Newcastle University Business School

HRM: On the Road to Nowhere?

HRM: on the road to nowhere?

The role of the Human Resources Manager has become a topic of hot debate in corporate and academic circles.

Is the HR department’s primary function to help staff become more productive so companies can improve their performance, or is it to create a best practice framework that ensures the well-being of staff and allows them to further their personal and career development? How are these two schools of thought related, and are they achievable given the ever-changing cultural and social contexts within which firms operate?

Some of these issues are explored in a new study that examines the complex relationship between Human Resource Management (HRM) and organisational performance. In particular, it looks at the factors that prevent HR practices from having a positive effect on performance.

The study finds that the HRM-performance link remains weak, patchy and riddled with caveats, even if it can sometimes lead to positive outcomes for firms and employees. In shedding new light on the competing pressures facing HR professionals as they deal with management and employees, the research advocates a move towards a more holistic approach that forges stronger links between organisational performance, ethical behaviour and better working lives. It also opens up a wider debate on the policies needed to boost corporate productivity, increase investment in skills and create an environment where HR professionals can generate more value for both employees and companies.

Professor Steve Vincent, co-author of the research at Newcastle University Business School, says: “Much of the existing literature on this topic tends to focus on what HRM should look like in theory, and then seek to quantify whether this is the case. Perhaps a more helpful approach is to consider what HRM can be, given the multitude of contexts within which HR professionals operate. This approach was the starting point for our study. We wanted to find out why the link between HR practices and organisational performance remains so unclear.”

The authors of the study examined a bank of existing research and found that HR theories, cultural factors (such as variations in ways of working and attitudes to employment relations across geographical borders), and social structures (such as corporate structures geared towards generating returns for shareholders) all undermined the HRM-performance relationship.

Professor Vincent says: “Our study suggests that HRM suffers tensions that emerge from its theoretical, cultural and social contexts, with these factors combining to leave practitioners on a road to nowhere if they try to implement HRM as suggested in the textbooks. It’s not difficult to see why many practitioners struggle to reconcile the dual (and often competing) demands of dealing with managers and employees. Managers may want HR policy to focus on the end goal of achieving profits for the company, but this might be at odds with employee interests; it might result in staff redundancies, for example, or cutbacks in workforce development programmes. Alternatively, too much focus on employee interests could have an adverse effect on a company’s financial performance.

“It’s a tricky balancing act for HR practitioners and their job is made more difficult when other cultural and social factors are taken into account. For example, in Romania, one legacy of communism is an employment relations culture that does not look kindly upon HR interventions but, in the Netherlands, HRM best practice through collective bargaining is viewed favourably. HR practices therefore have to be modified according to the contexts in whichthey’re implemented – but the problem is that these contexts are in a continual state of change.”

Given these barriers which prevent HR practices from having a positive impact on organisational performance, perhaps another approach is needed. Remodelling these practices so that they strengthen workplace relationships may be a positive step forward, the study suggests – especially in light of high-profile corporate scandals at Amazon and Sports Direct. Both firms have been criticised for providing inadequate working conditions for staff whilst making every effort to strip out inefficiencies from their business and maximise profits.

Professor Vincent says: “There is evidence to suggest that investing in staff, looking after their interests and treating them fairly can have a positive effect on organisational performance. The question is whether the current climate allows too much scope for companies to abuse staff in the quest for profit. HR practitioners are caught in the middle of this; sometimes they feel pressured into supporting unethical decisions to satisfy the needs of the business. They need to be given the tools to improve connections between managers and employees to help companies to become more productive. Britain has a long-standing productivity problem so perhaps the current approach to employee relations isn’t working. Maybe if firms looked after staff a bit better – by getting rid of zero-hour contracts, for example, or introducing more programmes to develop and upskill staff – our dire productivity performance over the last ten years would finally improve.”

Tightening employment regulation could be a way forward in the quest for greater productivity. Professor Vincent says HR managers and professional trade bodies could campaign for a government crackdown on companies that don’t treat staff with fairness and respect.

“Huge inequalities, including class-based prejudices and gender bias, still exist within some corporate cultures. To tackle these inequalities, policies need to be put in place to ensure companies treat staff fairly and with respect. If there’s a greater focus on ethical considerations in the HRM-organisational performance relationship, HR practitioners may be able to leave the road to nowhere and find another route to somewhere more beneficial.”

 Our study suggests that HRM suffers tensions that emerge from its theoretical, cultural and social contexts, with these factors combining to leave practitioners on a road to nowhere if they try to implement HRM as suggested in the textbooks.

Professor Steve Vincent

Professor of Work and Organisation