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Human Resources and Organizational Approaches

Human Resources and Organizational Approaches

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Human Resources and Organizational Approaches

177 pages
1 hour
Apr 4, 2016


The authors present the basics of four schools of thought regarding a personnel management-related standpoint with their axioms, assumptions and logic. Closest to the practical, normative business management comes the finance-oriented personnel management one only needs to think of remuneration management, personnel controlling, the Berlin Human Capital Assessment or occupational pension schemes.

Therefore, they take the example of the annual financial statement of an international enterprise and deduct and calculate the Berlin Balanced Scorecard Approach from it.

Personnel management can only be successful, if the structural and process-related organization of the company permits achieving company goals. Therefore, the description of four basic organizational theories complements the deliberations on human resource management.
Apr 4, 2016

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Human Resources and Organizational Approaches - Rebecca Popp


1 Theories on personnel management – from productivity to value and knowledge-based human capital

1.1 Scientific management as predecessor of a function-oriented personnel management

Academics oriented towards national economics, in this case national labour economists, often evade problems of general management and therefore also of some functions of human resources, especially of personnel management and organization. They project the economic assumptions of a perfect market model onto a kind of labour market within a company and take over all assumptions of an atomic market model. They consider business studies as field of microeconomics and national labour economics. Therefore, business studies should resort to the way of thinking, to the methods and patterns of argumentation of national economics.

With his book Production (1951) Gutenberg made a cut between national economics and business studies with the production functions A and B. He makes clear that the production function A of national economics is not suitable for business studies, as it is neither practically nor theoretically comprehensible and that company management, including personnel management, cannot be defined away with the help of market models.

Besides, models of national economics have been questioned for more than 200 years on a theoretical, legal-normative and empirical basis. This criticism is due to the development of industrial enterprises and especially to the phenomenon of management which questions the separation of ownership and leadership of microeconomic models and the dispositive production factor management, which coins Gutenberg’s production function. In a model it is thinkable that one person owns and leads the company and works for the company and controls it and is led by the market at the same time, however, this reduces personnel management in an industrial company to absurdity. Additionally, personnel management works in accordance with formal conduct guidelines dictated by the company goals of productivity, cost effectiveness and profitability and does not intend to solve the allocation problem on the national labour market. In this case the national labour economics as alleged business management function lacks credibility.

The performance measurement as predecessor of human capital assessment in the company is always achieved with a combination of technical, social and economic processes as well as an organizational approach concerning the process-oriented organization.

1.2 Scientific management as practical trigger of function-oriented personnel management

The first ideas on (industrial) business management refer in a narrower sense to questions on labour organization and to the explanation as to why in industrial businesses high productivity figures can be achieved and why enormous efficiency problems can be solved.

Pre-classical thinkers like Adam Smith explain high productivity rates in industrial businesses with the help of the example of pin production. High division of labour in industrial businesses as well as the invention of machines are analytically deduced as explanation for the enormous growth of productivity rates achieved by employees.

Around 80 years later Babbage perceived that with high and increased productivity rates staff costs can be reduced and high efficiency rates can be achieved. In addition to that, due to the freedom of trade in the free market economy in England, and due to the mass production in miscellaneous industrial companies, unskilled, low-salary day labourers or also children and women could be employed for a pittance. Today, this phenomenon of remuneration can be found between industrial countries and developing countries in transnational and multinational businesses, as those companies purposefully choose production in developing countries due to low staff costs.

The most sustainable and for more than 100 years most famous, global, industrial model of business management and staff management was practically, theoretically and empirically developed and put into practice by Frederick W. Taylor and Henry Ford I.

Example: The Ford Motor Company produced the car model T as first car in mass production for the anonymous mass on the assembly line. 16 million cars of model T were offered for a price of 800 USD. At that time the normal price of a handcrafted car was 5000 USD. Everybody could obtain an individual car, as long as the car could be black and the model T. There was no other mass car than the Ford Model-T. This mass production in the mass market automobile sector was and is up to now only possible due to the management theory of "scientific management" developed by Taylor (also called Taylorism or Fordism).

To explain to some extent with today’s concepts of strategic management this prime example of a success story in the automobile sector, one needs to attempt a consistent, up-to-date interpretation with Porters strategic concept of cost leadership. Taylor was certainly familiar with every classical thinker of natural science like Newton, as well as national economists like Adam Smith and Ricardo, as well as Darwin’s theories of behavioural science and evolution. He was convinced that the methodological knowledge from natural science and mechanics would also offer an instrumental, organizational and personnel management basis for business management. He propagated a radical division of labour with almost zero qualification of the employees, i.e. in today’s argumentation almost zero human capital, in order to achieve the highest productivity on the assembly line with the help of extreme labour division and for being able to discharge unnecessary employees in order to reduce staff costs. The remaining employees were offered a performance-oriented remuneration (piece work system), in order to motivate the employees in the sense of the picture of mankind as homo oeconomicus. This way an increase of productivity by 300% to 400% was achieved.

Taylor’s concept of staff management is put into practice with the help of a consequent staff selection, work places designed in accordance with scientific conclusions with breaks and recovery phases, training phases, a consequent process-oriented design of logistics in accordance with the organizational principle of continuity, as well as the entire production management, especially the strict separation of management functions from performing activities under functional management (the later matrix organization). Through analytical time and motion studies in the system of scientific business management staff costs and productivity were easier to calculate.

With the help of the attribution of contributions to individual employees or to at least larger groups of employees concerning the production process of one or several products, as conceived in today’s human capital assessment, cost accounting and bid proposal calculation for potential customers were made possible. Taylor and Ford enforced those inhuman production conditions by doubling the wages. Only this way the employees were prepared to tolerate the inhuman conditions at the assembly line. However, in his memoirs Ford prided himself as social entrepreneur for doubling the wages per day, allegedly on a voluntary basis.

Example: Ford had omitted that due to the extreme labour division at the assembly line his employees suffered from monotony and psychological saturation. E.g. they only fixed one screw on every car every single second during 10 hour-days and had to act like industrial robots, not being able to change the working conditions. The high fluctuation rate, which is said to have achieved levels of 800% or 900%, demanded for a wage increase by 100%, in order to at least maintain the production at the assembly line. Only since the Hawthorne surveys (1927-1932) personnel management concepts based on behavioural sciences and labour psychology try to explore the negative sides of Taylor’s and Ford’s industrial success story in order to avoid negative consequences.

The production of Ford’s model T became a worldwide success story. Despite all negative points from a personnel management point of view, Taylor developed personnel management functions as staff selection, use of personnel and staff training and even doubling the wages and/ or staff costs did not harm Ford’s success, as the increase in productivity compensated the rise in staff costs.

Info: Today we would attribute this to Porter’s strategic approach of cost leadership. Ford achieved competitive advantages by using mass production on the assembly line for his model T.

With the help of Taylors theory Ford had achieved cost leadership in the automobile sector. Via cost leaderships he had completed the learning and experience curve and put the law of mass production

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