FREE ESSAY ON HRM : A COMPARISON OF HRM STRATEGIES IN TWO LOCAL COMPANIES

HRM : A COMPARISON OF HRM STRATEGIES IN TWO LOCAL COMPANIES

1 Introduction
It is widely acknowledged and accepted in business that the sources of sustained
competitive advantage lie not only in access to finance or capital, but within the
organisation, in people and processes capable of delivering business strategies such as
customer satisfaction or rapid innovation. (Lundy, 1994). A strategic approach to human
resource management (HRM) ensures that a firm's human capital contributes to the
achievement of its business objectives.
Various influential writers have expressed differing opinions on the importance of
employees as a direct influence on an organisations competitive advantage. Although no
firm agreement has been reached, it is generally accepted that the use of strategic human
resource management (SHRM), (i.e. proactively changing and implementing a series of
internal HR policies to ensure effective contribution from a firms human capital to the
achievement of business objectives), is relevant within HR intensive firms.
2 Perspectives on HRM
Strategic human resource management is often used as the basic framework for the
investigation of human resource strategy and its relation to the organisations
performance. Three main theories have been focused on by the top writers on the subject.
These are the universalistic, resource-based and configurational perspectives of HRM.
Briefly these are:
2.1 Universalistic theory
Universalistic perspective is the simplest and most widely used model in literature.
Basically, the follower of the universalistic view seeks to instill 'best practices'.
That is, they believe some HR practices are always better than others and that firms
adopting these practices will experience an improved performance.
Seven practices have been identified as 'best'. These are: 
Good internal career opportunities
Formal training systems
Results and behavior based appraisals
Profit sharing plans
Strong employment security
Voice mechanisms, e.g. participation in decision making
Tightly defined jobs
A number of authors have spoken in support of this theory. Leonard (1990) found that
firms with long-term incentive plans in place for their executives had greater increases
in return on equity over a four-year period than other organisations. Abowd (1990) also
proved that the degree to which managerial remuneration was tied to their firm's
performance was strongly correlated with future financial performance.
There are however a number of critics of the universalistic theory. The first and most
obvious fault is that a lot of organisations that do not adopt 'best practices' manage to
survive in, and even lead their markets. It is also obvious that any competitive
advantage gained through the use of 'best practices' will be hard to sustain, as
competitors will be quick to catch on and imitate. It is apparent that the universalistic
approach is not suitable to all types of business. It has even been suggested by some
prolific thinkers, that only profit sharing, result-orientated appraisals and employee
security could have any strong relationship with important measures of performance.
2.2 Resource-based theory
The resource-based theorists hypothesize that an organisation needs to adopt specific HR
policies and practices for different business strategies. Thus, in order to be effective,
an organisations HR policies must be consistent with other aspects of the company. An
organisations strategy thus demands certain skills and behavioral requirements for
success, and the use of HR practices can control employee behavior to be consistent with
this strategy. An organisation can establish HR systems and practices to ensure that
staff with the required abilities are hired and retained, and then motivated to behave in
ways consistent with the business strategy (Fama & Jenson 1983).
2.3 Configurational theory 
The configurational theory is concerned with how patterns of multiple planned human
resource activities can achieve the organizations goals. To achieve this, an HR system
has to be developed that achieves both an internal consistency with the firm's HR
practices, but also fits in with other organisational characteristics such as a firm's
business strategy.
Miles and Snow (1984) developed a series of equally effective combinations of HR
practices and they argued that different sets of practices are suited for different firm
strategies. MacDuffie (1995) derived specific configurations of HR practices that
enhanced firm performance in a series of case studies.
The configurational perspective is still a very speculative framework without much
factual support. Additional theory development and testing is necessary to validate the
model.
All of these theories have been criticized. In particular, despite numerous studies of
the universalistic model, the evidence in support of the theory remains inconclusive.
Guest (1997) concludes that although the research evidence suggests that HRM does work,
this is 'a skeletal finding' which needs 'more flesh on the bones'.
The resource-based view of the firm provides an alternative approach to the question of
human resource management and organisational performance. From this perspective it is the
human resource, or human capital in which the firm invests which has the potential to
create superior performance. Thus, in contrast to the universalistic models of HRM and
competitive advantage, the emphasis is shifted from the practices that the firm adopts to
the people it employs. The resource-based view also differs from the universalistic
approach to HRM in that it is company focused, rather than environment focused. Neither
does it rely on the purely reactive notions of the configurational model.
3 HRM in organisational success
A lot of writing on strategic HRM has emphasized the significance of HRM and people as a
source of competitive advantage. (Lawler, 1991; Barney 1991; Snell et al 1996) Together
they suggest that greater emphasis should be placed on the development of human capital.
This is essentially because the more management believe that HRM contributes towards
success as a company, the more its role will be recognized as important, and the more it
will be integrated into the companies strategic long-term planning.
In our current turbulent environment, two of the most critical factors for effective
organisations are quality and service. To be successful, firms must be flexible enough to
shift production and resources to meet changing markets and customer demand. They must
therefore have employees that possess the skill and training to perform a variety of
different tasks. Historically, a lack of employee flexibility has been the cause of the
downfall of a number of massive organisations. A good example of the ill effects that
unprepared and poorly controlled employees can have is the demise of Ford UK. Ford has
struggled for years to educate their employees into a flexible mold, in an attempt to
stem the tide of advancement from foreign firms. The poor quality of HRM at Ford
prevented management from adapting to match the cost effectiveness and quality of certain
Japanese and German car firms. The famous Ford employee quote, "I'm not doing that! It's
not in my job description.", sums up the inherent lack of flexibility in the culture of
Ford's employees. This culture, predictably has ended with the halting of the majority of
Fords manufacture in the UK, and moves to countries with more 'readily-moldable' staff.
Snell et al (1996) argued that adaptation of so-called flexible forms of work is
correlated with firms operating in a competitive market, having technology which requires
high levels of skill, engaging in customized production, and following a strategy that
emphasizes variety and quality an contrast to low cost. Thus, offering skilled employees
high level of involvement, autonomy, training, good wages and benefits can be seen as a
way to attract, motivate, and keep qualified employees who will be committed to the
long-term goals of the company.
It is often argued that the effects of a flexible, competent and committed workforce
results in a highly productive organisation, which in turn gives the employees job
security and a decent standard of living. Thus, the relationship between HRM strategy and
company performance is heavily linked with labour market flexibility. It is essential for
a company to have staff that are flexible in every different way, if they are going to
respond competitively to the market. Begin (1992) identified four different types of
flexibility required. External numerical flexibility - the freedom to adjust the size of
the work force. Internal numerical flexibility - the ability to adjust the working hours
of the employees. Functional flexibility - the freedom to deploy workers across different
tasks within the company. 
Financial flexibility - the ability to adjust employee rewards, i.e. pay, bonuses, etc.
Looking back to the Ford example, you can see that the management did not have the
freedom to adjust any of these without risking extreme actions such as walk-outs, which
would reduce productivity to an extent where it would have been more efficient to
continue without change. 
A good example of competitive advantage being increased due to strategic human resource
management is that of ICL Ltd. ICL were formed in the 1970's at the very beginning of the
IT revolution. Originally, they constructed their own systems and provided IT solutions
to industry. From the early 1990's their profit levels dropped steadily until 1997 when
drastic action was taken. HRM consultants were hired who suggested an adoption of a 'best
practice' policy. The company was severely shaken up and remolded as a forerunner of good
HRM practice. Several best practices were adopted, including better internal career
opportunities, more intensive staff training systems, bi-yearly performance appraisals
with a bonus package for staff who had shown development since the last appraisal, a
profit sharing scheme, and a radical change in working methods by the formation of small
project groups. In the past three years, profitability has increased dramatically, staff
turnover has decreased and productivity per employee is higher than it ever has been.
This shows just how important an effective HR function is at influencing the success of
an organisation.
Peter and Waterman (1982) carried out a study of successful American companies and
identified a number of characteristics common among them all. One of these
characteristics was productivity through people. This is where the company sees their
employees as a key resource, and vital to the success of the firm. The contribution of
the staff to the organisation was valued as a key provider of competitive advantage to
each firm studied. Another common characteristic was what they termed 'simultaneous
loose-tight properties'. This basically means the company values are strongly emphasized
at all times, but staff were given considerable freedom within these, and errors were
tolerated. 
They also identified a shift in the importance of corporate culture from bureaucratic
structural based working to the style and skills of their workforce. Four key factors
relating to excellence were discovered. These are concern for customers, innovation,
attention to people and a strong leadership. All the firms studied that displayed these
characteristics were found to be highly productive class leaders. 
3 Conclusion
There are a great many theories and practices believed in by HRM writers. What is
apparent out of all these different models is that strategic human resource management is
vital to the ongoing success of an organisation in today's highly competitive market
place.
It is apparent that all of the HRM models discussed (universalistic, resource-based,
configurational) are relevant and useful to organisations. The methods used just depend
on the size and structure of each company. It is widely accepted, except in monopoly
situations, that the key to having happy customers is to employ staff that treat them
well. If your staff are happy with the organisation they are going to project a good
image to the consumers, thus attracting more business. So, how do you get happy staff?
With the use of strategic HRM. If you can obtain employees who are sufficiently trained
for their role, who understand that if they perform well they will receive a bountiful
remuneration, along with the chance to better their position within the company, they
will perform to their absolute best for you. Peter and Waterman (1982) discovered that
the singular most outstanding aspects of all the companies studied in their report was an
intelligent, well-trained flexible workforce. This goes to show the undeniable gains made
possible to industry through strategic use of human resource management.
Bibliography
5 Bibliography
? Achieving corporate success through people, Burn, 1998
? Building competitive advantage, Snell & Bateman, 1999
? Building the competitive workforce: Investing in human capital for corporate success,
Wovis, 1993
? Business driven HRM, Hussey, 1996
? HRM: A contemporary perspective, Beardwell & Holden, 1997
? HRM trends and challenges, Walton & Lawrence, 1985
? Human Resource Management, Torrington & Hall, 1995
? Working for Ford, Beynon, 1988
? People Management journal
? HRM Human Resources - Internet guide to Human Resource Management
http://guest.btinternet.com/~alan.price/hrm/site.htm