HUMAN RESOURCES MANAGEMENT

Human Resource Management, management

strategy emphasizing the individual employee as
against collective relations between management and
labour. Human resource management (HRM) involves
management relying less on hierarchy, instruction,
and command; and, instead, becoming more
participative and open. The aim is to promote
cooperative relations between management and
employees and to avoid the often adversarial
behaviour associated with traditional industrial
relations. Where HRM is successful, the employees
will be committed to the long-term future of their
organization and this, in turn, will help the
organization adapt to competitive pressures.

HRM requires a package of measures including:

employee involvement; relating pay to performance;
care with selection and training and fair treatment of
employees; and the dovetailing of personnel matters
with other company policies such as production,
marketing, and sales. Many organizations have one
or a few of these elements but very few operate the
whole package—so fully fledged HRM remains an
unusual management style. HRM is not confined to
any one sector. Companies operating HRM policies
include not just IBM and Marks & Spencer but also
McDonalds. Some public sector organizations, such
as British Gas, are inching their way towards this
style.
There are three basic styles of employee-
management relations. Traditionally, collective
bargaining, where pay and conditions of employment
are negotiated jointly between management and
unions, has been the norm, but the coverage of such
collectivism has been crumbling across the world.
Secondly, in place of collective bargaining some
organizations operate strong or weak forms of HRM.
However, even more workplaces are authoritarian—
the third basic style—characterized by managerial
prerogative, with no trade union and no HRM.

Employee involvement requires providing employees

with much more information than previously and
consulting them more about the operation of the
workplace. The key is two-way communication. Mere
team briefings or cascading information down the
management chain are not enough. Proper employee
involvement means problem-solving groups such as
quality circles, and regular meetings between top
management and employees. Such communications
emphasize the importance of quality control for the
goods and services provided by the organization.
Employee involvement permits the company to draw
fully on the untapped knowledge, skills, and initiative
of its employees. In this way, a high-trust relationship
is fostered between management and labour.

Making pay contingent on performance is the second

element of HRM. Instead of a common rate for the
job, as happens with collective bargaining, pay varies
according to the performance of the individual and of
the firm. Employees are appraised and awarded
individual performance-related pay. Profit-sharing and
employee share schemes ensure that pay is also
linked to the fortunes of the company. Under profit
sharing a pay bonus is awarded according to the
financial performance of the company. Employee
share schemes provide some compensation in the
form of shares which must be held for some years in
the future. These help bind the employee to the
company. Both profit sharing and employee share
schemes mean that the company's workers are
sharing both some of the risks and the benefits of the
operation of the company with its owners.

Organizations operating HRM policies devote

resources to staff recruitment, selection, appraisal,
training, and development. They are particularly keen
to employ individuals who can operate flexibly and
adapt to different tasks as opposed to keeping to
rigidly defined job demarcations. They must also be
able to adapt to rapidly changing work arrangements
such as annualized hours. These organizations would
expect to eliminate old-fashioned hierarchies between
white collar and blue collar workers. Employees would
be treated similarly regarding method of payment,
recording starting and finishing times, and subsidized
meals.
The final element in HRM is that employee relations
become the responsibility of all managers, not just
personnel managers. More thought is also given to
integrating personnel matters with the business
functions of the company.

Three questions arise in evaluating HRM. Has it been

implemented? Can unions survive in HRM
organizations? What impact has HRM had on
company performance? The various elements of
HRM—employee involvement, contingent pay,
emphasis on staff selection and development—are
pervasive but they are usually introduced piecemeal
rather than as a package. Indeed, unionized
workplaces are more likely to have two-way
communication methods and profit-sharing schemes
than non-union workplaces. Any role for unions would
be, where the full package exists, radically different
from that under traditional collective bargaining. For
example, management would communicate directly
with employees rather than via the union; pay would
not be determined collectively but individually. This
suggests a difficult time for unions in fully fledged
HRM companies.

Where there is no union the collective representation

of employees—as against consultation with
individuals—becomes an important question. Some
EU countries have works councils where labour and
management meet, sometimes just for consultation,
but in some countries to discuss, for example,
investment strategy and the introduction of new
technology. There is evidence that these works
councils have a neutral or benign effect on company
performance.

Evidence suggests that HRM workplaces have

superior economic performance than authoritarian
workplaces or those with collective bargaining. In
particular, production levels and productivity growth
are higher in HRM workplaces. By contrast, HRM
does not generate good industrial relations.
Resignations are higher, absenteeism is higher, and
the climate of management-employee relations is
worse in HRM workplaces than in other workplaces.
This suggests that the “caring halo” sometimes
associated with HRM is misplaced. This management
system is designed to squeeze effort out of
employees and commit them to the future
performance of the company. Those that cannot
stand the pace go absent or quit; and relations
between managers and workers are tenser than is
sometimes realized. But the system does deliver on
the bottom line—it generates better economic
outcomes.

Contributed By:
David Metcalf
Sue Fernie
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