What were the socioeconomic changes in the 1980’s which contributed to the emerging popularity of Human Resource Management? Does the concept of Human Resource Management present a radical novelty or is it a mere repackaging of personnel management? Introduction During the 1980’s, a new management concept referred to as ‘Human Resource Management’ (HRM) became very fashionable. At that time, many academics questioned whether HMR was simply a renaming of the previously known personnel management (PM) tool, or whether it was, as some claimed, ‘a radically different philosophy and approach to management of people at work’ (1).
Firstly, it seems appropriate to define HRM. However, the definition of HRM this has been widely debated, and so for our purposes, we will use Stephen Bach’s view that it ‘can be viewed as the involvement of particular strategies and approaches towards management of considerable labour’. We must also consider what we mean by “socioeconomic”, which we can state as the relationship between economic activity and social life. In this essay, the similarities and differences between HRM and PM are analysed in an attempt to see whether there is more to HRM than novel rhetoric.
Socioeconomic Changes Towards the end of the 1970’s and the early part of the 1980’s, both the US and UK economies experienced recessions of relative magnitude. Both governments sought new economic solutions, and adopted policies known as “Thatcherism and Reaganomics”, that contained monetarism and free market economics. One of the consequences of this radical period was the reforming and reshaping of what many described as the ‘conventional model of industrial relations’ (2).
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These new policies inevitably led to the empowerment of employers, and resulted in substantive destruction of trade union power at that time and eventually became the turning point of the era of trade unionism. There were a number of consequences as a result of this reshaping of the economy; probably the largest of note was that there was a considerable decline in a number of the mature Basic industries, such as Steel and Coal, which was balanced by the increase in the Service sector (this is still apparent today as 70% of UK GDP comes from the service sector (3)).
This period of decline in many Basic industries coincidently ushered in a time for new technologies based on hi-tech products, further assisting the aim of both governments to deregulate and intensify market competition through free market economics. With anti-union legislations and privatisation at the core of the Conservative party philosophy, as Thatcher pushed to remove the power of the “Socialist / Communist” trades unions, the result of which led to the encouragement of ‘firms to introduce new labour practices and re-order their collective bargaining arrangements’ (4).
This gave companies the opportunity to develop direct relationships with employees, and hence reduce further the power of trade unions. These ‘direct relationships’ are what some people to consider as one of the fundamentals of HRM. On a more global scale, this was an important period in the development of globalization that saw competition intensify from overseas. Japan rapidly became one of the major exporters of very competitively priced manufactured goods to the US undercutting many domestic suppliers.
This development, unsurprisingly, forced US companies to consider their cost structure in an attempt to see off this foreign competition. Companies quickly began to investigate the productivity of its workforce. One of the outcomes of this, which is judged to be one of the cornerstones of HRM, was to try to develop harmonious relations between employers and employees. The belief was already there that synergy could be created from the employee/employers relationship.
Furthermore, it became apparent that an environment free of conflict could help unite an organisation so that individual employees could commit themselves to organisational success. This Unitarianism perspective became one of the antecedents of the development of HRM. Toward the end of the 1980’s as more and more academics continued to produce a wealth of literature on the subject of HRM, it became clear that there was a recurring theme for those companies that appeared to perform extremely well in these market conditions.
It became obvious in these increasingly dynamic markets that companies that were proactive to market change were able to do so as a result of motivated workforce. The question that was begging to be asked was ‘how they were able to this so well’? The answer was through involved management styles that were instilling a culture in the workforce that was proactive rather than reactive. This is one of the key differences that will be referred back to later. It was suggested that these had been brought on by the intense competition and pressure, which eant a competent PM was more necessary than ever. There were several other socioeconomic changes that all acted as antecedents to the development and reshaping of PM that became known as HRM. These included increasingly strident demands of shareholders, changing work force (flexibility, part time largely through the employment of women), a changing age structure of the workforce, the young moving in the direction of private and service sectors, hence less prone to unionisation and finally increasingly mechanised manufacturing processes through new technologies.
Differences between HRM and PM The second part of this essay looks at whether HRM was in actual fact a novel idea or whether in reality it was a re-labelling of PM. Looking through a variety of literature on the subject, it immediately becomes clear that it is extremely hard to find a definitive line to draw between HRM and PM. Legge for example mentioned he felt their wasn’t a huge difference between the two and in fact drew on some very clear similarities. However he does manage to point out some diverging aspects.
While Torrington saw the development of HRM as only adding ‘a further dimension to the multi faceted role’ (5) therefore seeing HRM as an ongoing process in the evolution of PM. As a result he finds it hard to label HRM as a revolutionary model. There are those experts that do agree in the novelty of HRM. It’s these authors that remind us not to play down the effects of HRM, mentioning that while many of the techniques in HRM are similar to those in PM, it is the philosophical context of HRM that makes these techniques so much more effective.
The model of HRM unfortunately is not uniform and is made up of several different theoretical approaches therefore it becomes even harder to define clearly. This is perhaps what has muddied water so much in the debate of HRM and PM. Perhaps the easiest was to try and find an answer to this question is to compare the differences versus the similarities. Firstly the differences: Storey puts particular emphasis on the ‘strategic character’ (1) and continuously mentioned how HRM decision and formulations of policies should take place on ‘strategic level within an organisation’.
Meanwhile PM can be condemned for its limited consideration of business objectives during decision making. Another major concept that is fundamental to HRM (particularly in ‘Soft’ HRM) which cannot be identified in PM is the creation culture and values on an organisation level. The intention of this aspect is to drive towards employee commitment towards achieving organisational goals. This ‘commitment’ can be seen as a precursor of motivation and performance (6).
Furthermore we can consider the aspects of communication within HRM, whereby it rejects collective bargaining and attempts to set up direct channels of communication with individuals. By operating in this manor, HRM attempts to meet the individual needs of the employee so that they can then go on to contribute to the organisation. Consideration of the ‘proactive versus reactive’ argument can also identify differences (with HRM viewed as proactive and PM viewed as reactive). Proactive workforces enable organisations to pre-empt changes in markets.
However they can only be implemented if the workforce is sufficiently motivated. The final major difference that can be identified is the emphasis that HRM places on training and development, that PM does not seem to identify with in the same way (5). When we contemplate the similarities of the PM and HRM we can consider Legge’s work (he viewed the clearest change from PM to HRM to be the ‘re-labelling process’). He established three main aspects than run through both forms of management. He stated that ‘both emphasised the importance of integration.
Both sought to deliver the right people to the right jobs’ (he saw this as the principal role of the management of people in an organisation). Both PM and HRM gave people- management to “line” managers. Guest also discusses personnel development and functioning on a strategic level. However the above theses partially contradict what many other authors thought (6). In conclusion, we can accept that while HRM and PM contain significant similarities, we have to acknowledge that they differ in terms of their meaning and emphasis.
Perhaps cultural aspects and strategic considerations would be the most important alteration, when converting from one theory to the other. Perhaps it would be wrong to say that HRM was a completely novel idea, especially when so many of the procedures and techniques overlap. However it is correct to say that HRM took many of the principles of PM and applied them to a different philosophy and way of thinking, and in doing so, inherently took the continuous evolution of PM to what we today call HRM.
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