Learn and Understand, Why Change to Human Resource Management?


From the late 1970s and early 80s, we witnessed many developments and challenges which disturbed the stability of economic, political, technological and academic environment experienced in the 1960s. The Evolution and Development of HRM are Continue, Next, Why Change to HRM? with PDF, PDF Reader, and Free Download. Also learned, MIS, Why Change to Human Resource Management?

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These challenges have had enormous impacts on people management in organizations perhaps more than at any time in human history.

The shift in global macro policy framework:

The late 1970s and early 80s was an era of neoliberalism in which market forces were a driver of institutional frameworks of nation states and organizations. This was a period when we witnessed strong arguments against direct state involvement in the economy. It is not clear what was the ‘chicken’ or ‘egg’ between politicians and academics or who these people, often referred to as ‘experts’ of the World Bank and the International Monetary Fund are, and what their role in the architecture and birth of neoliberalism and marginalisation of the role of government in economic development is.

However, whatever the case may be, both politicians and consultants were important in the doctrine of neoliberalism. One of the foremost advocates of neoliberalism was the former conservative British Prime Minister Margaret Thatcher and her counterpart conservative president of the United States of America Ronald Reagan whose philosophies were known by their names, that is, Thatcherism and Reaganism respectively.

They brutally blamed earlier liberal governments for causing the economic crisis of the 70s through excessive government control of economies and overprotection of employees. The privatization of state-owned organizations, relaxation of legislation in favor of the private sector and the urge for profit maximization became the new agenda and both the desired and required framework for managing organizations and the workforce. Therefore, costs consciousness and the pressure to justify the role of employees in developing and sustaining organizations in the market became a challenge. Failure to respond to these challenges through proper personnel management strategies was seen as a slippery slope towards the collapse of companies that had long historical roots of the successful business.

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Business competition:

The 1980s and early 90s witnessed an uncertain, chaotic and often turbulent business environment. Increased competition from Japan and other international companies with cheaper but high-quality goods was a challenge to American and European organizations. In reaction to the new competition and as a strategy for coping with the crisis, a substantial number of organizations experienced takeovers, mergers, and business closures. These were also accompanied by heavy losses of work, working on part-time, the need for individuals to become multi-skilled, and the contracting out of some work. Partly as a way of addressing these challenges the role of the personnel specialist had to change from reactive to proactive and from routine to strategic approach to the management of personnel functions so as to be able to match the unpredictable environment.

Change in customer needs and expectations:

A change in customer taste, fashion, and quality of goods to reflect their purchase price put more pressure on the organizations to get the best out of their production systems, processes, and employees. This could only be achieved by getting the best people from the labor market, develop, reward, and ensure that they are committed to high-quality service to the organization. In order to achieve these objectives, an enabling environment for employee creativity and innovation became a necessity. This new demand had an impact on recruitment and selection criteria, staff development and reward systems as well as the roles of personnel specialist’s vis-à-vis line managers in personnel management functions. The role of personnel had to change from that of a doer of personnel functions to that of a partner in providing support services to other departments to perform personnel functions. Also learned, Guide to Theories in Human Resource Management!

Technological change:

The competition was also intensified by the organizations that could adopt and adapt flexible specialization technologies to meet customer needs and expectations. The implications were that organizations had fewer, but better-trained people, flexible to cope with rapid technological changes. Continuous learning and adaptation based on teams became a natural area of focus on people management. Information technology destroyed knowledge monopoly. The power of knowledge became how best to use it, rather than who owns it.

Change of philosophy of employee relations:

The power of employees was through legislated trade unions where thousands of employees under the industrial production system held power. Therefore, the power of individual employees in the employment relationship was vested in a collective solidarity. Mass redundancies, less protective role of the state, as well as the declining role of trade unions, made life more individualistic than collective. The change of employee relations from collectivism to individualism was an automatic consequence of the above changes. Employment relations became more based on arrangements and agreements between the employee and employer as opposed to the use of trade unions and labor legislation.

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Developments in the academia:

Building on the knowledge accumulated in previous decades and research that was being conducted particularly in the 1980s and early 1990s, it appeared that organizational strategy and strategic approach to managing employees was the best option for responding to challenges facing organizations (Hendry 1995). The Human Resource Management School, advanced by academics from America and Europe, which spearheaded the concept of ‘strategic approach’ to managing people, became the center of debates and development of human resource management as a philosophy distinct from personnel management. The Excellence School propounded by Peters & Waterman and their followers on the role of strong organizational cultures and commitment to excellence also have had a remarkable influence on the development of human resource management (Storey 1989). Some areas of corporate management including the size, structure, strategy, culture, product, and organizational life cycle were now included in human resource management (Schuler 2000).

The major issue was how personnel management functions could make an impact on the functional level, as part of supporting other departments, as well as being part of business strategy. Personnel managers had to become partners in the business. As part of improving employees’ utilization, a more rigorous method of assessing the performance of employees in relation to rewards was also developed. The introduction of performance management systems and reward systems based on performance was an indication of changes in personnel management practices.

Within these changes, personnel management was redefined and the concept of ‘human resource ‘vis-à-vis ‘personnel’ was adopted, although the debate concerning the differences continues (Storey 1989). However, as may appear in the literature, the difference between ‘human resource’ and ‘personnel’ may be clear or unclear (Armstrong 1995). This difference depends on the taste, or on the taste and fashion rather than on what managers do, this is notwithstanding the fact that most academics and managers in organizations use the term human resource management as opposed to personnel management when referring to people management even without making the conscious effort to distinguish between the two.

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Perhaps the most popular definitions of human resource management are those suggested by Storey and Armstrong because such definitions are based on thorough reviews of earlier works from both American and European human resource management debates. Storey looks at human resource management as:

… A distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an integrated array of cultural, structural and personnel techniques.

It is worth noting here that the focus of human resource management is on employee management techniques that are directed towards gaining competitive advantage depending on the adopted business or organizational strategy. Armstrong also appreciates the role of strategies but goes further by emphasizing the need for robust personnel systems, which will take care of employees (individuals and teams), as valuable assets where investment is crucial. Thus, he defines human resource management:

… As a strategic and coherent approach to the management of organizations’ most valued assets – the people working there who individually and collectively contribute to the achievement of business objectives.  

By looking at the various debates in academia and good practices in personnel and human resource management, human resource management may be further defined as a strategic approach and management practice of managing employees so that there is the sustainable achievement of an organizational mission, goals, and objectives. These definitions are conclusively derived from the American and European schools of thought.

The evolution and development of human resource management have relied on two traditions. These are the American, alias Harvard and European under the leadership of British academics, particularly from the University of Lancaster.

Why Change to Human Resource Management - ilearnlot


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