Human resource

management theories
By Sara M.
1801395
 Outlines
• Introduction of human resource
• History of human resource
• Definition of human resource
• Different human resource management theories
 History of human resource management
In the early 1980s, new courses in human resource management
(HRM), at undergraduate and graduate levels, have been created in
higher education institutions in the United States, Britain and Canada.

In the 1990s human resource management has become one of the

most dynamic and challenging areas of European business.
HRM focused on constructing theoretical frameworks or models to
study and understanding functional activities of human resource
management.

personnel management to be much more prescriptive and practical

than analytical.
Defamation of human resource management
The human resources of an organization consist of all people who
perform its activities.

Human Resource "The people that staff and operate an organization,"

as contrasted with the financial and material resources of an
organization.
Human Resources is the organizational function that deals with the
people and issues related to people such as compensation, hiring,
performance management, and training.
Human resource management (HRM) is
concerned with the personnel policies
and managerial practices and systems
that influence the workforce, all
decisions that affect the workforce of the
organization concern the HRM function.
also called personnel management.
Definition of humane resource theories is a researched belief that
people desire to be part of a supportive team that facilitates
development, growth and productivity.
 Humane resource management theories
 Resource-Based Theory
 Organization life cycle theory
 Strategic contingency theory
 Institutional theory
 Transaction cost theory
 General systems theory
 Human capital theory
 Agency Theory
 AMO Theory: Ability, Motivation & Opportunities
 Motivation-Hygiene Theory
 Theory X and Theory Y
 Participative Decision Making Theory
 Resource-Based Theory
Porter's [1980] strategic management explains a firm's success
regarding industrial sector features.

firm's success "distinctive competence" as what it is that an enterprise

does especially well. For this reason, considers that a competitive
advantage depends on the relationship between environmental
opportunities and a firm's distinctive competencies.
Assumption

• An employee is a rare resource, unchallengeable, and valuable.

• In order to gain from competitive advantage, there should

be creation and support of effective training and performance.
 Organization life cycle theory
Cameron & Whetton (1981)
characterizes organizational
development from formation,
growth, maturity, decline and
death.
 Assumptions
 Organization grows has stages.
Manage human resources according to the stage of growth of the
organization.
 Strategic contingency theory
The strategic contingencies theory proposed by Hickson et al. (1971)

Strategic Contingencies Theory focuses on tasks that need to be done

in the form of problems to be solved, thus de-emphasizing personality.
If a person does not have charisma but is able to solve problem, then
s/he can be an effective leader.
 Assumptions
Organizations have several strategies to adopt from organization
environment.

 The choice of strategies depends on organizational

environment.
 Institutional theory
Institutional theory deals with stability and change of institutions.
Commons (1931) defines ‘institutions’ as ‘collective action in control,
liberation and expansion of individual action’.
 Assumptions
Organizational norms, values, attitudes and myths are the sources of
organizational failure or success.

 These need be reorganized in order to ensure effectiveness

 Transaction cost theory
A theory that states that the goal of an organization is to minimize the
cost of exchanging resources in the environment and the costs of
managing exchanges inside the organization.

transaction costs the costs of negotiating, monitoring, and governing

exchange between people.
 Assumptions
It considers costs of establishment, negotiating, monitoring,
evaluation, and enforcement of exchanges (contracts).

Human resource management should minimize gaps in employment

associations like reviewing contracts, monitor, and ensure compliance
to set objectives, targets and standards.
 General systems theory
This theory was developed by biologist Ludwig von Bertalanffy in 1936
All systems have common elements. These are: input output
throughput or process and feedback. Input include the individual
effort, energy. considers the human resource department as a
component of the general system elements.
 Assumptions

 Organizations are complex systems.

Human resource management is a sub system Failure/success of

each component will have overreaching impact to the organization
 Human capital theory
Human capital is seen as group or individual dispositions of a person in
the form of source of knowledge and skills that reflect education and
experience of the individual person. ( Gary Becker)
 Assumptions
 It is an economic approach – people are valuable assets.

 The best Investment is to invest in people.

 Agency Theory
The agency theory is the branch of financial economic that explains the
relationship between principals and agents.
In this relationship the principal delegates or hires an agent to perform
work. The theory attempts to deal with two specific problems: first,
that the goals of the principal and agent are not in conflict (agency
problem), and second, that the principal and agent reconcile different
tolerances for risk.
 Assumptions
 The employer and employee have a principal-agent relationship.

As there may be disagreement between the two, legal implications

have to be carefully considered and, if possible, legal action should be
avoided.
 AMO Theory: Ability, Motivation &
Opportunities
Suggests that there are three independent work system components
that shape employee characteristics and contribute to the success of
the organization.

The employees can be very competent and motivated, but if they do

not have the opportunity to make a contribution, or if they do not
thrive, then it goes beyond their performance on the job.
 Assumption
 Utilizing the AMO theory provide organizational leaders with a
management tool that can enhance their employees’ performance.
 Abraham Maslow model
Suggest that five hierarchical needs which could also be applied to an
organization and its employees’ performance (Gordon, 1965).

Assumption
Person does not move to the second need until the demands of the
first have been satisfied or the third until the second has been satisfied,
and so on.
 Frederick Herzberg’s Motivation-Hygiene
Theory
Frederick Herzberg’s Motivation-Hygiene Theory was that traditional
perspectives on motivation, like Maslow’s, only looked at one side of
the coin—how to motivate people.

he called the factors that led to positive job attitudes motivators and
those factors that led to negative job attitudes hygiene factors.
 Douglas McGregor’s
Theory X and Theory
Douglas Y D. (1960). felt that there are
McGregor, two different
perspectives, which he termed as Theory X and Theory Y. These
theories were based on assumptions that managers have about their
workers.

• defined a Theory X manager who believes that most people do not

like work.
• Theory Y managers feel that people want to do what is best for the
organization and can direct themselves under the right conditions
 Rensis Likert’s Participative Decision
Making Theory
based in the notion that supervisors with strong worker productivity
tended to focus on the human aspects of subordinate problems while
creating teams that emphasized high achievement.

In other words, these supervisors were employee cantered and

believed that effective management required treating employees as
humans and not just worker bees
 Summary
HR theories aim to achieve two primary outcomes: more efficient and
effective job performance and increased worker motivation or
commitment. One efficiency theorist, Henri Fayol, argued that workers
function more efficiently when management is more efficient.
• http://www.leadership-central.com/strategic-contingencies-
theory.html#ixzz55OT79ssv
• http://www.investorwords.com/6398/agency_theory.html#ixzz55Pos
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