Understand how
the development of people practices improved organisational performance and
employee experience.
Question:
Critically
evaluate best practice, contingency and resource-based approaches to the
development of people practices.
Discuss the “resource-based approach “to
developing people strategies within organisations, critically evaluating its
sustainability/or not for developing these strategies withing your own
organisation, or one that is familiar to you. Fully justify your conclusions.
Pointers for candidates:
Draw on the academic literature in
defining the ‘resource-based approach’.
Consider the following key aspects:
• Resource
identification. This involves analysing the skills, knowledge, and competencies
of employees, as well as the culture and values that drive their behaviour.
Does your organisation have a robust system for identifying and evaluating
these resources, the resource-based approach can be effective in developing
people strategies. A well-established performance management processes and
talent assessment framework that enable one to identify and leverage our key
resources effectively.
•
Resource Development: The resource-based approach
emphasises the need for ongoing development and enhancement of resources to
maintain a competitive advantage. This involves providing training and
development opportunities, creating a supportive learning environment, and
fostering a culture of continuous improvement. Does your organisation place a
strong emphasis on employee development, provide adequate resources for
training and upskilling, and encourage a learning mindset?
•
Resource Alignment: Effective people strategies should
align with the overall organisational strategy and objectives. The
resource-based approach emphasises the importance of aligning human resources
with the strategic goals of the organisation. Does your organisation have a
clear strategic direction and a well-defined people strategy that aligns with
it?
There are several evidence-based factors
that are linked to the efficacy of RBV. These include:
•
Unique and Inimitable Resources: When organisations
have specific human resources that are unique and not easily replicated, such
as specialised knowledge, rare skills, or strong organisational culture, the
RBV can be highly effective.
•
Resource Heterogeneity: Research has found that
organisations with diverse and heterogeneous human resources, representing a
wide range of skills, backgrounds, and perspectives, tend to benefit from the
RBV. Why might this be?
•
Resource Complementarity: Studies have shown that when
human resources are aligned and complemented by other organisational resources,
such as technology, processes, or supportive structures, the RBV becomes more
effective.
•
Dynamic Capabilities: Organisations that invest in
continuous learning, skill development, and flexibility of their human
resources tend to benefit from the RBV, as they can respond effectively to
changing market conditions and gain a competitive edge.
•
Knowledge-Intensive Industries: Research suggests that
the RBV of human resources is particularly effective in knowledge-intensive
industries, where intellectual capital and expertise are crucial for
success.
Given your
analysis of the benefits, the barriers and the organisational enablers of the
‘resource based approach’, critically evaluate its suitability/or not for
developing these strategies within your own organisation.
Reading material:
Chapter
3 Marchington, Wilkinson, Donnelly and Kynighou (2020) Human Resource
Management at Work
Farnham, D (2015) Human Resource Management in Context 4th
Edn CIPD – various pages on contingency/ best fit approach
https://strategicmanagementinsight.com/tools/resource–based–view/
https://jaybarney.org/wp–content/uploads/2022/06/13–The–resource–based–view–of–the–firm–Tenyears–after–1991.pdf
https://www.mindtools.com/a1snnzo/mintzbergs-5-ps-of-strategy
Aligning
behaviour with wider organisational vision, values, strategies and plans; a
concern for business outputs and
impact rather than just following processes; connecting with internal and external peers regularly to benchmark, share
good practice and anticipate future trends to
inform future priorities and practice.
Moving on to look at other research models, in this
Assessment Criteria we are evaluating best practice, contingency and
resource-based approaches to the development of people practices.
Best practice:
Before we start to look at ‘Best Practice’ as one of the
models discussed in Assessment Criteria 2.3, it is a good time to establish the
difference between ‘best fit/good practice’ and ‘best practice’. ‘Best
Practice’ is the theory that there is a ‘one size fits all’ approach to HRM
practices. As we know all organisations are different and therefore can it
really be possible to have one approach to HRM that every organisation
follows? ‘Best-Fit’ is the view that it
is impossible to have a ‘one-size all’ approach to HRM because every
organisation is influenced by several factors externally, such as its product
market circumstances, etc.
The best practice list according to Pfeffer (1998)
1.
Employment security
2.
Selective hiring
3.
Self-managed teams
4.
High compensation contingent on performance
5.
Training to provide a skilled and motivated workforce
6.
Reduction of status differentials
7.
Shared information
Pfeffer,
1998, The human equation: building profits by putting people first. Boston:
Harvard Business School Press
Let’s debate these 7 practices below:
1.
Employment security – It is unreasonable to promise
employment security, but it is acceptable to ‘promise’ to look at alternatives
such as short time working, reduced hours etc., to preserve employment
security. Many factors could impact employment security – such as in today’s
world of Covid-19 and Lockdowns. This fuels the debate that HRM practices need
to be agile and fluid to match the external and internal demands of the
business (remember Ulrich’s outside-in model of HRM).
2.
Selective hiring – of course all organisations want the best
talent but the talent that matches your norms and values is always worth the
most. More sophisticated selection methods can help to ensure behaviours and
values are those that the organisation desires for its business needs.
3.
Self-managed teams – autonomy is often seen as a key
engagement factor in organisations and Dan Pink (2009) in his best-selling book
and workshops around ‘Drive’ showed research that ‘autonomy’ is seen as a key
motivator of employees and performance. However, not all roles can be
autonomous and not all teams work well if they are self-managed.
4.
Performance related pay (high compensation contingent on
performance). Much research and evidence has shown that if the performance
related pay is not high enough, or reduced through calibration across teams,
departments and organisations, the effect is less. However, gainshare, share
options and so forth are shown to be a much more valued compensation for
performance, and particularly where an employee has an opportunity to impact
performance. CEO’s and trading desks, financial services are clear examples of
where this works but ethical thinking such as executive pay ratios have a
bearing here. If you can’t impact performance significantly enough to get high
compensation does this work for you? The answer is probably no.
5.
Training to provide a skilled and motivated workforce. It is
fair to say that training improves skill but there is little research to prove
that training makes an employee motivated – it is having the opportunity to
practice and apply such skills and with autonomy that creates the
motivation.
6.
Reduction of status differentials – with the rise of the gig
economy flexible contracts have increased not reduced status differentials, but
they suit the type of work and the worker adequately.
7.
Shared information – research proves that those
organisations that share information, not necessarily through collective
bargaining but through ICE reps, employee reps or other forums, encourage a
sense of belonging between employees.
Does Best Practice Work? What is the evidence?
Ahmad and Schroeder (2003) examined the relationship between
HRM practices and operations management across a number of countries and
industries. They found a relationship between Pfeffer’s seven best HRM
practices and organisational performance across three industries and four
countries. This study provided empirical validation of an ideal HRM system for
manufacturing plants and provided overall support for Pfeffer’s list.
Another study by Guest (2000) in work commissioned by the
CIPD identified 18 key practices associated with high performance or high
commitment HRM, including regular appraisals, multi-skilling, profit-related
bonuses, internal communications and single status. So you can see that there
is some commonality between Guest’s list and that of Pfeffer. Guest’s research
demonstrated some association between his HRM practice list and the
profitability of the organisation. Ahmad and Schroder (2003) and others seems to
evidence that ‘Best Practice’ does work, but there may be a caveat that it only
works in certain circumstances or for various different employee groups/skill
levels.
In conclusion most views consider that a combination of best
fit and best practice works. It is good to have some best practice HRM
practices but to be fluid and agile in adapting these where necessary to create
a best fit.
Contingency theory and ‘best fit’
So here we touch back to ‘best-fit’ as closely aligned with
our second theory, ‘contingency’ theory which says HRM should be based on the
outcomes of two factors a) which factors in the organisation are important and
b) how they influence HRM. The factors
that most commonly affect organisations are law and regulation; political
system – both of which give organisations no choice, or may be a choice, but
employers use these forces to legitimise their choices. Another factor is
product markets and competitive strategies, which should link HRM with business
strategies etc. Contingency theory is based on (a) being product markets and
competitive strategies and (b) the way they influence HRM. HRM is often aligned
to where the organisation is in its life cycle, using models such as the Boston
Consultancy Group (BCG) matrix. Remember Ulrich says HR professionals need to
consider the outside environment and its approach on the inside of the
organisation. Contingency theory and best-fit are called ‘outside/in’ approaches.
Resource-Based View (RBV)
Resource based view, which has been developed further into
the now HR Architecture approach (no single HR style or system but varied
according to the relative contributions of particular segments of the
workforce) advocates for labour segmentation. Labour segmentation is where
different segments of the workforce receive different HR practices (and
sometimes rewards). RBV focuses on the fit between internal resources and the
external factors – the ‘inside/out’ approach – that enable organisations to
remain viable and achieve sustained competitive advantage
To gain a more in-depth view of the relevant theories.
Read Armstrong, M and Brown, D,
2019. Strategic Human Resource Management:
Back to the future? A literature review. Report 517 Feb 2019. Institute
of Employment Studies. Brighton: IES and London: https://www.employment-studies.co.uk/system/files/resources/files/517_Strategic-Human-Resource-Management-Back-to-the-future-IES-CIPD-2019.pdf