Hi Melanie,

below is a VERY full explanantion of the the current research into HR Strategy, it linkage to business and the models of HRM that fall out of that - aplogies for it's length but there may be stuff there that is useful - happy to send you a word document if desired, I am sure some of the diagrams will not paste across - email me.

Mark (www.peaktalent.co.uk)

The principle support offered to Education, is the Lifelong Learning and Cultural Services department (LL&CS). This department is led by the Education Management Team (EMT) consisting of the Corporate Director, three Assistant Corporate Directors, each leading one of the departmental divisions (Advice and Support; Planning and Operational Management; and Community Learning and Special Needs), and the Principal Adviser.  Located within the LL&CS and in direct support of the schools, is a Personnel department of c20 HR professionals and administrative support. (see Appendix N for organisation diagram).

The HR department’s priorities are set out annually in a strategic plan that draws together the work of all the different sections. This plan is based on a 3 year rolling programme and can be seen at Appendix A.

At the forefront of the direct support provided for schools is the Advisory Team, which comprises the Principal Adviser, 15 Advisers, and a team of Advisory Teachers and Consultants. The team offers support, advice and resources to schools in almost all subject and phase specialisms, including HR. The Advisory team is responsible for formulating the Education Development Plan (Appendix Q) and this sets out the programme for school improvement and the targets that have been agreed for the Borough as well as each individual school.

In addition to this support there is a ‘Hounslow Education Partnership’ forum, which brings together all the partners who contribute to the provision of education in Hounslow. The LA and its schools maintain particularly close relations with West Thames College and local higher education institutions. The central purpose of the Partnership is to ensure that all members of its diverse communities have opportunities throughout life to enjoy high quality education and training.

The Schools

The London Borough of Hounslow currently manages 79 schools in the Borough of which 14 are secondary schools, 5 are special schools dealing with children requiring special educational needs and the remaining 60 are primary, junior and infant (or a combination of these) schools. The breakdown for the Primary school provision is as follows:

All through primary schools (age 3-11)  30

Infant and Nursery (age 3-7)                             15

Junior (age 7-11)                                              15

(Hounslow School Organisation Plan 2002-2007)

Hounslow’s school population is culturally and racially diverse. The 2001 School Ethnicity, Language and Religion Survey showed that 51.3% of the school population were from ethnic categories other than White, with the largest groups being Indian, Pakistani, Black African and Black Caribbean. Over 43.1% of pupils had English as an additional language, and over 100 home languages were identified.

Primary Schools in Hounslow

There are two types of primary school:

County Schools - Wholly maintained and administered by the Local Education Authority. Each county primary school has a Priority Admission Area around it, whose residents will have priority for places at the school.

Voluntary Schools - Schools maintained by the Local Education Authority but administered by reference to and in agreement with the appropriate Board of Governors. Each Church primary school has its own admission criteria, based on family membership of the relevant Church.
 

Summary

The introduction has laid the foundation for this study. It has indicated that there is a theoretical linkage between business strategy and HRM and further, that a specific HRM philosophy will underpin policies and practises evident. This study aims to investigate that alignment, with particular reference to the London Borough of Hounslow and its Primary schools. Out of scope for this study is the issue of increased performance as a result of the alignment but that investigation may be possible with further research.

Further chapters will review and analyse strategic business and HRM models, consider current HRM thinking within the Private sector, review the methodological options available for this type of study, describe the methodology chosen, present and analyse the results and develop suitable recommendations.

Chapter 2

Literature Review

Introduction to Literature Review

The structure for this Literature Review, initially will be to understand some of the theoretical grounding for the concept of  Strategy and Human Resource Management (HRM). This will be followed by an examination of the literature that has theorised a linkage between the two, discuss the possible HRM implications and then enter into a discussion of the main issues arising that affect this study – within the public sector and primary education in particular.

Definition of Strategy

When considering the concept of strategy, researchers are often sub-consciously drawn to the military as the originator. The derivation of the word ‘strategy’ can be traced directly back to the Greek word ‘strategos’, a General, which in turn comes from the roots meaning ‘army’ and ‘lead’ (Bracker 1980, cited in Legge 1995).

According to Bose (2003) the earliest exponent of strategy was Alexander the Great, in that before him, war was really about two armies coming together head-on, with the bigger force almost always winning.

(Hounslow School Organisation Plan 2002-2007)

Hounslow’s school population is culturally and racially diverse. The 2001 School Ethnicity, Language and Religion Survey showed that 51.3% of the school population were from ethnic categories other than White, with the largest groups being Indian, Pakistani, Black African and Black Caribbean. Over 43.1% of pupils had English as an additional language, and over 100 home languages were identified.

Primary Schools in Hounslow

There are two types of primary school:

County Schools - Wholly maintained and administered by the Local Education Authority. Each county primary school has a Priority Admission Area around it, whose residents will have priority for places at the school.

Voluntary Schools - Schools maintained by the Local Education Authority but administered by reference to and in agreement with the appropriate Board of Governors. Each Church primary school has its own admission criteria, based on family membership of the relevant Church.
 

Summary

The introduction has laid the foundation for this study. It has indicated that there is a theoretical linkage between business strategy and HRM and further, that a specific HRM philosophy will underpin policies and practises evident. This study aims to investigate that alignment, with particular reference to the London Borough of Hounslow and its Primary schools. Out of scope for this study is the issue of increased performance as a result of the alignment but that investigation may be possible with further research.

Further chapters will review and analyse strategic business and HRM models, consider current HRM thinking within the Private sector, review the methodological options available for this type of study, describe the methodology chosen, present and analyse the results and develop suitable recommendations.

Chapter 2

Literature Review

Introduction to Literature Review

The structure for this Literature Review, initially will be to understand some of the theoretical grounding for the concept of  Strategy and Human Resource Management (HRM). This will be followed by an examination of the literature that has theorised a linkage between the two, discuss the possible HRM implications and then enter into a discussion of the main issues arising that affect this study – within the public sector and primary education in particular.

Definition of Strategy

When considering the concept of strategy, researchers are often sub-consciously drawn to the military as the originator. The derivation of the word ‘strategy’ can be traced directly back to the Greek word ‘strategos’, a General, which in turn comes from the roots meaning ‘army’ and ‘lead’ (Bracker 1980, cited in Legge 1995).

According to Bose (2003) the earliest exponent of strategy was Alexander the Great, in that before him, war was really about two armies coming together head-on, with the bigger force almost always winningIn Alexander we saw an individual who laid out the early pillars of strategic thinking. Previous commanders had used tactics, but Alexander was the first to see the big picture. The fundamentals of strategy have not really moved on from the basics laid down by  him “when to compete, how to compete, how to enter a market together with the use of systemic competitor and environmental analysis” (Bose 2003). 

Strategy within the business context

In the commercial sector by contrast, and crucial to an organisations growth and prosperity, is its ability to gain and retain competitive advantage. MacMillan, (1983, cited in Schuler et al, 1987) states that one way to do this is through strategic initiative that is defined as the “ability to capture control of strategic behaviour in the industry/sector in which a firm competes”.

Strategy has been referred to by writers as the achievement of superior competitive or market advantage (Kay 1993, Miller 1991) or where the focus is on those decisions that will have a major or long-lasting effect on the behaviour of the firm (Hickson et al., 1986).

Chandler (1962, cited in Whittington, 1993) defines strategy as “ the determination of the basic, long-term goals and objectives of the enterprise and the adoption of courses of action and the allocation of resources necessary for those goals. Miller (1993, cited in Legge, 1995) sees strategic management as:

• Assessing the organisations internal competencies and capabilities


• Assessing environmental threats and opportunities


• Deciding the scope of the organisations activities


• Creating and communicating a strategic vision


• Managing the process of change within an organisation

Boxall (1996) with a slightly different perspective notes that although issues as those described above are clearly strategic in content, so are decisions regarding internally focussed issues, such as the building of critical resources (staff), structure of the organisation, technology and finance.

The above descriptions combined with the basic understanding or view of strategy that most people have, reinforced perhaps by its military origins, would lead one to visualise it as a hierarchical and cascading process which is principally the preserve of the senior executive or leadership element within an organisation (Bourgeois 1985). Chaganti & Sambharya (1987) would also agree with this, in that they see “that the firm’s strategic orientation is related to its upper management” and Purcell (1989) articulates this with his three layered model, showing first, second, and third order strategies together with ‘downstream’ levels of strategic decision making. In this conceptual model, first order refers to the “long-term direction of the enterprise or the scope of its activities; second order strategies describe the structure of the organisation and procedures and third order describes the strategic “choice” in human resource management  (see figure 1).

It is worth noting that Purcell (1989) himself points out that, as do a number of other commentators (Legge, 1995; Bird et al 1995, Hendry and Pettigrew, 1986) that the strategy will be additionally influenced by external factors or issues (regulatory, environmental, cultural, political & legal) and therefore this hierarchical model of strategy must not be seen as too prescriptive but perhaps just one perspective on strategy.

Whittington (1993) in his oft quoted strategy together with other researchers (Legge, 1995, Storey 1995) picks ups this theme of varying views of strategy and indicates that Purcell’s essentially hierarchical view of strategy, which Whittington (1993) deemed to be the Classical approach, is just one way of viewing strategy – he went on to describe three further: the Evolutionary, the Processual and the Systemic typologies. These are mapped on two axes - one axis depicts the level of’ outcome’ while the other denotes the ‘process’ (see Figure 2).

From his standpoint, the essential components of each of these four types of strategies are as follows:

The Classical type is a top-down planning process initiated and controlled by the leadership function (often seen as a single individual “the general” (Whittington 1993; Legge, 1995) where profitability is the supreme goal of business, with a rational analysis to the planning process, where there is a “separation of conception from execution” together with a cascade of actions and resources from those original objectives (Chandler 1962).  A number of these ideas and concepts essentially echo those already discussed above (Bourgeois, 1985:Purcell, 1985) and interestingly although one is drawn to the military analogy in terms of conceptualising this strategy (Legge 1995), Whittington (1993) goes to some pains to explain that he sees no direct linkage from the military to modern business strategy and further indicates his view that the strongest influence by far, is that achieved by ‘pure economics’.

Mintzberg (1999) also articulates his understanding of this type of strategy, by identifying three ‘premises’ that for him indicate or captures the classical view – that the ‘strategy formation should be a controlled conscious process of thought’, that ‘responsibility for the control and consciousness must rest with the chief executive officer’ and lastly, that ‘implementation of the strategy is a distinct phase in the process’.

The Evolutionary approach to strategy, going back to Whittington (1993) model, is essentially “that the market picks the winner”, i.e. that the “competitive process is one of natural selection where instead of relying on managers, the expectation is that the market will secure profit maximization”. Interestingly Henderson (1989) of the Boston Consulting Group states, “Human beings may be at the top of the ecological chain but we are still members of the ecological community. That is why Darwin is probably a better guide to business competition than economists are”. This view is doubly interesting as the Boston Consulting group (BCG) are perhaps better known for their product life cycle model which mapped organisations against a ‘wild cat’ (start-up), ‘star’ (growth), ‘cash cow’ (maturity) and ‘dog’ (decline) matrix (Legge 1995, Kochan et al 1985, Purcell 1989) and this sits more happily in the Classical quadrant, than in the Evolutionary one.

In this Evolutionary typology, Whittington notes, investing in long-term strategies can be counter-productive. Organisations maximise their chance of survival in the short-term by achieving perfect fit against their current environment. Alchian (1950, cited in Whittington, 1993) puts a slightly different spin on it by saying that the ‘survivor may appear to be those who have adapted themselves to the environment, whereas the truth may well be that the environment has adopted them’.

The Processual type of strategy is one where “both organisations and markets are sticky, messy phenomena from which strategies emerge with much confusion and in small steps” (Whittington 1993). This approach has two themes centred on the limitations of “cognitive rational action” (Mintzberg 1978) and the “micro-politics of organisations” (Whittington 1993). What this means in practise, is that managers are influenced by a large number of drivers (reward, bias, prone to accepting the first easy answer, etc) rather than taking the classical approach of the “ rational economic man” where emotions and external factors have no or little impact. In addition these same individuals have their own personal objectives, political motives and agendas that have an impact on the way that they will allow strategy to be shaped. As such the strategy could be seen as “ the product of political compromise rather than for profit-maximisation” (Whittington 1993, Legge 1995).  In my view this also links back to Maslow’s  (1943) Hierarchy of Needs, where the principle drivers of human motivation are more concerned with the basic needs and welfare of the individual.

The final typology, the Systemic, is one where the strategy is shaped by the cultural context in which it exists. Whittington describes this as a theory that sees ‘decision makers as not simply detached calculating individuals interacting in purely economic transactions, but people rooted deeply in densely interwoven social systems’, by factors such as class, profession, national culture, ethnicity, religion and gender (Legge 1995). The norms that drive this strategy are not bound by the “human psyche” of the management structure but by the cultural rules of the local society – a change in that society will illicit a new strategy. Although this type of idea was much hyped in the 1990’s, it is interesting to see some multi-national organisations creating and developing policies which are often labelled under the term ‘Corporate Responsibility’ – the idea being that they need to give something back to society (People Management 2002). Perhaps the very recent examples of the major high-street supermarkets refusing to sell ‘own label’ products containing GM products, is another indication of the reshaping of strategy following a change in way society views certain issues.

Although, as we have said, Whittington’s model is more about the typology of possible strategies, there are a number of specific strategy models depicted in the literature and it is worth examining these in detail as they will shed light on the grounding for subsequent Human Resource Management ideas and concepts.

Business Strategy Models

Perhaps the most widely used model of competitive strategy, perhaps because of its simplicity and ease of use (Reitsberger 1993), was developed by Michael Porter (1980) in his book, Competitive Strategy, where he introduced a framework describing three competitive strategies – innovation, quality enhancement and cost reduction (Bird et al, 1995; Legge 1995; Othman, 1996).

For Porter (1980), the innovation strategy is one used to develop products or services that are different from its competitors or are focussed on a specific target group, segment or product line; the quality enhancement strategy on the other hand is one focused on enhancing the quality of the product or service thus permitting higher prices for a unique or ‘better’ product offering (Reitsberger 1993; Othman ,1996); and finally a cost reduction approach which creates a excessive return by ensuring that a product at the lowest production cost. Although there is an initial inference that if an organisation were to compete by utilising any one of the above strategies it will be successful, this may not be all together true.

Although Porter (1985) pointed out that  “Being all things to all men is a recipe for strategic mediocracy and below-average performance, because it often means that a firm has no competitive advantage at all”, he also noted, that if a firm failed to develop a strategy along at least one these categories or tried to combine two of the strategies (he referred to this as ‘stuck-in-the-middle) then the outcome is not “one where the firm fails to survive, but where low profitability is the more likely outcome” (Porter 1980). Although he is not directly contradicting himself, there is an element of ‘covering all the bases’ in his statements.

An example of this ambiguity in Porter’s is shown by Reitsberger et al (1993), where in his study of comparable strategies to Porter’s, he points out that in a number of firms (Toyota, IBM, etc), quality and cost leadership can often combine to produce high levels of performance. He goes on to say that firms or organisations are “unique and idiosyncratic” in their make-up and managers will endeavour to make the most of the resources available to them in order to compete effectively – perhaps a more “situational” model as he puts it, and this echoes some of the earlier reviews of strategy where we discussed researchers’ views on external factors (Legge, 1995; Bird et al 1995, Hendry & Pettigrew, 1986).

The importance of Porter’s (1980) model for most researchers however, has been the idea that if his concept of general strategies could be considered truly generic, they could be applicable across any number of industry sectors, although this view is not shared by all. Certainly Porter’s own view was that they could be applied in such a way, based on the “hundreds of case studies across a number of industry sectors”(Porter, 1980, 1985) that he conducted as part of his research. It is worth noting here, that these case studies were principally within ‘industry’ and were one to broaden this out into the modern day ‘service’ and public sector as well, the results could be different, particularly in light of the large increase in the ‘service’ sector within the economy since the 1980’s.

The contrary view to Porter’s is exemplified by Miller and Dess (1993) in their work on assessing Porter’s model for “generalizability, accuracy and simplicity”, where they point out that the model does indeed lend itself well to describing complex strategies in a simple way, but they are more scathing regarding Porter’s view that hybrid strategies do not perform well and that a narrow focus within one of his typologies, is the best for profit maximisation.

Miller and Dess (1993) are correct to the extent that there are some inconsistencies to the way that one can view Porter’s model. However, we are trying to understand ‘strategy’ across the hugely complex and diverse environment of today’s industrial, commercial and public sector - the fact that Porter’s model allows us to gain a basic understanding and a foothold for further investigation, is of value in itself. It is a ‘foundation’ on which we can build further ideas and acts as an initial filter for steering the researcher in a certain direction, dependent on the typology identified.

A second major model of business strategy is that developed by Miles and Snow (1984). Again their model was relatively simple and put forward the idea that organisations were located on a continuum between ‘Defender’ through ‘Analyser’ to ‘Prospectors’ and that the relative positioning of an organisation could change with time. (They also formulated a fourth descriptor, that of Reactor, but this is not widely used or reviewed).

In brief Defenders have narrow and relatively stable product-market domains where top managers are highly expert in their organization’s limited area of operation but do search outside their domains for new opportunities. As a result of this relatively narrow focus they tend not to have to change their infrastructure or operational systems; instead they tend to concentrate on the efficiencies of their internal operations. (Legge 1995, Bird et al 1995, Sonnenfeld et al 1988)

Prospectors are continually searching for product and market opportunities. They are often the creators of change to which their competitors must respond and because they are so focussed on product and market innovation, they are often inefficient. They tend to have diverse product lines and are often driven by geographical or product divisionalization. (Legge 1995, Bird et al 1995, Sonnenfeld et al 1988)

Analysers on the other hand are almost a hybrid of the above two – they operate in both stable and changing product or market domains. In the stable one they operate through the use of formalised structures and processes, while in more innovative and changing areas they can watch and respond to their competitors at speed. They typically have a limited product line, have cost-efficient technologies in place for their stable products and project technologies for their new products, mixed (often matrix) management structures and deep skills in production efficiency, marketing and process engineering. (Legge 1995, Bird et al 1995, Sonnenfeld et al 1988)

Where the above two models follow a route of mapping an organisation against a strategy of competitive advantage or management style, it is also possible to map it against the business life-cycle (Kochan & Barocci 1985) or product/geographic diversity (Fombrun et al 1994).  In the life-cycle model, an organisation can be thought of as being in one of four stages: start-up, growth, maturity or decline with different practises and policies flowing from each. This is in a similar vein to the earlier described model, put forward by the Boston Consulting Group (Lengnick-Hall 1988, Legge 1995). Fombrun’s model on the other hand was more driven by how one attacked the market, for example, with single or multiple products in vertical or horizontal markets or by going to market as a global multi-divisional entity or by franchising, etc.

The Jump from Business Strategy to Human Resource Management  

It is since the 1980’s that HRM has begun to establish itself in the management thinking and practice as well as within the literature (Guest 1992, Legge 1995, Storey 1995, Boxall 1993), which is hardly surprising when the concept stems from the models above, that were developed at the same time. Guest (1990) suggests that the global and national political scene may also have directly assisted its prominence and development at the time. In the US, the early to mid 80’s saw a re-emergence of the ‘frontier spirit’ and the ‘American Dream’ which linked directly to HRM, in that they both saw ‘opportunities for growth and prosperity based on individual achievement. Here in the in the UK we saw the political climate swing towards the conservative  ‘Thatcher Years’ which although politically very close to the ideals of the ‘Reaganites’ in the US, the effect was less marked (Kerfoot et al 1992, Legge 1995). Although Storey and Sissons’ (1990) view is that the effect was diminished in the UK because of the adversarial employee relations environment prevalent at the time, as well as the general world economic climate, to my mind, it was also a cultural issue between the US and the UK. For one, the ‘frontier spirit’ is not as important a concept, (although it is fair to say that Thatcherism was similar in terms of invigorating the entrepreneurial spirit) and secondly the UK is more reserved and conservative, both in terms of introducing new concepts but also in its management style.

Before looking at the linkage in some detail it may help us to go back to some basics and understand what we mean by the term HRM? How do researchers define and put this into context?

The major commentators seem to have very similar views on what the essential components of HRM are:

Storey (1986 & 1992) describes HRM in a way that seems to encompass both ‘hard’ and ‘soft’ versions of HRM (see Figure 3 for clarification of ‘hard’ and ‘soft’ HRM) in that he articulates it as having four pillars which explain the difference between it and the traditional ‘personnel’ function – first of all, the direction for the management of the ‘human resource’ stems explicitly from the corporate strategy – both internally in the sense that selection, appraisal and reward systems are in alignment with one another and externally, and that the whole philosophy or direction emerges from the business plan. Secondly, that the objective is to elicit the commitment of the employees and not just their compliance. Thirdly, that the means of doing the above, are seen as attainable through a more systematic and careful approach to recruitment, selection, appraisal, training, reward and communications – in essence, that the managerial style is shifted from reliance on collective forms of accommodation with the employees, to more individualistic ones. Finally he says that Human Resources (HR) is owned by line managers and not personnel specialists – this in itself will lead to a greater integration with the business.

Sissons (1990) view again has four components or characteristics that distinguish it from ‘personnel’ – the integration of personnel policies with business planning; a shift of responsibility from specialists to line managers; individualism in the management of employee relations and an emphasis of securing employee commitment as well as initiative.

Legge (1995) also sees a number of common threads – that the human resources within an organisation are valuable and a source of competitive advantage; that they may be tapped most effectively by mutually consistent policies that promote commitment (and as a result mean that the workforce is more willing to act in a flexible manner in the interests of the organisation) and lastly, that HR policies are integrated with strategic business planning.

Hendry and Pettigrew (1986) also choose four concepts with which to describe HRM – firstly the use of planning; secondly that HRM activities and practises are linked to the ongoing business strategy; thirdly that there is a coherent approach to the design and management of personnel systems, underpinned by an umbrella philosophy; and fourthly, seeing the employees as strategic resources in the achievement of the business strategy.

It is interesting to note that almost all of the above descriptions contain the word ‘commitment’ and we will come back to this later in a review of some of the issues with HRM.

The direct linkage between strategy and Human Resource management (HRM) has been discussed by a number of researchers (Bird et al 1995; Guest 1992 &1997; Hendry & Pettigrew 1986; Legge 1995; Othman, 1996; Purcell 1989; Schuler & Jackson, 1989) and the view that HRM has a positive impact on output or effectiveness is well documented (Guest 2001), Osterman 1994, Pfeffer 1994), The starting point for most, is that they see this following or developing from Chandler‘s (1962) and Purcell’s (1995) ‘structure follows strategy’ approach, i.e. a hierarchical or classical model of strategy and would see HRM coming to the fore during the implementation phase of any corporate strategy (Purcell 1989).

Legge (1995) certainly articulates her view that HRM has to come from the Classical perspective of strategy:

“clearly the feasibility and even what is meant by integrating HRM policies with business strategy will very much depend on which perspective on strategy and strategy making one adopts. Arguably the act of consciously matching HRM policy to business strategy is only relevant if one adopts the rationalistic ‘classical’ perspective……from the processual view there may be no strategy to match against……the evolutionary view suggests that it is a delusion and waste of time…..the systemic view would suggest that even the concept of strategy itself is unfamiliar….”

Further to this, the prevailing assumption of a number of writers is that the connections between HRM and business strategy are ones of contingency (Lengnick-Hall & Lengnick-Hall 1988) - this is to say that “the selection of human resource practises are determined by the specific strategy a firm adopts and secondly, it is assumed that firms achieving a tighter fit between environmental constraints, strategy requirements and HRM actions will perform better than those that do not. (Bird et al 1995).

That is not to say that this is the only possible linkage, Kochan & Barocci (1985) put forward the idea that HRM could be linked to their earlier described ’ life-cycle’ model under the areas of recruitment, reward, training and employee relations; as did Fombrun et al (1984) with their ‘product’ model, where the HRM areas considered were ‘structure, selection, appraisal, reward and development’.

HRM Models

Many models of HRM have been formulated and discussed (Boxall 2000;Budhwar 2000 & 2001; Legge 1995; Othman 1996) and have varied from the traditional and widely used ‘matching’ model of HRM, developed out of the US by Fombrun (1984), that aligned strategy with the utilisation of employees, to the Harvard model formulated by Beer et al (1984) which has a more person centric approach, as well as the more contextually driven model developed by Hendry & Pettigrew (1992) where corporate and HRM strategy are intrinsically linked to the environment in which they operate. It is true to say that some recent authors, including Budhwar (2000), have put forward the idea that there should be an HRM model that takes into account the ‘international’ perspective of HRM in that, either from the perspective of being able to assess HRM across geographical but more importantly ethnic and cultural boundaries but also, because large corporations by necessity tend to have global operations. For this study however this will not be considered, as the focus is the UK market, although we will allude to some similar issues later.

In essence however HRM models (including the above) fall into one of two schools of thought– the ‘best fit’ or ‘best practise’ approach (Boxall et al 2000) which in some ways defines for us whether the prevailing view is one where the emphasis is placed on human resources management or human resource management (Hendry & Pettigrew 1990).

The ‘best practise’ approach argues that all firms will be better off if they identify and adopt the best way of managing their people irrespective of the context in which the organisation is operating. Here the emphasis is on the ‘human’ aspect of HRM and is often termed the ‘soft’ version of HRM (Budhwar et al 2000; Legge 1995; Storey, 1992). The Harvard Model of HRM is an example of this type of approach.

The ‘best fit’ model on the other hand, argues that HRM strategy will be more effective when it is appropriately integrated with its specific organizational and environmental context (Boxall et al 2000). Often called the ‘matching’, ‘contingency’ or ‘hard’ model of HRM (Guest 1997; Legge 1995) it highlights the ‘resource’ aspect of HRM and emphasis the efficient use of employees to meet the organisational objectives (Budhwar et al 2001). Fombrun et al (1984) also explains that this model emphasises a ‘tight fit’ between organisational strategy, organisational structure and the HRM system. The main aim of this model from his view, is therefore to “develop an appropriate ‘human resource system’ which will characterise those HRM strategies that contribute to the most efficient implementation of business strategies”.

A number of researchers from the ‘contingency school’ have formulated corporate strategy models have also considered the HR implications arising from them. In the case of Miles and Snow’s business strategy model (1984), although they do not discuss HRM strategy or practises in detail, they do identify key HR implications associated with the three previously discussed types of business strategy – Defenders, Analysers and Prospectors.

Defenders create a secure market share with moderate steady growth. To support their strategy, they rely heavily on internally developed staff where employees are carefully selected, placed and trained (Bird et al, 1995). In addition they are expected to have longevity within the organisation, that is to say they will stay in the firm as employees for some time (Legge 1995, Miles and Snow 2001).

Prospectors on the other hand are organisations that are characterised by rapid growth and continual resource deployment, particularly of technical and management staff Bird et al 1995). To support this strategy, HR performs an entrepreneurial role, helping to identify and quickly develop crucial staff through the rapid movement and alteration of assignments. Key staff are brought in externally as well as developed internally. (Miles & Snow 2001, Othman 1996). This type of organisation is perhaps best exemplified by comparisons with a ‘consultancy’ environment, especially one operating in the technology sector.

In Analysers, the rational is that organisations can compete not only in the early phase of product development where the emphasis is on uniqueness, but later on as well, when efficient mass production becomes necessary to compete (Bird et al 1995). A typical example of this approach is the pharmaceutical sector where the initial R&D effort into new products is different to the production cycle thereafter (. For mature product lines HR will be heavily involved in the training and maintenance role appropriate to the Defender strategy, but for more innovative developments HR plays a more developmental role, by designing and enriching team structures and processes (Legge 1995, Miles & Snow 2001, Othman 1996).

Not previously mentioned but with their work deriving from Porter’s (1980) model are perhaps the most oft quoted authors emanating from the ‘contingency or matching school’ - Schuler and Jackson (1987). They have perhaps gone further than others in trying to analyse and quantify this linkage between business strategy and a model of HRM. They have developed the idea to the extent where they claim to be able to identify HR practise menus that they can relate back to organisational strategies in the way that they are applied. (See Figure 4.)

They argue that the HRM practise of an organisation, (where the principle areas for concern are planning, staffing, appraising, compensation, training and employee relations) should be directly reflective of its business strategy and further that these practises can be grouped into three types, which they call ‘ philosophies’ – they are Accumulation, Utilization and Facilitation.

In the view of Schuler & Jackson (1987), ‘Accumulation’ emphasises careful selection of good candidates based on personality rather than technical skills – the emphasis is on the acquisition of employees that have a large amount of ‘latent talent’ (Bird et al 1995). Bird’s concept for latent talent is one where employees are expected to have flexible skills, geared towards a changing environment and hence there is an emphasis on training and longevity to the employment contract.

They continue, by reporting that organisations following a ‘Utilisation’ approach would tend to select individuals by technical skills with a view to maximising utilisation of the asset in as short a time frame as possible. HRM takes a short-term view and the emphasis is on cost reduction with “narrow career paths, explicit job descriptions, little employment longevity a results based ethos” (Bird et al, 1995, Othman 1996).

The ‘Facilitation’ philosophy on the other hand, allows organisations to emphasise the ability of employees to collaborate in work situations. There is a high level of cross-functional and cross-unit co-operation and employee’s skills are enhanced, where possible, through development in the work place rather than through formalised training (Bird et al 1995, Othman 1996).

Using Porters (1980) model of competitive strategy which articulated the three different types of possible strategy - differentiation, cost reduction and focus - Schuler & Jackson  (1987) propose that in order to be successful, organisations must link their business strategy to their philosophy of HRM in the following way:

1.      Focus Strategy with an Accumulation philosophy

2.      Differentiation strategy with a Facilitation philosophy

3.      Cost reduction strategy with a Utilization philosophy

Later this concept takes a further step when Schuler (1992) develops his 5-P HRM model, which combined five HR activities (philosophies, policies, programmes, practises and processes) with the strategic needs of the business, although it is worth noting that in his model he still indicate that there are significant external influences or factors affecting the business. The 5-P model for him developed the idea or concept of Strategic HRM (see Figure 5). Schuler (1992) wrote that the purpose of strategic HRM was to ensure that:

1.      HRM is fully integrated with the strategy and strategic needs of the firm

2.      HR policies are coherent across the organisation

3.      Line managers use HR practises as part of their everyday work.

In a very similar construct to Schuler and Jackson (1987), Bird & Beechler (1995) in their study of the links between business strategy and HRM in Japanese subsidiaries operating in the US, propose a linkage between Miles and Snow’s (1984) model of business strategy (Defender, Analyser and Prospector) and Schuler and Jackson (1987) HRM model, where:

Defender Business strategy                                           Accumulator HRM strategy

Analyser Business Strategy                                           Facilitator HRM strategy

Prospector Business Strategy                                        Utilizer HRM strategy

Their study is also interesting from the perspective that it demonstrated that Japanese firms are able to effectively operate across two strategies concurrently – cost and quality (e.g. Toyota) perhaps thereby also combining HRM strategies, although there is no reference to this in their work.

Both the Schuler & Jackson (1987) and the Beechler (1995) models are relatively similar is design and approach, not only taking large steps forward in our understanding of HRM but also its scope for application. If one deems that their relationship models are correct, then in principle it is possible to link the HR practises in a given organisation to its HRM strategy and hence to its corporate or business strategy. The impact of being able to do so for most organisations is enormous, not just from a human perspective but also from a financial one. Organisations place a great deal of emphasis on the economies of production or raw materials, marketing strategies and financial modelling in order to stay competitive. Here we are suggesting that HR practices could be an equal differentiator in that overall process – how to make sure that the workforce is operating at its most economical, producing the best quality product or ensuring that production knowledge is maintained or developed further.