration of stay. Secondly, foreign

assignment locations will vary widely in terms of similarity with the expatriate's own culture. Using this model, Tung analysed the relationship between type of

and training procedure used and expatriate failure rate for the companies in her sample. She reports a correlation of -.63, indicating that the more rigorous the selection and training procedures used, the lower the failure

selection

rate.

A

second important paper is a recent review of the expatriate acculturation Mendenhall and Oddou (1985). In re\iewing problems in expatriate selection, Mendenhall 8c Oddou state that a major problem area is the ingrained literature by

practice of personnel directors

when

selecting potential expatriates to use the

The effect of this practice is that of importance in the selection process other than technical expertise and a successful domestic track record. They conclude that the field of expatriate 'domestic equals overseas performance equation'.

little

else

is

and training suffers from two interdependent problems. Firsdy, there is an inadequate understanding of the relevant variables of expatriate acculturation which leads to a second problem, the use of inappropriate selection and training methods. The purpose of their paper was to review the literature to determine the selection

key dimensions involved in the expatriate-adjustment process and to examine the implications of these dimensions for the selection and training of expatriates.

International perspectives of strategic

human

resource

management 335

From their review of tJie literature Mendenhall and Oddou conclude are four key dimensions in the expatriate adjustment process:

dimension;

(2) the others-oriented

(4) the cultural-toughness

dimension;

(3) the

(

)

1

that there

the self-oriented

perceptual dimension; and

dimension. The authors also make a

number of recom-

mendations concerning the selection and training of expatriates. Firsdy, they

recommend

on and weaknesses on the dimensions of expatriate

that the expatriate selection process should focus

evaluating the applicant's strengths

acculturation which they identify in their review. Secondly, the toughness of the culture of the country to which a future expatriate will be assigned should be assessed by

comparing the host country's

political, legal,

business systems to those in the parent country. If there

the host country

is

is

socioeconomic and

considerable disparity

'culturally tough') only applicants with

(ie

high scores on the above

dimensions should be considered for this assignment. For assignments to countries similar to the parent country (eg an assignment to Australia from the US) applicants with more marginal evaluation scores may be considered. This point is very similar to the notion of similarity/ dissimilarity between cultures as a selection factor

which Tung ( 1981 ) emphasises

in

her model.

Compensation International compensation policies are a key issue for the multinational firm.

Robock and Simmonds (1983) state that an effective compensation expatriates should strive to meet the following objectives: and

1

Attract

2

Facilitate transfers

foreign

retain

policy for

employees qualified for overseas service. between foreign affiliates and between home country and

affiliates.

and maintain a consistent and reasonable relationship between the compensation of all employees of any affiliate, whether posted at home or abroad, and between affiliates. 4 Arrange reasonable compensation, in the various locations, in relation to the 3

Establish

practices of leading competitors.

In practice, multinationals tend to have compensation packages which include the following components:

a

which serves a number of functions. home country payroll value for that individual

Base

salary,

•

represents a

It

repatriation •

It

upon

in terms of

the expiration of the foreign assignment.

provides the basis

upon which

various allowances

and

special benefits are

calculated.

While the base salary may be determined using a similar job evaluation plan for domestic

andforeign employees,

this is frequently

in foreign subsidiaries require considerably

problematic because

many positions

more autonomy of action than

comparable domestic positions.

(Harvey 1985)

336 Readings

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resource

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payments made to and to compensate for hardship or danger in the country involved. Two components or allowances are involved: an adjustment allowance to encourage mobility and a hardship

b Expatriate premium, the general term nsed

to describe

expatriates to increase the attractiveness of foreign posts,

allowance.

which include general cost-of-living, education, housing and tax equalisation. The overall purpose here is to ensure expatriates are able to maintain their normal pattern or standard of living. d Additional fringe benefits, such as home country visits, car allowances and payment of part of base salary in home or third country currency. c

Cost-of-living allowances,

There are a number of complex issues in the international compensation field. of the major issues is that of equity between PCN, HCN and TCN employees of a multinational working in a foreign location will receive a higher level of compensation than a TCN or HCN employee doing a similar job. The reason for this is that most multinationals opt for 'keeping the PCN expatriate whole' (ie maintaining relativity to home country counterparts plus compensating for the costs of overseas service) rather than equal pay for equal work (Teague 1972). The main advantage of the former policy is that it allows multinationals to achieve the first objective of an effective international compensation policy to attract and retain employees qualified for overseas service. However, HCN employees tied to lower local wage rates and TCN employees tied to wage rates in their home country will invariably react negatively to these salary differences, since they will use an equal pay for equal work equity standard. Short-term solutions to this equity problem include keeping compensation practices secret, pacing PCN expatriates in both local currency and home currency so that the amount of local currency available to the PCN expatriate will match HCN disposable income patterns, and

One

—

limiting the use of PCN expatriate assignments to relatively short-term consulting

or training assignments. this dilemma is to ensure that compenmatch the organisation's international staffing policies. Such a strategy recognises that there is no ideal approach to international compensation. Rather, compensation policies should complement overall staffing policies so that

Perhaps the best long-term solution to

sation policies

advantages are optimised. Thus,

if a multinational opts for an ethnocentric staffing pohcy for its foreign operations, the logical compensation policy would be to keep the PCN expatriate 'whole' because an ethnocentric policy (if consciously adopted) indicates that PCN employees have skills and experience which HCN and TCN employees do not possess. The dysfunctional side of this policy (perceived lack of equity by HCN/TCN employees) would be less important or

significant than the functional

outcome of satisfied

PCN

employees. Similarly, a

multinational which adopts a polycentric staffing policy would opt to keep expatriates whole. This

would be

polycentric staffing policy implies that

most PCN

PCN

HCN

employees as a assignments would be short-term

less controversial

with

consulting or training assignments.

However,

if

a multinational aims to develop an international executive cadre

via a geocentric staffing policy,

it is

not logically consistent to keep

PCN employees

International perspectives of strategic

human

resource

management 337

whole and ignore HCN and TCN dissatisfaction. For example, most large US oil companies do not delineate between domestic and international operations since most product and regional subsidiaries have international activities. To develop a worldwide selection pool of managers, it is necessary to have a compensation structure with standardised international base pay with allowances and premiums based on the country of assignment (Robinson 1978). A system of international base pay would need to match the average US salary for each pay grade or particular position. This would be a major cost for the multinational company, but it is a precondition which must be met if a geocentric staffing strategy is to be successfully implemented. A second issue in international compensation is that of taxation and currency rate fluctuation. Tax equalisation programs are an important component of international compensation packages which must be regularly reviewed to account for change in home country and foreign tax laws. Many companies now have fairly well developed procedures for dealing with tax equalisation or seek advice from consultants. A less well known problem area is that of incentive compensation plans for foreign based executives. As Brooks (1985) has recently pointed out, US multinationals that rely on the performance of overseas operations for long-term success need to assess the appropriateness of their incentive compensation plans outside of the

US because the value of awards to foreign based executives

and HCN or TCN executives) is largely determined by and currency exchange rates and regulations. expatriate

A final

issue in international

(both

local tax

US

codes

compensation concerns the administration of the

and benefits function. Changes in the external environment (eg national tax codes, floating exchange rates) and a growing number of PCN and TCN executives are making the management of the compensation process increasingly complex. An empirical study of this process was conducted by Toyne and Kuhne (1983). The focus of this study was to determine how multinational companies organise the three principal management tasks associated with international compensation: policy and procedure development, financing and supervision and control. A majority of the 83 chief compensation officers who responded to the survey indicated that both policy/ procedures development and supervision/control were centralised at US headquarters while financing was less centralised and as likely to be located in a foreign subsidiary as US headquarters. With regard to financing, international compensation

total

worldwide

sales

was inversely related to the centralisation of the financing

suggesting that multinational companies

task,

may decentralise this task as their financial

more sophisticated. Further research should be conducted to determine whether these findings are indicative of how most multinational companies manage their international compensation fianction. system becomes

International training

The

and development

rationale for international companies investing resources in training and development programs rests primarily on the cost of expatriate failure. As Robock and Simmonds (1983, p 562) have noted, 'however imperfect training may be as

338 Readings

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human

management

resource

a substitute for actual foreign living experience,

it is

valuable

if it

can reduce the

often painful and agonising experience of transferring into another culture and

avoid the great

damage

and

that culture shock

cultural misunderstanding can

do

to a firm's operating relationship'.

The need for international training and development becomes more apparent we examine the complexity of the role of the PCN manager Torbiorn (1985, p 59) has described the task of the PCN manager as one of 'realizing the expectaif

tions of a psychologically close, yet physically distant stakeholder in

containing other role senders

an environment

who are psychologically distant, but physically close'.

Because of the close link between parent company expectations and rewards, the will naturally pay close attention to these, but in the absence of

PCN manager

may well lack both

suitable training

the

skills

and motivation

tations of the host country stakeholders. Since

precondition for

Two additional problem areas concerning the domestic assignments.

on

all

is

invariably a

PCN success, such behaviour is clearly dysfunctional.

family

Firstiy,

members

expatriate assignment

initial

the

that for

since the stress associated with a foreign assignment

(Harris

& Moran

1979; Harvey 1985), training

programs directed towards the expatriate should Secondly, in addition to

make

and development more complex than

task of international training

falls

to attend to the expec-

HCN co-operation

also include family

members.

culture shock at the start of an overseas assignment,

many expatriates also experience a reentry or repatriation shock when they return to the parent company environment (Harvey 1985). The most common concerns to expatriate are personal finances, reacclimatisation to home country life, and readjustment to the domestic corporate environment. Failure to address repatri-

ation problems

companies are

may lead

to disillusionment

and

premium

for

willing to pay a

expertise (Kendall 1981).

To overcome

turnover, particularly when

many

an expatriate's experience and

repatriation problems, international

companies should develop training programs

to facilitate the reentry of expatriate

executives into domestic operations.

When looking at the issue of predeparture training, Tung's (1982) study of multinational training practices of 144 US, European and Japanese multinational companies found that the US multinationals tended to use training programs for expatriates less frequentiy than the European and Japanese firms (32% compared with 69% and 57% respectively). This finding is consistent with earlier research (Ronen 1986; Baker 8c Ivancevich 1971). Given this relatively low level

of training, the higher expatriate failure rates experienced by

US

executives

are perhaps less surprising.

Policy aspects of international training

A number

of writers (Edstrom

&

and development

&: Doz 1981) have suggested that the decision to transfer a manager may be for a number of reasons. The first and most obvious reason may be to fill a vacancy which has occurred. A second reason for a transfer may be to provide an opportunity for

management development.

Galbraith 1977; Prahalad

A third

reason

may be

that the organisation

is

using

International perspectives of strategic

transfers as a co-ordination

and control

A number of studies

cadre of managers.

human

resource

management 339

strategy to develop an international

(Edstrom

&

Galbraith 1977;

Ondrack

all three some 1985) have confirmed option (organisation development) tends to transfer policies, but that the third

that

be

restricted to

multinational organisations use

PCN employees only.

The experience of Australian companies The preceding

literature review discusses the issues highlighted

(mainly US) research studies in the area.

A major question

by previous

raised here

is:

What is

and importance of these issues to Australian companies? This is pertinent, as more Australian companies are expanding globally and die Australian government is actively encouraging local companies to become international in both outiook and operation. IHRM issues are therefore becoming important for the relevance

an increasing number of Australian companies. However, it is not clear what the major IHRM issues are for Australian companies. In the study which follows, focus is given to three of the issues highlighted in the literature: staffing policies, compensation, and training and development. These issues should be of primary importance to Australian companies, as they are to their US, Japanese and European counterparts. The following sector assesses whether this is in fact the case.

Research methodology and sample For the collection of data, a case study approach was used, with structured interviews of each company's personnel director, expatriate line managers (including returned managers and HCNs currently in Australia) and spouses. Additional data was obtained from company reports and newspaper articles. The topics covered during the research interviews were adapted from a study by

Ondrack (1985) and through

number of IHRM practitioners. During each interview, respondent's company was obtained in addition to a series of

consultation with a

information on the

and the HR function and details of international staffing and compensation policies. Four companies were selected for investigation. Two were Australian owned firms which had expanded internationally, primarily through strategic acquisitions questions concerning structure of international operations

of existing foreign competitors. Both of these firms were in the service sector.

Of

the other companies in the study, one was an Australian subsidiary of a multina-

and chemical company while the other was the regional international companies in the study appear in Table 21.3. It can be seen that the companies in this sample range from very large to relatively small. Total sales/revenue range from US$1129 million to US$62 716 million and total number of employees range from 4700 to 384 000. There is also a wide spread with regard to number of countries in which companies operate and length of time in which companies have been involved in intertional oil

division of an automobile manufacturer. Details of the

national operations.

340 Readings

in strategic

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resource

management

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