Critical analysis of strategic human resource management (SHRM)  and Employment Relations

Critical analysis of strategic human resource management (SHRM)  and Employment Relations



1.0 Introduction

This report is prepared, pursuant to a brief from the Regional Business Innovation and Skills department, with the aim of enlightening private and public sector leaders on the theoretical bases, models, and practices of strategic human resource management (SHRM). The key areas of focus are on SHRM, performance management and rewards, and employment relations.

The report consists of two parts. In part 1, the relationship between HR strategy and business strategy is reviewed. The theoretical bases and models and strategic perspectives of SHRM, as well as specific HR practices related to performance management and rewards are evaluated. Recommendations on how organisations should design/re-design their performance management systems are given.

In part 2, the nature of, changes in, theoretical perspectives of, and actors in the employment relationship are reviewed.  Recommendations of mechanisms of employee participation and employee voice to use to contribute to improved employment relations within an organisational context are then given.

2.0 Task 1 Relationship between HR and Business Strategy

2.1 Introduction

Since people are the most important source of an organisation’s sustainable competitive advantage; it is important to link the HR strategy with the business strategy. When this linkage between HR and business strategy occurs, HR transforms into strategic human resources management (SHRM). In this regard, this task evaluates the theoretical bases and strategic perspectives of SHRM, discusses HR practices related to performance management and rewards , and provides the recommendations on how organisations should design/re-design their performance management systems.

2.2 Theories about SHRM

Human resource (HR) denotes the capabilities, skills and effort which employees possess, and which can be usefully deployed to enable the organisation operate effectively (Dhar, 2008).  Accordingly, HR strategy is a conscious and overt plan aimed at managing employees in such a way that the organisation attains competitive advantages (Kearns, 2003).

Business strategy, on the other hand, refers to the entire process of formulating an organisation’s long-term goals and objectives, coming up with suitable action plans, and assigning resources to achieve the goals and objectives (Stonehouse and Houston, 2013). Since people are the most important source of an organisation’s sustainable competitive advantage; it is important to link the HR strategy with the business strategy. This involves integrating employee decisions with the decisions touching on the organisation’s goals and objectives (Dhar, 2008).

To achieve the best fit between the HR and business strategy, the organisation must achieve both vertical integration and horizontal integration (Wilton, 2016). Under vertical integration, the organisation’s HR strategy must be aligned with its competitive strategy. On horizontal integration, HR policies and practices must align with and support each other as a coherent whole (Wilton, 2016).

When this linkage between HR and business strategy occurs, HR transforms into strategic human resources management (SHRM). Important to understand, in this regard, are the theoretical bases and strategic perspectives of SHRM.

Three major perspectives on how the HR strategy can be aligned with the corporate strategy include: contingency/best fit, universalism, and the resource based theoretical frameworks (Marchington and Wilkinson, 2005). Contingency frameworks assume that there is no one-size-fits-all HRM practice or policy. Instead, HRM policies and practices adopted by an organisation depend on its specific context and business strategy. Therefore, every organisation is likely to have different HR policies and practices (Boxall and Purcell, 2015). An example of a framework under this perspective is the life cycle framework of Storey and Sisson (1993), which views an organisation as proceeding through the stages of start-up, growth, and maturity; with each of these stages being associated with its own unique HR practices and policies.

In contrast to the contingency frameworks, universalism contends that there is one ideal set of HR practices and policies which should be applicable to all organisations everywhere. This is deemed to hold, irrespective of organisational context or competitive strategy (Marchington and Wilkinson, 2005). An example of framework under this perspective is Pfeffer’s framework which recommends the following seven practices: job security, employee training and development, recruitment of the best people, workplace equality, use of autonomous work teams and decentralised decision-making,  high compensation linked to performance outcomes, and sharing of information (Pfeffer, 1998).

Finally, the resource based theoretical frameworks (e.g. the resource based view or RBV) associate the workforce with strategic value and maintain that the employees of an organisation and HR practices adopted by the organisation can endow the organisation with competitive advantage and success (Boxall and Purcell, 2015).

The universalistic perspective has been critiqued as being more simplistic relative to the other perspectives. It adopts a sub-functional view, and ignores the synergies and interdependencies which exist between different HR practices.  It assumes the existence of a linear correlation between various variables, and that this can be generalised to any population (Martın-Alcazar, Romero-Fernandez, and Sanchez-Gardey, 2005). In contrast, the contingency perspective assumes that this relationship is unstable, and varies depending on other situation-specific variables. Although, unlike universalism, it also considers groups of practice; the contingency perspective provides no consideration for synergies and integration of the HR practices. Unlike universalism, it is also more strategic and interactive, rather than unidirectional and reactive (Martın-Alcazar, Romero-Fernandez, and Sanchez-Gardey, 2005).

According to Kaufmann (2015), the RBV framework has been the central pillar in strategic HRM, but suffers a number of critical flaws. Its definition of value is not only poorly defined but also exogenous, thus leading to failure by SHRM to explain and forecast HR’s contribution to value. Moreover, the model advocates for the enhancement of organisational performance through the capture of human capital rent, which may lead to adverse employee relations (Kaufmann, 2015).

2.3 Specific HR Practices of Performance Management and Reward

Performance management communicates to an organisation’s employees the kind of behaviour which is valued and desired by the organisation. It helps to create an environment at the workplace in which the employees are facilitated to perform to the best of their ability. The performance management may be carried out through the use of the objective approach, the 360 degree feedback method, or through the management by objective approach (MBO) (Armstrong, 2006).

The 360 degree feedback collects performance information from multiple sources, including the employee’s peers and customers (Wilton, 2016). According to Burke and Cooper (2005), since the 360 degree feedback method incorporates peer opinions about the employee being evaluated, it can supplement the information which the supervisors and managers have about the employee, and provide a much broader perspective and a more accurate assessment. Since it permits for the pooling of ratings, it is associated with lower levels of bias.  Nevertheless, its effectiveness may be dulled by common execution mistakes. Moreover, when it is used as the basis for determining employee pay, the employee’s colleagues may provide misleading information (Dhar, 2008).

MBO evaluates an employee’s performance based on how well the employee has met certain pre-determined targets. It is results-oriented, clear on what needs to be done (i.e. no ambiguity), helps to highlight and focus effort on areas requiring improvement, and enhances communication and employee awareness of organisational goals (Armstrong, 2006). However, it requires too much paperwork, is time-consuming, and may be resisted since it exerts too much pressure on employees to meet targets. The behavioural approach, unlike the MBO, is not as aggressive, and therefore has been associated with enlisting high levels of cooperation among the employees. Its major weaknesses however, is that it does not fully consider the organisation’s mission and goals (Marchington and Wilkinson, 2005).

the organisational examples about the application of performance management practices?

Reward practices may be classified as either financial, or non-financial. Financial rewards may be further categorised into direct pay (consisting of the base pay, overtime pay, and premium pay) and indirect pay. Various types of indirect pay also exist. These may be statutory (e.g. maternity, parental and carers leave and holiday pay) or non-statutory (e.g. health insurance, pension, crèche, subsidized meals, and assistance programmes for employees).  Non-financial rewards include job security, recognition, work-life balance, and career development opportunities (Shields, Brown, and Kaine). the total reward? the organisational examples about the application of reward?

2.4 Recommendations

Based on the review of the theoretical bases and perspectives of SHRM and on the predominant performance practices used, the following recommendations can help the organisations to design/re-design their performance management system in order to support organisational development:

Organisations should begin by formulating suitable objectives regarding what they want their performance management systems to achieve. Having done that, the next step will involve determining the actual approaches or methods through which the employee performance will be evaluated. Based on the literature reviewed, the organisations may want to select between the MBO, 360 degree feedback and behavioural approaches.

The next step will then involve coming up with the actual performance management system. Such a system must be created through wide consultation to ensure buy-in from critical users and stakeholders. After that, the organisations should tie the performance outcomes to the organisation’s reward system so that employees can be compensated based on their contribution. Finally, the system should be tried, and any deviations from the desired performance corrected.

2.5 Conclusion

To be successful, organisations ought to align their HR strategy with their overall business/corporate strategy. Such alignment must be done both vertically and horizontally. In doing so, it is imperative that the organisation take into account the various theoretical bases of SHRM such as contingency/best fit, universalism, and the resource based theoretical frameworks. Accordingly, based on the review of the theories and concepts carried out, there are several notable areas of improvement related to performance management and reward, which your organisations ought to consider implementing, and these are given in the recommendations section below.

3.0 Task 2 Employment Relations

3.1 Introduction

brief background? In this section, the nature, emerging trends, theoretical perspectives, and actors in the employment relationship are evaluated. Relevant conclusions and recommendations, in light of the analysis, are offered.

3.2 Nature and theoretical perspectives of employment relations

An employment relation is said to exist when one person (employee) is engaged by another person or organisation (employer), to work for the person/organisation engaging him/her, under certain stated work and pay conditions, in return for compensation for services or work rendered (Williams and Adam-Smith, 2010). The conditions may be set by the employer, acting unilaterally, or may be negotiated jointly between the employer and the employee. The relationship is usually formalised through an employment contract and procedural agreements (Towers, 2004).

Employment relations can be underpinned by various theoretical perspectives. These include: unitarism, pluralism, and Marxism. Unitarism views the employment relationship as bringing together different parties who share a mutual objective, values and interests. The relationship is characterised by a high level of cooperation, the end goal being to achieve the shared goals and values (Blyton and Turnbull, 2004).

A major weakness of unitarism is the assumption that conflict is not only needless and unnecessary, but also pathological, avoidable, and irrational. In reality, even though conflict can be dysfunctional, it is unavoidable and can also be beneficial for the organisation (Cradden, 2011). According to Robbins et al (2014), it can help the organisation to: remedy problems and implement change, enhance the cohesiveness of work groups, enhance organisational and group effectiveness. Since it assumes only once power centre (the management); unitarism can also foster paternalistic or autocratic leadership styles.

In contrast, pluralism frames the employment relationship as consisting of parties with diverse interests, goals, and values. Therefore, conflict is viewed as unavoidable. A major critique of pluralism, in this regard, is that it is likely to encourage the emergence of groups of employees who do not recognise the management’s right to manage, and whose loyalty belongs elsewhere (Budd and Bhave, 2006).

Marxism agrees with unitarism that the employment relation is characterised by conflict. However, unlike unitarism and pluralism, it relates such conflict to the society at large. In particular, it maintains that the employer/employee conflicts within the workplace simply mirrors the conflict between the bourgeoisie/capitalists and the proletariat (Blyton and Turnbull, 2004). Since the employees have no control over what they produce for the organisation, Marxism holds that the capitalistic system in which the organisation is located and operates, has adverse and alienating impacts on the employees. It also, like the pluralist perspective, maintains that conflict is inevitable but differs from pluralism on this score by insisting that such conflict cannot be resolved via mechanisms such as compromise (Cradden, 2011).

3.3 Actors in the Employment Relation and their Roles

The employment relationship consists of various actors, and these include the employer, and the employee. It may also consist of labour or trade unions, and employer organisations. According to Olusoji (2011), the state is also a critical actor in the employment relationship. Each of these actors has certain, well-defined roles.

Traditionally, the role of the employer or managers was to make the key decisions involved in the workplace, while the role of the trade/labour union was to represent the employees and defend or agitate for employee interests (Abbott, Heery and Williams, 2011). Olusoji (2011) argues that the traditional neoclassical objective of the organisation was to maximise allocative efficiency. Trade or labour unions’ role was to agitate for and represent the interests of the employees, namely: earning income commensurate to their work or qualifications, fair treatment and having a voice, achieving fulfilment and social identity, and attaining power and social control (Olusoji, 2011).

Trade unions represent employees during grievance procedures and other disciplinary processes, and also help to organise training for workers. During instances of mass layoffs or transfers, they play a statutory role of liaising with the employers to ensure that the negative effects of such moves are lessened (Gennard and Judge, 2005).

Traditionally, the employer organisations’ role was to represent and defend the interests of the employers. They represent organisations during negotiations with workers and in cases of industrial disputes. The employer’s main interest lay in the maximisation of profits. The state’s role included the regulatory role (e.g. enactment of worker protection laws), defending the interests of workers, the employer role (the state is an employer of workers in the public sector), the facilitative role (establish ground rules and provide support to ensure a favourable employment relations), the structural role (enactment of business policies that provide a favourable environment for organisations), and the constitutive role (determination of how employment relations are structured) (Olusoji, 2011).

3.4 Changing nature of employment relations and actors’ role

The nature of the employment relationship has however been changing. Power asymmetries between the employers/managers and the employees have reduced, leading to the reduction of employer-employee conflicts. At the same time, organisations are increasingly involving their employees in decision-making and empowering them (D’Art and Turner, 2006). There has also been an increase in employment legislation which confers more rights upon the employees, and obligations on the employers.

In that regard, the government’s legislative role, defining how managers/employers and employees ought to relate with each other has become more the case of the UK, the government’s intervention stance has shifted from  individualism to liberal collectivism.  Trade unions’ representation role has also continued to diminish due to: falling proportion of employees unionising, the emergence of new forms of employee involvement and representation sponsored by the employers and legal restrictions on trade unions by the government (Dundon and Rollinson, 2011).

3.5 Recommendations

Giving the employees of an organisation a voice and allowing them to participate in decision making is likely to help improve employment relations in different ways. Firstly, eliciting high levels of employee involvement and giving the employees a voice instils in the employees the sense that they are valued by the organisation. Secondly, giving the employees of an organisation a voice and allowing them to participate in decision making will help to significantly eliminate conflicts and enable better utilisation of the skills and knowledge sets possessed by the employees (Roche, Teague, ‎and Colvin, 2014).

In the aspect of employee invoice, they should set up two-way communication channels, which encourage the voice of the employee to be heard. This will ensure that even in the absence of unions, the employee’s voice will be heard. Organisations also need to set up feedback mechanisms. These will enhance the employee voice by giving them a platform through which they can voice their concerns to the employers/managers, and facilitate action towards that end. Some of the feedback mechanisms which organisations may want to consider implementing include hotlines, a dedicated email, and staff meetings. This will also require organisations to cultivate an open culture, and to offer rewards for the best feedback. Enhancement of employee voice may also be done through the use of attitude surveys. Collectively, these measures are likely to help organisations to enhance employee engagement, their voice, and participation in decision making.

What is your recommendation in the aspect of employee participation?

3.6 Conclusion

The employment relation consists of various actors, namely: the employer/ employer organisations, employee/trade unions, and the state. It can be understood through various perspectives, and these include pluralism, unitarism, and Marxism. The nature of the employment has over recent years been changing. Some of the emergent characteristics include: fewer hierarchies and less power asymmetries, less union influence, and more government intervention and legislation. Your recommendation?

4.0 Conclusion

The first part of the report has undertaken a critical evaluation of SHRM, zeroing in on the theoretical bases and strategic perspectives that underpin SHRM. Thereafter, a review of performance management and reward practices was done. It was shown that to achieve success, organisations need to align their HR strategy with their overall business/corporate strategy. Such alignment must be done both vertically and horizontally. The theories reviewed also led to the recommendation that organisations need to set up performance management system that should also be tied to employee rewards. This should be done taking into account the theoretical bases and perspectives of SHRM.

In the last half of the report, it has been demonstrated that the nature of the employment has over recent years been changing. Some of the emergent characteristics include: fewer hierarchies and less power asymmetries, higher levels of employee involvement, less union influence, and more government intervention and legislation. It is therefore recommended that organisations set up mechanisms to enhance employee voice and participation.

5.0 References

Abbott, B., Heery, E., and Williams, S. (2011) ‘Civil society organizations and the exercise of power in the employment relationship’, Employee Relations, 34(1), pp. 91-107.

Armstrong, M. (2006) A Handbook of Human Resource Management Practice. London: Kogan Page.

Boxall, P. and Purcell, J. (2015) Strategy and Human Resource Management. New York: Palgrave McMillan.

Blyton, P. and Turnbull, P. (2004) The Dynamics of Employee Relations. New York: Palgrave McMillan.

Budd, J.W. and Bhave, D. (2006) ‘Values, Ideologies, and Frames Of Reference in Employment Relations’, in: Bacon, N., Blyton, P., Fiorito, J. and Heery, E. (eds.) Sage Handbook of Industrial and Employment Relations (Ch. 5). London: SAGE.

Burke, R.J. and Cooper, C.L. (2005) Reinventing HRM: Challenges and New Directions. London: Routledge.

Cradden, C. (2011) ‘Unitarism, Pluralism, Radicalism…And the Rest?’ Working Paper N°7 / 2011, pp.1-20.

D’Art, D. and Turner, T. (2006) ‘New working arrangements: changing the nature of the employment relationship?’ The International Journal of Human Resource Management, 17(3), pp. 523-538.

Dhar, R.L. (2008) Strategic Human Resource Management. New Delhi: Excel Books.

Dundon, T. and Rollinson, D. (2011) Understanding employment relations. 2nd ed. Maidenhead: McGraw Hill.

Gennard, ‎J. and Judge, G. (2005) Employee Relations. London: CIPD.

Marchington, ‎M. and Wilkinson, A. (2005) Human Resource Management at Work. London: CIPD.

Olusoji, J.G. (2011) Impact of Culture on the Transfer of Management Practices in Former British Colonies. London: Xlibris Corporation.

Robbins, S., Judge, T.A., Millett, B. and Boyle, M. (2014) Organisational Behaviour. Frenchs Forest, NSW: Pearson Australia.

Roche, W.K., ‎Teague, ‎P. and Colvin, A.J.S. (2014) The Oxford Handbook of Conflict Management in Organizations. Oxford: Oxford University Press.

Williams, S. and Adam-Smith, D. (2010) Contemporary Employment Relations: A Critical Introduction. Oxford: Oxford University Press.

Kaufmann, B.E. (2005) ‘The RBV theory foundation of strategic HRM: critical flaws, problems for research and practice, and an alternative economics paradigm’, Human Resource Management Journal, 25(4), pp. 516–540.

Kearns, P. (2003) HR Strategy: Business Focused Individually Centred. Boston: Butterworth-Heinemann.

Marchington, ‎M. and Wilkinson, A. (2005) Human Resource Management at Work. London: CIPD.

Martın-Alcazar, F., Romero-Fernandez, P. and Sanchez-Gardey, G. (2005) ‘Strategic human resource management: integrating the universalistic, contingent, configurational and contextual perspectives’, Int. J. of Human Resource Management, 16(5), pp. 633–659.

Pfeffer, J. (1998) The Human Equation. Boston, Mass: Harvard Business School Press.

Shields, ‎J., Brown, ‎M. and Kaine, S. (2016) Managing Employee Performance and Reward. Cambridge: Cambridge University Press.

Storey J. and Sisson, K. (1993) Managing Human Resource and Relations. London: Biddles Ltd.

Stonehouse, G. and Houston, B. (2013) Business Strategy. London: Routledge.

Towers Watson. (2014) Ticking all the boxes? A study of Performance Management practices in the UK. London: Author.

Wilton, N. (2016) An Introduction to Human Resource Management. London: SAGE.





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