International HRM

 INTERNATIONAL HUMAN RESOURCE MANAGEMENT

Everything you need to know about international human resource management. International human resource management is the process of employing, training and developing and compensating the employees in international and global organizations. Carefully analyze the article to find out more important facts & get sound knowledge of IHRM . 

Introduction – the HRM concept

 Human resource management (HRM) is concerned with all aspects of how people are employed and managed in organizations. It covers the activities of strategic HRM, human capital management, knowledge management, corporate social responsibility, organization development, resourcing (workforce planning, recruitment and selection and talent management), learning and development, performance and reward management, employee relations, employee well-being and the provision of employee services. It also has an international dimension. As described in Chapter 3, HRM is delivered through the HR architecture of systems and structures, the HR function and, importantly, line management. The practice of referring to people as resources as if they were any other factor of production is often criticized. Oster by and Coster  (1992: 31) argued that: ‘The term “human resources” reduces people to the same category of value as materials, money and technology – all resources, and resources are only valuable to the extent they can be exploited or leveraged into economic value.’ People management is sometimes preferred as an alternative, but in spite of its connotations, HRM is most commonly used.

The development of the HRM concept 

The term HRM has largely taken over that of ‘personnel management’, which took over that of ‘labor management’ in the 1940s, which took over that of ‘welfare’ in the 1920s (the latter process emerged in the munitions factories of the First World War). HRM largely replaced the human relations approach to managing people founded by Elton Mayo (1933) who based his beliefs on the outcome of the research project conducted in the 1920s known as the Hawthorne studies. Members of this school believed that productivity was directly related to job satisfaction and that the output of people would be high if someone they respected took an interest in them. HRM also shifted the emphasis away from humanism – the belief held by writers such as Likert (1961) and McGregor (1960) that human factors are paramount in the study of organizational behavior and that people should be treated as responsible and progressive beings.

An early reference to human resources was made by Bakke (1966). Later, Armstrong (1977: 13) observed that in an enterprise ‘the key resource is people’. But HRM did not emerge in a fully fledged form until the 1980s through what might be called its founding fathers. These were the US academics Charles Fombrun and his colleagues in the ‘matching model’, and Michael Beer and his colleagues in the ‘Harvard framework’

In the UK they were followed by a number of commentators who developed, explained and frequently criticized the concept of human resource management. Legge (2005: 101) commented that: ‘The term [HRM] was taken up by both UK managers (for example, Armstrong, 1987; Fowler, 1987) and UK academics’. Hendry and Pettigrew (1990: 18) stated that HRM was ‘heavily normative from the start: it provided a diagnosis and proposed solutions’. They also mentioned that: ‘What HRM did at this point was to provide a label to wrap around some of the observable changes, while providing a focus for challenging deficiencies – in attitudes, scope, coherence, and direction – of existing personnel management’ (ibid: 20). Armstrong (1987: 31) argued that:

HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel management, but as usually   perceived, at least it has the virtue of emphasizing the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufficient attention has been paid to it in many organizations.

However, commentators such as Guest (1987) and Storey (1995) regarded HRM as a substantially different model built on unitarism  (employees share the same interests as employers), individualism, high commitment and strategic alignment (integrating HR strategy with the business strategy). It was also claimed that HRM was more holistic than traditional personnel management and that, importantly,

it emphasized the notion that people should be regarded as assets rather than variable costs.

 

The conceptual framework of HRM 

HRM as conceived in the 1980s had a conceptual framework consisting of a philosophy underpinned by a number of theories drawn from the behavioural sciences and from the fields of strategic management, human capital and industrial relations. The HRM philosophy has been heavily criticized by academics as being managerialist and manipulative but this criticism has subsided, perhaps because it became increasingly evident that the term HRM had been adopted as a synonym for what used to be called personnel management. As noted by Storey (2007: 6): ‘In its generic broad and popular sense it [HRM] simply refers to any system of people management.’

HRM practice today 

HRM practice is no longer governed by the original philosophy – if it ever was. It is simply what HR people and line managers do. Few references are made to the HRM conceptual framework. This is a pity – an appreciation of the goals, philosophy and underpinning theories of HRM and the various HRM models HRM defined Human resource management can be defined as a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organizations. It was defined by Boxall and Purcell (2003: 1) as ‘all those activities associated with the management of employment relationships in the firm’. A later comprehensive definition was offered by Watson (2010: 919): 

HRM is the managerial utilization of the efforts, knowledge, capabilities and committed behavior which people contribute to an authoritatively co- ordinated human enterprise as part of an employment exchange (or more temporary contractual arrangement) to carry out work tasks in a way which enables the enterprise to continue into the future. provides a sound basis for understanding and developing HR practice. 

The goals of HRM are to: 

● support the organization in achieving its objectives by developing and implementing human resource (HR) strategies that are integrated with the business strategy (strategic HRM); 

● contribute to the development of a high-performance culture; 

● ensure that the organization has the talented, skilled and engaged people it needs; 

● create a positive employment relationship between management and employees and a climate of mutual trust;

● encourage the application of an ethical approach to people management.

The philosophy of human resource management 

Doubts were expressed by Noon (1992) as to whether HRM was a map, a model or a theory. But it is evident that the original concept could be interpreted as a philosophy for managing people in that it contained a number of general principles and beliefs as to how that should be done. The following explanation of HRM philosophy was made by Legge (1989: 25) whose analysis of a number of HRM models identified the following common themes: 

That human resource policies should be integrated with strategic business planning and used to reinforce an appropriate (or change an inappropriate) organizational culture, that human resources are valuable and a source of competitive advantage, that they may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act flexibly in the interests of the ‘adaptive organization’s’ pursuit of excellence,

Storey (2001: 7) noted that the beliefs of HRM included the assumptions that it is the human resource that gives competitive edge, that the aim should be to enhance employee commitment, that HR decisions are of strategic importance and that therefore HR policies should be integrated into the business strategy.

Underpinning theories of HRM

 The original notion of HRM had a strong theoretical base. Guest (1987: 505) commented that: ‘Human resource management appears to lean heavily on theories of commitment and motivation and other ideas derived from the field of organizational behaviour.’ A number of other theories, especially the resource-based view, have contributed to the understanding of purpose and meaning of HRM. These theories are summarized below.

 Commitment 

The significance in HRM theory of organizational commitment (the strength of an individual’s identification with, and involvement in, a particular organization) was highlighted in a seminal Harvard Business Review article by Richard Walton (1985).

Motivation

 Motivation theory explains the factors that affect goal-directed behavior and therefore influences the approaches used in HRM to enhance engagement (the situation in which people are committed to their work and the organization and are motivated to achieve high levels of performance).

 The resource-based view 

Resource-based theory expressed as ‘the resource based view’ states that competitive advantage is achieved if a firm’s resources are valuable, rare and costly to imitate. It is claimed that HRM can play a major part in ensuring that the firm’s human resources meet these criteria.

Organizational behavior theory

 Organizational behavior theory describes how people within their organizations act individually or in groups and how organizations function in terms of their structure, processes and culture. It therefore influences HRM approaches to organization design and development and enhancing organizational capability (the capacity of an organization to function effectively in order to achieve desired results).

 Contingency theory 

Contingency theory states that HRM practices are dependent on the organization’s environment and circumstances. This means that, as Paauwe (2004: 36) explained: ‘The relationship between the relevant independent variables (eg HRM policies and practices) and the dependent variable (performance) will vary according to the influences such as company size, age and technology, capital intensity, degree of unionization, industry/sector ownership and location.

’ Contingency theory is associated with the notion of fit – the need to achieve congruence between an organization’s HR strategies, policies and practices and its business strategies within the context of its external and internal environment. This is a key concept in strategic HRM.

Institutional theory

 Organizations conform to internal and external environmental pressures in order to gain legitimacy and acceptance.

 Human capital theory 

Human capital theory is concerned with how people in an organization contribute their knowledge, skills and abilities to enhancing organizational capability and the significance of that contribution.

 Resource dependence theory 

Resource dependence theory states that groups and organizations gain power over each other by controlling valued resources. HRM activities are assumed to reflect the distribution of power in the system.

AMO theory 

The ‘AMO’ formula as set out by Boxall and Purcell (2003) states that performance is a function of Ability + Motivation + Opportunity to Participate. HRM practices therefore impact on individual performance if they encourage discretionary effort, develop skills and provide people with the opportunity to perform. The formula provides the basis for developing HR systems that attend to employees’ interests, namely their skill requirements, motivations and the quality of their job.

 Social exchange theory 

Employees will reciprocate their contribution to the organization if they perceive that the organization has treated them well.

 Transaction costs theory 

Transaction costs economics assumes that businesses develop organizational structures and systems that economize the costs of the transactions (interrelated exchange activities) that take place during the course of their operations.

Agency theory 

Agency theory states that the role of the managers of a business is to act on behalf of the owners of the business as their agents. But there is a separation between the owners (the principals) and the agents (the managers) and the principals may not have complete control over their agents. The latter may therefore act in ways that are against the interests of those principals. Agency theory indicates that it is desirable to operate a system of incentives for agents, ie directors or managers, to motivate and reward acceptable behavior.

Models of HRM 

The most familiar models defining what HRM is and how it operates are as follows.

 The matching model of HRM

Fombrun et al (1984) proposed the ‘matching model’, which indicated that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy. This point was made in their classic statement that: ‘The critical management task is to align the formal structure and human resource systems so that they drive the strategic objectives of the organization’ (ibid: 37). Thus they took the first steps towards the concept of strategic HRM. 

The Harvard model of HRM

 Beer et al (1984) produced what has become known as the ‘Harvard framework’. They started with the proposition that: ‘Human resource management (HRM) involves all management decisions and actions that affect the nature of the relationship between the organization and employees – its human resources’ (ibid: 1). They believed that: ‘Today... many pressures are demanding a broader, more comprehensive and more strategic perspective with regard to the organization’s human resources’ (ibid: 4). They also stressed that it was necessary to adopt ‘a longer term perspective in managing people and consideration of people as a potential asset rather than merely a variable cost’ (ibid: 6). Beer and his colleagues were the first to underline the HRM tenet that it belongs to line managers. They suggested that HRM had two characteristic features: 1) line managers accept more responsibility for ensuring the alignment of competitive strategy and HR policies; 2) HR has the mission of setting policies that govern how HR activities are developed and implemented in ways that make them more mutually reinforcing.

Contextual model of HRM 

The contextual model of HRM emphasizes the importance of environmental factors by including variables such as the influence of social, institutional and political forces that have been underestimated in other models. The latter, at best, consider the context as a contingency variable. The contextual approach is broader, integrating the human resource management system in the environment in which it is developed. According to Martin-Alcázar et al (2005: 638): ‘Context both conditions and is conditioned by the HRM strategy.’ A broader set of stakeholders is involved in the formulation and implementation of human resource strategies that is referred to by Schuler and Jackson (2000: 229) as a ‘multiple stakeholder framework’. These stakeholders may be external as well as internal and both influence and are influenced by strategic decisions . 

The 5-P model of HRM

 As formulated by Schuler (1992) the 5-P model of HRM describes how HRM operates under the five headings of: 

1 HR philosophy – a statement of how the organization regards its human resources,the role they play in the overall success of the business, and how they should be treated and managed. 

2 HR policies – these provide guidelines for action on people-related business issues and for the development of HR programmes and practices based on strategic needs. 

3 HR programes – these are shaped by HR policies and consist of coordinated HR efforts intended to initiate and manage organizational change efforts prompted by strategic business needs. 

4 HR practices – these are the activities carried out in implementing HR policies and programes. They include resourcing, learning and development, performance and reward management, employee relations and administration. 

5 HR processes – these are the formal procedures and methods used to put HR strategic plans and policies into effect.

European model of HRM 

Brewster (1993) described a European model of HRM as follows:

● environment – established legal framework; 

● objectives – organizational objectives and social concern – people as a key resource; 

● focus – cost/benefits analysis, also environment; 

● relationship with employees – union and non-union; 

● relationship with line managers – specialist/ line liaison; 

● role of HR specialist – specialist managers – ambiguity, tolerance, flexibility. The main distinction between this model and what Brewster referred to as ‘the prescribed model’ was that the latter involves deregulation (no legal framework), no trade unions and a focus on organizational objectives but not on social concern. As set out by Mabey et al (1998: 107) the characteristics of the European model are: 

● dialogue between social partners; 

● emphasis on social responsibility;

● multicultural organizations; 

● participation in decision-making; 

● continuous learning.

The hard and soft HRM

 models Storey (1989: 8) distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that: ‘The hard one emphasizes the quantitative, calculative and business-strategic aspects of managing human resources in as “rational” a way as for any other economic factor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communication, motivation and leadership.’ However, it was pointed out by Keenoy (1997: 838) that ‘hard and soft HRM are complementary rather than mutually exclusive practices’. Research in eight UK organizations by Truss et al (1997) indicated that the distinction between hard and soft HRM was not as precise as some commentators have implied. Their conclusions were as follows.

HRM today

 As a description of people management activities in organizations the term HRM is here to stay, even if it is applied diversely or only used as a label to describe traditional personnel management practices. Emphasis is now placed on the need for HR to be strategic and businesslike and to add value, ie to generate extra value (benefit to the business) by the expenditure of effort, time and money on HRM activities. There have been plenty of new interests, concepts and developments, including human capital management, engagement, talent management, competency-based HRM, e-HRM, high performance work systems, and performance and reward management. But these have not been introduced under the banner of the HRM concept as originally defined. 

HRM has largely become something that organizations do rather than an aspiration or a philosophy and the term is generally in use as a way of describing the process of managing people. A convincing summary of what HRM means today, which focuses on what HRM is rather than on its philosophy, was provided by Peter Boxall, John Purcell and Patrick Wright (2007), representing the new generation of commentators. 

conclusion

Even if the rhetoric of HRM is ‘soft’, the reality is almost always ‘hard’, with the interests of the organization prevailing over those of the individual. In all the organizations, we found a mixture of both hard and soft approaches. The precise ingredients of this mixture were unique to each organization, which implies that factors such as the external and internal environment of the organization, its strategy, culture and structure all have a vital role to play in the way in which HRM operates .

 Truss et al (1997: 70)

References

Armstrong, M (1977) A Handbook of Personnel Management Practice, 1st edn, London, Kogan Page 

Armstrong, M (1987) Human resource management: a case of the emperor’s new clothes, Personnel Management, August, pp 30–35

Armstrong, M (2000) The name has changed but has the game remained the same? Employee Relations, 22 (6), pp 576–89

 Bakke, E W (1966) Bonds of Organization: An appraisal of corporate human relations, Archon, Hamden

 Beer, M, Spector, B, Lawrence, P, Quinn Mills, D and Walton, R (1984) Managing Human Assets, New York, The Free Press 

Boxall, P F (2007) The goals of HRM, in (eds) P Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford, Oxford University Press, pp 48–67

 Boxall, P F and Purcell, J (2003) Strategy and Human Resource Management, Basingstoke, Palgrave Macmillan

Boxall, P F, Purcell, J and Wright, P (2007) Human resource management: scope, analysis and significance, in (eds) P

Boxall, J Purcell and P Wright, Oxford Handbook of Human Resource Management, Oxford, Oxford University Press, pp 1–16 

Brewster, C (1993) Developing a ‘European’ model of human resource management, The International Journal of Human Resource Management, 4 (4), pp 765–84