Fundamental Goals of Human Resource Management - Literature review Example

With regard to the management of employment relations in competitive environments, Boxall (2007) argues that employers’ goals are cost efficiency and social legitimacy. Additionally, he says that employers need flexibility and autonomy for adapting to change. Discuss these four goals of employers with reference to a specific contemporary challenge confronting organizations. Details Essay question Fundamental Goals of Human Resource Management Introduction In creating viability for their firms, employers pursue both economic and social political goals. The way those goals are pursued dictate the kind of Human Resource strategy a firm adopts. One of the important questions to consider when looking at Human Resource Management (HRM) is what employers seek by engaging in HRM and what their goals are. In addition, it is important to determine whether the goals they seek relate to broader business goals. According to Boxall (2007), the main economic goals employers have are cost efficiency and social legitimacy. Furthermore, he argues that in order to meet the social political goals, employers need flexibility and autonomy for adapting to change. This paper uses contemporary challenges to discuss these four goals that employers seek to meet through the HRM practices they adopt. It shows how different firms adopt different HR strategies based on the kind of industries they exist in and the kind of competition they face. In addition, this discussion shows how employees need to strike a balance between social legitimacy and managerial autonomy in a bid to sustain productivity in a cost effective way and sustain competitive advantage. Cost Efficiency Boxall (2007) posits that firm’s major economic objective is to have economic viability in the industry in which it competes. This means that firms are concerned with getting labour productivity in the most cost-effective way of managing labour. Cost effectiveness or cost-efficiency is described as “the need for every firm to stabilize a production system that enables it to compete in its chosen market” (Boxall, 2007, p. 57). Each industry has its combination of production system which involves different types of technology and work organizations. This means that there are different ways of producing products and services in each industry and the Human Resource (HR) practices or model in that firm should be designed in such a way that it supports the production dominant design. The fact that firms want to adapt a HR strategy that supports the economic production has brought major variation in HRM. For instance Boxall says that firms like fast foods, gas stations and supermarkets which face intense, margin-based competition adopt a low-commitment model of labour management since their customers priority is price rather than quality service. According to Godard and Delaney (2000) opine that in firms where the production system is capital intensive and/or it involves high technology, the costly, high-commitment HR model is often adopted. The effective use of technology is reliant on the workers. Therefore, it is more cost-efficient to train such workers well so that maximum of their skills is achieved while their motivation level remains high. The goal of self-efficiency by employers as the basic economic driver in HRM explains why different employers adopt to different HRM model. This is because HRM models adopted should be able to sustain a firm’s productive technologies as well as customer attitudes. Cost effectiveness also explains the inevitable strategic tensions between the employer and the employees (Boxall, 2007). Employers face the dilemma of handling labour scarcity and labour motivation within the economic resources that a firm has. Cost effectiveness also has to do with having adequate labour supply and keeping the employees motivated. This means the problem of keeping employees motivated in the work is an ongoing indeterminate process. Boxall (2007) says that in pursuing cost efficiency, employers should seek to gain sustained competitive advantage. This includes labour cost advantage and labour differentiation advantage. Manufacturing firms for instance relocate to low labour countries. However, it is argued that that advantage may not be sustained (Boxall and Purcell, 2003). Employers who seek to have sustained human resource advantage focus on differentiation of labour quality which they seek through better quality human capital and use of smarter organizational processes (Boxall 1996 cited in Boxall 2007). Differentiating labour quality may be possible where customers are willing to pay premium for better service. However, in mass services where cost-based competition is high it may not be possible. Basically, when looking at cost efficiency, market characteristics and competitive dynamics determine the HR strategy to be adopted. Boxall classifies service types into three; type one which includes mass service markets like fast foods and supermarkets, type two which is characterised by a mix of mass markers and higher value added segments like hotels and call centres and finally, type three which are significantly differentiated markets for example high-level professional services. In the type one markets, there is a low knowledge of the content of service among the staff and typically, the work design is generally low skill. In terms of competitive dynamics, the mass service markets face cost-based competition, there is substitution of labour for technology and mostly they are self-service. Therefore, as Boxall (2007) observes, the mass markets choose a HR strategy that supports their cost-driven competitive strategies where there are very limited prospects of HR advantage. In the type markets, there is a mix of skills needed for the work. In terms of work design, here is moderate discretion but there is potential for job enrichment. These firms face a mix of quality-based competition. Boxall (2007) says that the type two firms adopt HR strategies more or less like the type one markets. However, he notes that there is a HR advantage in the higher value added segments. In the type three firms, there exists high knowledge intensity in terms of knowledge of content and high discretion. They face expertise and quality based competition. Therefore, in these firms, there is extensive HR advantage especially in the expertise driven segments. However, in instances where expertise is routinized, lower-cost HR strategies are applied. A good example of how a firm meets the goal of cost effectiveness through the HR strategy is the Singapore Airlines (SIA). According to Wirtz and Heracleous (2012), SIA costs are below all other service airlines to an extent that their costs can compare with budget airlines. They say that the cost has been 4.6 cents per kilometre from 2001-2009. This is attributed to service differentiation through innovation and service excellence as well as better operational efficiency which is a result of combining HR strategy and other operations with the business level strategy. Wirtz and Heracleous (2012) assert that the airline has managed to its human resource to achieve sustainable competitive advantage through pursuing “the apparent conflicting objectives of service excellence and cost-effectiveness, at the same time, through its approach to recruitment, selection, training, motivation and retention of its employees” (p. 590). Their selection process aims at recruiting employees whose expertise and behaviours ensures customer loyalty. The company also engages in extensive investments in training and retraining (Wirtz and Heracleous, 2012). The staff members are motivated through rewards and recognition. Flexibility Cost efficiency is focused on making the labour resources of a firm as productive as possible at a competitive cost. However, as Boxall (2007) observes, cost efficiency is aimed at a given context. Since change in inevitable, the whole process of cost effectiveness should be flexible since production systems and cost structures of firms are bound to evolve. In other words, while employers aim at cost efficiency, they should envision change and embed organizational flexibility. This includes both functional and numerical flexibility. Kallenberg (2001) says that it is important for firms to adapt HRM practices that help the firm to adapt quickly to the rapid developments in labour markets, international and price competition and technology. In terms of flexibility, the employers should be ready to manage strategic tensions which include trade-offs. Two strategies of labour utilization have been emphasized; “enhancing employees’ ability to perform a variety of jobs and participate in decision-making” (Kallenberg, 2001, p. 479). Boxall (2007) talks about two ways of facing change; short-run responsiveness – firms develop a capacity to make “marginal adjustments to staffing levels or labour costs when conditions change” and Long run agility – “a much more powerful ability to learn in an environment that can change radically” (p. 59). While it is easy to incorporate a short-term response to changing conditions, Carroll and Hannan (1995) argue that it is hard to have the long-run agility given the fact that it is hard to change an organization’s core features once they have been laid down. This implies that a tension exists while a firm tries to stabilize a cost efficient work and employment system while at the same time creating a capacity for change. Companies need to include a flexibility policy in its HRM strategy at both the short-term and long-term level. Social Legitimacy Social legitimacy is considered as a social political objective of HRM. While pursuing labour productivity, employers are simultaneously concerned about social legitimacy. The level of compliance with labour laws as well as strongly held social norms in its employment practices will determine if a firm will be seen as legitimate or not (Boxall, 2007). The need to social legitimacy is exemplified by forms varying their HRM strategies based on different national institutional environments. Employers have the need to have good order in the work place and have institutional support outside the workplace. Kochan (2004) observes that the HRM profession face a crisis of either gaining trust or losing its legitimacy from its major stakeholders. Since it is hard for firms to influence social standards, they are required to follow the ethical framework that has already been established in relation to how they manage their labour. Kochan (2004) indicate that HRM professional is looked at the steward of social contract at work. Boxall and Purcell, 2003) say that social legitimacy is a necessary goal for those firms that are concerned with avoiding economic, social, legal and moral sanctions. When addressing the issue of social legitimacy, it is important to consider the issue of internal fit. This means that when considering social legitimacy, not all HR policies drive toward achieving an economic goal. They meet the regulatory requirement for their existence. For instance, regardless of the competitive strategy a firm has, if it does not meet the regulatory requirements for its existence, it cannot be able to meet its other goals. Managerial Autonomy Employers seek to have autonomy decisions and actions they take in leading different organizations. Firms’ management have a “less openly acknowledged ‘security objective’ alongside its profit (cost effectiveness) motive, a goal to maximize its control over an uncertain environment including threats to its power from work groups and trade unions” (Gospel (1973) as cited in Boxall, 2007, p. 61-62). Managers seek to gain power to govern especially in instances where there are problems with employee motivation leading to unstable employment relations which end up threatening the managerial authority. This need for instance is what leads most multinational firms to favour investments in countries where labour market regulations are not demanding. While discussing management of HR in multinational companies in Ireland, Gunnigle et al (2007) examined the level of discretion in four areas, “ payment and performance management, employee representation, and consultation, employee involvement and training and developments” (p. 7). Their study found out that there is quite a huge amount of discretion in the area of employee involvement in the work process. This was also reported in terms of setting policies for training and developments. However, in terms of union recognition and pay levels, the discretion level was low. Boxall (2007) notes that, the need by employers to maintain autonomy and their need for social legitimacy creates tension. However there is need to managers to have sufficient levels of autonomy so that they can be able to build productive and flexible enterprises. While no one can deny the fact that rational management needs space for action, the degree of autonomy will determine the success of the firm. For instance Boxall (2007) say that “excessive degrees of managerial autonomy come at the expense of worker rights and can escalate income dispersion, making society more fragile and less cohesive” (p. 62). At the same time, management can opt to have control of key information and gain management rewards but risk detriment of workers and other stakeholders. Kochan (2004) quotes the CEO of Hewlett Packard, Carly Fiorina who said that “ we have to remember that corporate executives serve at the pleasure and for the interests of shareholders, employees and their communities and not the other way round” (p.132). Conclusion There are strategic tensions between the economic and social political goals as well as within each of the objectives. Basically, the economic goal of cost effectiveness and the social political goal of social legitimacy are static. On the other hand the economic goal of flexibility and autonomy are dynamic. In whichever kind of firm, HRM mission should be to maintain the viability of the firm by enhancing cost efficiency in a socially legitimate labour management system. HRM success lies in striking a balance between these four goals. References Boxall, P. 2007, The Goals of HRM, in P. Boxall, J. Purcell and P. Wright Ed., The Oxford Handbook of Human Resource Management, Oxford University Press, Oxford. Boxall, P. and Purcell, J., 2003, Strategy and Human Resource Management, Palgrave Macmillan: New York. Carroll, G. R. and Hannan, M. T., 1995, Organizations in Industry: Strategy, Structure, Selection. Oxford University Press, New York. Gordad, J. and Delany, J. 2000, Reflections on the High Performance Paradigm’s Implications for Industrial Relations as a Field, Industrial and Labour Relations Review, Vol. 53, No. 3, pp. 482-502. Gunnigle, P., Levelle, J., McDonnell, A and Morley, M., 2007, Managing HR in Multinational Companies in Ireland: Autonomy, Coordination and Control, Employment Relations Research Unit, University of Limerick. Kallenberg, A., 2001, Organizing Flexibility: The Flexible Firm in a New Century, British Journal of Industrial Relations, Vol. 39, No. 4, pp. 479-504. Kochan, T. A., 2004, Restoring Trust in Human resource Management Profession, Asian Pacific Journal of Human Resources, Vol. 42, pp. 132-146. Wirtz, J. and Heracleous, L., 2012, Singapore Airlines: Managing Human Resources for Cost Effective Service Excellence, Available online at: http://bschool.nus.edu.sg/Marketing/Jochen%20papers/ESM2_Case%2014_Singapore%20Airlines.pdf Read More