Grand Theory and Middle-Range Theory in HR Planning - Literature review Example

RUNNING HEAD: HUMAN RESOURCE PLANNING Human Resource Planning [Name of the Writer] [Name of the Institution] Human Resource Planning Introduction Human resources have been proposed as one of the most important sources of competitive advantage in this global environment (Bartlett and Ghoshal, 1987). In Western nations, researchers have increasingly studied how HRM can be used to achieve and sustain competitive advantage (Becker and Huselid, 1998; Walker, 1994). Within the literature, this field of study is commonly known as 'strategic human resource management' (e.g. Wright and McMahan, 1992; Wright et al, 1999). An HRM system increases organisational performance, develops and maximizes an organisation's abilities (Huselid, 1995) and contributes to its continuous competitive advantage. The individuals working in the company become the source and basis for utilization of other resources. Thus, through an efficient HRM system, an organisation's employees become essentially a strategic asset. They form a system of resources and rare abilities that cannot easily be copied or replaced, and that provides the company with its competitive edge (Harel and Tzafrir, 1999). The paper discusses how external factors affect the human resource planning and make recommendations as to how the organisation can offset the impacts. The elements of a sound IR system are also closely linked to a progressive HRM system (Erickson et al, 2003) The adoption of strategic HRM has been the subject of many recent studies. Wright and McMahan defined strategic HRM as 'the pattern of planned human resource deployments and activities intended to enable a firm to achieve its goals' (1992; 298). A characteristic of a strategic approach to HRM, compared with personnel management, is the linkage between HR and business strategies (Schuler, 1992; Ulrich, 1997) and its positive relationship with firm performance (Becker and Huselid, 1998; Delery and Shaw, 2001). Evidence of the economic impact of strategic HRM has been accumulating (e.g. Becker and Huselid, 1998; Huselid, 1995; Wright etal, 2001a). Strategic HRM is about integration and adaptation and its main concern is to ensure that HRM is fully integrated with the strategy and strategic needs of the firm (e.g. Golden and Ramanujam, 1985; Schuler, 1992; Wright et al, 1999). Its purpose is to utilize human resources more effectively vis-a-vis the strategic needs of the organisation (Pfeffer, 1995; Schuler, 1992; Wright e/a/., 1999). Drawing from the human capital and resource-based view perspectives, HR practices can be used to ensure that the skills, knowledge and abilities of core employees can be transformed into a source of competitive advantage (e.g. Arthur, 1994; Huselid, 1995; Wright et al, 1999). Past conceptual and empirical research generally agrees on the importance of certain HRM practices in the determination of employee and organisation level performance. Arthur (1994) found that HR practices were related to scrap rates, productivity and employee turnover. Huselid (1995) found a substantial relationship with both employee turnover and firm profitability. Wright and his colleagues (1999) reviewed the relationships between various HR practices and firm performance. They found that there was substantial support for the relationship between HR practices and firm performance. Specifically, they found that appraisal and training were significantly related to workforce skills. External Factors According to Fisher (1989), there were three main external factors, apart from attempting to align HRM practices with the strategic orientation of the organisation. First, with the ever-growing trend toward globalization, HR executives must be able to address transnational issues, such as expatriation and the utility of applying HRM practices across nations. Second, because the number of mergers and acquisitions has risen substantially, HR executives must reflect the ability to facilitate the post merger/ aequisition process. Third, Fisher argued that as a result of foreign competition or acquisition, U.S. organisations have been forced to become "lean and mean." As such, these organisations have turned to downsizing and other alternative employment relationships. Consequently, HR executives must become more expert in addressing such issues as staff reductions and the management of contingent workers. The political influence perspective assumes that informal and unwritten activities in organisations have a significant impact on the design and implementation of HRM practices (Ferris & Judge, 1991). Moreover, this perspective views power and politics as being facts of life within organisations; as such, it is argued that researchers would not gain a complete understanding of organisational processes if these informal/unwritten activities were not addressed. At the heart of the behavioural perspective is the notion of employee behaviour as a mediator between organisational strategy and firm performance. Another popular SHRM theoretical model identified by Wright and McMahan (1992) is agency theory (Eisenhardt, 1989), which conceptualizes the HRM function as an incentive structure to better align employee behaviours with the agenda of its owners shareholders. Environmental factors, as we have conceptualized them, include business strategy, organisational culture, level of technological development, political and legal concerns both internal and external to the firm, level of development of foreign subsidiary (if one exists), the firms position in the organisational holders but also to stakeholders. These are groups who have a claim in the firm, beyond simply a claim to its assets. They include suppliers, customers, employees, shareholders, the local community, and managers in their roles as agents for these groups. These groups are active participants in the future direction of the organisation to which it has a stake (Evan & Freeman, 1993, p. 76). Like environmental factors, stakeholder interests affect a firm's choice of HRM systems. There are some similarities and marked differences between our proposed framework and that proffered by Beer et al. (1984). In both conceptualizations, stakeholder interests and environmental factors directly affect a firm's choices/abilities with respect to its HRM policies. Once established, a firm's HRM systems are critically linked to the attitudes and behaviours of its workforce, and to both the climate and reputation of the organisation. Naturally, there are some direct effects on behaviours associated with these HRM systems. Ferris et al. (1998) noted that the initiation of a new training program, when implemented properly, would indeed have a direct effect on which on-the-job behaviours are shown. Similarly, compensation schemes that are distribute fair or just, meaning that the perceived inputs-to-outcomes ratio is equal to a person's referent other, have a direct, positive effect on job satisfaction and pay satisfaction (attitudes), assuming the person is "equity sensitive" (Miles, Hatfield, & Huseman, 1989). Accordingly, exhibiting desired technical competencies, and higher levels of satisfaction, would affect organisational effectiveness. Pursuing additional elements of the "black box," the proposed framework focuses on the intermediate linkages between HRM systems and organisational climate and reputation as well. Organisational climate, as described by Bowen and Ostroff (2004), is important with respect to any discussion of levels of analysis. Climate helps model multilevel relationships; because it is composed of both psychological climates at the individual level and a firm's shared perceptions at the organisational level (Bowen & Ostroff, 2004). Psychological climate refers to individuals making sense of their environments, and those individuals' perceptions of the kinds of behaviours that management expects, supports, and rewards. Organisational climate is then the shared perception of a firm in terms of its policies, procedures, routines and rewards, especially what is then expected and rewarded (Bowen & Ostroff, 2004). Definitional convergence exists between the two frameworks in that we both consider environmental factors to be forces like the political and legal environment, task technology, and firm business strategy. Our conceptualization of stakeholder interests is very similar. We both consider stakeholders to be employees, shareholders, the community, suppliers, government organisations and labor unions. Ultimately too, organisational effectiveness (i.e., a part of Beer's "long-term consequences") is the dependent variable of interest in both frameworks. However, it should be noted that organisational effectiveness is not a static outcome, but rather acts as a feedback loop that affects the environment and stakeholders. However, there are several key differences between the two frameworks. For example. Beer et al. (1984) claimed that HRM policies lead directly to organisational commitment, and then that individual well-being occurs as a long-term consequence. We concede that there are direct effects of HRM policies on individuals' attitudes and behaviours, but contend that the field should broaden its focus somewhat and include the potential mediating effects of organisational climate on attitudes, behaviours, and then ultimately on organisational effectiveness, because the organisational climate construct contains descriptions of both an organisation's formal and informal practices. Conclusion The field of HRM continues to mature as an area of scientific inquiry, and as such, we take stock of progress to date in theoretical development. There is no grand theory of HRM, nor probably will there ever be, though we have established in this article a broad framework for HRM multilevel research. Indeed, HRM appears to be so broad and complex as to preclude a single grand theory of the entire field. However, multilevel conceptualizations, like the one presented in this article, reflect a compromise between a grand theory and a middle-range theory. Indeed, this framework incorporates a set of internally consistent and mutually reinforcing middle-range theories throughout the various boxes and linkages. Suggestions Develop a retrospective strategy. You must under stand the past to properly plan the future. A common misunderstanding is that old benefit programs were put in place for a good reason. A retrospective strategy allows you to also understand what will happen if you do not make any changes. Build an information foundation. Review your business direction, your culture, competitive programs, employment trends and compensation practices. You need to determine how internal and external influences will affect your benefit and business strategy. Develop the strategy. Begin developing a benefit strategy based on prospective thought processes that provide guidance for decision making. Include a plan-by-plan analysis, strategic statements, objectives, implementation, action plans and time lines. Study existing programs. Review programs to determine any inconsistencies that do not mesh with the new strategy. Decisions on modifications to design, funding, administration--and most important--communications must be made. Test employee understanding and implement employee acceptance. Smart benefit planners will do this continually throughout the process of developing a strategic plan. More important, begin your modifications from an employee understanding standpoint. Communicate the rationale, seek feedback and measure the effectiveness of the strategy. References Arthur, J.B. (1994) 'Effects of Human Resource Systems on Manufacturing Performance and Turnover', Academy of Management Jurist, 37: 670-87. Beer, M., & Spector, B. (1984). Human resource management: The integration of industrial relations and organisation development. In K. M. Rowland & G. R. Ferris (Eds.), Research in personnel and human resources management (Vol. 2, pp. 261-298). Greenwich, CT: JAI Press. Bowen, D. E., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The role of the "strength" of the HRM system. Academy of Management Review, 29, 203-211. Eisenhardt, K. (1989). Agency theory: An assessment and review. Academy of Management Review, 14, 57-74. Evan, W., & Freeman, R. (1993). A stakeholder theory of the modem corporation: Kantian capitalism. In T. Beauchamp & N. Bowie (Eds.), Ethical theory and business (4th edition). Upper Saddle River, NJ: Prentice Hall Ferris, G. R., & Judge, T. A. (1991). Personnel/human resources management: A political influence perspective. Journal of Management, 17, 447-488. Fisher, C. D. (1989). Current and recurrent challenges in HRM. Journal of Management, 15,157-180. Golden, K.A. and Ramanujam, V. (1985) 'Between a Dream and a Nightmare: On the Integration of the Human Resource Management and Strategic Business Planning Process', Human Resource Management, 24: 429-52. Harel, G. and Tzafrir, S. (1999) 'The Effect of Human Resource Management Practices on the Perceptions of Organisational and Market Performance of the Firm', Human Resource Management, 38: 185-200. Huselid, M. (1995) 'The Impact of Human Resource Management Practices on Turnover, Productivity and Corporate Financial Performance', Acarfem^' of Management Journal, 38: 635-72. Miles, E. W., Hatfield, J. D., & Huseman, R. C. (1989). The equity sensitivity construct: Potential implications for worker performance. Journal of Management, 15, 581-588. Schuler, R. (1992) 'Strategic Human Resource Management: Linking the People with the Strategic Needs of the Business', Organisational Dynamics, and 21(1): 18-32. Wright, P. M., & McMahan, G. C. (1992). Theoretical perspectives for strategic human resource management. Journal of Management, 18, 295-320. Wright, P., McCormick, B., Sherman, W.S. and McMahan, G. (1999) 'The Role of Human Resource Practices in Petro-Chemical Refinery Performance', International Journal of Human Resource Management, 10: 551-71 Read More