PEOPLE MANAGEMENT AND DEVELOPMENT

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PEOPLE MANAGEMENT AND DEVELOPMENT

• Best practice and best fit human resource
  management

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Objectives

• To review elements of best practice HRM
• To examine questions about best practice HRM
• To review best fit HRM
• To consider limitations of best-fit models
• To consider the resource based view

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Defining and measuring best practice HRM

• High commitment, high performance, high
  involvement, best practice
• USA studies (Pfeffer,Huselid) explored links
  between HRM and performance
• UK studies (West, Guest, Purcell)
• Studies differ in several respects, making
  conclusions difficult

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Differences between studies

• Nature and type of HR practices used
• Proxies developed for each of the practices
• Measures of performance used
• Sectors in which studies have taken place
• Methods of data collection
• Respondents from whom information has been sought

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Components of best practice HRM

• Employment security and internal labour markets
• Selective hiring and sophisticated selection
• Extensive training, learning and development
• Employee involvement, information sharing and
  worker voice
• Self-managed teams/teamworking
• High compensation contingent on performance
• Reduction of status differentials

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Employment security and internal labour markets

• Fundamentally underpinning the other 6 practices
• Job reductions should be avoided wherever
  possible
• Enhance through HR planning and flexibility
• Defining employment security
• Policy of no compulsory redundancy
• Use of temporary workers to protect the core
  workforce
• Expectation on the part of senior managers that
  new staff will remain long-term

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Selective hiring and sophisticated selection

• Trend towards more sophistication in selection
  techniques
• Employers looking for more than technical ability
• Measuring selective hiring
• Number of applicants per position
• Proportion administered an employment test
• Sophistication of processes
• Measures capture different components of the
  selection process
• Best practice selection should be integrated and
  systematic

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Extensive training, learning and development

• Employers aiming to synergise the contribution of
  talented and exceptional employees
• T,L and D one of the most widely quoted and
  important elements of best practice
• Examples of measures used
• Number of days training
• Proportion of workers trained
• Budget set aside for training
• Studies have focused on quantity, not quality of
  training

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Employee involvement, information sharing and
worker voice

• EI can include downward communication, upward
  problem solving and project teams
• EI is important because
• It conveys an important message about trust
• Employee suggestions are important for quality
  management
• Participation provides management with legitimacy
• Measures for EI include
• Regularity of team briefs
• Regularity of attitude surveys
• age trained in group problem solving
• Wide range of measures make comparison of results
  difficult

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Self-managed teams/teamworking

• Identified by many managers as a fundamental
  component of organisation success
• Seen as leading to better decisions
• Measures used include
• Proportion of workers in teams
• Use of formal teams
• Distinguish between on-line and off-line teams?
• Difficulties of self-managed teams?

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High compensation contingent on performance

• Pfeffer argues there are two elements
• Higher than average reward
• Performance-related reward
• UK studies more critical of PRP than US studies
• Measures used
• Access to incentive systems
• Appraisal used to determine compensation

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Reduction of status differences/harmonisation

• Used to convey messages about employee value
• Encouraging an open culture
• Egalitarian symbols eg uniforms, canteens, car
  parking
• Share ownership may also be important
• Measures used
• Existence of employee share schemes
• Commitment to achieving single status

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Bundles of human resource practices

• EI/employment security/reduction of differentials
• Teamworking/incentives/training
• Selection/flexibility/internal promotion
• The more the better but how many are needed?
• What happens if achievement of one contradicts
  another?

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HRM and performance the USA studies

• Huselid survey of 1,000 organisations concluded
  that the magnitude of the return for investments
  in high performance work practices is
  substantial
• Pfeffer argues that best practice HRM has the
  potential to have a positive impact irrespective
  of size, sector or country

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HRM and performance studies in the UK

• Wests research in the NHS shows three practices
  have a strong impact on performance training,
  teamwork and appraisal
• Guest has looked at the extent of adoption of
  best practice HR and its effectiveness
• Guest concludes that research methods used impact
  on results
• Subjective measures lead to a positive message
• Objective measures produce a less consistent
  message

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Questions about the best practice performance
link

• Direction of causality
• Does HP management lead to better performance?
• Do profitable companies have more scope to
  introduce best practice/HP management?
• Little consistency in HR practices in the bundle
• Variation in proxies used to measure performance
• Dangers in relying on self-report scores from HR
  managers
• Doubts about how much autonomy organisations have
  in decision making

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Universal application of best practice HR?

• Pfeffer and Huselid argue for universality
• In the UK, Purcell stresses the need to
  understand where, when and how it is applied
• Marchington and Wilkinson express doubts about
  best practice at a conceptual level
• It works best on the assumption that employers
  have a long-term perspective
• Easier to engage in best practice HRM when labour
  costs form a low proportion of costs
• Is flexible employment compatible with best
  practice HRM?

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Critique in Beardwell, Holden and Claydon

• The validity of the research methods?
• Problems associated with inconsistencies in the
  models
• Direction of causality
• Applicability to organisations in highly
  competitive markets
• The underlying theme of unitarism

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Best-fit HRM

• Assesses the extent to which there is vertical
  integration between an organisations business
  strategy and its HRM policies and practices
• Demonstrate vertical integration through
• Linking business goals to individual objectives
• Measurement and rewarding of business goals

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Designing HRM to fit organisational goals

• How can HRM and business strategy be linked?
• Life cycle models
• Competitive advantage
• Strategic configuration
• All outside-in approaches

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Life cycle models (1)

• Start-up
• Need for committed, flexible staff
• Little formalised practice
• HR combined with other managerial tasks
• Growth
• Formal and systematic HR procedures
• Need for specialist expertise
• Maintenance of employee motivation and morale

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Life cycle models (2)

• Maturity
• golden age with high commitment practices
• May be followed by increasing focus on control of
  labour costs
• Doubts about sustainability of positive
  psychological contract
• Decline/renewal
• Rationalisation and redundancy
• Services contracted out

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Competitive advantage models

• Cost reduction
• Quality enhancement
• Innovation

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Cost reduction

• Resourcing
• Ad hoc
• Tight performance management
• Learning and development
• Poor or non-existent
• Employee relations
• Little EI or communication
• Reward management
• Low pay levels, no additional benefits
• HR function
• Lacking influence

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Quality enhancement

• Resourcing
• Sophisticated recruitment and selection
• Learning and development
• Extensive training, long-term focus
• Employee relations
• Well developed systems
• Reward management
• Competitive pay and benefits
• HR function
• Potentially large influence

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Innovation

• Resourcing
• Focus on competencies and transferable skills
• Learning and development
• Provided if necessary, individual takes
  responsibility
• Employee relations
• Informal communications
• Reward management
• Cafeteria reward system, some share ownership or
  profit sharing
• HR function
• Advice and support, potentially some influence

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Strategic configurations and HRM

• Defenders an internal employment system
• Concentrate on efficiency in current products and
  markets
• Have narrow product ranges
• Have a centralised organisation structure
• Prospectors market employment system
• Inclined to change and adaptability
• Explores new product markets and opportunities
• Less reliant on existing skills and abilities

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Defenders internal employment system

• Resourcing
• Careful recruitment and selection
• Well-developed internal labour markets
• Learning and development
• Extensive with long-term focus and career ladders
• Employee relations
• Emphasis on co-operation and involvement
• Reward management
• Clear grading structures, share ownership
• HR function
• Well established, potentially large influence

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Prospectors market employment system

• Resourcing
• Buy in labour for specific tasks
• Learning and development
• Extensive , individuals take responsibility
• Employee relations
• Emphasis on responsibility and performance
• Reward management
• Pay determined by external market comparison
• Bonus and incentive systems
• HR function
• Limited HR role

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Limitations of best fit models (Marchington and
Wilkinson)

• Models are deterministic and top down in
  orientation
• There are multiple influences on organisations
• Managers do not have complete control over
  workers
• Models are static
• Lack of attention to institutional forces
• Categorisation of real organisations can be
  difficult

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Limitations of best-fit models (Beardwell, Holden
and Claydon)

• Reliance on rational planning approach
• Lack of sophistication in description of generic
  strategies
• Employee interests ignored
• Lack of internal context

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Resource based view of the firm

• RBV analyses strategy from inside-out
• Focuses on internal resources and the unique
  factors which enable organisations to remain
  viable
• Competitive advantage requires four attributes
• Value the resource makes a difference
• Rarity there is a shortage of these resources
• Imperfect imitability difficult for other
  employers to copy these resources
• Non-substitutable resources cannot be rendered
  obsolete or unnecessary

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Converting HR strategy into goals

• Why might managers and supervisors not implement
  HR strategies in the way envisaged?
• Lack of identification with employer goals
• Problems of work overload
• Limited investment in training and development
• Value of retaining some flexibility at workplace
  level
• Failure to apply organisational goals

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Conclusions

• Best practice HRM suggests there is one best way
  in which HRM should be delivered and that this
  has a positive impact on organisational
  performance
• There are grounds for arguing that this model
  cannot apply to all workforces
• Best fit HRM is the idea that HR practice should
  and does vary between organisations, depending on
  business strategy or product market circumstances
• The resource based view focuses on internal
  resources

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References and further reading

• Beardwell,J., and Claydon,T. (2007), Human
  resource management a contemporary approach,
  FT/Prentice Hall
• Boxall,P. and Purcell,J. (2000), Strategic human
  resource management where have we come from and
  where should we be going?, International Journal
  of Management Reviews, Vol 2, No 2, pp183-204
• Boxall,P. and Purcell,J. (2003),Strategy and
  human resource management, Palgrave Macmillan,
  London
• Guest,D., Michie,J., Conway,N. and Sheehan,M.
  (2003) Human resource management and performance,
  British Journal of Industrial Relations, Vol 41,
  No 2, pp291-314
• Marchington,M. and Wilkinson,A. (2005) Human
  resource management at work, CIPD, London
• Sisson,K. and Storey,J. (2000) The realities of
  human resource management, Open University Press,
  Milton Keynes