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MASTER OF
BUSINESS
ADMINISTRATION
The Concept of Human
Resource Management
Dr. Franco Gandolfi
School of Global Leadership & Entrepreneurship
August 13, 2007
REV: June 30, 2017
 Franco Gandolfi
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The Concept of Human Resource Management
(HRM)
“You can get capital and erect buildings, but it takes people to build
a business” (Thomas J. Watson, Founder of IBM)
Introduction
The concept of human resource management (HRM) has attracted a
lot of attention since it first emerged as a field of study in the mid1980s (Armstrong, 2000). The term human resources implies that
individuals have capabilities that drive organizational performance
alongside other resources, including financial, material, and
information resources. The basic idea is that people (or human
resources) can make a difference in how an organization performs.
Research has shown that successful organizations are particularly
adept at bringing together a diversity of people to achieve a
common purpose. This is seen as the essence of HRM (Bohlander,
Snell, & Sherman, 2001). Likewise, the concept of strategic human
resource management (SHRM) is based on the philosophy that the
strategic nature of HRM needs to be integrated with the prevailing
business or corporate strategy (Armstrong, 2000).
How is HRM defined? Unsurprisingly, a large variety of definitions
have appeared in literature. For the purpose of this human resource
(HR) course, the following definition has been adopted:
“Human Resource Management is the utilization of individuals to achieve
organizational objectives” (Mondy, Noe, & Premeaux, 2002: 2)
As a consequence, all managerial employees throughout the
organization and at every level must concern themselves with the
function of HRM. In other words, in order to get things done
through others, managers must effectively utilize human resource.
The field of HRM has become increasingly complex and dynamic.
Indeed, individuals dealing with the management of HR matters
face a multitude of opportunities and challenges, such as profound
technological, societal, and structural changes as well as on-going
pressures to keep costs low and to increase the firm’s levels of
productivity and effectiveness in the face of globalization.
Managers that are engaged in the process of managing HR need to
be cognizant of the main concepts and constructs of HRM. The
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purpose of this first essay is to introduce the student of HRM to the
fundamentals of HR concepts, constructs, and functions.
Purpose of HRM
The underlying purpose of HRM is to increase the productive
contribution of employees to the organization and the fulfillment of
its mission and objectives. This needs to take place in a manner
that is strategically legitimate and ethically and socially responsible
(Werther & Davis, 1996). This purpose drives the study and practice
of HRM which has emerged out of the function of personnel
management. The history of HRM and its predecessor, personnel
management, will be discussed in more detail in this paper.
Perspectives on HRM Theories
HRM approaches are grounded is essentially three perspectives or
theories that contrast in their approach to the nature of workplace
relations – unitary, pluralistic, and the Marxist (or conflict)
perspective (Geare, Edgar, McAndrew, 2006).
Unitary: The organization is seen as an integrated and harmonious
entity where management and non-management share a common
vision and purpose. The ideal of a “happy family” prevails. Conflicts
are seen as disruptive and trade unions are superfluous. The focus
is on mutual cooperation and full loyalty is presupposed.
Pluralistic: The organization is viewed as being made up of powerful
and divergent sub-groups. There is recognition that the interests of
management and employees are conflicting. The key players in a
pluralistic environment are management and trade unions.
Marxist: This perspective looks at the nature of capitalism and the
fundamental division of interest between capital and labor.
Inequalities of power and economic wealth are seen as a capitalistic
problem. Marxists believe that conflicts are inevitable and trade
unions emerge as a natural response to the exploitation of workers
by capital.
Hard versus Soft HRM
HRM approaches are also built on two divergent perspectives of the
individual’s role in the organization. The hard version of HRM
emphasizes the quantitative business-strategic aspects of HR in a
purely calculative, rational way. This philosophy stresses the
importance of adding value in order to achieve competitive
advantage. It sees individuals as human capital (Armstrong, 2000)
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from which a return can be obtained by investing judicially in their
development (Storey, 1989). Guest (1999) points out that hard
HRM embraces a viewpoint that sees the worker as a commodity.
The soft version, on the other hand, can be traced back to the
human relations school with its emphases upon leadership,
motivation, and communication. It treats employees as assets and a
source of competitive advantage through their high skills,
adaptability, and commitment (Armstrong, 2000). There is a strong
focus on the development of a high-commitment, high-trust
organization as well as the fostering of positive organizational
culture (Guest, 1999). Finally, the focus is on “mutuality”
(Armstrong, 2000: 7), which is a belief that the interests of
management and employees should coincide.
Both scholars and practitioners have pointed out that the reality of
modern-day organization is that the rhetoric of HRM is generally
‘soft’, whereas the reality is often ‘hard’. In other words, there is a
perception that the interests of the organization generally prevail
over those of the employees. Some writers also discuss the hard
version of HR in relation to McGregor’s theory X and associate the
soft version with theory Z, respectively (Truss, 1999).
The Development of the HRM concept
The history of HRM largely corresponds with the development and
origins of the general management discipline. HRM has emerged
from five interrelated sources; the scientific management
movement (or Taylorism), the industrial welfare movement, the
early industrial psychology, the human relations movement
(including the Hawthorne Studies), and the labor movement
(French, 1986). HRM-related themes can be found in literature as
early as the 1970s. At that time, personnel management was the
prevailing discipline and HR practitioners mainly drew upon the
emerging knowledge from the behavioral sciences and systems
theory. Note that there is a distinction between personnel
management and HRM: the two are often used interchangeably.
While the personnel management movement was prominent from
the 1920’s to the 1970’s, the modern view of HRM first gained
prominence in the early 1980s when the Harvard Business School
launched its prestigious MBA course.
In order to fully appreciate the modern-day concept of HRM, it is of
importance to study two initial concepts that emerged out of North
America – the matching model and the Harvard Framework. These
were later further developed by scholars in the United Kingdom.
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The matching model of HRM, also called the Michigan model, holds
that HR systems and the organization structure should be managed
in a way that is congruent with organizational strategy. The
matching model further assumes that there are four generic HR
processes (or HR functions) in an organization; selection, appraisal,
rewards, and development (Formbrun, Tichy, & Devanna, 1984).
The Harvard framework is seen as the other founding father of
HRM. This framework asks for a more comprehensive and strategic
role with regard to the management of human resources. Harvard
scholars Beer, Eisenstat, and Spector (1990) argue that there is an
urgent need for a longer-term perspective in managing people. In
this sense, employees should be seen as assets rather than as an
expense or a variable cost. The framework is also in direct response
to problems that had occurred under the historical personnel
management in which the function was largely reactive,
administrative, and bureaucratic. As a consequence, there ought to
be a central philosophy about how employees should be involved in
and developed by the firm. This can only be provided by general
managers (Boxall, 1992). Failure to recognize this will inevitably
lead to a HR system that remains a set of independent variables
and a function that is largely inconsequential in importance and
status within the firm.
Characteristics of HRM
There are a number of distinct features that characterize the unique
nature of HRM. The following list constitutes the characteristics of
HRM collected from the writings of Guest, Legge, Hendry, Pettgrew,
Purcell, Sisson, and Storey:
●HRM stresses the need for strategic fit – the integration of
business and HR strategies,
●HRM emphasizes the importance of gaining commitment to the
organization and its vision, mission, and values,
●HRM is a top management-driven activity,
●The performance and delivery of HRM is a line management
responsibility,
●HRM creates and maintains a firm’s competitive advantage,
●HRM focuses upon adding value to the firm,
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●HRM adopts a comprehensive and coherent approach to the
provision of mutually supporting employment policies and practices,
●HRM is performance-oriented,
●HRM is committed to the delivery of high quality service to
customers and the achievement of high levels of customer
satisfaction.
Having listed some of these characteristics, the most important
characteristic of HRM is the increasing recognition of HR as a
legitimate strategic business partner within the firm. This will be
more thoroughly explored and discussed in a paper on HR strategy.
The Functions of HRM
Most HR practitioners, managers, and scholars describe the
practice, functions, or functional activities of HRM in terms of a
process-systems terminology. This is a most useful approach in that
it takes into account the interdependence of all HR aspects and
recognizes the inherent relationship between HR activities and
organizational goals. The term process refers to a combination of
events that lead to an end result, whereas the term system
identifies specific procedures and devices that control those events.
According to the process-systems view, the term HRM is defined as:
“The systematic control of a network of interrelated processes affecting and
involving all members of an organization” (French, 1986: 9)
This definition is important since it provides the foundation for the
second aspect in that the generic processes (also called functions)
are the major HR functions that are performed in all organizations.
They were presented in the Michigan-school framework of the
model matching of HRM as selection, appraisal, rewards, and
development.
What are the HR functions? Mondy et al. (2002) discuss five
functional HR areas, namely staffing, human resource development
(HRD), compensation and benefits, safety and health, and employee
and labor relations. Similarly, Dessler (2004) categorizes the HR
activities into recruiting, selecting, training, compensating,
appraising, and developing individuals.
Noe, Hollenbeck, Gerhart, and Wright (2007) present nine principal
functions of HRM. These are the functions we will be using
throughout this course. These are frequently linked with the actual
responsibilities of HR departments. They are the following:
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1. ANALYSIS AND DESIGN OF WORK (Work analysis, job design, job
descriptions)
2. RECRUITMENT AND SELECTION (Recruiting, job postings, interviewing,
testing, coordinating use of temporary labor)
3. TRAINING AND DEVELOPMENT (Orientation, skills training, career
development programs)
4. PERFORMANCE MANAGEMENT (Performance measures, preparation and
administration of performance appraisals, discipline)
5. COMPENSATION AND BENEFITS (Wage and salary administration, incentive
pay, insurance, vacation leave administration, retirement plans, profit sharing,
stock plans)
6. EMPLOYEE RELATIONS (Attitude surveys, labor relations, employee
handbooks, company publications, labor law compliance, relocation and
outplacement services)
7. PERSONNEL POLICIES (Policy creation, policy communication, record
keeping, HR information systems [HRIS])
8. COMPLIANCE WITH LAWS (Policies to ensure lawful behavior, reporting,
posting information, safety inspections, accessibility accommodations)
9. SUPPORT FOR STRATEGY (Human resource planning and forecasting,
change management)
Unfortunately, there is a (wrong) perception on the part of line
management that the key activities of HRM are carried out by HR
professionals only. It must be understood that the HR function is
most potent when both line managers and HR professionals carry
out the HR activities. The reality is that all managers carry out HR
activities on a daily basis and are thus considered quasi HR
managers!
The traditional HR functions and responsibilities will be explored and
discussed in greater detail in the subsequent papers.
Line and Staff Authority within HRM
Authority has been defined as the right to make decisions, to direct
others, and to give work orders (Dessler, 2004). In management
theory, there is a distinction between line managers and staff
managers. The former are authorized to give orders and are
responsible for achieving organizational goals. On the other hand,
staff managers assist and advise line managers in accomplishing
these goals. Traditionally, HR managers (and formerly personnel
managers) have been staff managers. However, more recently
changes to the HR function, including the devolution of the HR
function, has seen line managers embrace an increasing number of
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HR-type activities. In this sense, both HR and line managers
mutually share the responsibility for HR activities.
The Role of HR – Why is it Important to All Managers?
Most HR writings point out the importance of HR and what effective
and successful HR practices can achieve ‘in a perfect world’.
However, all organizations make personnel mistakes – some may
be minor, but others may have the propensity to seriously hurt the
organization. For instance, the most successful and well-managed
firms have shown:
●to hire the wrong person for the job and/or the organization;
●to experience high levels of absenteeism among individuals;
●to experience high levels of employee turnover;
●to find employees perform at substandard levels;
●to be implicated in discriminatory actions;
●to be accused of unsafe workplaces by the federal occupational
safety laws;
●to commit unfair labor practices; and
●to allow a lack of training to undermine individuals’ competency.
Competitive advantage and HRM
Regardless of the mistakes made, effective HRM is critical to
organizational success. Individual employees have always played a
central role in organizations. Today there is even a greater
recognition that people are able to build an organization’s
competitive advantage. This is particularly important in so-called
knowledge-based industries, such as information services and
software development. Success increasingly depends upon “peopleembodied know-how” (Bohlander et al., 2001: 4). There is also a
growing number of professionals that argue that the key to a firm’s
success is based upon the building and development of a set of core
competencies. These integrated knowledge sets within an
organization enables it to distinguish itself from its competitors by
delivering value to customers. Examples abound: British Petroleum
(BP) has core competencies in oil exploration; BHP Billiton has core
competencies in mining, and Credit Suisse has core competencies in
providing financial services. Core competencies provide a long-term
basis for technology innovation, product development, and service
delivery.
It is important to recognize that core competencies tend to be
limited in number, yet they are vitally important to the success and
survival of any organization in any industry and anywhere in the
world. Core competencies provide a competitive advantage, or
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competitive edge. Sustained competitive advantage through
employees can be achieved if the following five criteria are met:
1. Human resources must be of value. People are a source of
competitive advantage when they improve a firm’s levels of
efficiency, effectiveness, and competitiveness.
2. Human resources must be rare. People are a source of
competitive advantage when their KSAO’s (knowledge, skills,
abilities, and others) are not equally available to competitors.
3. Human resources are difficult to imitate. People are a source
of competitive advantage when people’s capabilities and
contributions cannot be copied by others.
4. Human resources can be organized. People are a source of
competitive advantage when they can be deployed to work at
various assignments at a moment’s notice
5. Human resources have no substitutes. People are a source of
competitive advantage when they are highly motivated, well
trained, embrace continuous learning, and care about
customers. It is difficult to imagine how another source can
replace committed, talented employees (Bohlander et al.,
2001, Noe et al., 2007).
Admittedly, these five qualities imply that human resources have
enormous potential. How can a firm unleash and realize this vast
potential? The answer is simple: a firm realizes the potential of its
human resources through its human resource management system!
The effective management of human resources has the capacity to
develop a high-performance work system. This is an organization in
which technology, organizational structure, human resources, and
processes operate to give an organization a competitive advantage
in a dynamic environment (Noe et al., 2007).
Objectives of HRM
How does an organization know if their HR management system is
performing well? Like any performance system, identifying the
appropriate evaluative standard is critical: Objectives are
benchmarks against which actions are evaluated. It is importance to
recognize that HR objectives do not exist in isolation. Indeed, HR
objectives typically reflect the intention of senior management and
balance challenges from the organization and the external
environment, including the wider society. Failure to consider the
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internal and external environments can jeopardize the firm’s
reputation, image, profitability, and survival. These challenges
spotlight four objectives that form a framework and that are
common to HR management (Werther & Davis, 1996).
Societal objectives
Organizations are expected to be ethically and socially responsive to
the needs of the society. The failure of a firm to utilize its resources
for society’s benefits is likely to result in restrictions. A society
usually limits an organization’s HR decisions by instituting laws that
address discrimination, safety, and other areas of societal concern.
Organizational objectives
The HR function (or HR department) does not constitute an end in
itself. Rather, the HR department exists in order to serve the entire
organization and to contribute to organizational effectiveness and
success.
Functional objectives
The person in charge of the HR function (e.g., Vice President HR or
Director HR) is responsible for maintaining the department’s
contribution at a level appropriate to the organization’s needs. In
other words, precious resources are wasted when the HR function is
more or less sophisticated than the organization’s demands.
Personal objectives
The HR function attempts to assist individuals in achieving their
personal goals assuming that they will enhance the person’s
contribution to the organization. In this sense, HR practices and
policies will act as tools to attract, maintain, motivate, and retain
employees.
Clearly, not every HR decision and action can meet all societal,
organizational, functional, and personal objectives every single time
simultaneously. Nonetheless, the more these objectives can be met
by the organization’s actions, the larger the contribution to the
overall society’s, organization’s, and employees’ needs.
Having previously outlined the traditional HR functions and
discussed the four levels of management objectives, the following
depicts how the various HR activities contribute to the realization of
management objectives.
Societal objectives:
1. Legal compliance
2. Union-management relations
3. Benefits
Organizational objectives:
1. Human Resource Planning
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2.
3.
4.
5.
6.
Recruitment
Selection
Placement
Training and Development
Performance Appraisal
Functional objectives:
1. Appraisal
2. Placement
3. Assessment
Personal objectives:
1.
2.
3.
4.
5.
Training and Development
Appraisal
Placement
Compensation
Assessment
It must be understood that HR activities ought to contribute to at
least one or, ideally, all objectives. If an activity does not contribute
to any objective, the resources would need to be judiciously
redirected.
Proactive and Reactive HRM
The practice of reactive HRM occurs when HR individuals with
decision-making authority primarily respond to HR problems within
the organization. Undoubtedly, an attitude of waiting for an issue to
arise and then responding or reacting is likely to be inappropriate,
slow, and costly. Such an approach would also provide the HR
function with a primarily operational, day-to-day status. On the
other hand, proactive HRM takes place when the HR function is
bestowed with a strategic role within the organization. As such,
future HR trends, issues, and problems are anticipated and built into
the overall organizational planning, thinking, and strategic intent.
Conclusive Remarks
Human Resources Management (HRM) is a broad concept and refers
to the philosophy, policies, procedures, and practices used in
managing individuals throughout the organization. People – human
resources – create organizations and make them survive, grow, and
succeed. If human resources are neglected or mismanaged, the
organization is unlikely to do well over the long haul. The central
challenge facing society today is the continued improvement of our
private and public organizations. The purpose of HRM is to improve
the contribution made by people to these organizations.
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References
Armstrong, M. (2000) Strategic Human Resource Management: A
guide to action, 2nd edition, Kogan Page, London.
Beer, M., Eisenstat, R., & Spector, B. (1990) Whey change
programs don’t produce change, Harvard Business Review,
November-December, 158-166.
Bohlander, G., Snell, S., & Sherman, A. (2001) Managing Human
Resources, South-Western College Publishing, Cincinnati, OH.
Boxall, P.F. (1992) Strategic HRM: a beginning, a new theoretical
direction, Human Resource Management Journal, 2 (3), 61-79.
DeCenzo, D., & Robbins, S. (2007) Fundamentals of Human
Resource Management, 9th edition, John Wiley & Sons, Inc,
Hoboken, NJ.
Dessler, G. (2004) A Framework for Human Resource Management,
3rd edition, Pearson Prentice Hall, Upper Saddle River, NJ.
Formbrun, C.J., Tichy, N.M., & Devanna, M.A. (1984) Strategic
Human Resource Management, Wiley, NY.
French, W. (1986) Human Resources Management, Houghton Mifflin
Boston, MA.
Geare, A., Edgar, F., & McAndrew, I. (2007) Employment
Relationships: ideology and HRM practice, The International Journal
of Human Resource Management, 17, 7, 1190-1208.
Guest, D.E. (1999) Human resource management: the workers’
verdict, Human Resource Management Journal, 9 (2), 2-25.
Mondy, R., Noe, R., & Premeaux (2002) Human Resource
Management, 8th edition, Prentice Hall, NJ.
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2007)
Fundamentals of Human Resource Management, 2nd edition,
McGraw-Hill, New York, NY.
Storey, J. (1989) From personnel management to human resource
management, in J. Storey (ed), New Perspectives on Human
Resource Management, Routledge, London.
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Truss, C. (1999) Soft and hard models of HRM, in L. Gratton, V.H.
Hailey, P. Stiles and C. Truss (eds), Strategic Human Resource
Management, Oxford University Press, Oxford.
Werther, W., & Davis, K. (1996) Human Resources and Personnel
Management, 5th edition, McGraw-Hill, New York, NY.
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