Ch. 2: SHRM and context (guest lecture)

This guest lecture, given by two consultants of an HR and management consultancy firm, covers Chapter 2 of the book (SHRM and context) and adds a practitioner view on performance, engagement and strengths. The theory part deals with the best-practice versus best-fit debate, the concept of strategy, the Harvard approach and the strategy scan (six component model). The second part deals with employee engagement and working on strengths. The consultancy firm itself (a Dutch firm with around 210 professionals, founded in 1990) is used only as a worked example of the strategy scan.

1. Best practices: Pfeffer (1998)

Pfeffer (1998) argued that every organization should use a fixed set of HR practices to increase the overall performance of the firm:

1. Employment security (people are not easily laid off, which creates trust and willingness to invest);
2. Selective hiring (careful recruitment and selection of the right people);
3. Extensive training (investing in knowledge and skills);
4. Performance-related pay, linked to individual or team performance;
5. Self-managed teams or teamworking;
6. Information sharing (openness about financial results, strategy and performance).

(In Pfeffer's original work, reduced status differences between management and workers is a seventh practice; the lecture lists the six above.)

2. Two propositions: best practice versus best fit

In the best-practice view, the HR practices themselves are 'universal'. In the best-fit (contingency) view, a practice that works well in one organization (e.g., individual bonuses in a sales firm) can be harmful in another (e.g., a hospital team where cooperation is key). The book takes a position that combines both: there are some general principles, but the context determines the concrete practices.

3. The concept of strategy (based on best fit)

• The business strategy consists of multiple strategies that cover multiple 'silos' within the business, such as human resources or marketing (Boxall and Purcell, 2003).
• The HR strategy is one of these functional silos.
• SHRM is focused on the alignment or fit between the strategy of an organization and its HR strategy.

4. The Harvard approach (Figure 2.1)

The Harvard approach (Beer et al., 1984) is one of the first HRM models and is summarised as: strategy, goals, policy, consequences and back again. It consists of five boxes:

How the model works: stakeholder interests and situational factors both influence HRM policy choices (the situational factors also influence stakeholder interests). The policy choices lead to HR outcomes, which in turn lead to long-term consequences. Feedback loops (dotted lines) run from the long-term consequences back to the stakeholder interests, the situational factors and the policy choices: the consequences change the context and the interests, which is why the model says 'and back again'.

Why the Harvard approach matters for the balanced view: it explicitly includes multiple stakeholders (not only shareholders) and formulates long-term consequences at three levels: individual, organizational and societal well-being. This is very close to the balanced approach of the book.

5. The strategy scan: the six component model (Figure 2.6)

The six components are:

1. The external general market context: macroeconomics and the labour market; market mechanisms that affect all organizations in a country or region.
2. The external population market context: competition, market, technology and products that are specific for the 'population' (industry or sector) of the organization.
3. The external general institutional context: legislation, norms and values that apply to all organizations in a country (and the EU).
4. The external population institutional context: collective bargaining agreements (CBAs), trade unions, works councils, other stakeholders and sector-specific laws.
5. The configuration: the internal organizational context, i.e., history, culture, ownership, technology and workforce.
6. The HR strategy and practices: selection and recruitment, compensation, appraisal and performance management, development, participation. These feed into the HR value chain (Chapter 3).

The arrows in the model are numbered and represent four types of fit:

6. The strategy scan applied: example of a consultancy firm

The lecturers applied the strategy scan to their own firm. The example shows what kind of information belongs in each box.

• External general market context: inflation, which causes rising expenses; a tight labour market with labour shortages, leading to wage increases and higher labour costs, labour intensification (employees work harder because vacancies cannot easily be filled) and selecting less qualified employees because there is no alternative. This can directly affect efficiency (cost-effectiveness) and quality.
• External population market context: a mature consultancy market with several large competitors, and new technological developments such as AI.
• External general institutional context: country legislation (e.g., in the Netherlands a works council must be installed in every organization with 50 or more people; maximum working hours; employment security rules on unemployment and liability; the legal position of employees, e.g., anti-discrimination law), EU legislation (e.g., European public tendering rules) and social norms and values (attitude towards part-time work, the importance of diversity).
• External population institutional context: no binding collective agreement for the consultancy sector (and the firm is not a member of an employers' organization), but CBA developments in the public sector matter because clients are public organizations; psychologists must be certified by the Dutch professional association and many consultants are Certified Management Consultant.
• Configuration: founded by entrepreneurs focused on organizational development; owners who stimulate working from positive psychology; a partnership with Gallup; an open, informal and human-centred yet professional and up-tempo culture; team-oriented with no individual bonuses; mostly university-educated staff; about 10% trainees; 75% women.
• Resulting HR strategy and practices: employee development and strengths-based organizing, emphasis on a good working environment instead of bonuses, and a traineeship for starters.

The example shows that the HR practices follow from the context: e.g., no individual bonuses fits a team-oriented culture (organizational fit) and a non-competitive work environment, and a traineeship is a response to a tight labour market (strategic fit).

7. From strategy to people: performance, engagement and strengths

Strategy and policies are developed and aligned, but in the workplace people make the difference. The question is how organizations can influence people in their performance. The lecture starts from the question of Don Clifton (founder of CliftonStrengths): What will happen when we think about what is right with people rather than fixating on what is wrong with them?

The workplace has changed because of four developments:

• Technology disruptors: big data, collaboration platforms, AI and automation are changing the game;
• Remote and hybrid working: the share of employees working remotely or hybrid has increased significantly since the pandemic;
• Heightened complexity: companies find it increasingly hard to deal with complexity;
• Need for greater agility: organizational agility is a key requirement in a disruptive world.

The employee experience is a lifecycle framed by purpose, brand and culture: Attract (recruit top talent), Hire (pick the stars), Onboard (affirm the decision), Engage (build strengths and purpose), Perform (drive expectations), Develop (coach career growth) and Depart (positive exit experience).

8. Why engagement?

• An engagement-focused strategy builds a culture of high development and produces sustainable high performance, even amid disruption.
• Employees have fundamental psychological needs that must be met to achieve and sustain high performance. This holds for remote workers as well as for office workers.
• Engaged employees are highly involved in and enthusiastic about their work and workplace. They are psychological 'owners' of their work, drive performance and innovation, and move the organization forward.

The key message: satisfaction is not the same as engagement. A satisfied employee is content, but an engaged employee invests energy and ownership.

9. The items of engagement (Gallup Q12)

Gallup measures engagement with twelve items, built as a hierarchy of needs (a pyramid). Below the pyramid is overall satisfaction (Q00: How satisfied are you with your company as a place to work?).

The logic of the pyramid: lower needs must be met first. Without clear expectations and the right materials (basic needs), recognition and growth opportunities have less effect.

10. The additive effect of human capital strategies

Gallup research (Harter et al., 2014) estimated the additive impact of four human capital strategies on output, taking into account the interrelationships between them:

11. Talents and strengths

Talents and strengths help to cultivate success, create a good balance in work and stimulate engagement. In the strengths approach, a talent is a naturally recurring pattern of thinking, feeling or behaving that can be productively applied (e.g., always making to-do lists and sticking to them, wanting to race someone at the traffic lights, always asking questions). A strength is a talent that is developed with knowledge and skills into consistent near-perfect performance. The CliftonStrengths instrument identifies 34 themes (e.g., Achiever, Learner, Developer, Individualization, Responsibility, Woo (Winning Others Over), Positivity); people are advised to focus on their top 5. The approach links to the positive psychology idea of looking at what is right with people.

Key take-aways

• Best practice (Pfeffer) versus best fit (Delery and Doty): the book stresses context.
• Strategy is planned alignment between organization and environment; SHRM is about fit between business strategy and HR strategy.
• The Harvard approach links stakeholder interests and situational factors to HR policy choices, the 4 Cs and long-term individual, organizational and societal consequences.
• The strategy scan has six components and four fits: strategic, institutional, organizational and internal.
• In the workplace people make the difference: engagement (Q12) and strengths contribute to performance; satisfaction is not the same as engagement.