HRM and strategy

Helen Mortimore
 Aims of this session
This study unit will enable students to:

• Demonstrate understanding of the links between people

management and business strategy

• Identify and critically review different theoretical perspectives

linking people management to improved performance (i.e.
‘best practice’ and ‘best fit’ models)

• Use strategy maps in connection with people management

 Definition of strategic HRM (1)
Tyson, 1995

‘the intentions of the corporation both

explicit and covert, toward the
management of its employees, expressed
through philosophies, policies and
practices’
 Definition of strategic HRM (2)
• ‘…the application of the adjective strategic implies a concern
for the ways in which HRM is critical to the firm’s survival
and to its relative success’

• Strategic HRM choices may be planned or emergent

• These choices may be enacted by line managers or HR

specialists

Boxall and Purcell, 2011, p. 64

 The goals of HRM
Boxall and Purcell (2011, p. 12-24) define the economic goals of HRM as:

• Cost effective labour

• Organisational flexibility (headcount and skills)
• Human resource advantage

… and the socio-political objectives of HRM as:

• Social legitimacy
• Managerial power

‘Strategic tensions’ arise from the conflicts inherent in seeking to achieve

these different goals.
Organizational and HR strategy relationships

Org. HR Separation

Org. HR ‘Fit’
Torrington et
al, 2008, p. 33
Org.
HR Dialogue

Org. HR Holistic

Org. HR HR Driven
 ‘Best practice’ vs ‘Best fit’ HRM
Overview by Henderson (2011, p. 33-34)

• ‘Best fit’ – certain HRM strategies work best in particular

types of organisation. There is ‘vertical integration’ between
the organisation’s overarching strategy and its HRM policies
and practices.

• ‘Best practice’ – certain HRM approaches will always

produce the results (i.e. the best performance) regardless of the
organisation’s structure or orientation.
 Best practice HRM
• Focus on High Performance Work Systems (HPWS)/ High
Commitment Management (HCM)

• HPWS based on individual reward systems

• HCM focuses more on inculcating commitment to the culture of the

organisation (and through this high performance)
 Components of ‘best practice’
1. The provision of employment security
2. Systematic recruitment and selection
3. High investment in training, learning and development
4. Self-managed teams and decentralisation of decision-making
5. High compensation contingent on organizational performance
6. Reduction of status differentials
7. Sharing performance data with employees
 Critiques of ‘best practice’
• Universalist approach –does one size really fit all?

• ‘Black box’ problem: how and why do HR practices make a

difference?

• Lack of consensus over what constitutes core HR practices

• ‘Best practice’ for whom? (Legge, 1978). The focus is on

increasing shareholder value.
 Best fit HRM
• Schuler and Jackson (1987) build on Porter’s (1980) typology
of competitive strategies to propose ‘best fit’ HR strategies.

• There is an assumption that ‘cost leadership’ will only require

low employee involvement and ‘personnel management’
whilst ‘differentiation’ will have a high concern for creative
involvement, requiring more sophisticated HRM.
• …However, most organisations will have
a combination of ‘knowledge’ workers
and less-skilled roles. This can lead to
‘elite’ and ‘egalitarian’ approaches.
 Vertical and horizontal fit
Vertical fit: HRM strategy aligns with business strategy

Business strategy

HRM strategy

Performance
Resourcing Reward L and D ER
Mgmt

Horizontal fit: HR practices integrate with one another

 Activity: Best practice or best fit?
• In the two HR Director job descriptions, can you identify
where the requirements of the role are oriented more to best
practice and to best fit?
HRM ‘Bundles’
• A ‘bundle’ is a collection of HRM
approaches which complement one
another

• Where ‘a coherent, synergistic

and value-adding bundle’ is in
evidence, ‘it is likely that the high
commitment paradigm is deeply
embedded into the culture of the
workplace’ (Marchington and
Wilkinson, 2014, p. 69)
 When bundles go bad
• Kepes and Delery (2007) suggest that ‘bundles’ of HRM can
lead to: ‘powerful connections’ but also ‘deadly
combinations’.
 The balanced scorecard
• https://www.youtube.com/watch?v=M_IlOlywryw
 Strategy maps
• Strategy maps are a starting point for the development of HRM
priorities

• Maps performance drivers and outcomes

• Explores links between HR practices and competitive advantage

• Makes strategy accessible

Kaplan and Norton, 1996 and 2001

Haynes and Fryer (2000) A strategy map in the
luxury hotel industry
 Strategy map activity

• Using the template, and drawing from Haynes and Fryer

(2000), draft a strategy map for an organization that you know.
 References
• Haynes, P. and Fryer, G. (2000) Human resources, service quality and
performance: a case study. International Journal of Contemporary
Hospitality Management. 12:4, pp. 240 – 248

• Kaplan, R.S. & Norton, D.P. (1996) The balanced scorecard:

translating strategy into action. Boston, MA: Harvard Business School
Press

• Kaplan, R.S. & Norton, D.P. (2001) The strategy-focused organization:

how blaanced scorecard companies thrive in the new business
environment. Boston, MA: Harvard Business School Press

• Legge, K. (1978) Power, Innovation and Problem-solving in Personnel

Management, London: McGraw-Hill
 References
• Marchington, M. and Wilkinson, A. (2012) Human Resource
Management at Work, 5th edition. CIPD

• Porter, M. (1980) Competitive Strategies. New York: Free

Press

• Schuler, R. and Jackson, S. (1987) ‘Linking competitive

strategies and human resource management practices’,
Academy of Management Executive, 1:3, pp. 207-19

• Tyson, S. (1995) Human Resource Strategy. London: Pitman.