Strategic human resource management

i

STRATEGIC

HUMAN RESOURCE

MANAGEMENT

ii

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iii

Michael Armstrong

London and Philadelphia

STRATEGIC

HUMAN RESOURCE

MANAGEMENT

A GUIDE TO ACTION

4TH EDITION

iv

Publisher’s note

Every possible effort has been made to ensure that the information contained in this book is

accurate at the time of going to press, and the publishers and author cannot accept responsi￾bility for any errors or omissions, however caused. No responsibility for loss or damage occa￾sioned to any person acting, or refraining from action, as a result of the material in this

publication can be accepted by the editor, the publisher or the author.

First published in Great Britain and the United States in 1992 as Human Resource Management:

Strategy and Action

Second edition published as Strategic Human Resource Management: A Guide to Action 2000

Third edition 2006

Reprinted 2006

Fourth edition 2008

Apart from any fair dealing for the purposes of research or private study, or criticism or review,

as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be

reproduced, stored or transmitted, in any form or by any means, with the prior permission in

writing of the publishers, or in the case of reprographic reproduction in accordance with the

terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms

should be sent to the publishers at the undermentioned addresses:

Kogan Page Limited Kogan Page US

120 Pentonville Road 525 South 4th Street, #241

London N1 9JN Philadelphia PA 19147

United Kingdom USA

www.koganpage.com

© Michael Armstrong, 1992, 2000, 2006, 2008

The right of Michael Armstrong to be identified as the author of this work has been asserted by

him in accordance with the Copyright, Designs and Patents Act 1988.

ISBN 978 0 7494 5375 6

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

Armstrong, Michael, 1928–

Strategic human resource management : a guide to action / Michael Armstrong. -- 4th ed.

p. cm

Includes bibliographical references and index.

ISBN 978-0-7494-5375-6

1. Personnel management. I. Title

HF5549.A89784 2008

658.301--dc22

2008017601

Typeset by Saxon Graphics Ltd, Derby

Printed and bound in India by Replika Press Pvt Ltd

Contents

Introduction

PART 1 THE CONCEPTUAL FRAMEWORK OF STRATEGIC HRM

1 The concept of human resource management 5

HRM defined 5; Human resource systems 8; Aims of HRM 9;

Characteristics of HRM 12; Reservations about HRM 17

2 The concept of strategy 21

Strategy defined 22; The concept of strategy 23; The formulation

of strategy 28

3 The concept of strategic human resource management 33

Strategic HRM defined 33; Basis of strategic HRM 34;

Principles of strategic HRM 35; Aims of strategic HRM 35;

Concepts of strategic HRM 37; Perspectives on strategic HRM 39;

The best-practice approach 40; The best-fit approach 42;

Bundling 46; The reality of strategic HRM 48; Practical

implications of strategic HRM theory 49

v

PART 2 THE PRACTICE OF STRATEGIC HRM

4 HR strategies 53

What are HR strategies? 53; What is the purpose of HR

strategies? 54; Overall HR strategies 54; Specific HR strategies 59;

Criteria for an effective HR strategy 61; How should HR

strategies be developed? 62; Developing HR strategies 66;

Implementing HR strategies 70

5 The strategic role of HR 72

The strategic nature of HR 72; The strategic partner model 73;

What being strategic means 75; The strategic role of HR

directors 76; The strategic role of heads of HR functions 77;

The strategic role of HR business partners 78; The strategic

contribution of HR advisers or assistants 78

6 The impact of strategic HRM 79

How HR impacts on organizational performance 79;

How strategic HRM concepts impact on practice 85

7 Strategic HRM in action 86

Formulating HR strategy 86; The content of HR strategies 96;

Corporate issues 98; Achieving integration 101; What are the

most characteristic features of strategic HRM in action? 104

PART 3 HR STRATEGIES

8 Human capital management strategy 107

Aims of human capital management 108; The link between HCM

and business strategy 108; Developing a human capital

management strategy 109; Conclusions: the role of human capital

management strategy 114

9 High-performance strategy 115

High-performance work system defined 116; Characteristics of a

high-performance work system 116; Components of an

HPWS 117; Impact of high-performance work systems 117;

Developing a high-performance strategy 121

10 Corporate social responsibility strategy 126

Strategic CSR defined 127; CSR activities 127; The rationale for

CSR 128; Developing a CSR strategy 130

vi l Contents

11 Organization development strategy 132

Organization development defined 132; OD strategies 133;

Assumptions and values of OD 133; Activities incorporated in the

OD strategy 134; Strategies for organizational transformation 136

12 Employee engagement strategy 140

Engagement and organizational commitment 140; The

significance of engagement 141; Engagement and discretionary

behaviour 142; What is an engaged employee? 142; What are the

factors that influence engagement? 143; Strategies for enhancing

engagement 145; Measuring engagement 148

13 Knowledge management strategy 149

The process of knowledge management 149; Sources and types

of knowledge 150; Approaches to the development of knowledge

management strategies 151; Strategic knowledge management

issues 151; Components of a knowledge management

strategy 153

14 Employee resourcing strategy 154

The objective of employee resourcing strategy 154; The strategic

HRM approach to resourcing 155; Integrating business and

resourcing strategies 155; Bundling resourcing strategies and

activities 156; The components of employee resourcing

strategy 156; Human resource planning 157; Employee value

proposition 160; Resourcing plans 161; Retention strategy 163;

Flexibility strategy 167

15 Talent management strategy 168

Talent management defined 168; The process of talent

management 170; Developing a talent management strategy 173

16 Learning and development strategy 175

Strategic human resource development (SHRD) 175; Strategies

for creating a learning culture 178; Organizational learning

strategies 178; Learning organization strategy 180; Individual

learning strategies 181

17 Reward strategy 183

Reward strategy defined 183; Why have a reward strategy? 183;

Characteristics of reward strategies 184; The structure of reward

strategy 184; The content of reward strategy 185; Guiding

principles 188; Developing reward strategy 189; Effective reward

strategies 191; Reward strategy and line management

capability 192

Contents l vii

18 Employee relations strategy 193

Employee relations strategy defined 193; Concerns of employee

relations strategy 194; Strategic directions 194; The background to

employee relations strategies 195; The HRM approach to

employee relations 195; Policy options 197; Formulating

employee relations strategies 197; Partnership agreements 198;

Employee voice strategies 200

PART 4 THE STRATEGIC HR TOOLKIT

1 Strategic human resource management toolkit 205

References 226

Subject index 241

Author index 246

viii l Contents

Introduction

Strategic human resource management (SHRM) is an approach to the devel￾opment and implementation of HR strategies that are integrated with

business strategies and enable the organization to achieve its goals.

In essence, strategic HRM is conceptual; it is a general notion of how inte￾gration or ‘fit’ between HR and business strategies is achieved, the benefits

of taking a longer-term view of where HR should be going and how to get

there, and how coherent and mutually supporting HR strategies should be

developed and implemented. Importantly, it is also about how members of

the HR function should adopt a strategic approach on a day-to-day basis.

This means that they operate as part of the management team, ensure that

HR activities support the achievement of business strategies on a continuous

basis and are consciously concerned with seeing that their activities add

value.

To understand strategic HRM it is first necessary to appreciate the

concepts of human resource management and strategy as covered in

Chapters 1 and 2 respectively in Part 1 (the framework of strategic HR). The

concept of strategic human resource management (strategic HRM) is then

examined in detail in Chapter 3.

Part 2 of the book is concerned with the roles of management and HR in

strategic HRM and with the processes of developing and implementing HR

strategies. Part 3 covers each of the main areas of HR in which strategies are

developed. The book concludes with a toolkit providing guidance on devel￾oping HR strategy through a strategic review.

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Part 1

The conceptual framework

of strategic HRM

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1

The concept of human

resource management

In the first section of this chapter human resource management (HRM) is

defined in general and as a system. Its aims and characteristics are described

in later sections of the chapter.

HRM DEFINED

Human resource management is defined as a strategic and coherent

approach to the management of an organization’s most valued assets – the

people working there, who individually and collectively contribute to the

achievement of its objectives.

Boxall et al (2007) describe HRM as ‘the management of work and people

towards desired ends’. John Storey (1989) believes that HRM can be

regarded as a ‘set of interrelated policies with an ideological and philo￾sophical underpinning’. He suggests four aspects that constitute the mean￾ingful version of HRM: 1) a particular constellation of beliefs and

assumptions; 2) a strategic thrust informing decisions about people

management; 3) the central involvement of line managers; and 4) reliance

upon a set of ‘levers’ to shape the employment relationship. HRM is further

defined by the two models of HRM developed by what might be described

as its founding fathers.

5

The matching model of HRM

One of the first explicit statements of the HRM concept was made by the

Michigan School (Fombrun, Tichy and Devanna, 1984). They held that HR

systems and the organization structure should be managed in a way that is

congruent with organizational strategy (hence the name ‘matching model’).

They further explained that there is a human resource cycle (an adaptation of

which is illustrated in Figure 1.1), which consists of four generic processes or

functions that are performed in all organizations. These are:

l selection – matching available human resources to jobs;

l appraisal – performance management;

l rewards – ‘the reward system is one of the most under-utilized and

mishandled managerial tools for driving organizational performance’; it

must reward short- as well as long-term achievements, bearing in mind

that ‘business must perform in the present to succeed in the future’;

l development – developing high-quality employees.

The Harvard framework

The other pioneers of HRM were the Harvard School of Beer et al (1984), who

developed what Boxall (1992) calls the ‘Harvard framework’. This

framework is based on their belief that the problems of historical personnel

management can only be solved:

when general managers develop a viewpoint of how they wish to see

employees involved in and developed by the enterprise, and of what HRM

6 l The conceptual framework of strategic HRM

Selection Performance

Rewards

Development

Performance

appraisal

Figure 1.1 The human resource cycle

Source: Fombrun, Tichy and Devanna, 1984