Storey 1989 hard and soft hrm

Chapter 1: The essence of human resource management (HRM)

LEARNING OUTCOMES

On completing this chapter you should be able to define these key concepts. You should also know about:

· The fundamental concept of HRM and how it developed

· The meaning of HRM

· The goals of HRM

· The philosophy of HRM

· The underpinning theories

· The reservations made about HRM

· Models of HRM

· The position of HRM today

Introduction – the HRM concept

Human resource management (HRM) is concerned with all aspects of how people are employed and managed in organizations. It covers the activities of strategic HRM, human capital management, knowledge management, corporate social responsibility, organization development, resourcing (workforce planning, recruitment and selection and talent management), learning and development, performance and reward management, employee relations, employee well-being and the provision of employee services. It also has an international dimension. As described in Chapter 3 , HRM is delivered through the HR architecture of systems and structures, the HR function and, importantly, line management.

The practice of referring to people as resources as if they were any other factor of production is often criticised. Osterby and Coster (1992: 31) argued that: ‘The term “human resources” reduces people to the same category of value as materials, money and technology – all resources, and resources are only valuable to the extent they can be exploited or leveraged into economic value.’ People management is sometimes preferred as an alternative, but in spite of its connotations, HRM is most commonly used.

The development of the HRM concept

The term HRM has largely taken over that of ‘personnel management’, which took over that of ‘labour management’ in the 1940s, which took over that of ‘welfare’ in the 1920s (the latter process emerged in the munitions factories of the First World War). HRM largely replaced the human relations approach to managing people founded by Elton Mayo (1933) who based his beliefs on the outcome of the research project conducted in the 1920s known as the Hawthorne studies. Members of this school believed that productivity was directly related to job satisfaction and that the output of people would be high if someone they respected took an interest in them. HRM also shifted the emphasis away from humanism – the belief held by writers such as Likert (1961) and McGregor (1960) that human factors are paramount in the study of organizational behaviour and that people should be treated as responsible and progressive beings.

An early reference to human resources was made by Bakke (1966). Later, Armstrong (1977: 13) observed that in an enterprise ‘the key resource is people’. But HRM did not emerge in a fully fledged form until the 1980s through what might be called its founding fathers. These were the US academics Charles Fombrun and his colleagues in the ‘matching model’, and Michael Beer and his colleagues in the ‘Harvard framework’ as described on page 9.

In the UK they were followed by a number of commentators who developed, explained and frequently criticized the concept of human resource management. Legge (2005: 101) commented that: ‘The term [HRM] was taken up by both UK managers (for example, Armstrong, 1987; Fowler, 1987) and UK academics’. Hendry and Pettigrew (1990: 18) stated that HRM was ‘heavily normative from the start: it provided a diagnosis and proposed solutions’. They also mentioned that: ‘What HRM did at this point was to provide a label to wrap around some of the observable changes, while providing a focus for challenging deficiencies – in attitudes, scope, coherence, and direction – of existing personnel management’ (ibid: 20). Armstrong (1987: 31) argued that:

HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel management, but as usually perceived, at least it has the virtue of emphasising the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise. Although there is nothing new in the idea, insufficient attention has been paid to it in many organizations.

However, commentators such as Guest (1987) and Storey (1995) regarded HRM as a substantially different model built on unitarism (employees share the same interests as employers), individualism, high commitment and strategic alignment (integrating HR strategy with the business strategy). It was also claimed that HRM was more holistic than traditional personnel management and that, importantly, it emphasized the notion that people should be regarded as assets rather than variable costs.

The conceptual framework of HRM

HRM as conceived in the 1980s had a conceptual framework consisting of a philosophy underpinned by a number of theories drawn from the behavioural sciences and from the fields of strategic management, human capital and industrial relations. The HRM philosophy has been heavily criticized by academics as being managerialist and manipulative but this criticism has subsided, perhaps because it became increasingly evident that the term HRM had been adopted as a synonym for what used to be called personnel management. As noted by Storey (2007: 6): ‘In its generic broad and popular sense it [HRM] simply refers to any system of people management.’

HRM practice today

HRM practice is no longer governed by the original philosophy – if it ever was. It is simply what HR people and line managers do. Few references are made to the HRM conceptual framework. This is a pity – an appreciation of the goals, philosophy and underpinning theories of HRM and the various HRM models provides a sound basis for understanding and developing HR practice. But account needs to be taken of the limitations of that philosophy as expressed by the critics of HRM set out later in this chapter.

Aim of this chapter

The aim of this chapter is to remedy this situation. It starts with a selection of definitions (there have been many) and elaborates on these by examining HRM goals. Because the original concept of HRM is best understood in terms of its philosophy and underpinning theories these are dealt with in the next two sections. Reference is then made to the reservations made about HRM but it is noted that while these need to be understood, much of what HRM originally set out to do is still valid. However, as explained in the next section of the chapter, HRM is more diverse than interpretations of the original concept can lead us to believe. This is illustrated by the various models summarized in this section which provide further insights into the nature of HRM. The chapter ends with an assessment of where the concept of HRM has got to now. Following this analysis the next two chapters explain how in general terms HRM is planned through the processes of strategic HRM and delivered through the HR architecture and system, the HR function and its members, and, importantly, line managers.

HRM defined
Human resource management can be defined as a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organizations. It was defined by Boxall and Purcell (2003: 1) as ‘all those activities associated with the management of employment relationships in the firm’. A later comprehensive definition was offered by Watson (2010: 919):

HRM is the managerial utilisation of the efforts, knowledge, capabilities and committed behaviours which people contribute to an authoritatively co-ordinated human enterprise as part of an employment exchange (or more temporary contractual arrangement) to carry out work tasks in a way which enables the enterprise to continue into the future.

The goals of HRM
The goals of HRM are to:

· support the organization in achieving its objectives by developing and implementing human resource (HR) strategies that are integrated with the business strategy (strategic HRM);

· contribute to the development of a high-performance culture;

· ensure that the organization has the talented, skilled and engaged people it needs;

· create a positive employment relationship between management and employees and a climate of mutual trust;

· encourage the application of an ethical approach to people management.

An earlier list of HR goals was made by Dyer and Holder (1988: 22–28) who analysed them under the headings of contribution (what kind of employee behaviour is expected?), composition (what headcount, staffing ratio and skill mix?), competence (what general level of ability is desired?) and commitment (what level of employee attachment and identification?). Guest (1987) suggested that the four goals of HRM were strategic integration, high commitment, high quality and flexibility. And Boxall (2007: 63) proposed that ‘the mission of HRM is to support the viability of the firm through stabilizing a cost-effective and socially legitimate system of labour management’.

The philosophy of human resource management
Doubts were expressed by Noon (1992) as to whether HRM was a map, a model or a theory. But it is evident that the original concept could be interpreted as a philosophy for managing people in that it contained a number of general principles and beliefs as to how that should be done. The following explanation of HRM philosophy was made by Legge (1989: 25) whose analysis of a number of HRM models identified the following common themes:

That human resource policies should be integrated with strategic business planning and used to reinforce an appropriate (or change an inappropriate) organizational culture, that human resources are valuable and a source of competitive advantage, that they may be tapped most effectively by mutually consistent policies that promote commitment and which, as a consequence, foster a willingness in employees to act flexibly in the interests of the ‘adaptive organization’s’ pursuit of excellence.

Storey (2001: 7) noted that the beliefs of HRM included the assumptions that it is the human resource that gives competitive edge, that the aim should be to enhance employee commitment, that HR decisions are of strategic importance and that therefore HR policies should be integrated into the business strategy.

Underpinning theories of HRM
The original notion of HRM had a strong theoretical base. Guest (1987: 505) commented that: ‘Human resource management appears to lean heavily on theories of commitment and motivation and other ideas derived from the field of organizational behaviour.’ A number of other theories, especially the resource-based view, have contributed to the understanding of purpose and meaning of HRM. These theories are summarized below.

Commitment
The significance in HRM theory of organizational commitment (the strength of an individual’s identification with, and involvement in, a particular organization) was highlighted in a seminal Harvard Business Review article by Richard Walton (1985).

Source review

From control to commitment – Walton (1985: 77)

Workers respond best – and most creatively – not when they are tightly controlled by management, placed in narrowly defined jobs and treated as an unwelcome necessity, but, instead, when they are given broader responsibilities, encouraged to contribute and helped to take satisfaction in their work. It should come as no surprise that eliciting commitment – and providing the environment in which it can flourish – pays tangible dividends for the individual and for the company.

The traditional concept of organizational commitment resembles the more recent notion of organizational engagement (see Chapter 15).

Motivation
Motivation theory explains the factors that affect goal-directed behaviour and therefore influences the approaches used in HRM to enhance engagement (the situation in which people are committed to their work and the organization and are motivated to achieve high levels of performance).

The resource-based view
Resource-based theory expressed as ‘the resource-based view’ states that competitive advantage is achieved if a firm’s resources are valuable, rare and costly to imitate. It is claimed that HRM can play a major part in ensuring that the firm’s human resources meet these criteria.

Organizational behaviour theory
Organizational behaviour theory describes how people within their organizations act individually or in groups and how organizations function in terms of their structure, processes and culture. It therefore influences HRM approaches to organization design and development and enhancing organizational capability (the capacity of an organization to function effectively in order to achieve desired results).

Contingency theory
Contingency theory states that HRM practices are dependent on the organization’s environment and circumstances. This means that, as Paauwe (2004: 36) explained: ‘The relationship between the relevant independent variables (eg HRM policies and practices) and the dependent variable (performance) will vary according to the influences such as company size, age and technology, capital intensity, degree of unionization, industry/sector ownership and location.’

Contingency theory is associated with the notion of fit – the need to achieve congruence between an organization’s HR strategies, policies and practices and its business strategies within the context of its external and internal environment. This is a key concept in strategic HRM.

Institutional theory
Organizations conform to internal and external environmental pressures in order to gain legitimacy and acceptance.

Human capital theory
Human capital theory is concerned with how people in an organization contribute their knowledge, skills and abilities to enhancing organizational capability and the significance of that contribution.

Resource dependence theory
Resource dependence theory states that groups and organizations gain power over each other by controlling valued resources. HRM activities are assumed to reflect the distribution of power in the system.

AMO theory
The ‘AMO’ formula as set out by Boxall and Purcell (2003) states that performance is a function of Ability + Motivation + Opportunity to Participate. HRM practices therefore impact on individual performance if they encourage discretionary effort, develop skills and provide people with the opportunity to perform. The formula provides the basis for developing HR systems that attend to employees’ interests, namely their skill requirements, motivations and the quality of their job.

Social exchange theory
Employees will reciprocate their contribution to the organization if they perceive that the organization has treated them well.

Transaction costs theory
Transaction costs economics assumes that businesses develop organizational structures and systems that economize the costs of the transactions (interrelated exchange activities) that take place during the course of their operations.

Agency theory
Agency theory states that the role of the managers of a business is to act on behalf of the owners of the business as their agents. But there is a separation between the owners (the principals) and the agents (the managers) and the principals may not have complete control over their agents. The latter may therefore act in ways that are against the interests of those principals. Agency theory indicates that it is desirable to operate a system of incentives for agents, ie directors or managers, to motivate and reward acceptable behaviour.

Reservations about the original concept of HRM
On the face of it, the original concept of HRM as described above had much to offer, at least to management. But for some time, HRM was a controversial topic, especially in academic circles. The main reservations as set out below have been that HRM promises more than it delivers and that its morality is suspect:

· Guest (1991: 149) referred to the ‘optimistic but ambiguous label of human resource management’.

· HRM ‘remains an uncertain and imprecise notion’ Noon (1992: 16).

· ‘The HRM rhetoric presents it as an all or nothing process which is ideal for any organization, despite the evidence that different business environments require different approaches’. (Armstrong, 2000: 577)

· HRM is simplistic – as Fowler (1987: 3) wrote: ‘The HRM message to top management tends to be beguilingly simple. Don’t bother too much about the content or techniques of personnel management, it says. Just manage the context. Get out from behind your desk, bypass the hierarchy, and go and talk to people. That way you will unlock an enormous potential for improved performance.’

· The unitarist approach to industrial relations implicit in HRM (the belief that management and employees share the same concerns and it is therefore in both their interests to work together) is questionable. Fowler (1987: 3) commented that: ‘At the heart of the concept is the complete identification of employees with the aims and values of the business – employee involvement but on the company’s terms. Power in the HRM system remains very firmly in the hands of the employer. Is it really possible to claim full mutuality when at the end of the day the employer can decide unilaterally to close the company or sell it to someone else?’ Later, Ramsey et al (2000: 521) questioned the unitarist assumption underlying much mainstream management theory that claims that everyone benefits from managerial innovation.

· HRM is ‘macho-management dressed up as benevolent paternalism’ Legge (1998: 42).

· HRM is manipulative. Willmott (1993: 534) asserted that: ‘any (corporate) practice/value is as good as any other so long as it secures the compliance of employees’. HRM was dubbed by the Labour Research Department (1989: 8) as ‘human resource manipulation’. John Storey (2007: 4) referred to ‘the potential manipulative nature of seeking to shape human behaviour at work’.

· HRM is managerialist. ‘The analysis of employment management has become increasingly myopic and progressively more irrelevant to the daily experience of being employed. While the reasons for this development are immensely complex… it is primarily a consequence of the adoption of the managerialist conception of the discourse of HRM’ (Delbridge and Keenoy, 2010: 813).

· HRM overemphasizes business needs. Keegan and Francis (2010) have rightly criticized the increasing focus on the business partnership role of HR at the expense of its function as an employee champion. An illustration of this is provided by the Professional Map produced by the British Chartered Institute of Personnel and Development (CIPD), which as stated by the CIPD (2013: 2): ‘Sets out standards for HR professionals around the world: the activities, knowledge and behaviours needed for success.’ The map refers to ‘business’ 82 times but to ‘ethics’ only once and ‘ethical’ only twice.

These concerns merit attention, but the more important messages conveyed by the original notion of HRM such as the need for strategic integration, the treatment of employees as assets rather than costs, the desirability of gaining commitment, the virtues of partnership and participation and the key role of line managers are still valid and are now generally accepted, and the underpinning theories are as relevant today as they ever were.

And it should be remembered that these objections, with the exception of the last one, mainly apply to the original concept of HRM. But today, as explained in the final section of this chapter, HRM in action does not necessarily conform to this concept as a whole. The practice of HRM is diverse. Dyer and Holder (1988) pointed out that HRM goals vary according to competitive choices, technologies, characteristics of employees (eg could be different for managers) and the state of the labour market. Boxall (2007: 48) referred to ‘the profound diversity’ of HRM and observed that: ‘Human resource management covers a vast array of activities and shows a huge range of variations across occupations, organizational levels, business units, firms, industries and societies.’ There are in fact a number of different models of HRM as described below.

Models of HRM
The most familiar models defining what HRM is and how it operates are as follows.

The matching model of HRM
Fombrun et al (1984) proposed the ‘matching model’, which indicated that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy. This point was made in their classic statement that: ‘The critical management task is to align the formal structure and human resource systems so that they drive the strategic objectives of the organization’ (ibid: 37). Thus they took the first steps towards the concept of strategic HRM.

The Harvard model of HRM
Beer et al (1984) produced what has become known as the ‘Harvard framework’. They started with the proposition that: ‘Human resource management (HRM) involves all management decisions and actions that affect the nature of the relationship between the organization and employees – its human resources’ (ibid: 1). They believed that: ‘Today… many pressures are demanding a broader, more comprehensive and more strategic perspective with regard to the organization’s human resources’ (ibid: 4). They also stressed that it was necessary to adopt ‘a longer-term perspective in managing people and consideration of people as a potential asset rather than merely a variable cost’ (ibid: 6). Beer and his colleagues were the first to underline the HRM tenet that it belongs to line managers. They suggested that HRM had two characteristic features: 1) line managers accept more responsibility for ensuring the alignment of competitive strategy and HR policies; 2) HR has the mission of setting policies that govern how HR activities are developed and implemented in ways that make them more mutually reinforcing.

Contextual model of HRM
The contextual model of HRM emphasizes the importance of environmental factors by including variables such as the influence of social, institutional and political forces that have been underestimated in other models. The latter, at best, consider the context as a contingency variable. The contextual approach is broader, integrating the human resource management system in the environment in which it is developed. According to Martin-Alcázar et al (2005: 638): ‘Context both conditions and is conditioned by the HRM strategy.’ A broader set of stakeholders is involved in the formulation and implementation of human resource strategies that is referred to by Schuler and Jackson (2000: 229) as a ‘multiple stakeholder framework’. These stakeholders may be external as well as internal and both influence and are influenced by strategic decisions

The 5-P model of HRM
As formulated by Schuler (1992) the 5-P model of HRM describes how HRM operates under the five headings of:

1. HR philosophy – a statement of how the organization regards its human resources, the role they play in the overall success of the business, and how they should be treated and managed.

2. HR policies – these provide guidelines for action on people-related business issues and for the development of HR programmes and practices based on strategic needs.

3. HR programmes – these are shaped by HR policies and consist of coordinated HR efforts intended to initiate and manage organizational change efforts prompted by strategic business needs.

4. HR practices – these are the activities carried out in implementing HR policies and programmes. They include resourcing, learning and development, performance and reward management, employee relations and administration.

5. HR processes – these are the formal procedures and methods used to put HR strategic plans and policies into effect.

European model of HRM
Brewster (1993) described a European model of HRM as follows:

· environment – established legal framework;

· objectives – organizational objectives and social concern – people as a key resource;

· focus – cost/benefits analysis, also environment;

· relationship with employees – union and non-union;

· relationship with line managers – specialist/line liaison;

· role of HR specialist – specialist managers – ambiguity, tolerance, flexibility.

The main distinction between this model and what Brewster referred to as ‘the prescribed model’ was that the latter involves deregulation (no legal framework), no trade unions and a focus on organizational objectives but not on social concern.

As set out by Mabey et al (1998: 107) the characteristics of the European model are:

· dialogue between social partners;

· emphasis on social responsibility;

· multicultural organizations;

· participation in decision-making;

· continuous learning.

The hard and soft HRM models
Storey (1989: 8) distinguished between the ‘hard’ and ‘soft’ versions of HRM. He wrote that: ‘The hard one emphasises the quantitative, calculative and business-strategic aspects of managing human resources in as “rational” a way as for any other economic factor. By contrast, the soft version traces its roots to the human-relations school; it emphasizes communication, motivation and leadership.’

However, it was pointed out by Keenoy (1997: 838) that ‘hard and soft HRM are complementary rather than mutually exclusive practices’. Research in eight UK organizations by Truss et al (1997) indicated that the distinction between hard and soft HRM was not as precise as some commentators have implied. Their conclusions were as follows.

Source review

Conclusions on hard and soft models of HRM – Truss et al (1997: 70)

Even if the rhetoric of HRM is ‘soft’, the reality is almost always ‘hard’, with the interests of the organization prevailing over those of the individual. In all the organizations, we found a mixture of both hard and soft approaches. The precise ingredients of this mixture were unique to each organization, which implies that factors such as the external and internal environment of the organization, its strategy, culture and structure all have a vital role to play in the way in which HRM operates.

HRM today
As a description of people management activities in organizations the term HRM is here to stay, even if it is applied diversely or only used as a label to describe traditional personnel management practices. Emphasis is now placed on the need for HR to be strategic and businesslike and to add value, ie to generate extra value (benefit to the business) by the expenditure of effort, time and money on HRM activities. There have been plenty of new interests, concepts and developments, including human capital management, engagement, talent management, competency-based HRM, e-HRM, high performance work systems, and performance and reward management. But these have not been introduced under the banner of the HRM concept as originally defined.

HRM has largely become something that organizations do rather than an aspiration or a philosophy and the term is generally in use as a way of describing the process of managing people. A convincing summary of what HRM means today, which focuses on what HRM is rather than on its philosophy, was provided by Peter Boxall, John Purcell and Patrick Wright (2007), representing the new generation of commentators.

Source review

The meaning of HRM – Boxall et al (2007: 1)

Human resource management (HRM), the management of work and people towards desired ends, is a fundamental activity in any organization in which human beings are employed. It is not something whose existence needs to be radically justified: HRM is an inevitable consequence of starting and growing an organization. While there are a myriad of variations in the ideologies, styles, and managerial resources engaged, HRM happens in some form or other. It is one thing to question the relative performance of particular models of HRM in particular contexts… It is quite another thing to question the necessity of the HRM process itself, as if organizations cannot survive or grow without making a reasonable attempt at organizing work and managing people.

Key learning points: The essence of human resource management

HRM defined

Human resource management (HRM) is concerned with all aspects of how people are employed and managed in organizations.

Goals of HRM

The goals of HRM are to:

· support the organization in achieving its objectives by developing and implementing human resource (HR) strategies that are integrated with the business strategy (strategic HRM);

· contribute to the development of a high-performance culture;

· ensure that the organization has the talented, skilled and engaged people it needs; create a positive employment relationship between management and employees and a climate of mutual trust;

· encourage the application of an ethical approach to people management.

Philosophy of HRM

The beliefs of HRM included the assumptions that it is the human resource that gives competitive edge, that the aim should be to enhance employee commitment, that HR decisions are of strategic importance and that therefore HR policies should be integrated into the business strategy (Storey, 2001: 7).

Underpinning theories

‘Human resource management appears to lean heavily on theories of commitment and motivation and other ideas derived from the field of organizational behaviour’ (Guest, 1987: 505).

The diversity of HRM

Many HRM models exist, and practices within different organizations are diverse, often only corresponding to the conceptual version of HRM in a few respects.

Reservations about HRM

On the face of it, the concept of HRM has much to offer, at least to management. But reservations have been expressed about it. There may be something in these criticisms, but the fact remains that as a description of people management activities in organizations HRM is here to stay, even if it is applied diversely or only used as a label to describe traditional personnel management practices.

Chapter 2: Strategic HRM
LEARNING OUTCOMES

On completing this chapter you should be able to define these key concepts. You should also understand:

· The conceptual basis of strategic HRM

· The fundamental characteristics of strategy

· How strategy is formulated

· The aims of strategic HRM

· The resource-based view and its implications

· The meaning of strategic fit

· The three HRM ‘perspectives’ of Delery and Doty

· The significance of bundling

· The significance of the concepts of ‘best practice’ and ‘best fit’

· The significant features of strategic HRM

· The content and formulation of HR strategies

Introduction
Strategic human resource management (strategic HRM or SHRM) is an approach to the development and implementation of HR strategies that are integrated with business strategies and support their achievement. SHRM has been described by Boxall (1996) as the interface between HRM and strategic management. Schuler and Jackson (2007: 5) stated that SHRM is fundamentally about ‘systematically linking people with the firm’.

Baird and Meshoulam (1988: 116) pointed out that: ‘Business objectives are accomplished when human resource practices, procedures and systems are developed and implemented based on organizational needs, that is, when a strategic perspective to human resource management is adopted.’ Wright and McMahan (1992: 295) explained that the field of HRM has ‘sought to become integrated with the strategic management process through the development of a new discipline referred to as strategic human resource management’.

In essence, strategic HRM is conceptual; it is a general notion of how integration 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 add value.

The aim of this chapter is to explore what this involves. It starts with an analysis of the meaning of SHRM. It then covers: an examination of its nature and its aims; an analysis of its underpinning concepts – the resource-based view and strategic fit. This is followed by a description of how strategic HRM works, namely the universalistic, contingency and configurational perspectives defined by Delery and Doty (1996) and the three approaches associated with those perspectives – best practice, best fit and bundling. The chapter continues with a summary of the distinctive features of strategic HRM and ends with an examination of how HR strategies are developed and implemented when an SHRM approach is adopted.

The conceptual basis of strategic HRM
Strategic HRM takes the notion of HRM as a strategic, integrated and coherent process and associates it with an approach to management that involves adopting a broad and long-term view of where the business is going and managing it in ways that ensure that this strategic thrust is maintained. It is influenced by the concepts of strategic management and strategy.

Strategic management
According to Boxall and Purcell (2003: 44): ‘Strategic management is best defined as a process. It is a process of strategy making, of forming and, if the firm survives, reforming its strategy over time.’ Strategic management was described by Johnson et al (2005: 6) as ‘understanding the strategic position of an organization, making strategic choices for the future, and turning strategy into action’. The purpose of strategic management has been expressed by Kanter (1984: 288) as being to ‘elicit the present actions for the future’ and become ‘action vehicles – integrating and institutionalizing mechanisms for change’ (ibid: 301).

The key strategic management activity identified by Thompson and Strickland (1996: 3) is ‘deciding what business the company will be in and forming a strategic vision of where the organization needs to be headed – in effect, infusing the organization with a sense of purpose, providing long-term direction, and establishing a clear mission to be accomplished.’

The focus is on identifying the organization’s mission and strategies, but attention is also given to the resource base required to make it succeed. Managers who think strategically will have a broad and long-term view of where they are going. But they will also be aware that they are responsible, first, for planning how to allocate resources to opportunities that contribute to the implementation of strategy, and second, for managing these opportunities in ways that will add value to the results achieved by the firm.

The concept of strategy
Strategy is the approach selected to achieve specified goals in the future. As defined by Chandler (1962: 13) it is: ‘The determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.’ The formulation and implementation of corporate strategy is a process for developing a sense of direction, making the best use of resources and ensuring strategic fit.

Strategy has three fundamental characteristics. First, it is forward looking. It is about deciding where you want to go and how you mean to get there. It is concerned with both ends and means. In this sense a strategy is a declaration of intent: ‘This is what we want to do and this is how we intend to do it.’ Strategies define longer-term goals but they also cover how those goals will be attained. They guide purposeful action to deliver the required result. A good strategy is one that works, one that in Abell’s (1993: 1) phrase enables organizations to adapt by ‘mastering the present and pre-empting the future’. As Boxall (1996: 70) explained: ‘Strategy should be understood as a framework of critical ends and means.’

The second characteristic of strategy is the recognition that the organizational capability of a firm (its capacity to function effectively) depends on its resource capability (the quality and quantity of its resources and their potential to deliver results). This is the resource-based view as described later in this chapter.

The third characteristic of strategy is that it aims to achieve strategic fit – the need when developing functional strategies such as HR to achieve congruence between them and the organization’s business strategies within the context of its external and internal environment.