Ch. 1: SHRM in the 21st century

Chapter 1 of Boselie and Van der Heijden, Strategic Human Resource Management: A Balanced Approach, sets out the lens that the rest of the book uses. The core claim of the book is that employees matter, and that the management of employees (human resource management) is a potential source for achieving organizational goals. The chapter introduces five building blocks: the impact of organizational change, competitiveness (competitive advantage), three perspectives on HRM (MHRM, IHRM and SHRM), the stakeholder perspective, and the balanced approach.

1. Organizational change and its impact

Organizations operate in an environment that changes continuously. The slides list a number of examples of change that affect both organizations and the people who work in them:

• Acquisitions (one company takes over another)
• Mergers (two companies combine into one)
• Reorganizations (restructuring departments, layers or tasks)
• Strategic alliances (long-term cooperation between independent organizations)
• Private equity interventions (investment firms buy a company and push for higher returns)
• Global crisis and financial crisis (e.g., the 2008 credit crisis)
• Ageing population (fewer young workers, a greying workforce, labour shortages)
• and many more (technological change, digitalisation, AI, pandemics).

Each of these changes has a double impact: an impact on organizations (strategy, structure, costs, survival) and an impact on employees (job security, workload, careers, well-being, trust). HRM sits exactly on the intersection of these two, because it has to translate organizational change into consequences for people and has to help people cope with it.

2. Organizational change and competitive advantage

Why should organizations care about how well they cope with change? The book links this to the concept of competitive advantage. Coping optimally with change is embedded in competitive advantage, and competitive advantage has two important features:

• it is important for organizational survival: an organization without any advantage over competitors will, in a competitive market, eventually lose customers, revenue and legitimacy;
• it is at least partly manageable by human resource management: the knowledge, skills, motivation and behaviour of employees are among the resources that make an organization different from its competitors.

This is the starting point of the strategic view on HRM: people are not only a cost factor but can be a source of (sustained) competitive advantage. This idea is worked out further in Chapter 3 (resource-based view, VRIO) and Chapter 6 (high performance work systems).

3. Three HRM perspectives

The field of HRM can be studied from three different perspectives, each with its own focus, level of analysis and research tradition.

The three perspectives are complementary. The book uses the strategic perspective as its core, but combines it with insights from MHRM (how do individual employees react to HR practices?) and IHRM (how does the context shape HRM?).

4. Three perspectives in studying SHRM practices

Besides the three HRM perspectives, the book stresses three ways of looking at SHRM practices that together make the approach 'balanced':

1. A multi-actor perspective: HRM involves multiple stakeholders, including employees, managers, HR professionals, works councils, trade unions, top management, shareholders, financiers and government. Each actor has its own interests and its own view on what 'good' HRM is.
2. A broad societal view with an emphasis on different institutional contexts, for example on the level of branches of industry, regions and countries. HRM in a Dutch hospital with a collective labour agreement differs from HRM in an American tech start-up.
3. A multi-level perspective, including both the individual employee perspective and the strategic organizational perspective. What is good for the organization is not automatically good for the individual employee, and vice versa.

5. Paauwe (2004): HRM is more than managing 'resources'

Paauwe (2004) formulated four starting points that underpin the balanced view in the book:

• Human resources are something more than just 'resources': employees are people with their own goals, feelings and rights, not only production factors.
• HRM is not concerned solely with financial performance: outcomes such as well-being, fairness and legitimacy also count.
• HRM focuses on the exchange relationship between employee and organization: both parties give and receive something (effort and loyalty versus pay, development and security).
• The shaping of the employment relationship takes place in an era of continuous tension between added value and moral values: economic rationality (efficiency, profit) and moral rationality (fairness, legitimacy) can pull in different directions.

6. Boxall and Purcell (2003): the scope of HRM

Boxall and Purcell (2003) give a broad definition of the field of HRM:

• HRM covers all workforce groups, including core employees, peripheral employees and contingent workers (e.g., temporary agency workers, freelancers).
• HRM involves line managers and specialist managers, and is not solely aimed at employees: line managers carry out a large part of HRM in practice.
• HRM is about managing work and people, both collectively (e.g., collective agreements, teams) and individually (e.g., individual appraisals, i-deals).
• HRM is embedded in industries and societies: laws, unions, norms and sector traditions shape what HRM can and should be.

7. The stakeholder perspective

Because many actors are involved in and affected by HRM, the book takes a stakeholder perspective. HRM is not only for shareholders and top management, but also for employees, line managers, works councils, unions, customers, government and society at large. This perspective links directly to the Harvard approach (Chapter 2), in which stakeholder interests are one of the inputs for HRM policy choices, and to the idea of legitimacy as a critical HR goal (Chapter 3).

8. The balanced approach

Applied to HRM, the balanced approach means that HRM has to balance three types of goals:

• Goals of the individual employee (e.g., fair pay, development, well-being, work-life balance, job security);
• Organizational goals (e.g., productivity, profit, flexibility, innovation, survival);
• Societal goals (e.g., employment, fairness, sustainability, legitimacy, compliance with laws and norms).

An organization that focuses only on shareholder value, at the expense of employees and society, may win in the short term but loses legitimacy and trust. An organization that focuses only on employee well-being without economic viability will not survive. The balanced approach looks for HRM that serves all three at the same time, an idea that returns in 'mutual gains' (Chapter 5), 'agility and vitality' (Chapter 5) and 'sustainable careers' (Chapter 10).

The chapter also illustrates the gap between formal HRM and what employees actually feel with a cartoon: an employee who, confronted by HR with the claim that he does not care about his job, replies that he only pretends to care. Formal policies do not automatically create real commitment, which is exactly why HRM must look at employee perceptions and not only at intended policies (see the intended, actual and perceived HR practices in Chapter 3).

Key take-aways

• Organizational change (mergers, crises, ageing) affects both organizations and employees.
• Competitive advantage is vital for survival and is at least partly manageable through HRM.
• HRM can be studied from a micro (MHRM), international (IHRM) and strategic (SHRM) perspective; 'fit' is central in SHRM.
• SHRM practices should be studied from a multi-actor, societal (institutional) and multi-level perspective.
• Paauwe (2004) and Boxall and Purcell (2003) broaden HRM beyond financial performance and beyond core employees.
• The balanced approach: success requires above-average financial AND societal performance (Deephouse, 1999) and balancing individual, organizational and societal goals.