MONASH

BUSINESS
SCHOOL

MGF 2661 HRM

Week 2: HRM Models and Theory

Marie Crozier-Durham
Marie.crozier-durham @monash.edu
 Returning to last week

Resource based view • Economic theory that argues that employees are valuable
resources that need to be invested in and developed
of the firm

Human Resource • A system (represented by a model) that helps us to understand

Management (see how employees can be made valuable and the outcomes that
flow from this
lecture slides)

Harvard Model (see • A model of HRM that recognises the impact of multiple
stakeholders on an organisation’s HR policy choices
Beer et al reading + • A model of HRM that has multiple (plural) outcomes that relate to
lecture slides) employees, the organisation and society more generally
 Economic perspective on HRM:
Resource Based View of the firm

Re Barney and Wright 1997 (see video on moodle)

• Human capital or human resources are vital to firm success ie “people are of value”
• Human capital resources are
• “the characteristics of a firm’s human resources, including all of the knowledge,
experience, skill and commitment of a firm’s employees, and their relationships with each
other and those outside the firm” (Wright et al 1994 cited in Barney and Wright, 1997:4)
• The role of SHRM is to utilise human capital resources as a valuable firm resource to achieve
strategic outcomes this has the potential to create value and therefore competitive advantage

Theoretical assumption: This perspective explains how and why ‘people

are of [economic] value’ to the firm
What did the reading tell us?

Reading 1: Beer, M., Boselie, P., & Brewster, C. (2015)

Key elements of the Harvard Model (p. 429-430)

• Stakeholders/multistakeholder perspective (p. 430) & situational factors
• Situational factors
• HR Policy choices and HR outcomes
• Longer term outcomes (plural) which implies a trade off between the interests of managers
and shareholders clf employees and unions

Describes the SHRM model

• Model that links HRM to the economic success of firms
• Model that focuses on productivity and efficiency (of employees)
• Assumes employees are a resource (extract value) and a cost

Identifies problems with the model

• Overly focused on financial/measurable outcomes – profits more important than people
• Neglected individual and societal wellbeing
• Employees not just resources that represent a cost
• Employees have social capital that is valuable
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 MONASH
BUSINESS
SCHOOL

Moving on to Week 2

HRM Models and Theory

 Learning objectives for today

Learn more about theoretical and conceptual bases

Learn of HRM;

Understand and differentiate the Harvard and SHRM

Understand and differentiate models

Understand the link between HRM and business

Understand strategy using the SHRM model

Describe and differentiate “soft” and “hard”

Describe and differentiate perspectives of HRM

Understand how the models might be used to

Understand understand or gain insight into HR (Telstra example).
Learning resources for this week
▪ TEXT
Nankervis et al., 2020 Chapter 1. Skim pages 1-21. Carefully read
pages 13-22 take particular notice of the Harvard Model of HRM
model, fig 1.1 page 17.

Nankervis et al., 2017 Chapter 1. Carefully read pages 22-45 (save

pages 40-43 on Ethics and HR for Week 3) take particular notice of
the SHRM model, fig 1.5 page 44.
PLUS
▪ Compulsory Reading for Week 2
– Hospitality HRM: past, present and the future - Michael C.G.
Davidson, McPhail, Ruth and Barry, Shane 2011 - International
Journal Of Contemporary Hospitality Management, 2011,
Vol.23(4), pp.498-516. 7
HRM MODELS AND CONCEPTS THAT
HELP US EXPLAIN HRM
 Revisiting the Harvard Model
(one way of seeing HRM and its outcomes)

Stakeholders
Shareholders
Management
Employee groups
Government
Community HRM Policy
Unions Choices HR Outcomes Long-term
Employee influence Commitment Consequences
Human resource Competence Individual well-being
flow Congruence Org. effectiveness
Reward systems Cost effectiveness Societal well-being
Situational Factors Work systems
Workforce characteristics
Business strategy
and conditions
Management philosophy
Labour market
Unions
Task technology
Laws and societal values Multiple beneficiaries
3 key stakeholders
External & Internal factors and
stakeholder groups
Source: M. Beer, B. Spector, P.R. Lawrence, D.Q. Mills & R.E. Walton, Managing
human assets, Free Press, New York, 1984, p. 16.
See also Beer et al 2015.
 Understanding the Harvard Model by looking at
its various parts

Stakeholder interests (power and

Pluralist (see your text + Davidson et al 2011)
conflict)

Situational factors (eg Shape/constrain strategic choice eg labour market

context/environment factors) factors, demographics

HRM Policy choices (multiple Management choices aimed at multiple HR

focus) outcomes

What the organisation wants to achieve from its

HR outcomes (the ’Four Cs’) HR policy choices (may be shaped by1 & 2 above)

Long term outcomes (multiple Assumed benefits of HRM for individuals, the
outcomes = pluralist) organisation and society in general

See also Reading 1 Beer et al

 6th Component – Feedback loop
• The sixth component of the Harvard model is a
feedback loop. As we have discussed,
situational factors influence HRM policy and
choices. Conversely, however, long-term
outputs can influence the situational factors,
stakeholder interests and HR policies, and the
feedback loop in Figure 1.1 (textbook) Fig 1 in
Beer et al (2015) reflects this two-way
relationship.
Presentation title
Further to the Harvard Model

▪ : ‘the employment relationship entails a blending of

business and societal expectations’ (Boxall, 1992, p. 72).

▪ The stakeholder interests recognize the importance of

‘trade-offs’, either explicitly or implicitly, between the
interests of business owners and those of employees
and their organizations, the trade unions.
▪ The model is a much more pluralist frame of reference
than is found in later models.

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Critical perspective

▪ The strength of the Harvard model lies in its

classification of inputs and outcomes at both the
organizational and the societal level.

▪ A weakness, however, is the absence of a coherent

theoretical basis for measuring the relationship between
HR inputs, outcomes and performance (Guest, 1997)..

13
Harvard HRM: Assumption #1 Power

Conflict of interests is inevitable because

Power is pluralist (see text multiple stakeholders with multiple interests

p.16) Multiple outcomes – conflicting interests

taken into account in outcomes

See also Beer et al 2015; This explains the concepts of pluralism and
unitarism
Davidson et al 2011 p. 501

Pluralism relates to where If employees and management have

conflicting goals, they will come into conflict
power lies in relations b/w and therefore the employment relationship
must be negotiated between parties .
stakeholders

Presentation title
Harvard HRM: Assumption #2 Outcomes

▪ HR Outcomes (4 Cs)
3 Long Term Outcomes ▪ Commitment
Societal well-being
▪ To the organisation
Individual well-
being (meet
Org. effectiveness
(profit,
(assumes a social
contract or social
▪ Competence
people’s needs and
aspirations)
sustainability,
competiveness)
responsibility to
stakeholders)
▪ Employees have
relevant skills
▪ Congruence
▪ Trust and common
purpose
Rejects a purely economic ▪ Cost effectiveness
and strategic view of HRM ▪ HRM generally gets
return on
– see Reading 1 Beer et al
investment

15
Harvard HRM: Assumption # 3 Employees are
resourceful

▪ See page 500 of

Soft HRM Davidson et al 2011
“The soft HRM approach
(Harvard model….)looks for
ways to unleash
resourcefulness of
employees through
commitment and
involvement that in turn
increases their
effectiveness”

See also p. 17 of your text

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 Harvard HRM: Assumption # 4 Employee
Needs

• The Harvard model assumes that meeting employees needs

through HRM can create positive work attitudes and actions and
engendering commitment, satisfaction and engagement (see
also White and Bryson (2013)
– The assumption is that this leads to changes in behaviours
and attitudes
– Engagement, commitment, high productivity
– This is consistent with a soft HRM approach (see p.
16-17 of your text, Davidson et al 2011; also Beer et al
2015)

1
7
 The Strategic HRM Model
(SHRM)

• “A pattern of planned HR deployments and

activities intended to enable an organisation to
achieve its goals” (DeCieri and Kramar, 2005:
601).

1
8
 Simplified SHRM Model

EXTERNAL ENVIRONMENT ONE beneficiary

Local, regional, national and global
Politics, law, demographics, economic
of HRM
conditions

STRATEGIC HR
OUTCOMES
for the organisation
Performance,
Vertical alignment

Productivity
HRM Strategy Flexibility
BUSINESS STRATEGY
Goal achievement
Strategic Vision & Mission Dependent on strategy Cost effectiveness
Strategic planning leading to and environment Profitability
strategic business goals
Via HRM strategy
Key stakeholders

HRM System
Set of integrated HRM policies and practices

See also page 44 of your text Horizontal integration

Presentation title 28th 2
Jetstar’s low cost HR strategy:
cabin crew and rest hours

https://youtu.be/bOgGDhoWRdo
SHRM Model is underpinned by the Resource Based View of
the Firm (think about the Jetstar video)

Employees = ‘human capital’ that add value/are valuable

to the firm when effectively organised or managed using
HRM policies and practices

Note: Employees become firm resources through HRM –

this is what adds value eg training, performance
management, work design

Employees are considered ‘resources’ rather than

Davidson et al’s ‘resourceful’ employees

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 SHRM: Assumptions #1Power

• Power is unitary
– Employees and management are assumed to
share the same interests and goals in wanting the
organization to be successful (see p. 16 of the
text, Davidson et al 2011, p. 501, and Jetstar
example).

• The potential for conflict between

stakeholders (c/f Harvard Model) is
downplayed or ignored completely (see the
Beer et al reading and Jetstar example)
SHRM: Assumption #2 Outcomes

▪ HR Outcomes
(measured in financial
All outcomes relate terms)
to organizational ▪ Performance
success and survival ▪ Productivity
▪ Flexibility
▪ Goal achievement
Employee needs ▪ Cost effectiveness
secondary ▪ Profitability

24
SHRM: Assumption # 3 Employees are resources

▪ Hard HRM
▪ Employees viewed as
economic resources
and outcomes
measured in financial
terms
▪ Their performance,
flexibility, productivity
etc must meet
organisational
requirements

See also p. 17 of your text and Davidson et al., reading

25
SHRM: Assumption # 4 meeting
employee needs

Employee needs are assumed to be met via

The key outcome of SHRM the effective implementation of HRM that will
communicate and reinforce shared goals and
is organisational success direct employees’ attitudes and behavior
towards achieving the organization’s strategy

‘the measurement and management of

employee costs and outcomes for
organisational benefit’ (p. 17 of the text)
Consistent with ‘hard’ “hard HRM is tough and calculative (….) and
largely focuses upon the crucial importance of
HRM defined as: integration between HR policies and systems
with business requirements” (Davidson et al,
2011)
Overly economic focus (Beer et al., 2015)

26
 Going back to the Jetstar example

• Hard HRM (instrumental approach)

– Management centered
– Employees viewed as units of production
or costs
– HR strategy deploys staff in ways that
achieve the organisation’s business
strategy
– Aligns with SHRM model
Jetstar, RBV and SHRM

▪ HRM practices that give Jetstar sustained

competitive advantage by keeping costs low
through aligned HRM practices
✓ ‘Off-shoring’ labour/use of labour hire
companies
✓ Recruitment: Access to an abundance of
staff (cheap and hardworking) willing to
work for Jetstar – company brand and
perhaps Qantas reputation enhances this
✓ Retention: Access to low cost staff who
accept employment contracts that offer
‘hard’ employment terms and conditions
including staff paying a bond, paying for
training, low pay and fewer holidays
This gives Jetstar a competitive advantage
that cannot be easily copied by
competitors and of course Qantas does
not compete.

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 SHRM: strategic alignment and integration

• SHRM model’s strength is built on the assumption that

HRM systems and processes can be integrated into
management practices and aligned with strategic goals
via:
Horizontal fit (synergy)
• How do key elements of the HR system work as
an integrated whole?
– Vertical fit (adding value)
• Does the HR strategy (and the organisational
capabilities it creates) enable the
implementation of business strategies? Eg
Jetstar (low costs)
– Temporal fit (adapting to the future)
• Have we invested adequately in future HR needs
and anticipated capabilities? Eg Air Services
example for HR Planning.
Take note: Davidson et al reading

▪ Note the first section of the article on the

development of HR

▪ Read carefully the sections on

– Unitarist and pluralist perspectives
– Strategic HRM (SHRM)
– Hard and Soft HR
– Skim rest of the article but note generational differences
and skills priorities
– Make links back to Beer et al reading

30
In summary #1

▪ We are now familiar with 2 contrasting models of HRM

that while describing how and why organisations should
develop an HR strategy/system, have different
assumptions about employees and how to manage them
▪ Both models assume that managing people using HRM
is a source of value for organisations
▪ The Harvard model is pluralist and aligned with soft HRM
in that it sees that a key outcome of HRM is meeting
employee needs
▪ The SHRM model is unitarist and aligned with hard HRM
in that it sees that a key outcome of HRM is meeting
organizational goals
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 In summary # 2
• Harvard Model • SHRM
– Pluralist – multiple – Unitarist (single
stakeholders and outcomes outcome =
– ‘Soft’ focus employee organisational
needs effectiveness/success)
– Meets org, employee & – ‘Hard’ – focus needs
society needs met via org.
– Recognises tradeoffs outcomes.
between conflicting – Meets org. needs only
interests – Conflicting interests
are assumed away
Both models assume that employees are valuable and best organised
through a system of HRM practices that are aligned with each other
and the business strategy to achieve particular outcomes
HRM MODELS AND CONCEPTS THAT
HELP US EXPLAIN HRM ( TELSTRA
EXAMPLE )
HRM in the News – can we apply these
concepts and models

‘Telstra shelves job cuts as crisis upends its

strategy’ (The Age March 21, 2020)
• Current business strategy ‘T22’ developed to cut 8000 staff
announced in 2018
• Aim of strategy to cut fixed costs of $2.5 billion in 2021-22
• Central to this is to cut jobs

Corona virus (impact from external environment)

• Call centres in the Philippines shut down

• Retail outlets suffering
• Put job cuts ‘on ice’ (however they have already cut 6000
of jobs

Telstra’s response

• Will have to staff Australian call centres to meet demand

(HR planning)
• Bringing forward spending on 5G network to increase
network capacity
• Reassured shareholders that current dividend payments
will not change

34
Understanding what Telstra has done using the Harvard
Model
(one way of seeing HRM and its outcomes)

Stakeholders Concern with shareholders and customers

Shareholders
Management
Employee groups Org. wellbeing
Government Staffing call centres/virtual workforce/working
Community HRM Policy
Society??
Unions Choices HR Outcomes Long-term
Employee influence Commitment Consequences
Human resource Competence Individual well-being
flow Congruence Org. effectiveness
Reward systems Cost effectiveness Societal well-being
Situational Factors Work systems
Workforce characteristics
Business strategy
and conditions
Management philosophy
Labour market
Unions
Task technology
Laws and societal values Claim that cost Multiple beneficiaries
Savings are on track 3 key stakeholders
Corona virus – external shock
External & Internal factors and
Source: M. Beer, B. Spector, P.R. Lawrence, D.Q. Mills & R.E. Walton, Managing
stakeholder groups
human assets, Free Press, New York, 1984, p. 16.
See also Beer et al 2015.
Understanding what Telstra has done using the Harvard Model (one way
of seeing HRM and its outcomes)

Shareholders –
re maintaining
dividends
▪ What we do see Customers –
call centres
– Strategic focus on cost Stakeholders staffing and 5G
rollout
savings, customers and Suspend job
Employees??
cuts (reduce
Government??
shareholders call on cash for
Unions???
payouts? Retain
▪ Unitarist focus HR choices
staff for
rollout?? Call
centres??
– Customers and Most likely
organize staff
shareholders which to work from
reflects organizational home
Cost virtually
effectiveness
interests HR outcomes Competency
(keep skilled
▪ What we do not see/hear staff)

– People are of value Organisational

effectiveness

– Pluralist outcomes Longer term Societal

wellbeing???

– Soft or hard HR?? outcomes Individual

wellbeing?

36
 SHRM may shed more light on Telstra’s
response using SHRM

• “A pattern of planned HR deployments and

activities intended to enable an organisation to
achieve its goals” (DeCieri and Kramar, 2005:
601).

3
7
Understanding what Telstra has done using the
SHRM Model
HR strategy to
support
EXTERNAL ENVIRONMENT
Local, regional, national and global
Staff local call centresONE beneficiary
Politics, law, demographics, economic Roll out 5G of HRM
conditions

STRATEGIC HR
Corona Virus OUTCOMES
for the organisation
Performance,
Vertical alignment

Productivity
HRM Strategy Flexibility
BUSINESS STRATEGY
Goal achievement
Strategic Vision & Mission Dependent on strategy Cost effectiveness
Strategic planning leading to and environment Profitability
strategic business goals
Via HRM strategy
Key stakeholders

HRM System
Suspend current strategy
Set of integrated HRM policies and practices

See also page 44 of your text Horizontal integration

 Understanding what Telstra has done
using the SHRM Model

▪ Business Strategy ▪ Re-alignment of HRM

– Suspend T22 strategy – argues they
are on track to achieve cost savings
strategy with business
– Retain staff to support new strategic strategy
efforts ie Roll out 5G more quickly
– Need to staff local call centres
because Philippines call centres ▪ What we see/hear
closed
▪ HRM Strategy
▪ Employees valuable a
– To support the above
resource to mobilise to
– Also support staff to work from home
achieve revised strategy
▪ Strategic outcomes
– Protect the ongoing profitability and ▪ Unitarist assumptions
effectiveness of the organization
– Concern to reassure customers and
shareholders

39
Week 3
We will look at employee
engagement
• If we assume that people • Technology has both
are valuable we need
ideas about how to
‘extract’ this value
• Ideas such as employee
engagement and theories
of engagement and
motivation helps us to do
this
We will also look at
technology and HRM
disrupted employment
and work AND facilitated
the ability of
organisations to respond
to COVID 19
40
 Reading for next week (please do it!)
• Text
– Nankervis et al., 2020/2017 Chapter 1.
PLUS
• Reading 3a: Arnold B. Bakker , Simon Albrecht ,
Gruman, J., Macey, W., and Saks, A. (2015) "Work
engagement, human resource management practices
and competitive advantage: an integrative
approach",Journal of Organizational Effectiveness:
People amd Performance, Vol 2, No 1, pp 7-35
• Reading 3b: Strohmeirer, S. and Parry, E (2014) HRM
in the Digital Age. Editors’ introduction, Employee
Relations 36(4)