What is strategic human resource management?
What is strategic human resource management?

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What is strategic human resource management?

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.

Convergence theory

Convergence theory suggests that traditional differences in the way work is organised and managed, as well as differences in consumption patterns and lifestyles and beliefs, are being reduced or even eliminated. It suggests that there is a drive towards a more homogeneous international mode.

Naturally, this is a contentious interpretation and there are counter-trends and counter-evidence to be considered. The debate has relevance for HR practitioners, not least because it affects the extent to which they may seek to extend common HR solutions across their international operations.

Another meta theory and one which in a sense represents a counter to convergence, is ‘institutional theory’.

Rational actor theory versus institutional theory

Rational actor theory is implicit in much everyday thinking about human behaviour. It is made more explicit and used as the basis for formal modelling by economists. It builds on the premise that individuals make decisions based on a rational calculation of costs and benefits and then make free choices based on utility maximising.

Institutional theory represents an alternative view to the rational actor model. Institutional theorists point to the socially embedded nature of human actors whose views, norms and values are shaped by the society in which they operate. In such settings individual actors seek legitimacy and acceptance. Thus, institutional theory emphasises the normative influences on decision makers both at the individual and the organisational level.

Institutional theory has different components and concerns. For us, the relevance and significance is that if institutions matter, then HR managers need to be alert to the nature and contours of the institutional settings within which they seek to operate. Prior assumptions of rational, calculative action as found in classical economics may not be sufficient. Rather, this theory suggests that there are cognitive and cultural explanations for different organisational phenomenon. Theorists from this school of thought stress that for organisations to survive they must to a large extent conform to the rules and beliefs of the social milieu within which they seek to operate; that is they must earn legitimacy (DiMaggio and Powell 1983, Powell and DiMaggio 1991, Scott 1995).

As might be evident, theorists emphasising such institutional differences tend not to lend too much weight to the convergence thesis.

It should be noted however that while institutions matter, they are not unchangeable. Economic pressures can also exert influence on institutions. Note the extract below from a recent article on German labour relations:

In the 1980s and 1990s, industrial relations writers asked why German labour-management partnership was resilient in the face of changing world markets. The answer was that institutions mattered: country-specific rules regulating in-firm worker participation (co-determination) and wages (coordinated collective bargaining) produced mutual gains for workers and employers on a mass scale (Turner 1991). In recent years, however, Germany has gone from being one of the most equal societies in Europe to having an incidence of low-wage work close to that of the UK (Bosch and Weinkopf 2008). Much of this low-wage work is nominally organized, with 34 per cent of workers in the lowest income quintile covered by collective agreements in 2008 (Bispinck et al. 2010). If, as theorists argue, formal institutional change has been gradual and has served to shore up the system’s basic logic (Streeck and Thelen 2005), why have these outcomes changed?

(Greer et al., 2013, p. 215)

Such an assessment indicates the contentious and rapidly changing nature of the work and HR environment. Other evidence lends further weight to the convergence proposition. A study of institutional changes in Britain, France and Sweden over the past 25 years points to ‘institutional plasticity’ in these three countries and a tendency towards convergence (Howell and Givan 2011). Examples from other countries that might also support the convergence thesis include China where the Reform and Open Door Policy starting in 1978 and the 1995 Labour Law, which required all employees to be given contracts of employment, set that country on a path in some ways similar to market economies. And in Japan the tradition of lifetime employment among the larger corporations has begun to break down and Japanese employers have also experimented with individual performance incentives.

The theories and interpretations briefly introduced above relate mainly to the outer context. There are other theories relevant to the inner context – for example, the micro-politics of the relative power and influence of HR managers within organisations vis-à-vis other managerial professions and office holders.

An important tension you may have spotted already is between assumptions, approaches and theories – based, on the one hand, around ‘choice, strategy and decision-making’, and on the other hand, around ideas based on ‘institutional theory’ and ‘contexts’ which seem to stress relative limits to choice and rational decision. For many working within strategic HRM, the key anchoring theme, as mentioned already, is the idea of strategic choices. This follows the notion of HR as a ‘decision science’ (Boudreau and Ramstad 2009). This suggests a more formalised and systematic approach to the practice of HR taking it closer to the logic-based approaches found in accountancy and law. While the scope for a more systemic approach (such as HRM as a decision science) is acknowledged, the strong emphasis here is upon an exploration of the nature and importance of different kinds of context for the exercise of strategic choice. In other words, in order to exercise strategic choices in HRM, informed analysis of the multiple contexts which may be actually or perceptually constraining those choices require close attention.

A related point to bear in mind – and one that makes skilful HR practice especially challenging – is that the discipline is subject to many swings in fads and fashions. In other words, often the most apparently obvious manifestation of ‘context’ is a widely held and accepted view that the time is right for downsizing, employee engagement, outsourcing, or for human capital development, for total quality management, or a clear focus on shareholder value. And so on. Each of these themes and points of focus have had their moment. ‘Conventional wisdom’ is a crucial part of the context. A skill for the HR practitioner is to be able to take an informed stance with regard to whichever conventional wisdom is prevailing during their time of office. A lack of ability to do this will render the practitioner slave to prevailing and often transient fashion. Conversely, a practitioner wedded to a certain way of doing things irrespective of changes to the surrounding environment, risks being out of touch and ill-equipped to take advantage of new opportunities.

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