What is strategic human resource management?

Introduction

This free course is about the interplay between decision making about people management and the environments within which such decisions are made. The underlying premise is that, normally, better choices are made when they are informed by an understanding of the multiple contexts which are relevant to those choices (Storey, Wright and Ulrich 2009).

The underlying contention is that the management of human resources (HR) is normally (and needs to be) different depending on an organisation’s business strategy; that it is rather different in small compared with large businesses; that it varies depending on the national context, which is likely to involve different employment law and different cultures and practices; it varies depending on the nature of the workforce and the employment sector (Storey 1992; 2007). So, fitting HR decisions to business objectives and to other aspects of context represent two core elements. Another is that strategic HRM involves taking a long-term perspective rather than simply making HR decisions in an ad hoc and short-term manner.

All of that said, there is a counter-argument, which asserts that there is, despite these variations, some common base of ‘good practice’ irrespective of context. This proposition rests on the idea that there are certain fundamentals when managing people. These include fair play, involving the workforce, investing in the workforce so as to increase the value of its contribution and a number of other approaches. This suggests the idea of a basic universal formula based on good professional and ethical practice. It is sometimes labelled the ‘one best way’. There has been some research which suggests a link between such a generic best practice approach and a set of performance outcomes.

So that sets the scene for a debate which has persisted in the HR field for some time. Nonetheless, even if the idea of a basic set of good practices were to be accepted, few people would argue with the additional idea that different contexts are also likely to be important and that the basic approach may need to be adapted to cope with, for example, an economic recession, a shift in market conditions, new technology and so on.

Additionally, whatever the ‘prescriptive’ approach might be, there can be little doubt that in practice there are notable variations in the way human resources are managed and that these variations are often patterned and can be shown to relate to context.

Turbulence and volatility

Numerous practitioners and analysts increasingly refer to the unusual levels of volatility, uncertainty, complexity and ambiguity in the wider environment. Turbulence is found, for example, in shifts in:

• economic fortunes across the globe
• severe weather events which interfere with air traffic and trade
• uncertainties arising from the threats and opportunities introduced to industry by the internet
• domestic political difficulties
• geopolitics in areas of regional unrest.

These points of turbulence and disruption have been so frequently remarked upon that an acronym (VUCA) has been coined to refer to the levels of volatility, uncertainty, complexity and ambiguity in contemporary environments.

Uncertain times ahead?

Daunting and exciting as these forces might be, the essence of strategy is to seek a measured understanding of the multiple environments and to work out a way forward while bearing in mind the relevant factors. This applies to all aspects of business strategy. In this free course we attend in particular to HR strategy – in other words the implications of these environmental forces for the way human capital is accumulated, deployed and harnessed.

This OpenLearn course is an adapted extract from the Open University course B864 Human resource management in context.

Learning outcomes

After studying this course, you should be able to:

• explain the scope of HRM

• understand the meaning and nature of strategic HRM

• appreciate how HR strategies are related to business strategies

• describe how HR strategies can be informed by a knowledge of labour markets and product markets locally, nationally and internationally

• describe the dynamic nature of global competition and of social and technological trends and their significance for HRM practice.

1 Inner and outer contexts

It has become an accepted convention to distinguish between ‘internal’ and ‘external’ contexts. The internal context essentially refers to the inner context, that is, the organisational environment within which HR management takes place. The external, or outer context refers to the environment outside the organisational boundaries. This latter includes societal characteristics, the prevailing culture (this could itself be multi-layered – for example local, regional and national culture), the technological environment and the political and the legal environment. These features are summarised in Figure 1.

Activity 1: Your organisational contexts

Timing: Allow around 20 minutes for this activity.

Populate the figure below with details of your own organisation’s inner and outer contexts, or use a case organisation with which you are familiar. Use the contexts already identified in the figure as a starting point for your ideas.

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Figure 1: The internal and external contexts of HRM

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Figure 1 depicts the internal and external contexts of Human Resource Management. Two slightly flattened circles are shown with one inside the other. The outer circle is titled ‘Outer Context’ and lists the factors ‘social environment’, ‘culture’, ‘technology’, ‘politics’ and ‘law’. The inner circle is titled ‘Inner Context’ and lists as a factor ‘organisational characteristics’.

Figure 1: The internal and external contexts of HRM

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Click ‘View’ below the figure to access the note-making version of the figure.

Discussion

In this kind of introductory exercise, many people struggle to go beyond the abstract concepts for the outer context and they struggle to identify relevant inner context elements. The practical skill we are working towards is to identify factors most relevant to specific work organisations. This will also mean identifying and interpreting trends and other dynamic elements of contexts.

So, HR strategic choices take place in multiple contexts. The broad theory is that there is an interplay between economics, policy and institutions. For example, the impact of recession on societies of all kinds has been dramatic. Especially notable has been the increase in unemployment, particularly youth unemployment.

But the nature and extent of the impact is affected by the institutional arrangements and the policies followed – as well as the extent of debt. For example, Germany has maintained an apprenticeship system based on an investment in human capital approach. This has been underpinned by state policy and by regulation. Thus, the requirement to have a ‘license to practice’ in so many occupational areas means that employers need to invest in education and training in order to have access to such labour resources. The system becomes self-supporting because, as a consequence of the commitment to substantial training by employers, vocational and educational training is taken seriously by parents and young people – and so the quality is sustained. Without such a constellation of supporting structures of regulation, institutions and cultural esteem, numerous vocational educational and training initiatives in other countries, including the UK, have struggled to make a sufficient impact.

This example points, in a powerful way, to the critical importance of context. And yet it does not mean that context of one sort (here national differences) is entirely deterministic. There are, for example, exceptions even in the UK to the generally poor apprenticeship system – the case of Rolls Royce aerospace is one such exception. But that company’s effort in building and sustaining an effective apprenticeship system is unusual and exceptional; it is enabled by a powerful international brand.

Inner contexts

Organisational characteristics that constitute the inner context include features that can be crucial to the practice of HR. Examples of such factors include:

• the occupational profile of the organisation (for example, whether constituted by scarce and highly paid skilled staff or a more lowly paid, low-skilled workforce)
• the ownership (e.g. whether an owner-managed, family firm or a large, shareholder-owned PLC)
• the history and culture of the organisation (e.g. whether there is a history of mistrust and conflict or conversely a context of high trust and goodwill).

Another example of an inner context which can impact significantly on HR practice is those organisations which have become part of the ‘third sector’ – that is, co-owned enterprises, social enterprises and mutual organisations. These bodies typically seek to work on a values-based approach and the notion of bosses and workers is complicated with notions of members and co-owners.

If you were a newly appointed HR specialist to an organisation you would need to learn about all of the aforementioned and, in addition, you would also need to know about the key units and departments – which groups are considered core to the operation and what are the contours of power and influence in the organisation.

The John Lewis Partnership: a video case study

Activity 2: Inside John Lewis

Timing: Allow around 20 minutes for this activity.

A very good example of the need for an HR specialist to take account of an organisation’s ‘inner context’ can be found in the case of the John Lewis Department Stores. These stores are part of the wider John Lewis Partnership – a co-owned retail business with multiple divisions, including food retailing as well as the department stores. Any attempt by a new HR manager to make strategic choices about HR would need to first take close account of the features of the inner context. The video clip below should make this point abundantly clear.

Watch the video clip and answer the following question:

Download this video clip.Video player: Bonus day

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Transcript: Bonus day

AUTOMATED VOICE:

Going up. Going down. Going up. Doors Closing.

[MUSIC PLAYING]

NARRATOR:

The 11th of March, 2009, the directors of a very British institution have let our cameras behind the staff only doors to see how they cope with the worst recession in their history. Even in difficult times, it's a business that prides itself on looking after its employees, otherwise known as partners.

MALE PARTNER 1:

It's like a family, and lots of people work together. My wife works for the Partnership as well.

FEMALE PARTNER 1:

I've been in John Lewis for-- this my 23rd year.

INTERVIEWER:

Really?

FEMALE PARTNER 1:

So quite some time.

NARRATOR:

It's an extraordinary business owned by the people who work there.

MALE PARTNER 2:

It's our business. I mean, it's not owned by shareholders. We own this company.

JULIA FINCH (CITY EDITOR, GUARDIAN):

So yeah, it's very odd for such a huge organisation to be essentially owned by its staff.

NARRATOR:

Today is the most important day in the John Lewis calendar.

FEMALE PARTNER 2:

Ooh, I think this is what we've been waiting for.

NARRATOR:

It's bonus day, when the department store's 29,000 partners get a share of the profits.

EXECUTIVE 1:

First we work out how much profit we've made in a year. Then we set aside the amount of capital we need to invest for the future. And then the balance is then distributed as bonus.

NEWCASTLE BOSS:

Fantastic.

FEMALE PARTNER 2:

Secret addressee only.

NARRATOR:

Thanks to the recession, expectations are low.

FEMALE PARTNER 3:

I reckon 10 or 11 per cent.

FEMALE PARTNER 4:

Probably, I would say around about 10% more.

BRISTOL BOSS:

Good morning!

ALL:

Morning!

BRISTOL BOSS:

I don't feel I heard that. Morning!

ALL:

Morning!

JOAN:

What I'm hoping for is about 15 per cent, but I think it will be about 10, the way things are. But 10 is better than nothing. Good afternoon, you're speaking to Joan at John Lewis. How may I help?

NEWCASTLE BOSS:

Good morning, everybody!

ALL:

Morning!

NEWCASTLE BOSS:

Thank you for coming along this morning to hear the bonus announcement.

ALL:

Woohoo!

ANDY STREET:

No question that today's the best day of the year for the Partnership, because it's when being a Partnership really comes home to every single partner.

LONDON BOSS:

Well, welcome everybody to arguably the most eagerly awaited moment of the year.

ALL:

Seven, six, five, four, three, two, one.

BRISTOL BOSS:

And here we are, drumbeats. Wooh!

LONDON BOSS:

Wait. Wait a minute. It's stuck. It's stuck.

NEWCASTLE PARTNER:

13 per cent!

[CHEERING]

LONDON BOSS:

Oh, yes!

[MUSIC PLAYING]

NARRATOR:

It's Easter. Sales of products for the home, from dining tables to duvets, are down nearly 10 per cent on last year.

FEMALE STORE CLERK:

We are struggling, obviously, because you don't wake up one day and think, oh, I need to change all my towels. That can always wait another year. People are not moving, so they're not buying new things for their new bathrooms or new bed linens, and so on.

MALE STORE CLERK:

Times are very hard, aren't they?

Yeah. You can tell a difference. Like, two or three years ago, we was busy all the time. But of course, now people haven't got the money to spend anymore, have they?

[MUSIC PLAYING]

JULIA FINCH (CITY EDITOR, GUARDIAN):

He's John Lewis through and through. You cut him in half, and he'd be John Lewis through the middle.

ANDY STREET:

There, there, there.

JULIA FINCH (CITY EDITOR, GUARDIAN):

And from the way he speaks, the way he walks, the way he talks, right through to the way he runs the business.

ANDY STREET:

Gentlemen, are we well?

JULIA FINCH (CITY EDITOR, GUARDIAN):

It's the staff really like him.

ANDY STREET:

Rachel, come and tell me what's going on.

RACHEL:

He's totally unorganisable, if that's a real word. We actually just work round him and sweep up after him. And that's basically how we spend our day.

NARRATOR:

Andy Street is the Managing Director of John Lewis.

ANDY STREET:

Why did I get the job? I hope I got the job because I think people believe that I had a instinctive understanding of what the John Lewis brand was about.

Is that all right? OK?

I haven't got a clue why I got the job, actually. That's a ridiculous question.

AUTOMATED VOICE:

Every Monday morning, the directors gather at Head Office to examine the weekly sales figures.

ANDY STREET:

Right. OK, we'll make a start. As to trade last week, I'm going to let Dan talk about it, but I think we would perhaps describe it as a "thin" week's trade.

DAN:

We turned over 43.2 million pounds. That was 11.6 per cent down on last year and 5 per cent down on budget.

MALE DIRECTOR:

Sports are really struggling with large equipment, which in credit crunch times is hardly a necessity, which is minus 25.

FEMALE DIRECTOR:

It was a second tough Easter week for us, not unexpected. We were minus 14.5.

NARRATOR:

John Lewis is unique on the High Street. It's a partnership created in 1929 by a man called John Spedan Lewis.

JOHN LEWIS:

If a naturalist who was a bit of a gardener, found a seed washed up by the sea, he might plant it and tend it just to see if it was alive. The John Lewis Partnership has been an experiment of that sort, not with the sea, but with an idea for a better way of managing business.

ANDY STREET:

He did see what he then formally set up at the end of the '20s as an alternative to a rampant capitalism, where his family was taking more profit from the business than all the other employees put together, which he thought was immoral. And indeed, the threat of Bolshevism. So it was very clearly, in Tony Blair's language, "a third way."

End transcript: Bonus day

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Bonus day

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If you joined this retail organisation as an HR manager, what key features of the inner context do you think you would need to bear in mind?

Make your notes in the box provided below and then click ‘Save and reveal feedback’ to see our thoughts on the question.

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Discussion

There are many characteristic features of this organisation that you would need to take account of if you were to have any chance of making a difference or even surviving in the organisation. The retailer seeks to work within a very distinctive ‘model’, key features of which were designed decades ago by its founder. These include elements of a democratic character whereby employees (partners) expect to have a voice, to have democratic structures and to be treated as a co-owners of the business. The annual bonus is an expression of their share in rewards but they also expect – and other senior managers expect – that this is but one part of a wider sense of co-ownership which carries rights and responsibilities.

The existence of this model does not prevent change but it does influence the way changes can be introduced, and the nature and justification of any proposed changes.

Outer contexts

Various frameworks with associated acronyms have been created to help put some analytic order on the complexity of the environment. A well-known one is PESTLE:

• Political
• Economic
• Social
• Technological
• Legal
• Environmental.

Another acronym much used in the study of the external environment for HR is ‘STEEPLE’. This refers to the factors shown in Table 1:

Aspects of each of these acronyms are indicated in Figure 2:

Maximise

(Farnham, 2010, p. xvi)

Figure 2: The external, internal and business and management contexts of organisations: a framework for analysis and learning

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Figure 2 depicts the external, internal and business and management contexts of an organisation. It is titled. Three rectangles are shown with enclosed by another, which in turn is enclosed by the largest rectangle. The largest rectangle is titled ‘External Contexts’ in bold and lists the following: ‘socio-cultural’, ‘technological’, ‘economic’, ‘environmental’, ‘political’, ‘legal’ and ‘ethical’ and is summed up in bold and in brackets as the ‘outer layer’. The rectangle inside this is titled ‘Internal Contexts’ in bold and lists the following: ‘culture’, ‘layout’, ‘innovation’, ‘power, conflict, control’ and ‘social components’ and is summed up in bold and in brackets as the ‘inner layer’. The smallest rectangle is titled ‘Business and Management Contexts’ in bold and lists the following: ‘Management’, ‘Managerial functions’, ‘Modern managerial functions’, ‘Managerial power, authority, and influence’, ‘Managerial politics’, ‘Models of HR and relationships with employees’ and is summed up in bold and in brackets as the ‘central, core layer’.

Figure 2: The external, internal and business and management contexts of organisations: a framework for analysis and learning

Activity 3: Steeple analysis

Timing: Allow around 60 minutes for this activity.

Part 1

You would find it helpful if you now tried a short STEEPLE analysis of your own.

EITHER: Use the space below to perform a STEEPLE analysis on an organisation you know well:

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Part 2

OR: If you do not have an organisation to use, compare the following two case organisations and answer the question that follows in the space provided.

A high-end hotel leisure resort

The Grand Hyatt, Goa

The company website states:

Grand Hyatt Goa is set to take its place as Goa’s largest and most sophisticated luxury conference and wedding resort.

Grand Hyatt Goa brings the ultimate event experience to the dynamic meeting and weddings scene, with an overall banquet facility of over 3000 sq m.

The Grand Hyatt brand has long enjoyed a well-earned reputation for excellence in the field of banqueting and catering. A professional and attentive team oversees many successful events and ensures that catering and conference needs are met to the client’s satisfaction. To further enhance its position as a leading conference venue, a dedicated events team has been established and will provide and maintain the highest standards of excellence and personalised service for our delegates and organisers.

The versatile function rooms are located across two floors, and include the elegant Grand Ballroom. Six functions rooms are on the ground level with a pre-function area ideally equipped to hold receptions. The lobby level also houses two meeting rooms and two board rooms.

Grand Hyatt makes available a full complement of meeting aids and technical assistance, which includes an impressive inventory of state-of-the-art equipment for high-speed Internet access and video conferencing. Experienced professional technicians can assist with the set-up and operation of each audiovisual programme.

(Hyatt Corporation, 2014)

Club 18–30 mass-market travel

Club 18–30 recruitment site

Described as ‘cheap clubbing holidays’, the advertisement to recruit holiday reps for this company states:

Do you got [sic] what it takes?

Being one of our Club 18–30 holiday reps is a job like no other! It’s definitely not for the faint hearted, you’ll need to have a great personality, awesome communication skills and enough stamina to keep you going from morning to night!

(Thomas Cook, nd)

Compare the strategies of these two companies in so far as they can be inferred from their marketing. Using a STEEPLE analysis as a framework, what implications would you think that these contrasting strategies would carry for the practice of human resource management?

Write your notes in the space provided below.

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Discussion

The two contrasting cases of the Grand Hyatt and Club 18–30 would seem to carry a range of implications for HR, and the STEEPLE framework can help to order your thinking about these differences. So, for instance, the social/cultural contexts of the two organisations are likely to be dramatically different as they attract diverse clientele with divergent cultural expectations and interests. The leisure pursuits on offer would be different and the kind of staffing arrangements needed to facilitate these different cultural interests would be distinct.

The brief person specification of the ideal Club 18–30 reps indicate the expected behaviours and interests of the staff appointed to these roles. The technology offered by these two companies will vary between a high-investment in facilities in the Grand Hyatt and thus a need for specially trained staff to offer the services built around these technologies (fine dining, cocktail bars, spas and so on) in contrast to the low-tech, low investment in buildings associated with Club 18–30 where the emphasis is upon trips with considerable alcohol consumption.

The political, economic and legal contexts will vary depending on which country these international companies operate within. Host country contexts will present widely divergent challenges. Luxury hotels may sit uneasily in local contexts where there is extreme poverty. Local politics may require a certain proportion of labour to be locally sourced. The more mass-market end of the tourist industry, as exemplified by Club 18–30, will face its own challenges in that expectations and behaviours of clients may conflict with local values and norms. And again there will be dilemmas about the relative use of local versus imported labour.

2 Different types and levels of context

Differences between the following contexts cause variation in HR practice:

• clusters of countries
• countries
• industry sectors
• organisations within the same sector
• parts of organisations.

Differences between clusters of countries

Analysts have noted patterns which show similarities of employment policies and practices among Mediterranean countries, which differ from Scandinavian countries, which in turn differ from Rhineland countries (Germany and related northern European countries) which are different again from Anglo-Saxon countries.

A striking example of differences in employment practices across countries is found in the vibrancy of the small- and medium-sized German companies known as Mittelstand. These companies, many of them family owned, invest for the long term, are export-oriented and invest in their workers and their machinery. They are often contrasted with Anglo-Saxon practices which seem more short term in their outlook and which rely on City finance.

Activity 4: The strength of the Mittelstand companies

Timing: Allow around 30 minutes for this activity.

Part 1

Watch the short video ‘Mittelstand’ and then listen to the radio clip ‘Lessons from Germany’s Mittelstand’. From both sources make notes on your own thoughts about what lessons managers from other countries might draw from these cases.

Download this video clip.Video player: Mittelstand

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Transcript: Mittelstand

BOB HOCKENHULL:

Mittelstand are medium-sized companies. It's these not large multinationals credited with creating Germany's economic success. Our government believes a similar model here could boost the UK economy by 50 billion pounds.

MAN 1:

Germany's been concentrating on this for probably 60 years, so we can't do it overnight. But if you look at, for instance, the proportion of German companies that export, export outside the EU, it is much higher than the UK.

MAN 2:

We drive long-term strategies, and that gives us the flexibility to try out something that doesn't seem to give the return right away, but long term is a very fruitful opportunity.

BOB HOCKENHULL:

F. Ball, near Leeke, an example of what the government wants. It makes adhesive flooring, is still family run, has invested millions in machinery, but kept the 130-strong workforce.

MAN 3:

I think it's investing in the people, which is one of the most vital things to ensure that you have the buy-in from everybody, to ensure that the customer can get what he wants.

BOB HOCKENHULL:

Today's Mittelstand Conference is taking place at JCB, which, of course, was once a medium-sized company itself. One delegate had a warning, though.

MAN 4:

Don't try to copy the German model because a copy can never be as good as the original. But look at it, and take the best out of it.

BOB HOCKENHULL:

It's estimated Britain would have a quarter of a million extra jobs if mid-sized companies had grown at the same rate as Germany's. Bob Hockenhull, BBC Midlands Today, Staffordshire.

End transcript: Mittelstand

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Mittelstand

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Transcript: Lessons from Germany’s Mittelstand

Presenter

Vorsprung durch Technik, you know what I mean by that, and the British Government wants businesses here to get some. It's invited German middle-sized businesses, mittelstand, to meet their UK counterparts. Why are these German firms so successful? Our reporter Bob Walker went to the meeting of European Minds in Staffordshire.

Bob Walker

This conference is taking place at the headquarters of JCB, a company which continues to expand and take on more workers, but today's delegates are trying to learn lessons from Germany. There are more than three-and-a-half million mittelstand companies in Germany, each employing fewer than 500 people, and they account for around a half of German national income. I am joined by one of today's speakers, Joachim Secker, who is from GE Capital, a lending company. What would you say is the secret of the success of mittelstand in Germany?

Joachim Secker

The ownership structure, which is family-based, usually company goes from generation to generation. A lot of these companies are champions in niches, which they decided to go to. They take a lot of care for two things. One is R&D, where they invest on average about 5% of their revenues, and the other one is education, the apprenticeship model, which the mittelstand supplies four out of five in Germany.

Bob Walker

And why is the system of family-owned companies so important?

Joachim Secker

It gives the whole thing a long-term spin. There is no shareholder-driven quarter result focus. You can see in a lot of companies that they really plan over decades and that clearly shows that this is a long-term oriented thinking.

Bob Walker

And the differences in the banking system here, in Germany?

Joachim Secker

The mittelstand companies really profit from the three pillar system, as we call it. Eighty per cent of the lending market for medium-sized enterprises is in the hand of cooperative banks and government-owned saving banks, only 20 per cent by private banks, and these two institution groups are there to support mittelstand companies.

Bob Walker

And the system of apprenticeships, I just heard you, during your speech, talk about how respected apprentices are.

Joachim Secker

Oh, absolutely, it is certainly no different if you sit down with people in Germany around a desk and you have people telling that they have an education based on an apprenticeship. They are as socially high respected as somebody with a college study would be.

Bob Walker

And you say ‘treat your employees well’?

Joachim Secker

Yes, that is certainly something that German companies have in mind, you know. If you look at the cooperation between the unions and the employers, that is very cooperative, it is not based on confrontation, and also things like holidays, subsidies in terms of benefits which employees can get, that is things that medium-sized companies in Germany hold very high, and that works to the advantage, and I see quite some differences there compared to other European countries.

Bob Walker

And finally, if there were one lesson for companies here in the UK, what would it be, a one tip?

Joachim Secker

Be patient, be there for the long-term, but don't stop investing into it.

End transcript: Lessons from Germany’s Mittelstand

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Lessons from Germany’s Mittelstand

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What do you think drives the differences between German and UK approaches?

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Part 2

Now listen to the interview which takes place in the studio and compare your answers to the points made by the expert guest.

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Transcript: The differences in approach between German and UK mid-sized companies

Presenter:

Quentin Peel, for several years was the Financial Times chief correspondent in Berlin. What can British small and medium-sized businesses learn really from the German experience?

Quentin Peel:

That it's actually rather complicated, that it isn't something that you could just get a nice blueprint and say we'll copy it, you know, it's to do with apprentices, it's to do with your banks, it's to do with being export-oriented and, even if you've only got sixty people, ten of them are out there trying to sell to China.

Presenter:

So is it so different and are there so many different factors that trying to import it piecemeal, trying to import elements of that is pointless?

Quentin Peel:

I don't think it's pointless, no, because there are a lot of good lessons to be learnt but, the trouble is, we've lost a hell of a lot of what we once had. I mean we used to train a lot of apprentices in this country too, but back in the ’80s Margaret Thatcher deregulated the whole sector and it's never really recovered. I think one of the reasons why it works in Germany is that these small companies trust the system so something like 85 per cent of all German apprentices are trained in small companies, and most of them work the rest of their lives in the same company. It's a sort of, you know, I look after you and you look after me system where people don't turn over their jobs every five years.

Presenter:

What about the idea that so many of the companies are family-based and can go back generations, I mean there's some of that here but is it much more prevalent there?

Quentin Peel

Yes, I think it is. They've survived. There are new ones, too, I mean I was looking, East Germany is a big problem because all the family companies were destroyed by communism so one of the big challenges they face is can they recreate this now in East Germany? I went to a company there in former Karl Marx Stadt, founded by three chemical engineers. They've now, twenty years later, they've got a thousand people and 50 per cent of the world market in the machines that coat solar panels, and that's the sort of thing they're so good at. They make the machines that do things and people want to buy them.

Presenter:

What's different about the banking system in this context?

Quentin Peel

Well, very localised. You've got all these Sparkassen, savings banks, very local level, only one town at a time, they know their customers, and it's a long-term relationship. The customers save with them, and they borrow from them and they don't get it called in in short notice so, again, it's the long-term planning that's involved. And you also get, these are very provincial companies, it's not as if they're all rushing to the big cities. You've got these mittelstand companies all over Germany in places we've never heard of.

Presenter:

What about, we've talked about banking, we've talked about apprenticeships, what about the university system and the sort of degrees people take?

Quentin Peel

Well, I mean what worries me about Britain is that we've actually probably got too many people going to universities, doing superficial degrees that don't really qualify them to do jobs.

Presenter:

So what are they doing in Germany?

Quentin Peel

Sixty per cent of German school-leavers do apprenticeships and very practical work. I mean I've got lots of kids coming out of school here in this country at the moment and they face a situation where far from doing apprenticeships, they're expected to be interns, paid absolutely no money, in order to get a foothold in the jobs market, whereas in Germany they'd have gone and become apprentices and have a much more formalised system.

Presenter:

Is Britain good at the sort of long-term planning they seem to be good at in Germany?

Quentin Peel

No, it's not good at the long-term planning, it's much more short term. Again, the German companies, and I think the figure's something like 7 per cent go to venture capital for their money. Now venture capital on the whole is looking for quite a quick return, or the banks are looking for a quick return. The German system isn't. Far more of these companies are family equity-financed. They just plough the profits back in because you're looking after, you know, little Johannes, your grandson, who actually you want the company still to go for. It's not perfect because, you know, the third generation often blows it but, having said that, it's amazing how many companies do survive.

End transcript: The differences in approach between German and UK mid-sized companies

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Discussion

The answer is indicative of the complexity of content explored in this course. The drivers include a mix of industrial policy, culture, the way companies find the finance, employment laws, the apprenticeship system and other factors. There is also some uncertainty about the extent to which it is possible to cherry-pick selective elements without adopting the full package. This reflects the point discussed earlier about the interplay between contextual variables.

Differences between countries

Within the clusters there are also differences between countries. For example, within the Anglo-Saxon cluster, there are differences between American HR practices and those in the UK. Both in turn differ from the practices in Australia.

Labour laws and the ways in which they are enforced or ignored are one important example of differences between countries. These laws are not static, they are also subject to change with industrial policy and in response to changes such as membership of trade areas like the European Union. A shift to a more open, free labour market in the UK, along with complex and prevalent outsourcing and sub-contracting arrangements, led to tensions such as those described in the video below, which discusses the use of contract workers at Total Oil refinery.

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Transcript: Total Oil refinery

EMMA MASSEY:

At a time of economic weakness and when jobs are being cut across the country, UK workers here at Total's oil refinery are frustrated because there are jobs available here in Immingham, just not for them. And that's because an Italian-based company, IREM, has been contracted in to do part of the HDS-3 construction project and it will be using Italian and Portuguese workers, leaving British workers out in the cold. Billy Bones is a contractor at the North Lincolnshire oil refinery and he says workers' livelihoods are being threatened.

BILLY BONES:

This is a classic case, is this industry, of being able to train highly-skilled, competent people but with us being barred from employment by all these foreign companies – which is getting worse and worse, it's getting more and more prevalent throughout the industry – the employment opportunities for us, as adults, and also for the training, is just disappearing.

EMMA MASSEY:

Lindsey Oil Refinery is Britain's third largest. It processes 200,000 barrels of oil a day. That's 10 million tonnes of oil a year. The unions have been told foreign workers have been brought in because they're skilled workers, but the union Unite disputes this and says these contractors are pipefitters, welders and riggers, all construction workers available in the UK.

UNION REPRESENTATIVE:

Our members have worked on these projects throughout their working life and have got the skills and experience better than anybody else, because the British engineering worker is clearly established as the front person within the engineering construction industry throughout the world.

EMMA MASSEY:

There are also concerns that because the overseas workers are bussed in and out of work and live on a barge in Grimsby which acts as a floating hotel, they're not part of the local community. Total has issued a statement which says, "The main contractor, Jacobs, is currently having discussions with workers and union representatives," and hopes "the situation will be resolved as soon as possible."

Elsewhere today, unemployed construction workers have been protesting at a power station near Newark for similar reasons. They claim jobs at Staythorpe Power Station have been going to foreign workers too.

Although today's walkout has not affected the day's normal operations at the refinery, that may be different tomorrow when workers picket the site in further protests. Emma Massey, BBC Look North, in Immingham.

End transcript: Total Oil refinery

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The lack of training and the reliance on an opportunistic use of highly mobile, temporary, contracted labour forces illustrated by this video shows a marked contrast with the long-term employment system characteristic of the Mittelstand companies described above.

Implication for HR practitioners

For each of the above types of context, the HR practitioner – and indeed any operational, general or line manager seeking to get involved in employment management – will need to thoroughly understand these different contextual conditions and variations if they are to avoid costly mistakes.

HR strategy is about choices. This is a crucial starting point. The skill of the HR practitioner is in making appropriate choices. It is worth pausing at this point to consider what might be meant by an ‘appropriate choice’.

So far in this course we have emphasised that choices are at the heart of HR strategy and that such choices need to be made based on an informed and intelligent reading of the environment.

We have also noted that the environment (context) is multifaceted, multilayered and complex. Additionally, large parts of it are likely to be turbulent and fast moving. So, these are characteristic features of the context within which the practice of HR has to operate.

Before examining more closely the different types of environment (that is, types and levels of context) you will find it useful to note that there are a number of theories about the main underlying forces in the contemporary environment. Some of these theories focus on technology, others on markets and regulation, and others on social trends.

3 Key trends and key theories

The sheer scale and complexity of contextual factors in ‘the environment’ can make it hard to comprehend. However, a number of analysts have sought to clarify patterns and trends. Here we will have the opportunity to evaluate some of the more compelling interpretations of emerging trends in the HR environment and as a consequence, the implications for HR policy and practice.

The theories and interpretations we want to assess most especially are those which capture the intertwining variables. Although we will be subjecting each to critical evaluation, it helps to state the themes and trends as propositions.

In this section we gather together and introduce the main theories and interpretations which currently prevail concerning how to make sense of the business and HR context. Aspects of these theories can be found in many diverse sources. They can be seen described in the general business press as well as in a very wide range of more specialised publications even though they are not normally brought together in the way we do here.

The link between ‘trends’ and theories

Five trends – and their associated theories – are summarised below. We suggest that each of these should be treated as propositions requiring testing and qualification rather than as absolute truths.

1. Globalisation feeds hyper competition. This theory suggests that global transportation systems, such as air-freight and massive seaborne container carriers, facilitate extensive and complicated supply chains which allow products such as clothing and electronic goods to be produced and shipped for very low unit costs. Added to this, business support services such as accountancy and IT, and even functions such as R&D, sales and marketing can be dispersed and configured globally.
2. Deregulation and the lowering of trade barriers. This theory suggests that where governments and other regulatory authorities liberalise their rules, the globalised capabilities mentioned above may be accelerated.
3. A retreat from bureaucracy and a shift to networked forms. This is the theory that there is a change in the way work is organised – drawing on collaboration rather than hierarchy and formal rules. One major manifestation of this is the growth in forms of work which differ from the archetypal model of full-time employment (Cappelli and Keller 2013). These include part-time work, temporary work, contract work, agency work and many other types of ‘non-standard’ employment. Agility and responsiveness become prized over standardisation and economies of scale.
4. Another theory is that rapid advances in technology also support and accelerate the above trends. Information and communications technology supports global supply chains and international networked organisations. In addition, automation has already reduced the number of routine manufacturing jobs and so has transformed the nature of workplaces and reduced the need for armies of supervisors and production managers. Routine white collar office jobs are now also being subject to automation and to inroads from artificial intelligence. Many high street retail jobs have been lost to online shopping. Amazon.com provides a classic example. This revolution means that work is polarising into, on the one hand, knowledge work where creativity and intellectual capital is critical, and on the other, personal service work such as hairdressing and social care. The implications for HR are the drastic reductions in traditional industrial and traditional white collar occupations and a severe questioning of the continued relevance of much conventional personnel administration.
5. The death of deference is a theory in the social sphere. Shifts in identity and social structures such as mobility and the breakdown of traditional communities lead to social patterns built on consumption rather than production. The social world is also characterised by the VUCA elements noted in the introduction to this free course. Social norms and values become less certain.

We will be concerned to understand what implications such wider contextual trends carry for the practice of human resource management.

One immediate implication can be noted. The above five trends lead on to another general phenomenon which can be called ‘new modes of managing’. If traditional personnel administration approaches to people management are ill-fitted to the new work landscape then the new forms appear to depend on more sophisticated modes of managing through common purpose and values. There are associated HR implications including a need to accommodate flexible working of all kinds; to combine and recombine teams from across the globe on a regular basis; and to manage at a distance.

4 Volatility, uncertainty, complexity and ambiguity

In our overview of the environment so far we have emphasised a number of features of turbulence and uncertainty. Most notably, we earlier referred to the acronym of VUCA. In their Harvard Business Review article, ‘What VUCA really means for you’, Bennett and Lemoine (2014) suggest that this level of complexity is often used to excuse the hard work of planning. However, the authors contend that one can prepare for a VUCA world. They reason that the four elements have different attributes and appropriate preparations can be made as follows:

Activity 6: Preparing for a VUCA world

Timing: Allow around 30 minutes for this activity.

Part 1

Jot down in the space below your thoughts about how employers might respond to the environmental challenges represented as volatility, uncertainty, complexity and ambiguity.

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Part 2

Now answer the following question:

How would you use the VUCA model to advise a grocery retailer seeking to grow in its own domestic market while also planning for expansion into international markets? In particular what are the HR implications? We have reproduced the VUCA diagram below from ‘What VUCA really means for you’ (Bennett and Lemoine, 2014) to help you create a VUCA diagram for the grocery retailer. Click on ‘View’ below the diagram to access a blank version and add your notes, using the Characteristics, Example and Approach structure that you see here.

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Figure 3: VUCA grid (Bennet and Lemoine, 2014, p. 27)

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Figure 3 shows the VUCA diagram from Bennett and Lemoine (2014). It is shown in the form of a two by two grid, with a vertical axis and a horizontal axis which do not show values but have arrows at the end of the axes to suggest that values go up, in the case of vertical, or to the right, in the case of the horizontal axis. The vertical axis is labelled ‘How much do you know about the situation’, suggesting higher or lower knowledge, with the horizontal axis being labelled ‘How well can you predict the results of your actions?’ suggesting higher or lower predictability. The four VUCA concepts – Volatility, Uncertainty, Complexity and Ambiguity each have one square of the two by two grid, each with a list of characteristics, examples and approaches. At top left of the grid (higher knowledge, lower predictability) is ‘Complexity’. Characteristics are listed: ‘The situation has many interconnected parts and variables. Some information is available or can be predicted, but the volume or nature of it can be overwhelming to process.’ Example is listed: ‘A grocery retailer might find that different markets have diverse regulations, tax regimes and shopping habits and expectations.’ Approach is listed: ‘The retailer may respond by building local partnerships or with a programme of management development through expatriate placements, or with a targeted drive for local talent recruitment and so on.’ At the bottom left of the grid (lower knowledge, lower predictability) is ‘Ambiguity’. Characteristics are listed: ‘Causal relationships are completely unclear. No precedents exist; you face “unknown unknowns”.’ Example is listed: ‘Entry into an emergent market will make demands on knowledge and agility.’ Approach is listed: ‘Pilot experiments and recruitment of local staff may be considered.’ At the top right of the grid (higher knowledge, higher predictability) is ‘Volatility’. Characteristics are listed: ‘The challenge is unexpected or unstable and may be of unknown duration, but it’s not necessarily hard to understand; knowledge about it is often available.’ Example is listed: ‘a change of government in a foreign location may result in a change in tax policy or in tighter regulations, or an economic crisis may result in plummeting sales revenue.’ Approach is listed: ‘Planning options may include lobbying of governments, reconfiguration of supply chains or online delivery across national frontiers. Human resources would need to be in place to deliver on such strategies.’ At the bottom right of the grid (lower knowledge, higher predictability) is ‘Uncertainty’. Characteristics are listed: ‘Despite the lack of other information, the event’s basic cause and effect are known. Change is possible but not a given.’ Example is listed: ‘A new entrant to the market muddies the future of the business and market.’ Approach is listed: ‘Greater market intelligence is required, an investment in data analytics may be justified; investment may be required in enhanced customer service and thus in staff training and selection so that a new entrant possibly competing on cost such as an Aldi or Netto might be countered with a different customer offer.’

Figure 3: VUCA grid (Bennet and Lemoine, 2014, p. 27)

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How did your answers compare with the initial notes you made?

Discussion

Click on ‘View larger image’ to read our version of the VUCA model.

Maximise

Figure 4: The four VUCA challenges (Based on Bennett and Lemoine, 2014)

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Figure 4 shows the VUCA diagram from Bennett and Lemoine (2014). It is shown in the form of a two by two grid, with a vertical axis and a horizontal axis which do not show values but have arrows at the end of the axes to suggest that values go up, in the case of vertical, or to the right, in the case of the horizontal axis. The vertical axis is labelled ‘How much do you know about the situation’, suggesting higher or lower knowledge, with the horizontal axis being labelled ‘How well can you predict the results of your actions?’ suggesting higher or lower predictability. The four VUCA concepts – Volatility, Uncertainty, Complexity and Ambiguity each have one square of the two by two grid, each with a list of characteristics, examples and approaches. At top left of the grid (higher knowledge, lower predictability) is ‘Complexity’. Characteristics are listed: ‘The situation has many interconnected parts and variables. Some information is available or can be predicted, but the volume or nature of it can be overwhelming to process.’ Example is listed: ‘You are doing business in many countries, all with unique regulatory environments, tariffs, and cultural values.’ Approach is listed: ‘Restructure, bring on or develop specialists, and build up resources adequate to address the complexity.’ At the bottom left of the grid (lower knowledge, lower predictability) is ‘Ambiguity’. Characteristics are listed: ‘Causal relationships are completely unclear. No precedents exist; you face “unknown unknowns”.’ Example is listed: ‘You decide to move into immature or emerging markets or to launch products outside your core competencies.’ Approach is listed: ‘Experiment. Understanding cause and effect requires generating hypotheses and testing them. Design your experiments so that lessons learned can be broadly applied.’ At the top right of the grid (higher knowledge, higher predictability) is ‘Volatility’. Characteristics are listed: ‘The challenge is unexpected or unstable and may be of unknown duration, but it’s not necessarily hard to understand; knowledge about it is often available.’ Example is listed: ‘Prices fluctuate after a natural disaster takes a supplier off-line.’ Approach is listed: ‘Build in slack and devote resources to preparedness – for instance, stockpile inventory or overbuy talent. These steps are typically expensive, your investment should match the risk.’ At the bottom right of the grid (lower knowledge, higher predictability) is ‘Uncertainty’. Characteristics are listed: ‘Despite the lack of other information, the event’s basic cause and effect are known. Change is possible but not a given.’ Example is listed: ‘A competitor’s pending product launch muddies the future of the business and the market.’ Approach is listed: ‘Invest in information – collect, interpret and share it. This works best in conjunction with structural changes, such as adding information analysis networks, that can reduce ongoing uncertainty.’

Figure 4: The four VUCA challenges (Based on Bennett and Lemoine, 2014)

Volatility and regulation

Governments use their legislative and regulatory powers to try to counter volatility and provide businesses with conducive environments. They also try to protect labour from exploitation. In most countries, political pressure sees the balance between labour protection and de-regulation in frequent flux. The video clip below illustrates the uncertainty and volatility even in the state-dominated context of China. Ironically it is a regulative measure – a residence permit needed to work and live in particular areas, which fosters unrest among migrant workers who lack this permit and consequently suffer hardship.

Activity 7: Regulatory impacts

Timing: Allow around 40 minutes for this activity.

Watch the video ‘Chinese migrant workers’ and answer the question below:

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Transcript: Chinese migrant workers

NARRATOR:

This is the province of Guangdong in southern China. Progressive and capitalist. Population, 100 million, 2/3 locals, 1/3 migrants. Tension is rising.

WORKER:

We have a very tiny share of the wealth. Our lives have not improved that much. Wages are low, inflation is high. Migrant workers are scraping a living. We're only just getting by.

NARRATOR:

There's been a wave of strikes and protests here. A clandestine meeting at the back of a restaurant. These workers forced an 11 day shutdown over conditions at a local watch factory.

WORKER:

The hours are long, the work is hard, and there's a lot of pressure on us. And there is no outlet for our unhappiness. People have felt oppressed for a long time. The pressure is building up.

NARRATOR:

Entertainment at the factory gates. Management believes dancing in step will keep the migrants happy. But there are thousands of protests by migrant workers every year in China, and the pressure doesn't end when the shift is over.

These migrants run the risk of meeting protection squads hired by locals to keep order. They live under the shadow of violence and intimidation. In this advice centre, I met a doorman who used to sell fruit at a market. He told me what happened when a fellow stall holder refused to pay protection money.

STALL OWNER:

Suddenly four locals showed up on motor bikes. They'd been drinking. They attacked him. They beat him with sticks. It lasted for two hours, even though the police station was just around the corner. When the police finally did come, he was all swollen. His face was purple and green.

NARRATOR:

Migrant workers are vulnerable because they don't have what's known as a hukou. Hukou is your residency permit in China. It guarantees legal rights as well as access to schools, hospitals, and welfare, but only in your home town or village. It was designed under Chairman Mao to stop people from moving. But in the last few decades, hundreds of millions of people have moved to find work. And now they live in limbo.

[CHILDREN TALKING]

This is what not having a local hukou means. Education is largely free to locals, but migrants must pay. Almost a year salary to put your child through primary school. 1/3 of these children are from migrant families. Zhou Jiang's parents came from Sichuan province. But the school has waived his fees because his family faces bigger problems.

TEACHER:

Zhou Jiang is a very good student. Every morning he read English at home for one hour.

NARRATOR:

And what happened to Zhou Jiang's mother?

TEACHER:

His mother got sick. And every month she should go back to the hospital to see the doctor. And they should pay a lot of money to see the doctor. So their life is very difficult.

NARRATOR:

Zhou Jiang's parents earn 60 pounds a week, just enough to get by on until his mother found a lump in her breast. Doctors told her she had cancer, that she needed a mastectomy. But without a local hukou, she'd have to pay for it herself. The family has gone deep into debt.

MOTHER:

I have been crying since the moment I found out. I lost a breast. I no longer feel like a woman. Our fate is a bitter one.

NARRATOR:

Factories are meant to provide medical cover for migrants without hukou, but many don't bother. Hers eventually did make a contribution. Then they docked her wages and tried to sack her.

MOTHER:

The factory kept trying to make me resign. I told them I can't afford to leave. I've contributed to my insurance. Now that I'm very ill and I need the money, you want me to go.

NARRATOR:

Caught between the gaps in China's system, turned away because she's not an official resident.

DI LEE:

Just because you're a non hukou holder and I don't see a medical insurance record. So I'm sorry, you have to go to another hospital.

NARRATOR:

For seriously sick people they're turned away from hospital?

DI LEE:

Yep.

NARRATOR:

Because they don't have this permit?

DI LEE:

Exactly.

[SPEAKING CANTONESE]

NARRATOR:

Di Lee runs a worker's helpline in Guangzhou. Every day his staff field hundreds of calls. Migrants are increasingly vocal about the discrimination they face. Resentment is growing.

DI LEE:

It's getting more and more serious, if I can say that. Because according to the records, there are so many riots and conflicts and even strikes. Just because they are migrant workers they're totally not accepted as a local hukou holder.

NARRATOR:

For many years, it didn't matter that millions of migrants didn't have proper access to hospitals and schools because everyone was on the make. But the long boom is over. Life in China's getting harder. Food prices are rising, job opportunities are shrinking, and public services are under intense pressure.

Suddenly, a large population of restive, unregistered migrants looks like a problem to China's leadership. There's new talk of equality. The Communist party admits the problem is serious. It wants to be seen to be responding to migrants' concerns.

MAN 2:

Migrant workers live and work in this city and we must provide them with basic rights and benefits. If they can't educate their children or find decent housing, they'll be dissatisfied with the government. If we don't reform hukou, we could see more social instability.

NARRATOR:

The government's language is changing. Migrants can now apply for the same rights as city residents under a points based system based on education and skills. Guangdong wants to keep garments factories like this one open and keep the workers coming here.

But so far, few permits have been issued. Last year 3,000 permits from a population of millions. A drop in the ocean. If you recognise the problem, why don't you just do away with this distinction? Why don't you treat all the residents of the city the same now?

MAN 2:

We can't abolish hukou overnight. Our policy does, however, create a clear path for migrant workers to obtain the same benefits and services as local residents. But there is a huge cost associated with that. That's why we're introducing the points system gradually.

NARRATOR:

The hukou system was designed for a very different China, to stop the rural poor overwhelming the cities. For years, it prevented chaos. Now it could be fueling disorder. But the migrants are here to stay.

End transcript: Chinese migrant workers

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Chinese migrant workers

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Discussion

The Hukou system of resident permits is a regulation designed under Chairman Mao to control the movement of people. It now conflicts with the change in the Chinese economy which has been enabled by massive internal movement of labour. The government’s use of a point-based system reflects similar tactics to those of many Western governments but the government in China has taken this much further by applying the technique to internal movements of labour. The video also notes the different outlooks and expectations among the younger generation of Chinese workers. The implication for HR managers is a need to understand the different regulations governing the movement and the hiring of labour. Paradoxically, these tend to be both stricter, and in other ways, looser than those found in many Western countries. For example, making workers redundant in China can be much easier than in European countries.

Time as context

Given the evolution of HRM, time itself can be regarded as a form of context. Alongside this, place also matters hugely.

At the corporate level, the place and contribution of human resource management can be contingent upon strategic decisions about organisational structure and form. In some circumstances, HR may have a considerable input to such decisions, in other circumstances it may be the object of such upstream decisions and thus have to work within a given context. A clear example is the different ways in which two global corporations – Unilever and Proctor & Gamble – utilised shared service centres including their use for HR. Proctor & Gamble (P&G) had operated for some time with a highly centralised approach to management, hence it established an internal shared services centre before moving on to outsourcing much of its HR shared services. Conversely, Unilever which traditionally operated with a decentralised approach, turned to outsourcing as a means towards globally standardising its systems and processes (Gospel and Sako, 2010).

On an even wider front, the underlying ideas, beliefs and assumptions of human resource management are a product of their historic and geographical contexts. For example, up until about the mid-1980s, conventional wisdom about people management and employment management in the UK was that the approach had to be based on ‘pluralism’ – that is that economic organisations are composed of multiple interests and interests groups which need to collaborate and compromise for their mutual benefit. Thus, trade unions were accepted as essential representatives of worker interests. Valued skills among people managers were based around negotiation.

A disruptive and initially challenging rival to this approach in the mid-1980s was the idea of a ‘new’ type of approach based on US ideas and human resource management practice. This initially was a small group of ‘disruptive’ specialists who sat uneasily alongside mainstream industrial relations and personnel departments. The HR and personnel practitioners tended to rely on procedure and due process. Over time, the tenets, beliefs and methods of the interloper began to take over. As trade union membership declined and industry restructured – especially with a shift from manufacturing employment to services – the previously prevailing approach to people management became replaced by HR notions of winning commitment, and a more unitarist set of assumptions in the face of global competition. In other words, a key part of the HRM context changed fundamentally.

5 Meta theories

While the outline in Section 3 focuses on interpretations – that is, theories – of social, technological, economic and political change, there are other meta levels of ‘theory’ which, in a sense, sit above these interpretations of events. One such meta-level theory posits that there is a general trend towards convergence in social and economic patterns across the globe.

6 Interacting contexts

Crucially, contextual factors often interlock and interact. A set of economic variables such as the industry structure may well be associated with a commensurate set of social policies (for example, regulating rights to time-off work for maternity or regulating workers’ rights and training).

Given such interlocking contextual factors it may not be sensible to think in terms of a pick-and-mix approach to human resource management. Often, approaches sit within constellations of polices which help reinforce each other. In the case study that follows we look at HR in the engineering company Bosch in Germany. This illustrates how aspects of the company’s approach to people management represent a coherent fit with the wider German institutional legal and cultural context.

A seminal work by John Dunlop many years ago explained how employment policies and practices normally could be understood as operating within what he termed ‘industrial relations systems’ – that is the industrial relations rule-making system of a country normally fitted alongside its political, industrial, legal and cultural systems and the main actors operated within a broadly common ideology (Dunlop 1958).

The growth of alternatives?

One of the major debates triggered by the events of 2008, such as the collapse of Lehman Brothers and the wider economic crisis, was whether economic and corporate policies would revert to business as usual or whether alternative models would be adopted.

From a range of political perspectives, thought leaders are talking about the possibility of alternative and new approaches to economic activity. New interest was shown in social enterprises and co-ownership models. The Occupy Movement, which emerged across a number of countries alongside widespread anxiety about top pay and bonuses and added anxiety about the adequacy of regulatory bodies, reflected a widespread concern about extreme inequalities and the institutions which reproduce them. A counter voice expressed warnings about an 'anti-business' culture which could hamper economic recovery and growth.

Each and all of these can render prescriptions about HR that were suitable for one time and place, ill-suited to a different time and place.

Activity 8: The changing social context: the death of deference

Timing: Allow around 45 minutes for this activity.

Watch this short and playful clip about the death of deference and its critical contribution to modern leadership, management and organisation design, and answer the questions that follow.

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Transcript: Never mind the bosses and the need for S.P.E.E.D.

NARRATOR:

We have something revolutionary to say about companies and organisations, about how they should be run and how they need to change. We believe traditional hierarchical working practices are becoming as relevant as prog rock in the white heat of punk and leaders that ignore what's happening are about to do a diplodocus.

[DINOSAUR ROAR]

Don't believe us? Look around. The Arab Spring, protests in Brazil and Turkey, WikiLeaks, Occupy, the rise of the whistleblower-- the world is challenging authority in a completely new way.

[SHUTTER CLICK]

Closer to home, the traditionally unimpeachable-- teachers, doctors, lawyers-- are but an internet search away from being challenged or even unmasked. From government to global finance, bigwigs to broadcasters, people are losing faith in institutions and in leaders, using technology to self educate and to organise. This is the death of deference and it's coming to your office. It's an internet-enabled David and Goliath and a unique opportunity for organisations and individuals alike to rewrite the rule book on accountability and innovation.

Visionary workplaces are already reshaping the deal with employees and with clients, creating dialogue and sharing power in ways unimaginable just a few years ago. We have a plan for putting the final nail in the coffin of deference and we call it "Change at Speed."

First, S for symbols, symbols of hierarchy-- job titles, big desks, posh offices. Search and destroy. It sends out a big statement of intent.

Next, the psychological contract between management and workers. This is the deal we all sign up to at work and it needs to be about giving everybody more say. In turn, your bosses will be able to ask for more responsibility and get it.

Then you can spread the executive power. Let people who are closer to the customers make some decisions for a change and free them from all the approval and sign-off agony. Push the power down the ranks.

Do these things and real employee engagement will follow, with all the benefits that this brings. And as long as you maintain authentic, meaningful discourse, where the real stuff gets discussed, you will be able to see what's working and work out what to do with the bits that aren't. It sounds simple, doesn't it? Most revolutions are. It's time to say, "Never mind the bosses."

[MUSIC PLAYING]

End transcript: Never mind the bosses and the need for S.P.E.E.D.

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(Robin Ryde, 2013)

Never mind the bosses and the need for S.P.E.E.D.

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1. What is your assessment of the validity of the claims made about fundamental changes to the social climate regarding authority?
2. What, if any, are the main implications for human resource management specialists?

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Discussion

Our view is that this is a clever and persuasive short video heralding the death of deference and the rise of empowered and engaged employees, customers and suppliers. The claimed revolution is more likely to be disparately represented across and within economies. In that sense it over-claims. But it does touch on a recognisable trend in certain quarters.

If the analysis is correct, there are profound implications for the practice of human resource management. These include (to name just a few): a need for even less reliance on formal rules and procedures; a need to focus on staff recruitment and staff development; a new approach to reward. The analysis also implies a trend towards a more individualised form of employment relationship. Currently a more collectivised form of relationship is the norm, with collective bargaining, rules and procedures, job grades, job evaluation and a formal hierarchy of authority dominating in most sectors.

Conclusion

In this free course we have emphasised the importance of context for the skilful practice of human resource management. Your study has enabled you to gain an initial understanding of the following:

• the scope of HRM
• the meaning and nature of strategic HRM
• how HR strategies are related to business strategies
• how HR strategies can be informed by a knowledge of labour markets and product markets locally, nationally and internationally
• the dynamic nature of global competition and of social and technological trends and their significance for HRM practice.

These were the learning objectives set out at the beginning of the course.

References

Further reading

Acknowledgements

This free course was written by John Storey

Except for third party materials and otherwise stated (see terms and conditions), this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence.

The material acknowledged below is Proprietary and used under licence (not subject to Creative Commons Licence). Grateful acknowledgement is made to the following sources for permission to reproduce material in this free course:

Images

Course image Angie Garrett in Flickr made available under Creative Commons Attribution 2.0 Licence.

Introduction: Uncertain times ahead: © Gunnlaugur Por Briem. Made available under https://creativecommons.org/ licenses/ by-nc-sa/ 2.0/

The Grand Hyatt, Goa © ImageBroker/Alamy

Bathroom: © Götz A. Primke made available under http://creativecommons.org/ licenses/ by-nc-sa/ 2.0/

Club 18-30 holiday: © Des Willie/PYMCA/REX

Figures

Figure 2: Farnham, D. (2010) Human Resource Management in Context, CIPD.

Figure 3: Bennett, N. and Lemoine, G.J. (2014) ‘What VUCA really means for you’, Harvard Business Review Jan/Feb. Harvard Business School Publishing.

Table

Table 1: Farnham, D. (2010) Human Resource Management in Context, CIPD.

Audio/video, including transcripts

Bonus Day: Footage of John Lewis © BBC

Germany's Mittelstand: BBC news item ‘Midlands Today’ 22.1.14 © BBC

Mittelstand location report: Radio 4 22.1.14 © BBC

Differences between countries: Local news report on use of Italian contract workers at Lindsay oil refinery, BBC North 28.1.2009 © BBC

Chinese migrant workers: Newsnight © BBC

Never Mind the Bosses and the Need for S.P.E.E.D courtesy © Robin Ryde Consulting

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