Analysis and Comparison of Personnel Management and HRM

INTRODUCTION

The report has two sections; the first will focus on critically analysing the principals of Personnel Management (PM) and Human Resource Management (HRM) and the similarities and differences between them. Furthermore, John Storey’s (1992), Guest’s (1987), Beer and Spector’s (1985) points of difference will be provided and adapted to a Subway franchise. Finally, the appropriate recommendations on how the company could improve its HR procedures.

The second will focus on context of Subway Franchisor Corporation which is currently the leading fast food company in the US, winning numerous awards since it was founded in 1965 by a 17 year old Fred DeLuca. It provides nutritious menu choices, flexible food options on its gourmet breads, sauces and toppings. The company also specialises in wraps, tortillas and salads as well as a variety of drinks.

According to Subway’s official website (subway.co.uk), their mission is to supply good quality food and service, and also provide the tools and knowledge to entrepreneurs to gain competitive advantage over other fast food companies. It is important to understand Subway’s role as a franchisor. This report is not based on an analysis of the Subway Corporation, the franchisor, but rather on an individual Subway franchisee.

Personnel Management

The history of PM began around the end of the 19th Century; a concept closely connected to the contradiction in relations between companies and their employees. It is believed that PM evolved through phases:

• Welfarist (until 1920s) – Characterised by an “emphasis on the provision of welfare facilities” and efforts “made to create the ideal factory” (Cumming, 1993, pp.4-5).
• Personnel Administration (1930s) – “In the form of recruitment, basic training and record keeping” (Armstrong, 1996, p.32).
• Development (1950s) – Management of employee relations becomes the critical contingency factor of PM due to the rise in TU membership and collective bargaining. A wider range of personnel services were provided (Armstrong, 1996).

A broad definition of PM is a function concerned with putting in place, the processes and procedures to make sure the organisation has the right staff at the right time so it can operate at a very basic level. Similarly, Cole (2002) describes PM as the function of management that has to deal with the recruitment, employment, training, redeployment, safety and departure of employees.

Functions of Personnel Management

PM tries to maintain fair terms and conditions of employment, whilst efficiently managing day-to-day, personnel activities at the operational level. Heavily based on administrative tasks; It involves hiring and developing employees so that they become more valuable to the organisation. More specifically, the functions of PM are identified by Armstrong (1996) in Appendix 1. In broader terms, the functions include:-

• Conducting job analysis, recruiting and selecting and handling promotion internally.
• Training based on legal requirements of Health and Safety procedures, risk assessment.
• Remuneration: making sure the correct wage/salary is paid at the right time (Cole, 2002).
• Providing benefits and incentives.
• Appraising performance, resolving disputes in the form of grievance and discipline.
• Monitoring absences and sickness using techniques such as the Bradford Factor (identifies the number and patterns of absences).
• Redundancy: “administration of and dismissal procedures” (Cole, 2002, p.26)

Advantages and Disadvantages of Personnel Management

Identifying people as the central function of an organisation which need controlling and allocated effectively (Bach, 2005), is the key advantage of PM as it is essential to the survival of the organisation. As previously mentioned, personnel managers can identify staffing gaps and assign the “right number and type of people the organisation needs,” (Armstrong, 1996, p.28). Furthermore, it is a very methodical. There are clear ideas of what has to be done in certain situations implying that there is transparency and consistency in the way individuals are treated.

The advantages of PM may however also have negative implications. For example, Maslow (cited in Strage, 1992) identifies that individuals are different with different needs. The model is inflexible and standardised, dealing with each employee and every organisation in a certain way. This may not be appropriate for all employees or organisations. PM has often been described as routine and very process driven. This may be ideal for large organisations however not for smaller firms. The process is costly and time consuming to manage effectively. Finally, the culture and individual values of the workers are not considered, along with the adversarial relationship (the wanting of different things) between workers and management.

Shift from Personnel to HRM

In the 20th Century there was a broad discussion whether or not HRM represents “a fundamental change in people management” or it just “a phase of PM” (Beardwell and Claydon, 2004). Some theorists emphasised a transformational shift from PM to HRM (Spector, 1985). Tyson and York (1993) believed that people are a business’s most important resource and that the achievement of organisational goals depends mostly on this. At the same time others believed that HRM was just a next step in PM development caused by historical and environmental factors (Bach and Sisson, 2000). It was stated that in PM, employees are seen as a variable cost, while HRM shows that they are a variable asset to the organisation. However, some theorists argued that change in name didn’t bring a change in reality, therefore HRM was described as ‘an old wine in new bottles’ (Armstrong, 1987) and as ‘a wolf in sheep’s clothing’ (Keenoy, 1990).

Theorists tried to answer these questions by identifying similarities and differences between two approaches of people management. Legge (1995) identifies following similarities:-

• Both emphasise the importance of integration.
• Both linked employee development with the achievement of organisational goals.
• Both sought to ensure that the right people were in the right job.
• Both gave the responsibility of people management to line managers.

Beardwell and Claydon Model (2007)

In contrast, Beer and Spector (1985), Guest (1987) and Storey (1992) compared the models and identified several points of difference which are summarised in a single model developed by Beardwell and Claydon, (2007, p.13). It examines differences between them in 5 perspectives seen in Appendix 2.

John Storey’s Model (1992)

Another model, underlying the previous one was made by John Storey, who identified 27 differences between PM and HRM. These points are grouped into four categories: beliefs and assumptions, strategic aspects, line management and key levers (Appendix 3).

Advantages

• Clearly identifies the differences between the two.
• Shows consideration to organisational culture, strategies, leadership.
• Identifies a two dimensional map: “interventionary/non-interventionary and strategic/tactical” (Armstrong, 1996, p.62)

Limitations

• Companies often combine both approaches and therefore cannot be characterised under just one.
• Organisation’s beliefs and assumptions as these are often invisible and non-tangible (Beardwell and Claydon, 2007).

Human Resource Management

HRM presents a variety of different styles and models. Storey (1989) identifies its two types: ‘hard’ and ‘soft.’ Later, Michigan Business School (MBS) and Harvard University developed two different basic models, which have been very influential in the interpretation of HRM (Beardwell and Claydon, 2007): ‘Matching’ model associated with a ‘hard’ approach and ‘Harvard model’, in connection with ‘soft.’ These two particular models underline the two main concepts: “Matching” model became a basis of best-fit school of Strategic Human Resource Management (SHRM), whilst “Harvard” model’s ideas contributed to best-practice approach. These will be discussed further.

Soft/Hard approach to HRM

The ‘hard’ approach stresses the importance of close integration of HR policies, and activities and systems of business strategy. Also, the emphasis is placed on cost-reduction strategies (Schuler and Jackson, 1987). Furthermore, it detects the strong from the weak i.e. those whose attributes and skills help the company to achieve strong strategic positioning and competitive advantage. The ‘soft’ approach recognises employees as valued assets to attain competitive advantage through their commitment, high quality, adaptability, performance and their skill set. Employees are proactive through collaborations and participation. Soft and hard approaches are very contrasting especially when implementing a single approach. Soft and hard approaches show an obvious gap between what would be characterised as rhetoric and reality.

Matching Model

The model is developed by MBS (Fombrun et al.,1984). It shows an interconnection between different environmental forces (political, economical, cultural), business structure and strategy and HR policies and practices. It emphasise a close relationship between the last two (Appendix 4). The model is associated with a ‘hard’ version of HRM that is characterised by using HR in order to meet business objectives. Two basic assumptions form a model (Beardwell and Claydon, 2007):

• Effective way of people management is not universal: it depends on the particular organisation.
• Employees should follow the same business views as managers and the owners in order to maximise organisational performance.

Advantages

• Takes into account the influence of external factors on an organisation and its HR polices.
• Emphasises ‘tight fit’ between HR and business strategy that leads to competitive advantage (Beardwell and Claydon, 2007, p.7).

Disadvantages

• Business level strategy and HR strategy could not be linear (Bratton and Gold, 2001).
• Fails to generate employee commitment (Purcell, 1995, cited in Storey).
• Excessive fit could be a disadvantageous to achieving goals (Boxall, 1996).

The Best-Fit Model

Best-fit model belongs to contingency school of SHRM that explores the link between stages of organisational development, strategy, HRM policies and practices (Boxall and Purcell, 2000). There are several best-fit models: life-cycle model (Kochan and Barocci, 1985), competitive advantage models (Schuler and Jackson, 1987 and Miles and Snow, 1984) and configurational perspective (Marchington and Wilkinson, 2002; Delery and Doty, 1996).

Life-Cycle Model

The model matches HR policies and practises with the stage of organisational life-cycle (Appendix 5). In the start-up phase, HR polices should be flexible and attract talented and skilled employees. The growth stage should have more formal HR procedures, efficient management and organisational development. The maturity stage is characterised by cost control, HR strategy and, finally, in the decline stage, the company shifts to rationalisation with a reduction of workforce and redundancy implications (Kochan and Barocci, 1985).

Competitive Advantage Model

The model links HR systems and organisational strategy. Porter (1980) argued that firms could follow only three generic strategies: cost leadership, differentiation or focus strategy. Schuler and Jackson (1987) matches these with a firm’s HRM polices (Appendix 6). The emphasis shifts from long-term focus, coordination and broad career path under the innovation strategy to fixed job descriptions, immediate focus and continuous training under quality enhancement and to short-term focus and minimal level of training under the cost reduction strategy (Schuler and Jackson, 1987). Miles and Snow (1978) classify companies into four distinct strategic groups (defenders, prospectors, analyzers and reactors) and base their response to three major problems: entrepreneurial, engineering, and administrative. Their competitive advantage framework (Miles and Snow, 1984) links three of these strategies with firms’ HR practices (Appendix 7). Application of their model to the organisation increases business performance.

Configurational Model

Contingency school was criticised for its lack of sophistication, because of its attempt to relate only to one variable. Configurational model is a more complicated approach that focuses on multiple independent variables that effect HRM strategy. This approach represents “non-linear synergistic effects and higher order interaction” to maximise performance of the company (Delery and Doty, 1996, p.808). The model emphasises internal congruence with organisational systems such as management style, finance and culture (Paauwe, 2004) as well as their vertical integration with strategic configuration (Marchington and Wilkinson, 2002).

Advantages of Best-fit model

• Analyses the influence of external environmental factors on organisation and its HR practises.
• Emphasises congruence and coordination between internal HR practises (Delery and Doty, 1996).
• Matches HR system with strategic management processes (Schuler and Jackson, 1999).

Disadvantages of the Best-fit model

• Ignores unique characteristics of individual businesses that could be the main source of competitive advantage (Beardwell and Claydon, 2004, pp.48-49).
• Ignores employee interests.
• Simplicity of classical approach in describing competitive strategies.
• Lacks sufficient attention to dynamics (Boxall, Purcell, 2000, p.187).

Harvard Model

The ‘soft’ approach Harvard model described by Beer et al. (1984) provides one of the first major statements on how managers should practise SHRM (Appendix 8). The analytical framework consists of six basic components: situational factors, stakeholders’ interest, HRM policy choices, HR outcomes, long term consequences and a feedback loop through which outputs flow directly into the organisation and to the stakeholders. It is associated with the goals of flexibility and adaptability and implies that communication plays a central role in management (Storey and Sisson, 1993).

Advantages

• Recognises and incorporates a range of stakeholder interests (Armstrong, 2003)
• Recognises the importance of trade-offs.
• Widens the context of HRM to include employee influence, the organisation of work and the associated questions of supervisory style (Armstrong, 2003).

Disadvantages

• Fails to show corporate or business strategy as key determinant of HRM strategies and polices (Tyson, 2006).
• This model does not explain SHRM functions in a detailed way (Loosemore, Dainty and Lingard, 2003).

Best Practice: High Commitment Models

These models are tools which are used to enhance company’s overall performance in improving employee spirits, behaviours, lowering labour turnover and absenteeism. The aim is to improve productivity, encourage high levels of expertise, and enhance quality and efficiency (Claydon et al. 2004). There are two approaches: the best practice SHRM and universalism. The best practice according to Guest (1989) has four objectives: strategic integration, commitment, flexibility, and quality. These objectives mentioned are required to achieve:-

• High job performance,
• Good problem solving among employees,
• Flexibility
• Lower employee turnover

Another model is Pfeffer’s (1994): ’16 HR practices for competitive advantage through people,’ later changed to ‘seven practices for building income by putting people first’ (Appendix 9). This type of model signifies that HR enables organisations to adapt and innovate to gain a competitive advantage. With the universal approach, “the concern is with how close organisations can get to the ideal of practices,” (Claydon et al. 2004) the assumption being that the closer a company gets, the better the company performs.

Other best practice models vary depending on the relationship of organisational performance. This can be seen in Appendix 10.

Limitations of best practice models are: difficulty in determining whether or not the HRM practices lead to enhanced organisational performance or whether it is the current financial position which leads to increases in performance. It is also very difficult to determine how organisations with tight financial control operate within highly competitive markets and how they can “invest in some of the HR practices advocated in the best practice models” (Storey, 1995). Other limitations include: improved performance through efficiency and its tight financial control could be associated with the ‘hard’ HR policies as mentioned in Storey’s 27 points of differences. According to Boxall and Purcell (2003) “high commitment models tend to ‘fudge’ the question of pluralists goals and interests” (Boxall et al, 2003) which has also led to negative comments of how best practice models assist with the organisations overall performance.

Subway’s Approach to Human Resource Management/Personnel Management

In this part we explore and critically evaluate Subway’s Leicester based franchisee’s HR practises and procedures and assess their PM and HRM characteristics. Manny’s Classic Subs Limited is a typical example of Subway UK based franchisee. HR practises in this company are conducted by the HR manager and Managing Director (MD), which include planning, advertising, interviewing, recruitment and selection, disciplinary procedures, training, payment and wages review, rewards system and retention. Some fundamental HR procedures are communicated from the head office; however, the way in which they are implemented depends on the management of individual franchisees. In this particular firm HR procedures are still being developed.

Role perspective

There are several top management roles such as the MD, Restaurant Managers, and Company Secretary. These are however, not clearly defined. When looking at lower roles: within the stores themselves, there is a high level of specialisation. The specific roles include:

Sandwich Artist – involves customer service, paperwork accuracy, cash register, equipment usage, product preparation and taking phone orders.

Shift Leader – involves supervision of sandwich artist, deals with customer complaints, delegating work, enforcing policies and dealing with staffing issues.

Assistant manager – involves hiring, training and supervising procedures, weekly inventory and paperwork, food service certification, service counter marketing

(Subway Operations Manual, 2009)

According to Storey (1992) and Guest (1987), characteristics of PM can be seen at the lower levels and HRM at the top levels. It can however be said that the level of standardisation is high in general. This is because strict guidelines are passed down from the corporate Franchisor to each Franchisee in relation to its operations. In addition to this, communication throughout the company is direct in reference to HR approaches. This could be associated with the size of the company and with the stage within its life cycle. This company has 46 employees and therefore classified as a small firm. In addition, Subway is in the growth stage because it was established two years ago and its market share is still growing.

Training and Development

A two week training program, in the corporate headquarters, in management, book-keeping and personnel procedures, is offered to new franchisees. Plus an additional 34 hours of job training at a nearest subway (Subway Staff Handbook, 2009). In contrast, staff training is provided by the local managers or supervisors however, when training employees in first aid, they are sent in groups to St John’s Ambulance to attend a four day training course in advance first aid. Preliminary courses are also organised before sales training. This way of controlling access to courses when training staff relates directly to PM.

Furthermore, the Subway Staff Handout (2009) states that employees could be sponsored to obtain relevant qualifications that may be beneficial to their development within the company.

Recruitment and Selection

The recruitment processes within Subway include e-recruitment (company website), job fairs and word-of-mouth from current employees. They clearly identify what they want from candidates especially in relation to punctuality, accuracy, communication, ability to take direction and follow rules and most importantly, customer friendliness.

The selection process begins once the company has received candidates’ applications. The HR manager identifies the key characteristics of a candidate for example, age, availability and previous work experience. On the second stage of selection, the HR manager selects appropriate candidates for a telephone interview to discuss in detail the requirements of the role. The candidates that match the company’s criteria are then invited to a face-to-face interview; ultimately leading to the selection of one candidate and the signing of the contract. The company contract is simple and generic as it applies to most employees. All requirements included within this contract are clearly stated implying a personnel approach.

Employment relations

Managers treat employees according to the business needs. The main focus is on company stakeholders especially customers, who they believe is the “heart of their business” (Kang, 2009).

Internal relationships between staff are fundamental to the company. If conflicts occur, they are de-emphasised and the main role for management is to manage climate and culture. This is a reflection of the HR approach.

Monitoring and Control

Subway adopts a personnel approach to monitoring its employees so that all procedures and regulations set by senior management are followed. The monitoring system used is called KADCAM which ensures every transaction is processed accordingly and any errors within the process line inform the manager that employees are not following the rules.

Pay and Rewards

Wage starts at £7 per hour for all staff apart from store managers, after a trial period. These are then reviewed annually and depend upon company results and in accordance with the HR approach; pay is also based on individual performance. Company policy also includes promotion for suitable candidates with an appropriate level of experience and essential competencies (Subway Staff Handbook, 2009).

CONCLUSION

The first section of the report critically analysed PM and HRM and evaluated the similarities and differences between the two approaches. It was identified that PM sees employees as a cost and the objective is to minimise this. In contrast, HRM approach argues that people are a valuable asset and its practices are aimed to increase the employees’ commitment. They allow for HR policies to fit company strategy and ensure the company maximises business performance.

In the second part of the report Subway’s approach to people management is analysed using comparative frameworks by Beer and Spector (1985), Guest (1987) and Storey (1992) and identified features of both personnel and HRM approaches in Subway.

RECOMMENDATIONS

According to the company’s life cycle which is at the growth stage, and strategy involving maximising return on investment and providing excellent customer service (Subway Staff Handbook, 2009); they have relatively appropriate HR strategies in place. However, in order for them to adapt to the changing dynamic environment, they could improve and develop some of their procedures.

From speaking directly with staff at the franchise, it was identified that the employees are given a high level of empowerment. When management first implemented this, staff members were allowed to give out free upgrades but weren’t given appropriate instructions on procedures. It is recommended that management provides training and supervision (in the form of instruction booklets) before employees are empowered.

Subway currently closely controls its staff, but it could shift from PM, monitoring approach to nurturing in order to build trust between the company and its employees.

As this franchise in particular is in the development stage, some HR procedures such as rewards and promotions are not clearly identified yet. The company could improve this in order to increase enthusiasm within employees, thus leads to achievement of organisational goals.

Subway already emphasises the importance of teamwork however this can always be improved and develop for example by the use of team building workshops. They could also have an additional rewards set for teamwork as opposed to just individual rewards.

Finally, rate of pay is fixed as there is no difference between weekend and week pay. Separate teams are allocated to work weekends and mid-week. With a separate team just working on the busier weekends, dissatisfaction may occur. In compliance with other fast food companies within the UK, a recommendation would be to increase the hourly pay rate for the members that work on the weekends.

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