Università degli Studi di Padova

Corso di laurea Triennale in Economia

Human Resource Management

prof.ssa Martina Gianecchini (martina.gianecchini@unipd.it)
Teaching Assistant Nicola Bertin (nicola.bertin.8@studenti.unipd.it)

HRM STRATEGY AND FUNCTION

OCTOBER 7TH, 2022

Strategy and human resource management

The relationship between strategy and human resource management can be described and analysed through
three approaches.
Linear (or sequential) approach - The choice of what to produce is traditionally a competence of the
strategy and that of how to produce a competence of the organization. This division of competencies has
generated the strategy-structure paradigm [Chandler 1963], which postulates a linear relationship: once the
strategy is defined by the entrepreneur or the governance of the company, the best suited structure is
implemented and then the necessary human resources will be included (Figure 1.1). The linear approach is
the one adopted in the seminal article by Tichy and colleagues [1982] on the subject of strategic human
resource management: the authors explain how choices regarding selection, evaluation, compensation and
development of personnel should follow the definition of strategy and structure (leading back to the
functional, multidivisional and global models). The linear relationship can also work in stable and simple
environments and when knowledge and decision-making power are highly concentrated at the top of the
organization. But it reveals all its limitations in more turbulent and complex situations.

Figure 1.1 – The linear approach

Organizational
Strategy HRM
Structure

Interdependent approach – When a company is competing in a complex and variable environment,

and distinctive knowledge and skills, with the associated decision-making power, are not concentrated in a
single person, the linear approach is no longer applicable. Strategy, structure and HRM influence each other
and are exposed to the pressures of the environment, to which they seek to adapt. Structure conforms to
strategy, which, in turn, is influenced by structure in a circular process. Tomorrow's strategy will be the
product of the current structure and people previously hired, combined with the stimuli from the
environment. This is therefore referred to as the interdependent approach (Figure 1.2).
 Teaching materials for the course Human Resource Management a.y. 2022-2023

Figure 1.1 – The interdependent approach

Environment

Organizational
Strategy HRM
Structure

Environment

Evolutionary approach - The organization is a system that learns and transforms itself through the
actions of a plurality of actors (internal and external) who interact with environmental changes. These
changes are cause and effect of the actions defined by the strategy (Figure 1.3). The structure has the capacity
to change, evolve and differentiate itself because of the pressure of a plurality of individual and collective
subjects (managers, executives, workers, professional groups, trade unions and all other stakeholders). It is
thus not only the result of interdependencies, but also of the strategies of all actors (internal and external),
whose role will be differentiated by their ability to determine or condition the organization's performance.
The idea of strategy postulates the freedom of the decision maker. In the case of the linear approach, this
freedom is granted to a single actor, together with the ability to implement the decision. In the
interdependent approach it is somewhat bounded by interdependencies. The evolutionary approach
recognizes the creative and relational aspect of strategy as a feature potentially attributed to all actors, albeit
within the system of simultaneous or successive interactions (i.e., following a path dependence logic,
whereby past decisions interact with current ones).

Figure 1.3 – The evolutionary approach

Actors’ strategies Legislation

Organizational
Strategy HRM
Structure

Environment

Human resources and competitive advantage

As successful companies talk publicly about their approach to human resources or present it in rich detail
in websites, publications, seminars and conferences, there are those who have wondered whether indeed
HR-related policies can be a source of competitive advantage. This is precisely the research question of
studies that refer to Strategic Human Resource Management, which attempt to analyze the link between
implementation of HRM practices and business performance. The theoretical perspectives underlying this
relationship can be traced to three major strands [Delery and Doty 1996].
The universalistic perspective assumes that there is a set of "strategic" human resource management
practices (best practices) that are better than others and all organizations should adopt these best practices.
There is a universal relationship between individual ‘best’ practices and firm performance. This perspective
is called universalistic because these activities should be the same for all organizations regardless of, for
example, industry, size, competitive environment. They are named High-Performance Work Practices and
are generally identified with [Pfeffer 1994]: career opportunities in the internal labor market, existence of
formal training processes and not only on-the-job, evaluation of staff based on performance and behavior,

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variable compensation plans based on profit distribution, use of contractual solutions that ensure stability
of the employment relationship, mechanisms for participation in business decisions, work organization that
promotes professional growth and work-life balance. Over the years, several studies have investigated the
relationship between the adoption of these practices and firm performance [Macky and Boxall 2007; Becker
et al. 1997] finding a positive effect on individual behaviors (e.g., job satisfaction, trust in management,
identification with the organization) and on certain organizational indicators (productivity, growth, rates of
return on investment). Criticisms generally made of this approach relate, first of all, to the impossibility of
using the same HRM system in companies with different structure and needs. Moreover, even if best
practices did not come from codified lists but are the result of activities of benchmarking, imitability would
only be apparent because very often these practices are characterized by causal ambiguity (it is not easy to
understand cause and effect relationships) and path dependency (their effectiveness depends on the
accumulated experiences of the firm).
The contingent perspective is more complex than the previous one because it hypothesizes that the
relationship between HRM and firm performance depends on "contingent" elements such as, for example,
the environmental context, the firm's level of innovation, and the relevant industry. As suggested by Delery
and Doty [1996], the contingent variable that should be considered in the design of a human resource
management system is the firm's strategy. In other words, the most effective HRM activities should be
chosen depending, for example, on whether a firm adopts a cost-cutting or differentiation strategy. A
limitation of this perspective is that it suggests conducting a contingent analysis for each of the HRM
activities taken individually. For example, a company adopting a cost-containment strategy might decide to
recruit by word of mouth. However, this channel might not provide access to the number and type of
candidates needed for business needs, consequently raising training costs.
The configurational perspective starts from the limitations highlighted for the contingent approach
and suggests the existence of groups (bundles) of personnel management activities that have the characteristic
of reinforcing each other and whose joint implementation produces a greater effect on performance than
the implementation of each activity individually. How to define a configuration of personnel management
activities that can bring value? According to their internal consistency (horizontal fit) and with corporate
strategy (vertical fit) [Wright and Snell 1998]. For example, in many family businesses maintaining traditions
and craftsmanship are two key elements of strategy that are nurtured through recruitment and selection
processes based on social networks, internal career paths, and promotions based on seniority. In contrast
in high-tech companies, where the strategic focus is on innovation, recruitment and selection is based on
the excellence of the candidate's educational and professional background, consistently training is offered
on soft skills with state-of-the-art teaching methods, and a system of services is provided that enhances the
individual.

HRM function as a strategic service

To understand what a HRM function can be designed and managed we now propose a model of analysis
that adopts a service delivery orientation [Normann 1984]. Personnel management activities can thus be
designed and analyzed with respect to five variables:
• task - HRM function's task, i.e., the ways in which it conceives its role and its objectives, consistent
with the corporate mission;
• customers - the recipients of the HRM function's activities, who from the perspective of the service
rendered can be called "customers" and who may be internal or external to the company;
• structure and tools - the organization of the function and the technical tools for the realization of
the task;
• performance assessment - performance indicators of the various activities carried out and of the
function as a as a whole;

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• strategy, culture and values - of the organization in general, and of the human resources in particular.
The variables are all interrelated and can be isolated in the description only for analytical convenience (Figure
1.4). They can be interpreted and combined in different ways, resulting in various configurations of HRM
function. The model is not intended to be prescriptive, but to allow us to grasp the relationships between
variables and to understand the importance of these relationships in specific contingencies. It is also meant
to explain business situations that adopt HRM function profiles that do not properly correspond to so-
called best practices, but equally constitute an innovative and effective mode, as is demonstrated by many
experiences of Italian companies [Gabrielli 2010, Rebora 2009, Campiglia et al. 2000] and small and medium-
sized enterprise systems [Albertini 2002].

Figure 1.4 – A model for studying HRM activities as a service

Task

Strategy
Structure and Performance
tools assessment Culture

Values

Customers

Task
The task of the HRM function i encompasses the ideal, cultural and technical options that descend from
the strategic orientation of the enterprise and its culture, and which are incorporated into the variable
"strategy, culture and values" (Figure 1.4). In fact, the latter should not be considered as the end and closing
point of the model, since due to the circular and iterative nature of the relationships, the variables are
simultaneously and not sequentially related.
From a vast literature summarizing the broad options available [Actis Grosso 1992; Fombonne 2001],
we can enucleate three types of tasks: Personnel Administration, Human Resource Management, and Human Resource
Management and Development [Costa 1997, pp. 54-64]. In the first case (Personnel Administration), the task is
defined in purely administrative terms and consists of taking care of the legal and accounting aspects of the
employment relationship. In the second case (Human Resource Management), administrative aspects are
complemented by attention to the organizational integration of people with the introduction of tools that
pursue the efficiency and effectiveness of their employment. In the third case (Human Resource
Management and Development), HRM function becomes a constituent factor of the strategy and
contributes in building competitive advantage.

Customers
If the HRM function is a service, thus is has relevant customers: the strategic top management, other
business functions, the staff itself and all other stakeholders. This leads to differentiating services according
to the needs and characteristics of the customers and their ability to interact in the production of the service
itself. In order to understand these needs and prepare the most appropriate tools for their satisfaction, it is
not possible to adopt a homogeneous view of all employees, which would lead to offering a standardized
service, responding more to the needs of those who provide it than to those who receive it or, at best, to a
cost and efficiency orientation of the HRM function's activities. It may be necessary to segment employees.
The segmentation is influenced by the configuration adopted, which in turn determines the criteria for
identifying the various segments in a dialectical relationship.

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HRM policies tend to differentiate according to organizational roles, professional and social
characteristics of individuals operating inside and outside the enterprise. For example, although there may
be a unique HRM policy, there will be different opportunities for the sales and production employees,
middle managers and managers, leaders and followers, and so on. Each of these categories presents different
needs in companies operating in different industries and with differentiated strategies. Take, for example,
professionals: an architect will be handled differently if he or she works in a design firm or construction
company; a lawyer in a law company or a bank; a programmer in a software house or a commercial company;
an engineer if he or she has project responsibility or manages a business unit; and so on. Policies may also
change depending on the type of motivation of certain types of workers. There is a tendency to abandon
general theories of motivation that apply to all types of workers in favor of theories that account for different
generations (baby boomers, millennials, Generation X, and so on).
A proper segmentation is also suggested by labor market studies that point to the existence of different
categories of workers who are generically referred to as core workers and peripheral (temporary or
contingent) workers. Some wonder whether segmentation may also be a source of discrimination and unfair
treatment. It depends on the spirit of the enterprise. Segmentation has also given rise to diversity
management policies [Peretti 2006a; Costa and Gianecchini 2006].

Structure and tools

The organizational forms of the HRM function differ greatly in the different companies. They can range
from the case where the HRM function has no autonomy (being part of the administrative function), to the
case of total integration into the strategic governance bodies. Each solution corresponds to significantly
different technical and behavioral competencies of HR professionals. In addition to that top management
and, in general, middle managers are increasingly involved in human resource management processes.
For some years now, HRM function's have also been grappling with the issue of outsourcing, that is, the
external acquisition of services related to the function. Several scholars have provided guidance regarding
which activities should be outsourced. Most of the proposed models are inspired by transaction cost theory
or the resource-based view. In the first case, the reasons that drive outsourcing can be traced back to strictly
cost-minimization aspects. In the second case, outsourcing responds to the need to acquire a set of skills
that, developed and combined with those that are already within the company, make it possible to create
unique resources that are difficult to reproduce by competitors. In both cases, the advantages and
disadvantages of outsourcing HRM practices balance differently depending on the size of the enterprise and
the type of processes the HRM function deals with.

Performance assessment
The assessment of HRM activities are affected by the definition of the HRM function role and task. The
competitive position of the firm and thus its ability to maintain profitable positions over time could
ultimately be the sole criterion for measuring human resource management activities. However, such a
criterion could have a low operational impact and would not achieve the goal, which is considered essential
in performance control systems, of guiding behavior. Therefore, it can be argued that while the performance
of the company as a whole (profit and value generated for all stakeholders) remains the main indicator of
human resource management policies, it is necessary to articulate the measurement tools in such a way as
to capture, control and support the contribution of the various activities [Huselid et al. 2005; Ulrich et al.
2009]. It is necessary to quantify, as far as possible, the value generated by HRM function activities, thus
overcoming the misconception that utility in staff services is not measurable.

Strategy, values and culture

The last element of the model relates to defining the characteristics of the organizational culture within
which the HRM function operates. As with the previous components, it is important here to assess how
consistent it is with respect to the entire model. In fact, the proposed framework has a strong systemic

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value, so the relationships among the variables are such that they require a balance among all the elements.
The HRM function can be viewed in a broad sense as a key department in diffusing corporate values, that
are sedimented over time and which should enable a company to manage the critical factors of its business
and distinguish itself from its competitors.

HRM function configurations

Let us use the previous model to explore three basic HRM function configurations. The evolutionary path
that has taken HR people from purely administrative functions to what are now called business partner
functions [Ulrich 1997] has required a series of intermediate steps fueled by a better understanding of the
factors that make a company competitive and enable its transformation.

Personnel Administration configuration

In a first configuration, which can be called "Personnel Administration," the task is characterized by an
accounting-administrative conception, aimed at administering the employment relationship. The HRM
function has little relationship with the strategic top management and the operational line, to which it
highlights administrative constraints and from which it is limited to receiving the information input
necessary to translate management choices into acts consistent with legislative and contractual regulations.
Management of people, on the other hand, is carried out by the strategic top management and the line
managers, without specialized support, with informal policies. HRM employees do not interfere with the
management policies.
It is common in successful small businesses in which corporate strategy is intrinsically linked to a
philosophy of relationship with the human resource and is managed by a single person (the founder) or a
small core of top management. The model works as long as due to growth in size, increase in complexity of
technology, processes and markets, or simply due to generational change requirements, it is necessary to
develop delegation and to activate organizational mechanisms to renew the strategy. The configuration also
occurs in other cases, such as in large bureaucratized enterprises or in public administrations, where strategy
has no particular connotations in terms of human resource management: personnel administration ends up
being the only dimension of the relationship with workers.
Organizationally, the function is confused with accounting and finance activities (Figure 1.5). The service
provided is of an undifferentiated type, without customers’ segmentation, except to the limited degree
required by the classification of workers into certain broad classes defined by legislation and contract (e.g.,
managers, middle managers, clerical workers, blue-collar workers, and contract workers). The
professionalism of employees is generic on management aspects, while it is normally highly developed on
legal-administrative aspects. Consultancy support from professionals (labor consultants) and business
associations may also be useful, especially in smaller sizes. The limited impact of such a function on the
organizational structure and decision-making system of the company has made it the main object of
outsourcing processes, even in organizations of significant size.
The dominant criterion for evaluating its performance is defined by administrative correctness and
"legitimacy" (compliance with legislative and contractual regulations). The culture, reference values and
guidelines expressed by staff members may be different from those expressed by the enterprise as a whole.
This is a pattern that, as noted above, is predominantly found in small enterprises of both traditional and
innovative types, in large bureaucratized enterprises, and in public administrations. In small innovative
enterprises, however, the culture and orientations expressed by staff members are totally irrelevant to the
culture and orientations expressed by top management and the line.
Within this configuration the HRM function plays the role that Dave Ulrich [1997] calls administrative
expert, characterized by a short-term orientation and an operational focus on processes. According to Ulrich,
who nevertheless thinks from a multirole perspective, this is a role that, however much it is sometimes
undervalued compared to strategic roles, continues to make an important contribution to value creation. It

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requires HR professionals to ensure efficient and effective procedures that involve constant monitoring and,
where necessary, frequent reformulations of processes [Ulrich 1997, p. 28]. In other words, the HR manager
must first and foremost comply with regulations (compliance manager), knowing them and anticipating changes
in them; he or she must understand and be able to interpret personnel information (analytics designer and
interpreter); and finally, he or she must master the media and technologies that enable the performance of
personnel management activities (technology and media integrator) [Ulrich, Kryscynski, Ulrich and Brockbank
2017].

Figure 1.5 – Personnel Administration configuration

CEO

Marketing and Accouting and

Manufacturing R&D
sales finance

General Reporting and Personnel

accouting control administration

Human Resource Management configuration

In a second configuration called "Human Resource Management," the task is characterized in management
terms, not just administrative terms. HRM function sets specific policies and provides the support to line
managers to implement HR activities. The focus on management aspects is not opposed to the focus, typical
of the previous configuration, on legal-administrative aspects, which is instead absorbed into a broader
perspective. The point legal-administrative correctness is still ensured and it is not the main and exclusive
concern of the HR manager. In defining and implementing its specific policies, the HRM function enjoys a
certain autonomy, which can be distinguished into:
• specialized autonomy, which derives from an organizational positioning that is autonomous and
differentiated from the administrative function. Its task is to provide, from a staff position, without
direct power and responsibility, technical support to the line, in areas that require specific
professional tools (e.g., selection techniques, salary check-ups, motivational analysis);
• political autonomy, which gives HR managers direct authority over human resource policies.
Organizationally, the HRM function reports directly to top management and has functional
authority over the line for all HR issues.
The professional background of HR staff members is normally generic with regard to business
management aspects, while it is specific on technical HR aspects, with use of tools that can be very
sophisticated and formalized. This type of configuration is related to the development, especially in large
companies, of specific professional figures within the HRM function, named HR Specialist. The HR
Specialist represents a point of reference for all problems related to his or her area of expertise, such as
recruitment, training, development. In the case then of groups operating internationally, the professionalism
of HR specialists can be brought together in specific organizational units called HR Shared Service. These
units, centrally located (corporate) at the parent company, offer services to all employees, wherever they are
geographically located and even if they belong to different companies in the group. This sets up, in this way,
an internal center of excellence with advantages both in terms of economies of scale and in terms of skill
development.

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The assessment of the function's performance is based on criteria of efficiency and effectiveness in the
implementation of HRM activities, with a prevalence of short-termism and specific problem-solving.
Employees have a strong professional identification. The strategic orientation is toward cost-effectiveness
optimization of the different personnel policies. This configuration is prevalent in medium and large
enterprises that have accumulated some experience in HRM and have resources to devote to specialized
activities.
Using Ulrich's model, the HRM function covers the role of employee champion (mentor, spokesperson,
friend) characterized by a short-term orientation but with a focus on people rather than processes and
procedures. In particular, the HR director must be able to support change processes not only in their
component of redesigning roles and processes, but also with reference to organizational culture (culture and
change champion). Second, individual development goes through the identification of talents, the enrichment
of their skills and the enhancement of their results (human capital curator). Finally, the process ends with
supporting employee motivation by designing roles with meaningful content and recognizing their
contributions (total reward steward) [Ulrich et al. 2017]. Covering this role requires HR professionals to
personally engage in employee relations and to prepare and stimulate other line managers to do the same
[Ulrich 1997, pp. 29-30].

Figure 1.6 – Human Resource Management configuration

CEO

Human Resource
Management

Marketing and Accouting and

Manufacturing R&D
sales finance

Human Resource Management and Development configuration

The third configuration is called "Human resource management and development" and it is based on the
adoption of a strategic perspective aimed at seeking consistency between strategic choices and HRM
policies. HRM policies are designed and evolve with the strategy of the enterprise. The business idea (the
distinctiveness of the good or service proposed to the market) includes the human resource idea (the
distinctiveness of the approach to the human resources that produce that good or service) [Normann 1984].
Both are also nurtured by a systemic view of the relationship between business, environment and social
actors.
The HRM function focuses on strategic, managerial and operational issues and it is integrated into the
highest decision-making levels of the enterprise. It participates in the business planning process not only by
receiving input, but also by providing it. Through HRM policies, important elements of competitive
advantage are constructed. In this comprehensive and integrated configuration (Figure 1.7), personnel
policies are placed, with respect to corporate strategy, in a proactive and anticipatory position aimed at
removing constraints and developing opportunities for both the company and the workers.
Staff segmentation is highly developed and provides infos for internal marketing. Segmentation is
estremely detailed culminating in activities tailored to small groups or key figures. Attention to external
stakeholders is developed in particular if they can influence the company's social image. With regard to

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organizational position, it is located in staff to the CEO for achieving economies of scale and unity of
direction, to concentrate certain functions, to make them homogeneous and consistent with the corporate
culture. On the other hand, there is the need, seemingly contradictory to the first, to empower the line, to
endow it with the capacity for autonomous and rapid initiative and response, to enhance the skills of those
who are in immediate contact with personnel and functional problems.
The balance between centralization and decentralization, between economies of scale and elasticity of
response, between uniformity of policies and adaptation to specific situations, is one of the most delicate
problems of managing this configuration. The most commonly adopted solutions are:
• involvement of the line managers into the policy-making of the employees and delegation of
relevant aspects to them: such as a plant manager managing production personnel or sales manager
managing the sales force;
• deployment in the different functions of HR staff components (e.g., an assistant, for HRM issues,
to the plant manager) (gray area in Figure 1.7);
• traininng of line managers on HRM issues.
The techniques used in this configuration may also be highly sophisticated, but without excessive
formalization. The professionalism of the employees is high, as much on business management aspects as
on the technical aspects of human resource management and development. Typical of this configuration is
the identification, within the HRM function staff, of HR Business Partners. Each HR Business Partner may
be assigned a function (e.g., sales, production), or a process (e.g., new product development, post-sales), or
a business unit for which s/he is the key person for all HR management issues. This model allows the HR
expert to simultaneously develop a broad professionalism regarding personnel issues and a deep
understanding of business issues. The dominant criterion for assessing the performance of personnel
management becomes the ability to nurture competitive advantage, through the development of distinctive
characteristics of corporate human resources. HRM function professionals must know the business and
anticipate its needs. They play a central role in characterizing, consolidating and disseminating corporate
culture and, when necessary, managing change. This configuration is found in medium- and large-sized,
product- and market-innovation-oriented firms operating in developed social contexts that face
differentiated labor markets and even highly disrupted environments that offer many opportunities for
innovators.

Figure 1.7 – Human Resource Management and Development configuration

CEO

Human Resource
Management

Marketing and Accouting and

Manufacturing R&D
sales finance

This configuration fully expresses the multi-role character of the HRM function theorized by Ulrich,
who emphasizes the fact that human resource professionals must at the same time ensure coverage of
strategic and operational roles, be controllers and partners, and assume responsibility for qualitative and
quantitative, short-term and long-term goals [Ulrich 1997, p. 24]. In addition to the role of administrative
expert and employee champion, there are the roles of business/strategic partner and change agent.

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The strategic/business partner (long-term orientation and focus on the processes) helps ensure the success of
the enterprise by increasing the organization's ability to implement strategy through:
• reducing the time from strategy conception to execution;
• an improved ability to respond to market demands as customer service strategies are translated into
policies and procedures;
• the achievement of better economic results because of more efficient execution of strategy [Ulrich
1997, pp. 26].
Sometimes, in this business support activity the HRM function may be joined by external service firms,
which offer organizational and personnel management consulting, for example in processes of
internationalization, organizational change, and digital transformation.
The change agent (equally long-term strategic orientation but focus on people) plays the role of guardian
and catalyst of corporate culture, which is one of the main "objects" of intervention in transformation and
change processes. Human resource professionals must improve the company's ability to design and
implement change. Thus, their activities consist of identifying and framing problems, building trusting
relationships, finding solutions, and implementing action plans [Ulrich 1997, pp. 30-31].
In order to carry out these activities, human resource experts must demonstrate that they are credible
(credible activists), meaning that the changes and actions they implement within the organization will be
facilitated if they have created trusting relationships with their employees. In other words, the HR director
is required to have interpersonal skills and the ability to influence others, and the ability to earn the esteem
of their colleagues through the achievement of results. The second key skill concerns the ability to
understand the business (strategic positioner) and consequently contribute to develop business strategies in line
with market trends and stakeholder requests. Finally, it requires HR staff to manage the tensions that often
occur in organizations (paradox navigator) and that are becoming increasingly frequent given the variability of
markets: these may relate, for example, to the need to maintain consistency between local business needs
and international development, between innovation and standardization, between individual employee
needs and organizational goals, and between control and individual autonomy needs [Ulrich et al. 2017].

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