Strategic Human Resource
Management
Strategic HRM: A balanced approach
Chapter 1 Introduction: Strategic HRM in the twenty-first
century
The new economy
The 1990s introduced a new concept mainly focused on the shift from a
manufacturing and production economy into a service sector asset-based
economy: The new economy. In the new economy assets are less tangible and are
embedded in reputation, brads and knowledge of employees. Outsourcing and
offshoring business activities to developing countries are another characteristic
of the new economy. Organisational change has become a common practice in
the new economy with major implications for employees.
Organizational change and competitive advantage
The relevance of optimal coping with change is embedded in the concept of
competitive advantage. Competitive advantage represents an organization’s
position in comparison to its direct competitors.
Competitive advantage is important for organizational survival and is partly
manageable by HRM.
The changing role of work in modern organizations
The new economy created a shift from traditional production to services in most
Western societies. Technology and flexibility were very important aspects of the
new economy. The ageing population (baby-boomers) in many Western countries
is also affecting work in modern organizations.
MHRM, IHRM and SHRM
HRM involves management decisions related to policies and practices that
together shape the employment relationship and are aimed at achieving
individual, organizational and societal goals. There are three major sub-fields:
1. MHRM: Focus on the influence of HR practices on the behaviour of
employees. Covers the sub-functions of HR policy and practice, including
recruitment and selection, induction and socialization, and training and
development.
2. IHRM: Is concerned with HRM in MNC’s and HRM across borders. It focuses
on issues such as the transferability of HR practices across business units
in different countries, the optimal management of expatriates and the
impact of different institutional country contexts on HRM.
3. SHRM focuses on issues of linking HRM to the business strategy, designing
high-performance work systems and adding value through good people
management in an attempt to gain sustained competitive advantage.
Stakeholders represent all groups inside and outside an organization that can
affect its strategy and goals.
Internal: employees, top management, employee representatives etc.
External: shareholders, financiers, trade unions, national government,
local government etc.
1
, Three perspectives
The multidimensional strategic HR model in this book includes the following key
characteristics:
1. A multi-actor perspective: HR professionals, works councils, trade
unions etc.
2. A broad societal view with an emphasis on different institutional
contexts, for example on the level of branches of industry, regions and
countries.
3. A multi-level perspective including the individual employee perspective
and the strategic organizational perspective.
Human resources are people with feelings, emotions, interests, norms and value.
HRM focuses on the exchange relationship between the employee and the
organization. The concept that best captures the exchange relationship is the
concept of the employment relationship. The employment relationship contains
different contract types:
1. Legal contract: The rights and obligations of both the employee and the
organization.
2. Economic or transactional contract: Input (effort) and output (salary).
3. Psychological contract: All things that are not written down but are
expected from both actors.
4. Sociological contract: Social aspects related to the relationships and
networks employees have within an organization.
Tensions
There are two approaches to HRM:
1. Soft approach: Focus on the values of people.
2. Hard approach: Focus on economical values.
Anglo-American models: Focus on creating shareholder value in terms of
profits and market value with little or no attention to other stakeholders.
Rhineland models: Acknowledge multiple stakeholders and their interests
explicitly taking into account employee interests in terms of well-being and
societal interests.
The balanced approach
In the strategic balance model, organizational success can only be achieved
when financial performance and societal performance of an organization are
above average in the particular population in which the organization is operating.
Framing HRM
There are four different perspectives or frames for studying organizations:
1. Structural frame: Seeks to gain an understanding of the various parts of
an organization.
2. HR frame: Focus on the employment relationship. It represents a specific
way of looking at organizations mainly focused on concepts such as needs,
skills and relationships of those involved.
3. Political frame: Examines issues of power.
4. Symbolic frame: Builds on meaning and identity, like culture, stories and
heroes.
TABLE 1.1 PAGE 12
SUMMARY PAGE 13/14
GLOSSARY OF KEY TERMS PAGE 14
2
Management
Strategic HRM: A balanced approach
Chapter 1 Introduction: Strategic HRM in the twenty-first
century
The new economy
The 1990s introduced a new concept mainly focused on the shift from a
manufacturing and production economy into a service sector asset-based
economy: The new economy. In the new economy assets are less tangible and are
embedded in reputation, brads and knowledge of employees. Outsourcing and
offshoring business activities to developing countries are another characteristic
of the new economy. Organisational change has become a common practice in
the new economy with major implications for employees.
Organizational change and competitive advantage
The relevance of optimal coping with change is embedded in the concept of
competitive advantage. Competitive advantage represents an organization’s
position in comparison to its direct competitors.
Competitive advantage is important for organizational survival and is partly
manageable by HRM.
The changing role of work in modern organizations
The new economy created a shift from traditional production to services in most
Western societies. Technology and flexibility were very important aspects of the
new economy. The ageing population (baby-boomers) in many Western countries
is also affecting work in modern organizations.
MHRM, IHRM and SHRM
HRM involves management decisions related to policies and practices that
together shape the employment relationship and are aimed at achieving
individual, organizational and societal goals. There are three major sub-fields:
1. MHRM: Focus on the influence of HR practices on the behaviour of
employees. Covers the sub-functions of HR policy and practice, including
recruitment and selection, induction and socialization, and training and
development.
2. IHRM: Is concerned with HRM in MNC’s and HRM across borders. It focuses
on issues such as the transferability of HR practices across business units
in different countries, the optimal management of expatriates and the
impact of different institutional country contexts on HRM.
3. SHRM focuses on issues of linking HRM to the business strategy, designing
high-performance work systems and adding value through good people
management in an attempt to gain sustained competitive advantage.
Stakeholders represent all groups inside and outside an organization that can
affect its strategy and goals.
Internal: employees, top management, employee representatives etc.
External: shareholders, financiers, trade unions, national government,
local government etc.
1
, Three perspectives
The multidimensional strategic HR model in this book includes the following key
characteristics:
1. A multi-actor perspective: HR professionals, works councils, trade
unions etc.
2. A broad societal view with an emphasis on different institutional
contexts, for example on the level of branches of industry, regions and
countries.
3. A multi-level perspective including the individual employee perspective
and the strategic organizational perspective.
Human resources are people with feelings, emotions, interests, norms and value.
HRM focuses on the exchange relationship between the employee and the
organization. The concept that best captures the exchange relationship is the
concept of the employment relationship. The employment relationship contains
different contract types:
1. Legal contract: The rights and obligations of both the employee and the
organization.
2. Economic or transactional contract: Input (effort) and output (salary).
3. Psychological contract: All things that are not written down but are
expected from both actors.
4. Sociological contract: Social aspects related to the relationships and
networks employees have within an organization.
Tensions
There are two approaches to HRM:
1. Soft approach: Focus on the values of people.
2. Hard approach: Focus on economical values.
Anglo-American models: Focus on creating shareholder value in terms of
profits and market value with little or no attention to other stakeholders.
Rhineland models: Acknowledge multiple stakeholders and their interests
explicitly taking into account employee interests in terms of well-being and
societal interests.
The balanced approach
In the strategic balance model, organizational success can only be achieved
when financial performance and societal performance of an organization are
above average in the particular population in which the organization is operating.
Framing HRM
There are four different perspectives or frames for studying organizations:
1. Structural frame: Seeks to gain an understanding of the various parts of
an organization.
2. HR frame: Focus on the employment relationship. It represents a specific
way of looking at organizations mainly focused on concepts such as needs,
skills and relationships of those involved.
3. Political frame: Examines issues of power.
4. Symbolic frame: Builds on meaning and identity, like culture, stories and
heroes.
TABLE 1.1 PAGE 12
SUMMARY PAGE 13/14
GLOSSARY OF KEY TERMS PAGE 14
2
