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The Evolution of Human Resource Management

Info: 9093 words (36 pages) Dissertation
Published: 19th Aug 2021

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Tagged: Human Resources

Table of Contents


Human Resource Management

Personnel Management

Historical Background

Welfare Tradition


Progression through the years

Best Practice Approach

1. Employment security

2. Selective hiring

3. Self-managed teams and decentralisation

4. High compensation contingent on organisation performance

5. Extensive training

6. Reduction of status difference

7. Extensive sharing – sharing information

New Approaches………………………………………….10

AMO Theory……………………………………………….10

Employee wellbeing……………………………………………12

Work-life balance initiatives

Competitive avantages………………………………………….13


Economic influences…………………………………………..13



The concept of managing people in the workplace has been in existence since the early 1900s. Starting out as People Management the process has undergone many changes from its emergence to present day Human Resource Management (HRM). HRM plays an important role in the function of an organisation’s overall success. This paper sets out to understand the concept of HRM and how it has evolved and developed through the years. The paper considers best practice approaches in HRM and identifies how investment in resources is critical to an organisation’s overall performance and profitability.

Human Resource Management

Human Resource Management (HRM), as defined by John Story (1995), is “a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of highly committed and capable workforce using an array of cultural, structural and personnel techniques”. Story’s contention was that great care should be taken in the context of human resources. Armstrong (2012) later theorised that “Human Resource Management is concerned with all aspects of how people are employed and managed in organisations”. To contextualise Human Resource Management, it is simply the method in which an organisation selects, hires and invest in the development of high calibre employees so that the workforce become a more valuable asset to the organisation. HRM is central to all aspects of the employment cycle.

HRM is relatively new in terms of people management. In existence since the 1980s, it took over from its predecessor, Personnel Management and is more resource focused.

It may be argued, that the definition or function could be broken down into two definitive segments: The first part being a managerial function, dealing with the traditional selection, recruitment, training, motivation, elements which can also be found in Personnel Management.  The second, a more operative function, entails looking at an organisations goals and objectives whilst also focusing on the strategy of resources playing an important role. The latter is where the real difference of HRM started to emerge.  It broadens the manner in which an organisation portrays a humane element, demonstrating a growth in promoting investment in wellbeing. In addition to this, particular focus was paid to training and development coupled with incentives and rewards.  In other words, encouraging motivation and good treatment of employees pays its own dividends.

Research refers to the term strategic approach or business strategy as being one of the main factors of HRM, looking at a better practice. In comparison, HRM is evidently more nurturing, following the second main influence of the Harvard ‘Human Capital’ approach.  The term ‘Human Capital’ may be defined as: “The competencies which employees apply to the production of goods and services for an employer” (cited by Robinson, 2006, Scarborough & Elias 2002). This analyses the human elements, such as people skill sets, looking at the highest calibre of people for the job and investing accordingly.  Large organisations, such as Apple and Google, are pioneering this by adopting a strategy of employing highly educated, skilled employees.

Modern society has witnessed the shaping of HRM and the influence of many theorists.  One such theorist, David Guest, formulated a ‘Soft approach’ model which focused on resources and suggested that for an organisation to be more successful, it should take into account strategies such as strategic integration, commitment, flexibility and quality (Gunnigle et al, 2011. Guest’s belief was that if an organisation implemented these strategies, this would lead to greater employee satisfaction and enhanced job performance. However, HRM can be difficult to manage as organisations may have employees with varying personalities, values or aspirations.

Personnel Management

Personnel Management incorporates many qualities similar to HRM but lacks the human personal touch. It was more associated with the demand to: “plan, organise, direct, and control the use of equipment, capital material and workers within organisations” (Gunnigle, et al, 2011). In his book titled ‘The Key Concepts of HRM’, Martin (2010) describes Personnel Management as: “The management function which coordinates the activities associated with the people needs of an organisation including employee selection, training and development and union-management relations”. Personnel Management focused on the administrative task of providing personnel for specific job roles and had the responsibility of managing the employee/employer relationship.

Historical Background

Personnel Management has its origins in the industrial revolution of the late 18th century. It has seen many changes over the course of history due to social and economic influences. Linked strongly to the workforce, it has been depicted as a more functional or labour role.  Personnel Management followed a pluralist approach where management were the managers and the workers were simply the workers. There was no real connection between the employees and management, it was merely about the contract.

History has shown Personnel Management essentially as workforce centred. This administrative function adopted the facade of being focused on a resource element and was predominantly linked with physical man power, associated with production lines. Workers were exploited during the industrial revolution in an era of widespread poverty. Personnel Management was viewed as calculating, resulting in poor working conditions. However, it was during this time, with the introduction of the ‘welfare tradition’ that positive change developed.

Welfare Tradition

World War II, witnessed a shift in the recruitment selection process. Due to labour force shortages, work traditionally done by men was now carried out by women.  Personnel Management practices started to introduce positive changes, and organisations slowly began to show compassion towards their employees, and began to take into consideration issues such as working conditions, employees’ health and wellbeing.

One of the first pioneers in Britain of the welfare tradition was John Cadbury, founder of Cadbury’s chocolate. Cadbury’s traditions and religious beliefs, along with his son George’s passion for social reform heavily influenced his managerial style (BBCNews, 2009).  Cadburys was one of the originators of better working conditions for employees.  The introduction of health and safety for factory workers also became a priority. It was with this that the introduction of welfare officers was born.


The strategies of multiple theorists influenced the development of Personnel Management. One such theorist was Frederick Taylor. His theories, otherwise known as Taylorism introduced the ‘scientific management’ style of thinking.  Taylor’s theory considered ways to increase productivity at the Bethlehem Steel Corporation. Scientific Management was more focused on a “managerial efficiency/profitability agenda” (Gunnigle, et al 2011). This suggested that an organisation should place more emphasis on efficiency and profitability as opposed to the previous employee focused welfare style of management.

Taylorism applied the view that dimensions such as efficiency and profitability, selection, payment and investment in training were crucial. According to Taylor, people should be specifically trained on certain jobs, thus simplifying work to increase productivity. This philosophy was strongly linked to factories and production lines. McDonalds fast food chain tends to operate this structure even today; where one employee takes the order, another cooks the food, one cleans the tables etc. As well as the scientific analysis Taylor also promoted the idea of a “fair day’s pay for a fair day’s work” (Grey, 2016). His belief being if one worked harder than one’s counter colleagues then one should be paid more than them.

Progression through the years

Throughout its evolution, Personnel Management has seen many changes, from the emergence of the behavioural school to the era of the industrial psychology of the 1930s.  Elton Mayo and his association with the ‘Hawthorne studies’ helped to shape Personnel Management and contributed significantly to the development of what is known as the ‘organisational behaviour’. This is the study of human behaviour in organisational settings (Wikipedia, 2017).

Mayo’s theory moved away from focusing on the productivity element towards greater attention to the needs of the worker and introduced the concept that motivation and job satisfaction were of significant importance in the workplace (Reidy, 2014). Industrial relations saw the emergence of the trade unions in the capital cities where there was a larger workforce and by the 1960s much of the labour force was unionised. From the 1930s to the 1970s, trade unions grew and achieved power, extending as a result of the national wage agreement. Thus, the beginning of human resources as a function began.

1990 saw the turning point, where the transition was made from Personnel Management to HRM. This was influenced heavily by American organisations, such as pharmaceutical and software companies which led the path for new developments.American multi-national companies tended to be non-unionised and were the first pioneers of HRM introducing a softer element than its predecessor Personnel Management. Such companies followed unitarist approach and considered a humane side of management, and elements of the ‘soft’ approach. The theory was that if an organisation treats and looks after its employees well through good HRM policies, in turn, employees would endeavour to look after the best interests of the organisation’s objectives/goals. It could be argued, encourages a relationship where both management and employees are working together, towards the same outcomes.

HRM processes spurred on competition in the economy in the first decade of the 21st century.   HRM practices helped achieve competitive advantage, by bringing out the best qualities performance through employees, an element in which Personal Management significantly lacked. Organisations which supported and invested in HRM practices tended to attain higher production outcomes and increased profitability in the market sector.

Best Practice Approach

Best practices in HRM are inclined to revolve around people.  Theorists suggest that people play an important role in an organisation’s overall success, implying, that in order for an organisation to perform well it should pay particular attention to its resources.  Organisations which wish to improve performance, need to apply the appropriate measures, to attract and retain highly skilled personnel.

The theorist Jeffrey Pfeffer (1998) developed the seven best practices of successful HRM.  Pfeffer’s model constituted an enhanced version of Guest’s ‘soft approach’ and comprised the following strategies: employment security, selective hiring of new personnel, self-managed teams and decentralisation, high compensation contingent on organisational performance, extensive training, reduction of status difference and extensive sharing. Pfeffer’s (ibid) theory argued that if an organisation implements all seven strategies it can achieve resultant success in performance output and productivity.

1. Employment security

The first strategy ‘Employment Security’ or job security may be defined as

“The state of having a job that is secure and from which one is unlikely to be dismissed” (Oxford dictionary, 2017) – in other words generally being perceived as a job for life. Employment security protects the employees from elements outside their control, coupled with the added security of permanent contracts. The Irish public sector has long been regarded as an example of an organisation which tends to provide employment security.

Pfeffer’s (1998) research emphasised the importance of implementing employment security.

This philosophy depicted “people as strategic assets rather than as costs”. Pfeffer (ibid) suggests that organisations which invest in their employees, gain valuable assets and that it is important that the organisation aims to retain skilled employees where possible.  Organisations which adopt such a policy tend to have the capacity to retain employees in times of financial difficulty. However, highly skilled employees may become attractive to competitors.

Employment security can be viewed more than simply having a steady income. In order to achieve best practice, it is important that organisations implement innovative strategies.  People are actively seeking the best place to work whilst attaining their own personal goals.  Organisations which can offer good employment packages such as good pay, flexibility, healthcare plans and pensionable job tend to be attractive to prospective employees.  Some well-known global organisations who have effectively introduced elements of Pfeffer’s theories tend to have content and committed employees who want to stay. The policies of Google and Apple both tend to follow the ‘Human Capital’ approach and seek to attract the highest calibre of people, by promoting innovation and rewards with incentives within their organisation. This practice can help encourage positive attitudes and increase overall performance, whilst instilling financial security.

In contrast, not all organisations offer good ‘Employment Security’. Organisations which have a high turnover of staff may be viewed as bad examples.  It may be argued that companies such as Dunnes Stores and Penneys fall within this category. Dunnes Stores tends to offer zero-hour contracts, which can result in take home pay fluctuating.  (O’Brien, The Irish Times, 2015). The impact of zero-hour contracts may create a stressful volatile working environment for employees. Tony Dundon (2017) has argued, in this context, that modern HRM is there mostly for the employer’s interest and dehumanises employees in favour of market rationale.

2. Selective hiring 

The success of an organisation’s performance and productivity ultimately begins with the recruitment process. The second of Pfeffer’s strategies outlines the main reasons why selective hiring plays such an important role in the organisation’s overall objectives. Warkentin (2015) defines it as “The extent to which the organisation engages in selective hiring practices, as a means to find and retain employees that fit the organisations lean transformation strategy”. This is the sequence of attributes sought when hiring potential employees.

Pfeffer’s analysis of selective hiring has been strongly associated with the importance of investing in people. Depending on the nature of the work, selective hiring practices may differ.  Organisations which do this well often carry out a rigorous recruitment process and tend to look for particular skill sets in a new recruit. The objective is to select the ideal person for the job, whilst also looking at the cultural fit. It is at this point that various factors come into play – often a job description would list the key skills and attributes required, such as orientation or attitude to work. Laszlo Bock, Google’s former head of HR (known as People Operations), stated in an interview for Fast Company (2015) that “it is the people who are key”. Google’s hiring process focuses intensely on choosing the right people. Four attributes form part of Google’s recruitment strategy: “General cognitive ability” which is seen as the best and brightest, “leadership ability, role related knowledge and Googleness” The latter being finding an employee who can be different and “who can push and challenge the status quo” (Fast Company 2015). By identifying these attributes, Google can predict whether an employee can be successful within their organisation.  Recruiters are often drawn to millennial graduates. Millennials tend to display qualities which make them attractive candidates, such as a positive/can do attitude, motivation, fresh ideas and the drive to succeed. In an article for the Business Insider UK, Lebowitz (2015) contends that “younger managers are constantly looking for new ways to work smarter and produce higher quality work”.

It is common practice for larger organisations, which invest in a strategic recruitment plan, to conduct several rounds of interviews. This has two very important, but different, purposes. Firstly, it whittles down the selection from a larger pool of people and secondly, selective and rigorous hiring approaches also separate serious candidates from those who are not, thus saving the organisation time and money. Pfeffer (1998) argues, in contrast to the above, that skill sets may not always be the most important aspect: common sense and personality may also prevail. For customer service roles, this would be a crucial element in the selection process.  From personal experience working in Royal Bank of Scotland (RBS) Insurance, (where the main focus of business was in the field of sales) when selecting potential employees, particular attention was paid to people skills. This was a classic example of Pfeffer’s theory, which suggests that it may be easier to provide training on a company’s product/system rather than to provide training on people skills (Pfeffer, 1998).

Developments in technology and social media have also changed the way in which organisations tend to recruit. There has been an increase in online job advertisements, as these can reach a worldwide audience and is more cost effective. In a survey carried out by CIPD, it was found that two-thirds of recruitment is now conducted online (cited et al, Gunnigle, 2011, CIPD 2006).

One can see the importance of applying Pfeffer’s selective hiring strategy. However, poor recruitment decisions can be detrimental and can produce long term negative effects.  Such impacts can lead to higher staff turnover, additional training costs, poorer performance and ultimately the organisation’s performance or productivity could suffer. This can be hard to pin point as on paper the employee may have an excellent c.v., but their personality may not be the best fit for the organisation (Half, 2017).

3. Self-managed teams and decentralisation

Pfeffer’s third strategy can be divided into two segments. The first segment ‘Self-Managed Teams’ may be defined as: “A group of employees organised around an operation or a process of work who are responsible for managing themselves and the day-to-day functions of the work that they do with little, if any, direct supervision” (Brounstein, 2014). In other terms, this style of team is typically a flat hierarchy with the removal of the middle layer of management. Generally speaking, with self-managed teams, the responsibility of the work lies with those in the team. Self-managed teams are more effective and may bring together a range of complimentary skill sets and experience, rather than that of an individual on their own. Organisations which apply this strategy give employees the autonomy to use their own initiative in conducting the task at hand and do so without direct supervision. This generates “Greater empowerment, which leads to higher employee morale” (Business.com, 2017).  The public sector is an example where one might typically find this style of management. This can be an environment where the team members are left to supervise their own work, with only little direction from management. Trust and empowerment are promoted and this may lead to highly motivated individuals.  Self-managed teams tend to be effective for team projects, taking employees from various divisions who in turn can contribute ideas and problem-solving solutions.

The second strategy ‘Decentralisation of decision making’ is the removal of the line manager from the equation and discretion lies in the hands of the employee. Decentralisation can be defined as “any process where the decision-making authority is distributed throughout a larger group” (Wikipedia, 2017). The power of decision making can result in employees feeling more involved in an organisation due to the autonomy and discretion in decision making.  By giving employees this power, motivation is boosted along with job enrichment.

4. High compensation contingent on organisation performance

Pfeffer’s fourth strategy is the method in which employee performance is incentivised through elements such as high pay, bonuses or profit shares. It can be defined as an intention “to pay distinctly more to reward highly effective job performance than you are willing to pay for good solid basic performance” cited by Gunnigle (et al, 2011, McBeath and Rands 1989). This can be viewed as a financial reward provided to an employee as a way of encouraging employee performance to deliver positive results. According to Pfeffer, high pay and compensation is the key to motivating and getting the best out of people. The fourth strategy emphasis on paying the premium wage attracts a high calibre of people. In order for an organisation to attract the best educated, highly skilled people it must be able to offer more than its competitors. Research has shown that organisations which motivate their employees with financial remuneration, such as bonuses and incentives, increase productivity. This concept tends to be effective in high performance organisations. Google and 3M are examples of organisations which encourage innovation by providing financial rewards such as a large bonus for successful products which make it into production.  This practice can also be applied to production lines where target incentives are set to encourage employee motivation. While in theory Pfeffer’s idea is correct – incentives can and have aided performance output – incentives can also pose the risk of non-payment if targets are not met. This can have a negative impact on an employee and could lead to poor morale.  Apple went one step further, when it rewarded its executives for missed targets and gave them “a recognition bonus of 3-5% of their base salary”. Apple’s decision was made in order to keep their employees “committed and motivated” (Storify,2012), as opposed  to them feeling deflated and unproductive.

There are many ways in which organisations implement rewards. Dropbox and Google both introduced the incentive of simply providing free food for their employees. Carla Stern of the Daily Mail (2016) observed that “lucrative companies have learned that food is the way to workers’ hearts and their productivity”.  The benefit of this perk is that it saves the employee having to think about breakfast, lunch and tea. By removing this thought process, employees can present themselves and focus on their work. It may be costly to Dropbox/Google, but is clearly effective at the same time. In Ireland, organisations such as Boston Scientific are attractive in terms of the provision of work based incentives. This multi-national promotes benefits such as “good health, financial wellness and security” and understands that these are extremely important to the overall organisation’s performance. This is reflected in Boston Scientific winning the award for outstanding best practice in HR leadership and innovation at the CIDP awards in 2012 (Boston Scientific.com).

5. Extensive training

The fifth of the strategies, Extensive Training, may be defined as “The process of learning the skills that you need for a particular job or activity” (Collins Dictionary). Pfeffer emphasises this as being one of the more important elements in the seven best practice strategies. According to Pfeffer (1998) “High-performance management practices emphasise training”. An organisations overall training and development strategy lists the attributes, such as skill sets, knowledge and behavioural attitudes, required to carry out the job (Gunnigle et al 2011). Having gone through the extensive selection process to recruit the highest calibre of people, organisations which invest in training tend to reap the benefits of higher production and longer tenures of work. In general, larger multi-national organisations do this the best, as they have access to greater funding and have the capacity to invest in their employees’ training and development. A classic example of this is “Facebook’s engineering bootcamp, a six-week on boarding program for new hires to learn the ins and outs of the company’s code base and culture” (Ram, Fortune.com 2013). Facebook provides this training to all of the employees, as their vision is that everyone should be able to understand all aspects of everything it does.

Training can be an asset to the organisation, as the employee who understands the nature of the business and what is required of them tend to be more productive. Organisations in the field of sales, which actively invest in training, aim to increase their overall productivity thus giving them a competitive market advantage. RBS Insurance, tends to view training and development (R&D) as one of the most important components and invests in this by providing time and resources to carry out R&D. All new employees, from sales advisors, administration staff and claims handlers to management, go through the same training process. This technique ensures that each new staff member is equipped with the key skills and attributes to carry out the role productively. Another benefit of all employees receiving the same training is that it lends itself to a multi-skilled workforce.

Organisations which see its employees as investments may provide financial support for upskilling, this can benefit both parties, and can lead to career opportunities. Research has shown that, in addition to increasing productivity, employees who have been invested in through training and development tend to feel more appreciated and valued. This creates a positive environment, in which employees are less inclined to leave thus reducing turnover.  Training is a competitive advantage as it creates confident knowledgeable employees, which also benefits the employee and can be viewed as a perk. However, when organisations are experiencing financial difficulty training and development can be one of the first things to be dropped as a cost cutting measure. As reported by Peter Kingston of the Guardian (2009), “half of larger companies are cutting back on training in the recessionary times”.

6. Reduction of status difference

Pfeffer suggests the reduction of status difference or harmonisation as being the penultimate key strategy in order to achieve successful HRM. Harmonisation can be defined as “The act of making systems or laws the same or similar in different companies, countries, etc. so that they can work together more easily” (Cambridge Dictionary, 2017). This is the process of having all employees on a level playing field. Organisations may achieve this by implementing certain standardised conditions in the organisation. There are certain companies which advocate this in the way they run their organisation. The Huffington Post highlights Gap retail stores, which “became the first of the Fortune 500 companies to announce equal pay for equal work” (Sharma, The Huffington Post, 2017).

In recent times organisations have been more proactive in promoting equality in their HRM policies. A good example of this is Ernst & Young ranking top place in the “Employer of the Year award” for their equality performance in the “Workplace Equality Index” (Tracey, Independent, 2015).

Generating an open plan office space can be another way in which an organisation may implement the reduction of status difference. Encouraging an open door managerial style policy creates an inviting space for employees to come should they have any concerns.

Organisations which have stripped back the hierarchy status, treating all employees the same by implementing common parking/canteen areas all demonstrate aspects of this practice.  Google promotes a casual dress code as part of the its culture (Fast Company, 2015) – all employees regardless of rank have a civilian dress code with suits being depicted as not part of the Google culture.

7. Extensive sharing – sharing information

The last of Pfeffer’s seven best practice strategies is the importance of sharing information or communication. This can be defined as “different departments, companies, etc. using the same information” (Cambridge Dictionary, 2017). According to Pfeffer (1998), the way in which management communicates within the organisation tends to play an important role.  By encouraging good channels of two-way communication trust and confidence are fostered in the employer/employee relationship. Larger organisations, such as Google and Facebook, tend to promote team meetings in order to share their organisation’s overall market performance, targets and profit/loss measures. Facebook’s Mark Zukerberg hosts weekly question and answer sessions with his employees as a form of open communication (Carlson, Business Insider 2012). By implementing this strategy of openly sharing financial or strategic aspects, organisations can make the employee feel valued.

Organisations that use brain storming exercises to come up with problem solving initiatives and improvement opportunities encourage information sharing amongst its employees.   Performance appraisals and personal development reviews are effective ways in which an organisation may provide feedback to their employees. Positive feedback and recognition can enhance job satisfaction; this also provides the opportunity to set objectives to encourage job enrichment. Appraisals also give the opportunity to organisations to identify training needs when required.

New Approaches

HRM practices developed further since Pfeffer’s theory of the 1980s, fundamentally due to the fact that best practice approach in reality did not necessarily always work in organisations. Newer approaches to HRM have been achieved through the work of Purcell and the people performance model.

AMO Theory

Robinson (2006) cited that Purcell’s people performance HRM model was heavily influenced by three key factors focusing on ability, motivation and opportunity otherwise known as the AMO theory. AMO takes on board the ‘human capital’ element, that it is the people who are key.  The first element, ‘ability’, is seen as the function of finding the right person with the right skills and ability to carry out the role/function. The second element ‘motivation’ looks at the ability to motivate employees’ performance by introducing incentives, performance recognition, employment security and interesting roles. The final element is ‘opportunity’ for the employee to contribute, grow and express their own ideas and influence organisations decisions. According to Robinson recruiting highly skilled talented people with ability is simply not enough, organisations’ need to have “process, systems and practices” in place “to ensure that people work effectively” (Robinson, 2006). An organisation may have talented employees, but without providing the opportunity for career progression or to further their talents, employees may feel unmotivated, disengaged or may even leave employment altogether. (Robinson, 2006).

Robinson suggests that the link between HRM and an organisation’s performance results from the AMO theory and if all three elements are present then performance is likely to be enhanced.  Literature suggests that highly committed, satisfied employees generate good performance outcomes. If an employee has job satisfaction and is motivated by recognition, they tend to go above and beyond the call of duty, otherwise known as “discretionary behaviour”. Research has shown that if an employee feels valued as part of the organisation, it can enhance discretionary behaviour. Discretionary behaviour is “Making the sort of choices that often define a job, such as the way the job is done – the speed, care, innovation and style of job delivery.” (CIDP, 2002). The individual employee’s behaviour is what makes them go out of their way to give more than what’s required of them.  In certain industries, such as call centres, it is more difficult to build up customer relations as one is not in a face to face situation. Having the ability to smile on the phone or show empathy when a customer is in distress are small examples of times when an employee demonstrates discretionary behaviour. Discretionary behaviour feeds into a better service being delivered, thus benefiting the organisation even more.  Such behaviour is heavily linked to job satisfaction, should this dip then morale and performance levels will drop.

Discretionary behaviour and motivation go hand in hand. Good motivation is not only achieved through monetary rewards but can also be encouraged through challenging or interesting work – “Your motivation for doing something is what causes you to want to do it” (Collins Dictionary, 2017). Organisations which demonstrate good HR policies and practice aid performance in terms of ability, motivation and opportunity. Larger multi-national companies foster many elements of best practices and AMO strategies render these organisations attractive to prospective employees. Google and Facebook are examples of organisations which tend to give employees the freedom to develop initiatives, and specifically look to recruit intrapreneurs.

People are actively seeking the best place to work in whist attaining their own personal needs.  Employees may pursue jobs for financial or motivational purposes, or simply to obtain a work-life balance. Once employment has been secured, and the employee contract established, the contract also forms the basis of the non-written ‘psychological contract’.   This has been defined as: “the unwritten understandings and information obligations between an employer and its employees regarding mutual expectations of how each will perform their respective roles.” (Business Dictionary, 2017) The psychological contract can make for a more open and trusting employer/employee relationship and addresses elements such as the working environment, employee wellbeing, job satisfaction and the quality of work-life balance (cited by CIPD, Holman et al 2003).

Employee Wellbeing

Newer HRM practices have resulted in increased pressure for organisations to promote the aspect of employee wellbeing. The workplace can be a stressful environment with heavy workloads, deadlines and targets demands set out by management. This too can also follow outside of the workplace with modern life demands, all adding to the stress load. There has been a strong emphasis on mental health and emotional balance in the workplace in recent times.  Many of the larger organisations have the ability to provide wellbeing initiatives to help support employees whilst boosting morale and performance. By engaging in wellbeing, there can be a positive impact such as reducing long term absenteeism. Google employs a ‘Head of mindfulness’ whose role is specifically to “enlighten minds” and the company believe that “mindfulness is the new fitness” (The Guardian, 2014).  Google’s philosophy is that if it can encourage those in managerial roles to be nicer to their employees, then employees will be happier, and this will transfer to their customer service ability and customers in turn will spend money – thus everybody wins. Irish companies are also taking on this approach. Keelings promotes a wellbeing week in which they provide a range of “holistic activities designed to support the physical, emotional and spiritual wellness of employees” (CIPD, 2016). However, it can be more difficult for smaller organisations to prioritise the wellbeing of employees in this way, due to lack of funding/resources.

Work-life balance initiatives

In addition to wellbeing, HRM has experienced changes where organisations are now supporting work-life balance initiatives to help employees combine their work with family life. Recent influences have seen organisations changing their HRM practices to become more family friendly, acknowledging the fact that employees require a work-life balance.  In the article on “2017 Workforce 100: Ranking the world’s top companies for HR” (Workforce, 2017) Google is ranked as the number 1 company to work for, followed closely by Facebook. As an example, Google has increased parental leave for its employees after realising that working mothers were deciding to leave full time employment for family reasons. By implementing this initiative, it has reduced turnover of working mothers by 50% (Fortune, 2017). Boston Scientific and Medtronic in Galway have brought on board family responsive HRM policies and promote family day events such as Santa visits and summer events which provides the opportunity for employees to bring along their families.  Organisations globally are becoming more flexible in terms of working conditions realising that these can be a functional advantage to both the employers and the employee. The current climate has seen employees wanting more control over their work, traditional working hours may prevent some individuals from working due to family commitments. Employee friendly aspects such as flexitime, annual leave, reduced working hours, job share or work from home initiatives when implemented effectively can increase employee job satisfaction. The advantages to an organisation are that it covers peak workloads, helps aid the reduction of absenteeism and increases retention levels.  By recognising that these aspects are important, it instils employee respect and employee motivation.

Competitive advantage

Research has shown that best practices in HRM lead to good business outcomes, however in addition, an organisation needs to consider its competitive market. Michael Porter’s five forces of competitive advantage model suggests that for an organisation to have the competitive edge over its rivals, it must have a strategy and know its business market and customer demands. If an organisation understands the environment in which it operates its product or service that can affect profits, it will be equipped with the knowledge to adjust its strategy accordingly. This is linked to HRM practices, as an organisation must rely on its resources in order to achieve certain aspects of competitive advantage. One such aspect of Porter’s five forces, the innovative strategy, would require employees with skill sets such as innovative and problem-solving abilities. 3M is an example of an organisation which promotes innovation by applying a “bootleg” initiative(Randall et al, 1987).  This rule allows technical employees to spend up to 15 percent of their worktime on their own projects and initiatives.


In an ever changing world, it is imperative that HRM practices keep up to date with current trends; an example of this is the way in which technology has developed and changed as a whole over the years. Current trends demonstrate how the manner in which communication technology in particular has had a direct impact on the way HRM now operates. Developments in communication, with the explosion of the .com era and the creation of www and social media, has changed the way in which HRM now operates. HRM practices have seen an introduction of software packages which carry out roles which were previously manual tasks. This technology enhances HRM and gives organisations the ability to reach out to a wider audience.

Economic influences

HRM practices deal with obstacles all the time, where one could be led to believe that in Ireland the economy is booming again – it is not without its problems. Ireland is currently experiencing a shortage of highly skilled personnel as many migrated due to the recession and depressed economic climate. Other elements like the housing market, lack of rental in the major cities and extortionist rental prices are other factors impinging on organisations’ HRM recruitment and retention functions. Google in Cork had issues over expansion due to the shortage of rental properties, while Facebook in Dublin previously appealed to their employees to house new employees due to shortages.

In the past two decades, HRM has witnessed positive and negative sectoral changes. Recessionary times had a negative impact on salaries and the demand for goods and services, with many organisations having to let go valuable employees due to deficit of funds. Even having emerged from the depths of the recession, economic growth in contrast has also affected HRM as it is difficult for organisations to retain highly skilled productive employees due to attractive competition in the sector. HRM in Ireland has seen positive results with an increase of supermarket chains in the market and a healthy growth in retail competition.  A market once dominated by Dunnes Stores and Tesco has seen the introduction of Aldi and Lidl which have brought positive influences.  Part of the discount stores’ HRM strategy was the introduction of the living wage which has made these companies more attractive to work for given the competitive wage advantage.


In conclusion, this paper has outlined the history of HRM from its inception in the early 20th century to the present day. The function of HRM has evolved down through the years from a pluralist approach, where management were the managers and workers were simply the workers, to the present day where best practices are inclined to revolve around people. Theorists, such as Pfeffer and Purcell, have identified several pillar strategies that underline good HRM policies. Research has illustrated that the implementation of these strategies pays dividends in term of the overall success of an organisation. Effective HRM has been shown to result in motivated employees, generating higher performance and ultimately greater prosperity for the organisation. Large multi-national organisations have demonstrated that implementing best practice provisions and creating environments which promote satisfied employees can in turn generate business growth. In this context, one can see how by applying best practices can provide organisations with the tools to enhance HRM processes.

In light of this consensus amongst many theorists, a question may be posed as to why is it that some organisations do not choose to apply best practices and yet prove to be very successful. Robinson (2006) contends that organisations (such as Ryanair, Penneys and Dunnes Stores) which may not foster “best practice or high-performance work practices” are equally as successful as those which do not. The companies listed are examples of organisations whose HRM policies include zero-hour contracts, lower pay and little or no employee benefits. All three companies specified have in common the fact that decision making process are more localised.  These retail stores do not appear to have adopted the best practice approach in HRM, but are still hugely profitable. This is a key paradox of HRM and begs the question as to whether or not best practices are always necessary.


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