Chapter 16 - Human Resources Management Strategy
Learning Objective: To understand the differences between hard and soft HRM
Human Resource Management (HRM) is the strategic approach to the effective management of an organization's workers so that they help the business gain a competitive advantage and meet its objectives.
Having a Human Resource Management Strategy, therefore, is of immense importance: a long-term plan for the management of an organization's Human Resources. Without an HRM Strategy business would:
Have the wrong number of employees and/or skillset (lack of workforce planning);
Unsuitable payment methods;
Inappropriate employment contracts for different types of employees;
Poor application of HR IT systems.
There are mainly two different approaches to HRM:
Companies that apply a hard model focus on cutting labor costs: employees are viewed and managed as any other business assets: they should be purchased cheaply and exploited as much as possible with little regards to work-life balance (Theory X; Taylor Theory).
The soft approach to HRM views workers as assets to be cared and valued as they are responsible for the organization's success (Theory Y; Herzberg Theory).
Some businesses go further by employing a soft approach towards its core workers and a hard model over their peripheral workforce. As a consequence, the level of motivation of peripheral workers decreases, leading to lower efficiency, productivity, and consequent impact on profitability to the firm.
This hybrid HRM approach can also cause bad publicity, negative consumer response and pressure groups actions.
Ultimately, applying a hard or a hybrid HRM increases recruitment and induction training costs.
Employment Contracts:
Different businesses approach employment contract differently: some businesses are more keen to full-time employment contracts (permanent employment contracts):
Other businesses are receptive to the idea of temporary employment contracts - where workers are engaged only for a specific period of time;
And even part-time employment contracts, where workers are only expected to work a proportion of the full working week;
The most extreme form of part-time contracts is called a zero-hour contract: when workers are on call to work when called. The business does not have to give them work and workers do not have to do work when asked.
All these different forms of contract gives HRM the ability to adjust labor costs flexibility:
It is also becoming increasingly common for businesses to hire workers not as employees but as contractors on a particular contract/job (gig economy). Such contractors are self-employed:
What many businesses do is a mix of the different contract forms: full-time contracts for important workers which the business wants to keep in the long-run (core workers) and more flexible contracts to the so called peripheral workers.
The Shamrock Organization Organization framework created by Charles Handy offers a suggestion on how to approach the employment of core workers, flexible workers, and even outsourced workers:
According to Handy core workers should be offered permanent (full-time) contracts with competitive salaries. On the other hand, non-core workers should be employed temporarily when needed (demand, season, peak). Contractors can be outsourced when their services are needed by the organization.
Therefore, one of the most important differences between hard and soft HRM is the type of employment contracts that are offered: hard HRM being more likely to offer flexible contracts whereas soft HRM prefers permanent contracts.
When employed correctly however, flexible employment contracts (temporary and part-time) can be extremely positive to companies and workers:
For businesses:
Flexible workers give the opportunity to employ extra staff during peak times (seasons) without the adding an extra fixed cost;
In case of absenteeism businesses can quickly find replacements;
Flexible contracts also allow for a deep assessment of a worker before offering a full-time contract;
Operating costs (such as rent) can be reduced with flexible workers: working from home setups are becoming increasingly popular;
In many instances temporary workers are employed under a zero-hours contract in which they are paid only when called in and their work is needed.
For workers flexible contracts can also be advantageous:
Some types of workers may not be able to hold a full-time job (students, parents, elderly);
In some cases workers are willing to have different jobs for having different experiences/variety;
Holding more than one temporary contract acts as a safeguard for workers - if they lose one job they still have another to support themselves.
There are issues that come together with flexible contracts which need to be weighted in:
Businesses end up with a higher number of workers which leads to communication and management challenges. A teamwork culture is also difficult to be established in such situations. Furthermore, zero-hours workers may not be available whenever needed;
Workers might have a lower income than if they were under full-time contracts and job security is very little to none under such flexible conditions.
Chapter 16 - Human Resources Management Strategy
To-Do-List: Activity 16.2
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