Many organisations are becoming progressively aware of the significance of strategic human resource management (SHRM). The recognition of SHRM is a critical factor in the performance of organisations (Edwards and Rees, 2006). Furthermore, Wright (2005) argues that this awareness has driven SHRM as a key field of study, which in turn has accelerated the development of newer tactics in the management of organisations and human resources (HR).
Armstrong (2009), states that SHRM highlights the need for the HR strategies to be devised within the context of the objectives of the organisation and to be able to adapt to the ever-changing nature of an organisation’s peripheral environment. This approach involves understanding and adaptation by HR practitioners to guarantee an appropriate relationship between HR strategies and plans. Therefore, the general themes of SHRM are a combination of the organisational goals, the functions of HRM, and how responsive practitioners are to external factors.
Although there is no fixed definition of SHRM, it can be summed up as being concerned with the decision aspect of human resources, as well as the conformation and performance of human resources, and the efficiency of these decisions given various business strategies and competitive situations where their link with strategic management is substantial.
Within the domain of SHRM, there are several different theories relating to the types of practices used in different organisations. Firstly, the concept of “hard” and “soft” approaches to HRM are used regularly when analysing different organisations’ strategies. Beardwell and Claydon (2007) explain that the “hard” approach is associated with cost minimisation. For example, it recognises minimal training, low wages, close supervision, and low levels of production such as downsizing. However, Legge (2005) identifies that the “hard” approach may well contain some components of the “soft” approach and vice versa. This means that most organisations will contain a balance of both “hard” and “soft” approaches, rather than just one or the other.
Linking to “hard” and “soft” HRM is another key theory in the domain of SHRM, rhetoric versus reality. Legge (2005) introduced the concept of rhetoric versus reality. She suggested that the rhetoric behind the SHRM of many organisations is usually predominantly “soft” HRM, whereas in reality, it is a mixture of “hard” and “soft” HRM. If the rhetoric used by an organisation matches the reality, then SHRM should increase business performance (Wright, 2005).
According to Armstrong and Baron (2004), the abilities, skills and experiences of individuals, united with their ability to organise these in the interests of the organisation, are acknowledged as making a substantial influence on an organisation’s success, as well as establishing a key source of competitive advantage. The key practices of SHRM, for example, training and development, employee laws and relations, resourcing, and appraisals, are all interlinked with how individuals are managed in organisations, allowing the organisation to achieve competitive advantage through their workforce.
Although most academics agree that successful SHRM practices lead to superior business performance, there are many arguments that challenge this ideology. The common key criticism of SHRM and its relationship with organisational performance is that there is an absence of firm theoretical development explaining the link between HR practices and business progression (Becker, Guest & Huselid, 2001). Considering this criticism, researchers have proposed further research that takes account of any intermediate links between SHRM and organisational progression (Belanger et al., 1999). Furthermore, a better comprehension of the function of SHRM in the improvement of organisational practices can be achieved through further theoretical development and practical evidence.
One of the major problems in the study of SHRM is that many academics tend to disregard contextual variables and predominantly competitive strategies, which impact on organisational performance. Baselie et al. (2005) states that there is a lack of understanding of the variable that may affect HRM and its performance linkage. He refers to this as “black box” theory. This theory is related to Wright and Gardner’s (2003) question: “How many variables should be considered when studying the HRM and performance linkage?”. The answer to the question is an multitude of variables, which is one of the main reasons why measuring the linkage between SHRM and organisational performance is so difficult.
To illustrate the theory that has been critically analysed previously in this essay, two examples are given of two organisations’ annual strategic reports. The first is a hospitality company, Mitchells and Butlers. The organisation owns eighteen popular brands of pubs, including Ember Inns and Harvester. Due to the size of the company, Mitchells and Butlers have over 14,820 employees and a further 1,300 apprentices.
Employee performance can positively impact organisational performance. As a consequence, organisations need to devise strategies for recognising, encouraging, measuring, assessing, refining and rewarding employees’ performance at work (Wright et al., 2003). Accordingly, in Mitchells and Butlers’ strategic report, they explain that they gain their understanding of their employees’ satisfaction rate when they carry out an annual ‘employee engagement survey’ called ‘Your Say’. From the results of this survey, they then create an action plan specific to the different engagement scores.
Referring to the theory of “hard” and “soft” HRM, using an anonymous survey to obtain details of employee satisfaction levels could be considered as both “hard” and “soft” HRM. On the one hand, the survey may be perceived as minimal communication from management, using a basic template that is not personal to each employee. This would be a characteristic of “hard” HRM.
On the other hand, the survey concentrates on employee issues such as their needs, aspirations, and job satisfaction. By doing this, the organisation is showing that they see their employees as an important resource in their business and that their opinions matter. Furthermore, it shows that the organisation takes a strategic approach to its longer-term workforce planning, all of which would be interpreted as “soft” HRM.
A performance-based rewards approach is one of the main practices used in SHRM (Collins and Clark, 2003). Undoubtedly, performance-based rewards have a positive effect upon employees and on organisational performance (Brown, Sturman & Simmering, 2003). In this case, Mitchells and Butlers (2017) claim to “acknowledge the importance of rewards [and] recognise the hard work and dedication of our people”. This is achieved through employee company discounts and presenting awards to their employees.
Previous studies of the relationship between performance-related rewards/pay and business performance have usually shown a positive relationship. However, an increasing number of studies assert that the level of pay is just as important as a rewards system (Wimbush, 2005). With reference to Mitchells and Butlers, there is no evidence in their strategic report that they focus on the level of pay of their employees. Furthermore, the discount that is offered to their employees must be used within the organisations’ various restaurant chains, meaning that the money earned by the employees eventually ends up being put back into their employer’s profits.
Training and development is also a key feature of “soft” HRM. Mitchells and Butlers emphasise the importance of this in their strategic plan. Despite this, their training and development programme is fundamentally online-based. Rarely could a training and development programme be “hard” HRM, but in the case of Mitchells and Butlers, it could be interpreted as inflexible and impersonal to its employees. This is because the training programme is not tailored to an individual’s needs, but rather institutionalises their employees to fit the company agenda.
It is important to consider the rhetoric and reality of Mitchells and Butlers’ strategic report. The rhetoric of their report suggests a “soft” HRM approach, focusing on the training and development of their employees, as well as appraisals and rewards. However, the reality can show the opposite. It is important to note that the majority of organisations set out a goal of achieving the best possible outcomes for their employees, through the use of SHRM and the soft approach of HRM. However, external factors can influence the strategies that are put in place. For example, political, economic, and cultural forces can all interfere with an organisation’s strategic plan. Therefore, Mitchells and Butler’s strategic report cannot be said to be the reality for their employees.
The second case study to be critically analysed is concerned with the supermarket giant Aldi. The German company has over 30,000 employees in the UK. Aldi provides quality low-price products to its customers, yet its employees are on higher salaries than those of other competitors in the same field.
In terms of business strategy, Aldi has operational efficiency as its fundamental strategy, which means that there is a requirement for efficient SHRM to allow the organisation and its employees to operate in a resourceful way. With reference to a study conducted by Wright and McMahan (1992), this means that the HR department within the organisation is commissioned to use a strategy that affiliates with the organisation’s competitive strategy.
Aldi would be considered as a flat organisational structure, meaning that there are few or no levels of management between management and staff, allowing employees to be more involved in decision-making processes. The three key focuses of Aldi’s values are quality, productivity, and service. This means that the HR department’s task of recruiting and hiring people with similar values to the company is crucial.
Aldi (2018), state that “people are the key to every success”, which gives evidence that Aldi are using the values of “soft” HRM in its organisation. Moreover, the HR department plays a vital role in achieving and maintaining the operation of low costs and high efficiency. Another example of Aldi’s use of “soft” HRM can be observed in their working environments. It would not be surprising to find over ten employees working at most major supermarket stores. Yet, Aldi keep their employees per store to a minimum, with an average of five employees per store. This allows employees to gain a feeling of importance within the company, rather than just being a number.
In terms of rhetoric and reality, the corporate strategy that Aldi uses aligns with Aldi’s key principles of “people are the key to success”. Their employees are on high salaries, encouraged to develop throughout the company, rewarded for hard work, and are made to feel appreciated. This would suggest that the rhetoric and reality are aligned, and that their strategic plan is successful. However, linking back to theorists such as Belanger et al. (1999), it is very difficult to prove that the objectives set out by Aldi in its rhetoric are being adhered to in reality.
In concluding therefore, the four key HRM theories identified in this analysis are strategic HRM, “soft” and “hard” HRM, rhetoric and reality, and the black box key theory. Critical analysis of both the theories and the case studies show that measuring HRM’s influence on business performance is a difficult task. Linking back to the black box key theory, a common theme in this analysis is that the external variables of an organisation are difficult to measure and that these variables do influence the reality of employee engagement. Furthermore, the rhetoric of the strategic plans of many organisations usually takes a “soft” HRM approach, yet in reality it is impossible to not have a mixture of both “soft” and “hard” HRM. Therefore, in order to increase business performance through SHRM, it is important for the HR department to consider all different external and contextual variables that may influence the environment of its employees.
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