Strategic Human Resource Management – Summary
Chapter 2 – SHRM and Context
Organisational fit: the firm to standardize employee development and increase employee
flexibility.
Pfeffer’s 7 best practices:
1. Selective recruitment and selection: the focus within this HR practice is on the
selective part of it and refers to a sophisticated way of trying to recruit and select the
best person for the job and the organisation. involve a combination of different
techniques, including intelligence tests, integrity tests, assessment centres and
structured interviews with HR managers, line managers and employees with whom
trainees are supposed to work in their first assignment
2. Extensive training: employee development training programs outside of the
organisation, training on the job, e-Learning etc.
3. Performance-related pay (PRP): linked to the profits of an organisation and linked to
individual and team performance, and the use of yearly bonuses for the best-
performing employees in the department.
4. Teamworking: with autonomy and self-responsibility in work design and planning for
a group of employees. It’s a way to break through the hierarchical model and
decentralise responsibility.
5. Information sharing and communication: the latter refers to the importance of the
CEO’s involvement with and commitment to major organisational changes.’’’’’’’’’’’’
6. Reduction of status differences: through avoiding status symbol linked to hierarchical
positions separate elevator for top managers. Private parking spots etc.
7. Employment security: employee benefits providing insurance for e.g., unemployment,
death for employees in their families
Pfeffer’s best-practice proposition: one size fits all in HRM empirical supported but also
criticized for its lack of attention to contextual factors including national differences with
regard to labour legislation, sector differences, the nature of business, the size of a firm and
different employee groups. (Universalistic)
The strength of the best-practice proposition: simplicity and clarity
Contrast: the best-fit proposition HRM’s success depends on the alignment of it with the
organisational context. It stresses the contextual embeddedness of HRM in organisations.
According to this proposition success can only be achieved through the appropriate fit
between HRM and its context. (Context-dependent).
Context: represents the set of facts or circumstances that surrounds the organisation.
- Internal context: represents the organisation’s unique history, the administrative
heritage and organisational culture.
- External context: puts pressure on an organisation and forces it to adapt its strategy
and decision making.
There are 2 general mechanisms that determine the external context of an organisation:
market mechanisms and institutional mechanisms.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
, The business model: the way an organisation manages its business to make money.
An optimal fit between HRM and the context can positively affect the business model and the
organisation’s success.
Strategy: generally defined by an organisation’s intention to achieve certain goals through
planned alignment (fit) between the organisation and its environment.
Furthermore, strategy is also about the embeddedness and implementation of plan at lower
levels of the organisation and with involvement of multiple actors.
Optimal strategy includes:
- A fit between HRM and the context
Another important concept in strategy definition is ‘goal’. Organisations aim for the
achievement of certain goals. Goals can be defined in narrow terms and in broader terms.
Alignment or fit are two concepts in the strategy definition: more specifically the
alignment or fit between the organisation and its environment. Alignment and fit refer to the
principle of matching elements.
The organisation refers to the social, legal and economic entity that exists for a certain
purpose. E.g. delivery services, manufacturing products or transporting goods.
SHRM: is focused on the alignment or fit between the strategy of an organisation and the HR
strategy of that organisation.
Business strategy: the systems of the firm’s important choices, a system that could be well
integrated around common concerns or which might have various links and foul-ups (Boxall
and Purcell).
HR strategy: one of the functional silos and the linkage between the business strategy and the
HR strategy.
Market mechanism: include the degree of competition between organisations in terms of
products, services, technology, and people. PMT dimension (products, markets, technology)
Paauwe.
Institutional mechanisms: represents several pressures that stem from legislation, protocols,
and procedures, routines, habits, norms and values, and social-cultural issues. SCL dimension
(social, cultural, and legal).
General environment: represents all the market and institutional mechanisms that affect all
organisations in a country.
Population or organisational field: it’s a community of organisations that partakes of a
common meaning system and whose participants interact more frequently or fatefully with
one another that with actors outside the field.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
, The population in which an organisation operates is mainly the sector with its competitors, but
it may also include suppliers and other types of organisations.
Deephouse distinction between general and population is relevant because it acknowledges
potential external factors that affect all organisations in a country versus potential external
factors that only affect the organisations in a population.
Strategic contingency approaches: emphasizes the impact of internal contingencies (firm
size, firm history and capital intensity) and external contingencies (degree of unionisation and
legislation) on the shaping and structuring of organisations.
Best-fit models: strategic contingency approaches with the strategic management typology of
competitive strategies by Porter – distinguishing cost leadership, differentiation and focus
strategies.
Strategic contingency approaches showed that certain contextual factors affect the shaping of
an organisation.
Schuler & Jackson: cost leaders’ strategies can be translated in HRM characterised by few and
simple tasks, few skills required to do the job, narrow career paths etc.
the two most common forms of fit in these HR approaches are strategic/vertical fit and
internal/horizontal fit.
Strategic/vertical fit: refers to that part of the best-fit school that assumes a necessary
alignments between the overall business strategy and the HR strategy.
Strategic/vertical fit has many faces and is modelled in different ways in which a distinction is
made between 4 linkages:
- Administrative linkage: between strategy and HRM represents the lowest level of
integration. It could be argued that organisations that incorporate this format have no
linkage between the business strategy and their HR strategy.
- On-way linkage: can be found in organisations where the HR strategy is derived from
the overall business strategy. In this ideal type, the HR strategy is affected by the
overall business strategy, but the relationship is only one way. A cost-reduction
strategy might result in certain HR interventions for goal achievement.
- Two-way linkage: reprents a potential model in which HR experts determine certain
external (or internal) developments that are put on the table of the board of directors.
These two-way HR issues can become part of the overall business strategy, reflected
in focus on employee attraction and retention.
- Integrative linkage: represents full alignment of HRM and strategy. Part on an
integrative linkage is the position of the HR director, who has a seat on the high table.
Internal/horizontal fit: reflects the link between individual HR practices and it thought to be
crucial for gaining success as well as the strategic fit.
HR system approaches: a general school of thought within HRM that builds on the ideas of
internal fit. An HR system is defined as a coherent and consistent set of HR practices that
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
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, combined together results in higher organisational performance that the sum of the effects of
using each HR practice separately.
The underlying idea of the system approach is that linking HR practices strengthens the HR
strategy and philosophy of an organisation, signalling the organisation’s intentions and aims
through the different elements of people management.
Recruitment and selection: can be used to signal the type of desired new employees in
terms of their quality and their attitudes.
Socialised: newcomers can be socialised in a way that fits the organisation’s strategy and
culture.
Training and reward system: the socialisation process can be strengthened by firm-specific
training and reward system.
Deadly combination: misfit between HR practices. These deadly combinations represent
combinations of HR practices that affect each other negatively.
Organisational fit: refers to the necessary fit between the HR strategy, policies and practices
on the other hand and on the other organisational systems, on the other. The other
organisational system includes the production system, the communication and information
system, the technological system, R&D department, marketing department, the financial
system and the legal system.
Environmental fit: is focused on the link between the HR strategy and the institutional
environments of an organisation. Organisations operate in different institutional contexts.
New institutionalism: this socio-economic theory argues that organisations are confronted
with both market mechanisms and institutional mechanisms. It also claims there are other
reasons for homogeneity among organisations that competition: institutional mechanisms.
3 types of institutional mechanisms:
- Coercive mechanisms: stem from legislation and procedures include national labour
legislation e.g. working hours and working conditions.
- Normative mechanisms: have their origins in the professions of employees.
Generally embedded in the employees’ professional norms and routines.
- Mimetic mechanisms: result of uncertainty or fashion. It’s focused on the general
tendency of organisations to copy/imitate other in times of uncertainty or as a result of
a hype.
The market mechanisms: reflect on the elements of competition between organisations
operating in the same market. Organisations compete for resources, customers, financiers,
shareholders and employees.
From a macroeconomic perspective competition creates more homogeneity among the
competing organisations because successful practices will be copied and implemented
resulting in a new equilibrium.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
Downloaded by Abdra Sree ()
Chapter 2 – SHRM and Context
Organisational fit: the firm to standardize employee development and increase employee
flexibility.
Pfeffer’s 7 best practices:
1. Selective recruitment and selection: the focus within this HR practice is on the
selective part of it and refers to a sophisticated way of trying to recruit and select the
best person for the job and the organisation. involve a combination of different
techniques, including intelligence tests, integrity tests, assessment centres and
structured interviews with HR managers, line managers and employees with whom
trainees are supposed to work in their first assignment
2. Extensive training: employee development training programs outside of the
organisation, training on the job, e-Learning etc.
3. Performance-related pay (PRP): linked to the profits of an organisation and linked to
individual and team performance, and the use of yearly bonuses for the best-
performing employees in the department.
4. Teamworking: with autonomy and self-responsibility in work design and planning for
a group of employees. It’s a way to break through the hierarchical model and
decentralise responsibility.
5. Information sharing and communication: the latter refers to the importance of the
CEO’s involvement with and commitment to major organisational changes.’’’’’’’’’’’’
6. Reduction of status differences: through avoiding status symbol linked to hierarchical
positions separate elevator for top managers. Private parking spots etc.
7. Employment security: employee benefits providing insurance for e.g., unemployment,
death for employees in their families
Pfeffer’s best-practice proposition: one size fits all in HRM empirical supported but also
criticized for its lack of attention to contextual factors including national differences with
regard to labour legislation, sector differences, the nature of business, the size of a firm and
different employee groups. (Universalistic)
The strength of the best-practice proposition: simplicity and clarity
Contrast: the best-fit proposition HRM’s success depends on the alignment of it with the
organisational context. It stresses the contextual embeddedness of HRM in organisations.
According to this proposition success can only be achieved through the appropriate fit
between HRM and its context. (Context-dependent).
Context: represents the set of facts or circumstances that surrounds the organisation.
- Internal context: represents the organisation’s unique history, the administrative
heritage and organisational culture.
- External context: puts pressure on an organisation and forces it to adapt its strategy
and decision making.
There are 2 general mechanisms that determine the external context of an organisation:
market mechanisms and institutional mechanisms.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
, The business model: the way an organisation manages its business to make money.
An optimal fit between HRM and the context can positively affect the business model and the
organisation’s success.
Strategy: generally defined by an organisation’s intention to achieve certain goals through
planned alignment (fit) between the organisation and its environment.
Furthermore, strategy is also about the embeddedness and implementation of plan at lower
levels of the organisation and with involvement of multiple actors.
Optimal strategy includes:
- A fit between HRM and the context
Another important concept in strategy definition is ‘goal’. Organisations aim for the
achievement of certain goals. Goals can be defined in narrow terms and in broader terms.
Alignment or fit are two concepts in the strategy definition: more specifically the
alignment or fit between the organisation and its environment. Alignment and fit refer to the
principle of matching elements.
The organisation refers to the social, legal and economic entity that exists for a certain
purpose. E.g. delivery services, manufacturing products or transporting goods.
SHRM: is focused on the alignment or fit between the strategy of an organisation and the HR
strategy of that organisation.
Business strategy: the systems of the firm’s important choices, a system that could be well
integrated around common concerns or which might have various links and foul-ups (Boxall
and Purcell).
HR strategy: one of the functional silos and the linkage between the business strategy and the
HR strategy.
Market mechanism: include the degree of competition between organisations in terms of
products, services, technology, and people. PMT dimension (products, markets, technology)
Paauwe.
Institutional mechanisms: represents several pressures that stem from legislation, protocols,
and procedures, routines, habits, norms and values, and social-cultural issues. SCL dimension
(social, cultural, and legal).
General environment: represents all the market and institutional mechanisms that affect all
organisations in a country.
Population or organisational field: it’s a community of organisations that partakes of a
common meaning system and whose participants interact more frequently or fatefully with
one another that with actors outside the field.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
, The population in which an organisation operates is mainly the sector with its competitors, but
it may also include suppliers and other types of organisations.
Deephouse distinction between general and population is relevant because it acknowledges
potential external factors that affect all organisations in a country versus potential external
factors that only affect the organisations in a population.
Strategic contingency approaches: emphasizes the impact of internal contingencies (firm
size, firm history and capital intensity) and external contingencies (degree of unionisation and
legislation) on the shaping and structuring of organisations.
Best-fit models: strategic contingency approaches with the strategic management typology of
competitive strategies by Porter – distinguishing cost leadership, differentiation and focus
strategies.
Strategic contingency approaches showed that certain contextual factors affect the shaping of
an organisation.
Schuler & Jackson: cost leaders’ strategies can be translated in HRM characterised by few and
simple tasks, few skills required to do the job, narrow career paths etc.
the two most common forms of fit in these HR approaches are strategic/vertical fit and
internal/horizontal fit.
Strategic/vertical fit: refers to that part of the best-fit school that assumes a necessary
alignments between the overall business strategy and the HR strategy.
Strategic/vertical fit has many faces and is modelled in different ways in which a distinction is
made between 4 linkages:
- Administrative linkage: between strategy and HRM represents the lowest level of
integration. It could be argued that organisations that incorporate this format have no
linkage between the business strategy and their HR strategy.
- On-way linkage: can be found in organisations where the HR strategy is derived from
the overall business strategy. In this ideal type, the HR strategy is affected by the
overall business strategy, but the relationship is only one way. A cost-reduction
strategy might result in certain HR interventions for goal achievement.
- Two-way linkage: reprents a potential model in which HR experts determine certain
external (or internal) developments that are put on the table of the board of directors.
These two-way HR issues can become part of the overall business strategy, reflected
in focus on employee attraction and retention.
- Integrative linkage: represents full alignment of HRM and strategy. Part on an
integrative linkage is the position of the HR director, who has a seat on the high table.
Internal/horizontal fit: reflects the link between individual HR practices and it thought to be
crucial for gaining success as well as the strategic fit.
HR system approaches: a general school of thought within HRM that builds on the ideas of
internal fit. An HR system is defined as a coherent and consistent set of HR practices that
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
Downloaded by Abdra Sree ()
, combined together results in higher organisational performance that the sum of the effects of
using each HR practice separately.
The underlying idea of the system approach is that linking HR practices strengthens the HR
strategy and philosophy of an organisation, signalling the organisation’s intentions and aims
through the different elements of people management.
Recruitment and selection: can be used to signal the type of desired new employees in
terms of their quality and their attitudes.
Socialised: newcomers can be socialised in a way that fits the organisation’s strategy and
culture.
Training and reward system: the socialisation process can be strengthened by firm-specific
training and reward system.
Deadly combination: misfit between HR practices. These deadly combinations represent
combinations of HR practices that affect each other negatively.
Organisational fit: refers to the necessary fit between the HR strategy, policies and practices
on the other hand and on the other organisational systems, on the other. The other
organisational system includes the production system, the communication and information
system, the technological system, R&D department, marketing department, the financial
system and the legal system.
Environmental fit: is focused on the link between the HR strategy and the institutional
environments of an organisation. Organisations operate in different institutional contexts.
New institutionalism: this socio-economic theory argues that organisations are confronted
with both market mechanisms and institutional mechanisms. It also claims there are other
reasons for homogeneity among organisations that competition: institutional mechanisms.
3 types of institutional mechanisms:
- Coercive mechanisms: stem from legislation and procedures include national labour
legislation e.g. working hours and working conditions.
- Normative mechanisms: have their origins in the professions of employees.
Generally embedded in the employees’ professional norms and routines.
- Mimetic mechanisms: result of uncertainty or fashion. It’s focused on the general
tendency of organisations to copy/imitate other in times of uncertainty or as a result of
a hype.
The market mechanisms: reflect on the elements of competition between organisations
operating in the same market. Organisations compete for resources, customers, financiers,
shareholders and employees.
From a macroeconomic perspective competition creates more homogeneity among the
competing organisations because successful practices will be copied and implemented
resulting in a new equilibrium.
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
Downloaded by Abdra Sree ()
