Human Resource Management

Human Resource Management broadly refers to the management activities in the employment relationship. However there is little agreement on what specifically establishes HRM, what it really means and the effect of the term. Some critics have argued that HRM is essentially about creating a climate of employee commitment and cooperation (Pfeffer, 1998) while others suggest that the term can refer to policies for managing people that are designed to further the strategic goals of the organisation (Legge, 2005). Early attempts to clarify the meaning of HRM have made a distinction between 'hard' and 'soft' variants of HRM. Hard HRM refers to the emphasis on strategy where human resources are arranged to achieve business goals (e.g. cost reduction or lean production) while the soft HRM is used to describe approaches aimed at enhancing the commitment, quality and flexibility of employees. However this theory is problematic as hard and soft variants are not necessarily incompatible but can be contradictory depending on the strategy and approach taken. retain the type of human resources needed for the organisations continued capability and secondly which HR policies are most efficient as organisations go through their lifecycle.

Alternatively, competitive advantage models argue that business performance will improve when HR practices mutually reinforce the organisations choice of competitive strategy. It is based on Porter's ideas of strategic choice where there are three bases for competitive advantage: cost leadership, differentiation through quality and services and focus on niche markets. Schuler and Jackson (1987) use these to define the appropriate HR policies that best fit the business strategy of cost reduction, quality enhancement or innovation. The result of such theory is desired employee behaviour which is aligned with the firm's goals, therefore achieving vertical integration. All three corporate strategies closely link HR practices with the goal of the business and the external context of the firm.

Some criticisms to the best fit approach include the lack of reality in its theory. It is unlikely that an organisation will only pursue one strategy given the ever changing external environment and will for example mix various approaches such as cost reduction and innovation. Thus, the configuration approach recognises the need for HR practices to be vertically integrated to the business and horizontally integrated with each other to achieve competitive advantage, therefore recognising the need for hybrid strategies. Miles and Snow's categories of 'defender' and 'prospector' are used to derive at HR policies that maximise horizontal fit (between HRM policies and line management) and then link it to strategic configurations to maximise vertical fit (between HRM and business strategy) therefore solving to some extent the linear relationship in the best fit approach.

The best fit model of SHRM clearly has some limitations most concerned with a lack of flexibility. Social and cultural influences in HR strategy are not taken into account and employee interest in the pursuit of enhanced economic performance is ignored.