Does one size fit all? As the competitive edge of the global business environment increases, organizations are keeping a close eye on their human resource to gain competitive advantage. Human resource management (HRM) is a constantly changing process which provides a framework that supports organisation’s business goals. The logic behind this essay will attempt to answer the question using the two main HRM strategies: control and commitment; and assessing how firms decide on the best strategy to use.
Control Strategy
Some firms employ the control HRM strategy, which is depicted by a stern and formal set of rules and procedures, low investments in employee training, lack of job flexibility and little involvement by employees in decision making (Ma et al, 2015). It is mostly concerned with ensuring that there is a good fit between the HR management and the firm’s strategy (Truss et al, 1997). (Marchington and Wilkinson, 2012) explain that companies that make use of a control strategy view employees more as a costly resource, rather than a valued asset.
This strategy appears to be built on (McGregor, 1960) Theory X view of management, in which he stated that the average human is lazy, irresponsible and hence needs strict control and direction by managers to improve his productivity levels (Truss et al, 1997). For this reason, there are “reward-or-punishment” systems in place by managers to ensure employees are working in line with the organization’s goals (Bobic and Davis, 2003).
To confirm these, we can assess the case of low fares airline Ryanair who run a cost leadership strategy. According to Barrett (2004), this involves keeping their operating costs (personnel inclusive) to the possible minimum. In terms of personnel costs, they minimise wages as much as possible, ensuring ‘minimal unionisation’ of their workforce (Barrett, 2004, p. 93). Their budget is so economical that staff is required to even pay for their training, uniforms, and meals (The Guardian, 2005).
Being that the Ryanair ensures the conformity of its practices with its cost leadership strategy, we can deduce that it operates a control strategy. Their staff payments are also based on individual productivity (Lawton, 2000), demonstrating that its management is exercising McGregor’s Theory X in order to expand the firm’s performance levels despite its sternness with employees.
Commitment Strategy
Commitment strategies involve firms promoting the long-term retention and development of quality workers in order to boost firm performance, as people are deemed as valued assets. They do this by means of increased involvement of staff in decisions, copious amounts of investment in training, attractive wages, employment of skilled workers and working flexibility, amongst other factors. (Marchington and Wilkinson, 2012; Baron and Kreps, 1999)
Arthur (1994) claims that commitment strategies of firms involve the convergence of employee interests and organisational goals. This could be based on (Blau, 1964) social exchange theory which explains the relationship between organisations and their employees. He states that social exchange is a voluntary action that begins the process of organisations’ treatment of its employees, with the step that such treatment will eventually come around from the receipt. (Eisenberger, 1990) suggests that the process in which this theory begins in organisations depends on the extent to which they value employee’s contribution and care, and seeing as commitment firms value staff, then they would be rewarded with high performance in return.
These components of commitment strategy can be clearly seen in Sysco, as they focus on ensuring commitment to their employees (by inspiring employees to come to work). At Sysco about 75% of employees say they are satisfied with work, they also indicate that each employee has the skills and technology needed to contribute as an individual or team in the organisation (Losey et al, 2005). The benefit of such HR practice can be shown financially in Sysco on figure 1 which clearly indicates that both in short and long-term operating expenses have been improving. Sysco human resource management practice proves the value you can gain from implementing commitment strategies.
Figure. 1: HR Practices and Operation Expenses at Sysco (Wright, 2008)
Factors
Although the commitment HRM strategy is often regarded to be related to higher firm performance, this does not indicate that commitment-based strategy is the best practice. The selection of the best fitting HRM system would depend on various factors affecting the firm. These factors include the internal and external environment of the firms, e.g. the size of the company, business strategy, industry characteristics and conditions of the labour market (E. Jackson, S. Schuler, and Jiang, 2014).
Firstly, the larger the firm size, the more public attention it receives, hence increased pressure to implement a commitment system (Kalleberg, 2013) and larger firms could be able to afford the higher cost of commitment-based HR system. Secondly, firms have different business strategies e.g a company using a cost leadership strategy would use control-based HRM system to save costs on employee training and welfare. Thirdly, the importance and uniqueness of the human capital are also important factors. Lepak and Snell (1999) indicated that the firms which appreciate the uniqueness of employees are more likely to implement a commitment-based HRM system. In contrast, the control-based strategy better suits firms which lack job flexibility and have little involvement by employees, such as manufacturing firms. Furthermore, the existence of unions and works council would also push the form of commitment HRM system for better working conditions (Jackson, 1995).
However, firms do not only choose between the control-based and commitment-based HRM system, they may also choose a hybrid system which is the combination of the basic commitment and control systems. For instance, Su and Wright (2012) argued that Chinese firms would have better performance with the hybrid HRM system implemented due to the China’s unique management context, including the internal and external environmental factors.
In summary, the choice of which HRM strategy to use will depend on the individual firm’s needs and circumstances, showing that one size in terms of HRM strategy doesn’t necessarily fit all firms after all.