Our ideas of contemporary human resource management practices have foundations in the 1970s when in the United Kingdom we realised that we had to make our employment practices more flexible and our staff more competent in order to compete with the Japanese. Before the 1970s the function that dealt with people in a firm was known as ‘personnel’. The new title of ‘human resource management’ emphasised the idea of management and the concept of optimising the human resource in the firm to meet strategic objectives. In the 1980s Margaret Thatcher fought the unions and introduced the new era of right-wing politics and with it the dual focus of ‘individual’ and ‘markets’ that came to be known as the ‘enterprise culture’.
In the 80s came the idea that if management committed to the workforce then that workforce would return the necessary improvements in quality and efficiency to allow UK to compete. In the 80s we realised that trading on price alone was difficult because the countries of the ‘Tiger economy’ (Hong Kong, Singapore, Thailand and Malaysia and more recently China) had substantially lower cost bases. They would always be able to undercut us and we had instead to derive competitive advantage through people.
The ‘High Commitment’ HR Management Model
Entering the 90s, many considered that competition through people the only trading position. Firms in the UK needed to commit to their staff and the staff in turn would respond with buy-in to company goals and with the necessary product and service quality. It was also assumed that commitment would also buy flexibility and innovation in order to support the new competitive position. In short, firms needed to invest in their people. This polarisation led academics and practising consultants in human resource management to conclude that there was a single best way of managing people in the workplace. This ‘best practice’ focused on flat organisational structures, training and retaining, employee participation, job security, rewarding work and management styles embracing participative and distributed leadership. Today those HR consultants who push a single ‘best practice’ model most likely trained in the 80s and 90s and have not retrained since. There is no doubt that this high commitment model fits some firms today. There is also no doubt that this model has valuable, reusable attributes, but does it fit every firm?
Linking Business Strategy and HR Strategy
In answering this question about whether or not there is a single best practice human resource management model, we need to look at where we are now, what the Labour market and economy look like and what the strategy of today’s firms now is. The United Kingdom has, over the last 20 years, evolved its economy from the competitive position in the 80s and 90s and the result is the ‘hourglass’ labour market. The metaphor of the hourglass illustrates that at the top of the market there are many high-paid jobs in technology and banking whilst in the centre of the market there are few jobs of medium pay and at the bottom of the market there are again a large number of lower paid jobs in the service industry. Whilst much has been written on strategy, there are very few companies today who actually have a thought-through and considered business strategy. All firms do have something that, upon analysis, we would identify as a strategy albeit perhaps simply a series of implied values that are the bosses’ wishes that guide the firm. If we analyse these guiding strategies we will see that there are three broad strategic approaches.
The first is price leadership. Price leadership is an attempt by the firm to compete on price alone. This strategic position is particularly relevant in the emergent service sector. To do this the firm needs a low cost base and in this case the HR strategy must be to likewise minimise costs perhaps through the use of contract labour and traditional job design techniques that aim to break the job into simple tasks that can be learned by anyone thereby overcoming the problems of transient labour force. Such a strategy is typical of our supermarkets and hospitality industry where emphasis is on cost control to maximise short-term shareholder return. Firms in these areas would take their staff from the bottom of the hourglass. Price leadership (and with it the necessary cost control and resulting short-term financial gain) fits well with British company ownership today. Classically the medium-to-large British company is owned by the financial institutions and by venture capitalists who both expect quick returns on their investments. Human resource management practices therefore need to facilitate this.
The second strategy type is quality leadership. In this case the focus is on quality with management oriented towards team participation in an effort to root out error and have the consumer marvel in the buying experience. In this case the business embraces process engineering and encourages team participation to optimise these processes to achieve equality goal. Firms adopting this strategy would again take their staff from the bottom of the hourglass.
The third and final approach is innovation leadership and this fits well with firms in the technology and finance sectors. Innovation leadership demands high investment in staff training and takes a longer term approach to human resource management. Innovation leadership seeks to make long-term improvement and hence will focus on staff development and improvement centric performance appraisals. Compensation systems will emphasise equity purchase with the workforce buying into the company. With this strategy goes career development within the firm and the development of broad competences to fuel the required innovation. Firms adopting this strategy would more likely take their staff from the top of the hourglass.
Necessary HRM Strategies
In looking at what drives British firms today, we see three very different strategic approaches. In price leadership, competition requires the firm to have a low cost base. In quality leadership emphasis is on mastering repetitive tasks thereby producing a consistent high-quality product. And innovation leadership requires employees to push the boundaries. In discussing the necessary human resource management practices that fit each of these strategies we can look at one aspect, the performance appraisal, to emphasise the point. In the case of price leadership the appraisal will focus on short-term measures to root out cost without necessarily investing in staff development. In the case of quality leadership, the appraisal will focus on the team and the team’s ability to deliver. In the innovation leadership, staff would be measured for their creativity, team innovation and commitment to personal development illustrating the firm’s desire to deliver novel solutions. Each of these performance appraisals would take a very different form and line management, in running the performance appraisal, would take a very different approach to the appraisal meeting. Even in this single example there is no one single appraisal solution for the three strategic approaches.
In Conclusion: Enter the HRM Consultant
This simple example shows that no one size fits all in today’s human resource management. The human resource management consultant must first understand the client firm’s business, analysing the market and the firm’s approach to that market. The human resource management consultant must work with the client management team to develop an approach to HRM that fits with the firm’s business and with the management team’s aspirations. In turn the human resource management consultant must develop the necessary approach and discreet HRM interventions that will achieve the management team’s goals. Today no one size fits all. There is no ‘best practice’ HR management. The HR consultant must first and foremost be a business manager who understands what it is to run a company. Secondly they must have a large repertoire of approaches to human resource management and to determining organisational behaviour. Human resource management within a firm must be tailored to the business of that firm and not simply a replica ported from some other organisation. Through academic training and extensive experience, TimelessTime’s HR consultants have the necessary breadth of competence. Call us today to discuss how we can build an appropriate human resource management framework to match your business strategy.