From Personnel Management to Human Resource Management (PDF)

C H A P T E R 4 From personnel management to human resource management: how did this field of work develop? When we come to consider the essential nature of Human Resource Management (HRM) we immedi...

C H A P T E R 4 From personnel management to human resource management: how did this field of work develop? When we come to consider the essential nature of Human Resource Management (HRM) we immediately encounter the question: what are the goals of specialists in this field, and how do these specialists assist in the achievement of the organization’s goals? Since the early years of the last century, writers such as Fayol and, later, Urwick and Brech have classified the activities of managers under the headings ‘planning’, ‘coordinating’, ‘controlling’ and ‘motivating’. These headings demonstrate an awareness of the primary managerial task of pushing work forward, adapting to changes in the environment and overcoming obstacles. Although this classification is helpful as an analysis of management deploying economic resources, when we observe managers at work it is difficult to see their actions in this simple way. For example, all their work involves coordination and control. Management work is better described as part of the continuous social processes that apply in organizational life. 62 Essentials of human resource management Chapter 4 The actions of managers are usually very much concerned with achiev- ing results through other people, and therefore the interpersonal skills they demonstrate – notably their capacity to communicate and to receive information, the climate of trust they establish, the degree of enthusiasm they generate, their sense of fairness and their own humanity – will be more significant than a grasp of techniques such as how to discount cash flow or to prepare a critical path analysis. We can now venture a description of what lies at the heart of manager- ial work. The essential characteristics seem to be that managers exercise their authority in such a way that it is regarded as legitimate, they main- tain the adherence of subordinates to the organization’s goals, and build teams which are capable of achieving these goals. Human resource man- agement in its specialized sense is concerned to help in the widest pos- sible way with these managerial tasks. The human resource function has organization-wide responsibilities for HR policy, and should be con- sidered as quite separate from the function which all managers carry out when managing people. From the 1960s up to the mid-1980s, the term most commonly used to describe the specialist occupation concerned with managing people was ‘personnel management’. In the last 20 years, the title ‘human resource management’, an import from the USA, has become more frequently used. An academic debate has grown around the question of whether this signals a change in the nature of the work performed, with one school of thought arguing that there are strong normative factors driving HRM, in contrast to the administrative and industrial relations concerns of earlier periods. Storey (1995) sets out a definition of HRM that emphasizes the strate- gic role. He sets out a twenty-five item checklist, differentiating person- nel and industrial relations from HRM. The gist of these differences rests on the more individual contract between employer and employee found in HRM, the accent on managing by values and mission, and the strong business orientation of HRM. We discuss the ‘fit’ between human resource and business strategy in the next chapter. However, definitions of this field of work have always described it in the broadest terms. For example, ‘Personnel Management is the recruit- ment, selection, development, utilisation of, and accommodation to human resources by organizations’ (French, 1978, p. 3). British defin- itions tended to grant it a professional status in its own right. In summary, while there is some controversy still about the significance of the change to HRM, there have always been many different definitions of the work and many different job titles. This change of terminology, according to some commentators, signals a new way of undertaking the personnel Chapter 4 From personnel management to human resource management 63 management role: ‘human resource management’ is a term which stresses the development of people as assets rather than their control as costs, and places people management at the strategic heart of business planning. This view has been challenged by some academics who see the opposite trend, towards cost reduction, work intensification and a diminution of the power of the specialist personnel department. One way to interpret these contrary trends is to appreciate that organizations adopt different HRM strategies according to the threats and opportun- ities they face in their planning environments. There are also those who regard the term ‘human resource management’ as merely a glossy label which attempts to market the same personnel departments as before. Whether or not there is now a new dominant ‘paradigm’, the degree of change and the effects of the varying personnel traditions help to explain how different models of personnel management have emerged. For the sake of consistency, we will use the term ‘human resource management’, or ‘HRM’, throughout this text. There are a number of different traditions in HRM. It can be per- ceived as a kind of social conscience, reminding the senior management of their social, legal and industrial relations responsibilities. Human resource departments can spend much of their time operating on per- sonal issues, providing a personal service to specialists and executives for example. If control of personnel is the main consideration, the role of HRM will be principally concerned with issues such as the reduction of absenteeism, labour budgeting, headcount, etc., with HR as the ‘police- man’. Other traditions in HRM include organization development, in which HRM helps the company to adapt to change, and strives to have a beneficial influence on relationships through the application of the social sciences to people management problems by using job redesign and job satisfaction schemes and communication techniques (transform- ational work in HRM). In some organizations, HR departments perform a kind of low-level administration, dealing with routine requests from managers for recruitment, transfers and termination (the ‘transactional’ work of HRM), whereas in other organizations they are concerned with strategic planning, developing long-term personnel plans and industrial relations strategy. How the work is conducted will depend on the particular organization, and there is no common standard applicable throughout the public sec- tor, industry and commerce. The way the company is organized and its size – whether, for example, it is broken down into divisions, profit centres or parts of a group – will also influence the way specialist HR departments fit into the policy-making and decision-making arrange- ments of the organization. 64 Essentials of human resource management Chapter 4 Different emphases are sometimes given to parts of the specialism, such as planning, selection, industrial relations, training and manage- ment development. In some cases, HR directors sit on company boards, advising their fellow directors on the influence of decisions on person- nel policy. There is, therefore, a multiplicity of types of relationships between HR and line managers. The HR manager is often depicted as an adviser to senior line man- agers. The amount of executive power he or she possesses to carry out decisions without referring them to others will be dependent on what the chief executive has delegated but, unlike some other managers, the amount of power HR staff possess to carry out policies is usually limited. If, for example, the HR manager wanted to introduce a new pension scheme, or to change the remuneration policy, it is extremely unlikely that this could be done unilaterally. Yet, as we have suggested, HR man- agers are sometimes given a general remit to improve relationships. The reason for this paradox can readily be found in the accountability that line managers have for the achievement of the organization’s objectives. To illustrate this point, we may consider the case of the sales manager who is given a sales target to achieve, but no say over the number, quality or deployment of the sales force. In such circumstances, the sales man- ager could hardly be accountable for the attainment of the target. In their ‘staff’ role, HR managers act as advisers to management on policy and strategy, while the conduct of the policy is often left in the hands of their line manager colleagues. As we have said, there are different models of HRM, and we can see these developing from a basic administrative role through to a ‘business manager’ or ‘consultancy’ role’ as shown in Figure 4.1. The shift to the right brings a number of problems for HRM. For example, the consultancy model of HRM can be performed either exter- nally or internally to the business. The growth of a variety of specialist consultants, in areas such as rewards, development, communications and selection, threatens to ‘Balkanize’ the HR role. The need to ‘fit’ the HR strategy to the business strategy might best be achieved under the business manager model, but if we are also expecting HR to provide some kind of social conscience, and to champion certain values (as those who see HRM as representing a normative position would) then the con- flict within the business manager model can only be avoided if the busi- ness adopts these values – a difficult position for managers to adopt given frequent restructuring, redundancies, and cost pressures gener- ated by a highly competitive marketplace. So far we have outlined the complexities of line manager–HR man- ager relations, and we have mentioned some of the various traditions Chapter 4 From personnel management to human resource management 65 Industrial relations Administration Business manager Consultancy systems Role Support function to Policy Strategic Internal consultancy line management service Focus Welfare IR Integration with Service agreements Personnel service Procedures/systems business relevance Projects, OD, Records/procedures based of programmes/ Change, external, Unitary Rule driven business Networks Pluralist Balance interests Objectives Servicing needs of Harmony Results/employee Enable change individuals/managers Legal correctness commitment Organization responsiveness Job Title Welfare officer IR manager HR manager/ Change manager Employment manager Labour office director HR director Personnel manager Figure 4.1 Models of personnel/HRM in HR work that exist. The history and development of personnel and HR work is a good starting point for understanding how different con- ceptions of HR management have emerged. The early history of personnel management, up to 1914 The industrial revolution that spread throughout Britain during the middle of the 19th century was brought about by the application of the principle of the division of labour combined with the harnessing of steam and other power sources. Concentrations of working people in factories and the related growth of towns led to the helter-skelter exist- ence that we associate with modern industrial life. The rapid increases in population, new markets, new technology and expansion by vertical integration were conditions that helped to create the need for a large- scale organization of resources. During the first half of the 19th century, a ground swell of criticism appeared against what seemed to be the unchecked greed and exploita- tion of workers by their fellows. Movements for democracy, and agitation for the repeal of anti-trade union legislation and for some minimal con- trols on employers found their expression through the Chartists, the Ten-Hour movement and the Anti-Corn Law League and in sporadic riots and petitions. In the works of Dickens and the later social investi- gations of Mayhew, Booth and Rowntree, the worst abuses of sweating 66 Essentials of human resource management Chapter 4 (excessive hours), child mistreatment and oppression by employers were revealed, and a working-class counterculture was described. Even among enlightened liberal opinion, public acknowledgement of the reasons for poverty had usually supported the beliefs underlying the 1834 Poor Law. There was no understanding of structural unemployment or the effects of a downturn in the trade cycle. The general image of the pauper was of a lazy profligate brought down by his or her own failings, notably excessive drinking. Such a vision was congruent with the middle- class ideology that was a celebration of capitalist economics. Management and the owners of business were drawn from the upper middle class, where a high value was placed on individualism, competition and the sur- vival of the fittest. Artisans, supervisors and shopkeepers would also have subscribed to such views. Little had changed for working people in the 19th century. Their conditions and life chances had always been poor. As John Clare, the Northamptonshire poet, wrote: ‘the poor man’s lot seems to have been so long remembered as to be entirely forgotten’. Pressures for reform and for the protection of working people came towards the end of the 19th century, mostly from trade union leaders and members of the labour movement. The extension of the franchise added to these pressures in the last quarter of the century. Active cam- paigning by individuals such as Rowntree was also effective, and the large Quaker employers set out to provide an example of how good working conditions and profitability could be compatible. What has been called the movement towards ‘industrial betterment’ came on the fringes of a wider claim for improvement in living conditions. Out of this movement emerged the earliest attempts at welfare policies. One inter- pretation of the industrial betterment movement is that it was a response by employers to the demand for change in society. Early welfare workers belonged to the property-owning classes, and at first were concerned only with women. The protection of women was seen as a worthy objective, and even the harshest employer would have found it difficult to oppose these aims openly. Extramural welfare work- ers visited sick employees and helped to arrange accommodation for women and girls, often including the supervision of moral welfare as part of their work. Welfare workers were usually employed in the newer industries, where women were engaged for light machine work, packing, assembly and similar routine jobs, and it was in these factories that full-time welfare staff were first in service. The scope of the welfare officer (sometimes called ‘welfare secre- taries’) was allowed to grow in those companies where she could demon- strate a successful integration of welfare and managerial objectives, so that she became concerned with the recruitment, training and transfer of hourly paid women factory hands. Chapter 4 From personnel management to human resource management 67 Up to 1900 there were still only a dozen or so full-time welfare secre- taries, but their number had grown sufficiently by 1913 for them to seek a recognizable identity by forming the Welfare Workers’ Association, this being the forerunner of the Institute of Personnel Management (now the Chartered Institute of Personnel and Development). They often found that managers and supervisors were suspicious of their work, and they were also attacked by the unions as a management device for controlling employees. The problems of being the ‘person in the middle’ were not unlike the difficulties faced by first-line supervisors. Workers were not sure whether the aims of welfare were altruistic, and felt that there was an element of hypocrisy in the welfare secretaries’ actions. Managers saw the possibility of another standard besides economic efficiency being applied, and were antagonized by the thought of any restriction on their power. The reasons for the development of a welfare movement can best be seen as a response to the wider trend of greater interest and concern for general living conditions. Although it has been argued that Quaker employers, such as Cadbury, may have been expiating their guilt feel- ings by becoming leaders of the welfare movement at a time when they had not yet reconciled the profit motive with Christian ethics, it is more accurate to see in their sponsorship of the welfare movement a belief in good organization, good health, hygiene and a broad mission of pastoral care for their workers. Individual welfare workers probably had mixed motives, but there is no doubt that most of them wanted to help improve conditions for working people. What was the purpose of welfare work? 1 It was an assertion of a paternalistic relationship between employers and their workforce. This outlook was in the spirit of the old guild masters, which meant that employers might expect a reciprocal sense of service from their workers. 2 To grant some form of moral protection over women and chil- dren just as the Factory Acts sought to provide a form of phys- ical protection. 3 To achieve higher output by control of sickness and absen- teeism, and by the early resolution of grievances and problems. 4 To provide sanitary and acceptable working conditions. Much of the early welfare work was in food factories where cleanli- ness also benefited the consumer. 5 To make the organization of women by trade unions unneces- sary through removing the employees’ grievances. From these early days some of the conflict and confusion about person- nel work has persisted. In fact, welfare work was always undertaken to 68 Essentials of human resource management Chapter 4 meet the interests of management, since ultimately it was a cost met by management. To some degree, the areas of welfare covered by welfare officers, or welfare secretaries, were on behalf of society as a whole, at a time when there was no help from the State. The First World War 1914–1918 The First World War occasioned a ‘step change’ in the development of personnel management. There was a large increase in the number of welfare officers (to about 1300), largely in munitions and war factories, where men were also recruited to oversee boys’ welfare. State regula- tion of employment was instituted through the Munitions of War Act 1915 which, together with its amendments, sought to control the sup- ply of labour to war factories and made welfare services obligatory in these factories. The extension of controls into such matters as timekeeping, attend- ance and ‘diligence’ gave the State an unprecedented impact on work- ing life. However, there were initially a number of different approaches adopted towards personnel problems, and it was not until towards the end of the war that the controls became well organized and effective. Welfare work was performed on an impersonal, bureaucratic basis. The government gave direct encouragement to welfare development through the Health of Munitions Workers’ Committee, which was the precursor to the National Institute of Industrial Psychology, and which continued the research into the psychological problems of working – boredom, fatigue, monotony, etc. Women were recruited in large numbers to fill the staffing gap caused by the demand for war materials and the expansion of the armed ser- vices. In 1915 one man was expected to do the work of two. The employ- ment of women necessitated agreement with the trade unions on what was termed ‘dilution’ – i.e. accepting unskilled women into craftsmen’s work, the abandonment of formal apprenticeship schemes, and changed manning levels. Although compulsory arbitration was intro- duced, there were many bitter wrangles. Lloyd George, as Minister of Munitions, was obliged to go to the Clydeside shipyards to try to resolve a dispute over ‘dilutees’ and discharge certificates, for example. After 1918 various forms of joint consultation were proposed. The only enduring form was the Whitley Joint Consultative Committee in the Civil Service, which is still in existence. However, for the first time the State had to open up a dialogue with the trade unions, and a rec- ognizable policy on industrial relations was evidenced in this period. Chapter 4 From personnel management to human resource management 69 Growth of employment management Employment management accented labour control, recruitment and discharge of labour and had separate origins from welfare. Labour managers came into being in the engineering industry and in large factories – e.g. in process industries – and in some cases developed from more routine jobs such as ‘timekeepers’ or record-keeping assis- tants on the works office manager’s staff. Often, wages clerks saw job applicants and came to deal with queries over absences, bonuses, piece rates, etc. The employers’ federations had industrial relations respon- sibilities, and employed officials to help settle disputes. In engineering and shipbuilding there were national negotiations of rates, but districts ‘plussed up’ on these rates according to tradition and the supply of skilled labour. Records of grievances and disputes were kept by engin- eering employers because of the need to follow procedures within the employers’ federation, and therefore specialists in the procedures evolved in some companies. Early personnel departments, 1920–1939 In the 1920s and 1930s employment managers with various job titles such as ‘Labour Officer’ and ‘Men’s Employment Officer’, were increas- ingly common. The number of employers’ associations that had trad- itionally fulfilled the major industrial relations role fell from 2403 to 1550 between 1925 and 1936. This was partly due to employers wanting to follow an independent tack, and because, with the growth in com- plexity of their businesses, they created their own personnel depart- ments with industrial relations policies. In the large organizations, such as ICI, Courtaulds, Pilkingtons, London Transport and Marks & Spencer, the first specialist personnel departments were formed between the wars. Specialist personnel management in organizations such as these was a response to the problem of control. Complex organization structures resulted in differing standards and divergent policies unless a central con- trolling influence was exercised. Mergers, acquisitions and expansions led to the establishment of personnel departments. These were usually in the newer industries, such as plastics, chemicals, mass-produced consumer goods and in multiple retail, whereas there was no attempt to develop employment management as a specialism in industries such as shipbuilding, textiles or mining, which were hit by the slump. This was because employment management addressed itself to the question 70 Essentials of human resource management Chapter 4 of staffing control in matters like absenteeism and recruitment with the intention of improving output. In the older industries, the pressing prob- lems were those of structural unemployment, and no techniques such as retraining adult workers, redeployment or work-sharing were considered by managements. The size of the problem (for most of the 1920s and 1930s there was never less than 10 per cent of the working population unemployed), and the worldwide recession, made it unlikely that solu- tions would be sought by the application of new techniques. As trade began to pick up, and rearmament began in the late 1930s, the larger companies in the new industries showed an interest in manage- ment development and training. Management trainees were recruited, who followed a central training scheme, and in this way the latent pur- pose of spreading a common managerial philosophy throughout diverse organization structures was ensured when the trainees moved between divisions. Since the First World War the National Institute of Industrial Psychology had begun to develop selection tests and to contribute to the solution of training problems. In the larger modern companies, the welfare and employment man- agement sections were merged in the later 1930s. Personnel man- agement in all but these few enterprises was a low-level affair until after 1945. The employees covered were usually hourly paid operatives and junior clerical staff. In retail distribution, some moves towards including sales staff and buyers took place in the 1930s, and the Staff Management Association was set up in 1934 specifically to cover the difficult personnel problems of managing staff scattered in small units. Industrial relations was not regarded as the mainstay of per- sonnel work, and was frequently the main responsibility of senior line managers. The effects of large-scale unemployment retarded advances in tech- niques. With a cheap supply of labour available, and uncertainty about future demand, there was no pressure for sophisticated staffing plan- ning, and the threat of unemployment averted attention from questions of motivation. Similarly, after the General Strike in 1926, and the weak- ening effect of structural unemployment, power was passing from the hands of trade union leaders. However, from 1937 onwards, rearma- ment and the prospect of war caused a change. There were also social pressures emanating from the Depression, for security and a better life. This was the period of improvements in suburban housing, of a national movement for holidays with pay, and it was a time when big corporations saw the value in improving employee benefits such as pension schemes as a way of ensuring a stable, tractable workforce. Chapter 4 From personnel management to human resource management 71 The Second World War 1939–1945 In the Second World War, personnel management was expanded in its staffing control aspects to virtually all factories, and the designation of welfare and personnel occupations as ‘reserved’ (e.g. those holding them were exempt from conscription into the forces) shows the import- ance that was attached to the personnel role. The growth in numbers of personnel officers was again a feature of wartime, as had been the case with the First World War, there being around 5700 by 1943. The three instruments of labour regulation were ‘protected estab- lishments’ (engaged in war work), the registration of all employment, and ‘essential work orders’. These gave an expanded Ministry of Labour and National Service considerable power to direct labour, to prevent the call-up of those with special skills, and to influence conditions of employment. Welfare and personnel work were inaugurated on a full-time basis at all establishments producing war materials, and the concept of a total war carried with it the belief that no effort should be spared to ensure high productivity. In addition to the administration of the rules, all aspects of the management of people came under scrutiny, and the government saw specialist personnel management as an integral part of the drive for greater efficiency. For example, the Ministry of Aircraft Production stipulated that specialist personnel management was manda- tory in aircraft factories. The evacuation of large numbers of civilians, the extension of shift working and the problems of training large numbers of women and young people gave welfare and personnel departments the same cen- tral place in the organization of production as had emerged during the First World War. Welfare was again part of the rule-governed environ- ment created for large-scale production. The pervasive aspects of the role were resented by workers, but less so in the Second World War than in the First World War. The acceptance of the vital importance of the struggle and the feeling of involvement by ordinary people in view of the Blitz were perhaps the main reasons for this different response. Nevertheless, personnel and welfare officers were seen as part of the operations of management, and the two world wars helped to create the image of the personnel officer as a bureaucrat. To achieve wartime production targets, strikes were made illegal and compulsory arbitration was introduced. In 1940 three men were expected to cover the work of four, and once again the staffing gap necessitated the employment of women in unfamiliar jobs, such as 72 Essentials of human resource management Chapter 4 crane drivers, and in war factories. Of necessity, restrictive practices had to be suspended by the unions, and the State entered into a dia- logue with the unions to try to maintain harmony. The relationship was more intentionally fostered in the Second World War, when Ernest Bevin, as Minister of Labour (and an important prewar trade union leader), and a coalition government were able to persuade the unions that the suspension of normal practices was not too great a concession to make. The linking of productivity improvements with joint consult- ation made a lasting impression on management thought, and the principles of joint consultation have come to be regarded as important in the training of personnel managers. After 1945, successive govern- ments have found various forms of consultation with the Trades Union Congress (TUC) necessary, continuing the tradition. Three significant tendencies deriving from both world wars can be summarized as follows: 1 The belief among managers, sustained by research, that out- put and employment conditions are related, and the develop- ment by personnel managers of specific personnel techniques. 2 The integration of employment management and welfare work into the broad function, under the umbrella of person- nel management, and the massive increase in the number of people in the occupation. 3 The wars demonstrated that the regulation of employment by the State could produce the desired outcomes in the short term at least, but that this required large-scale controls and could only succeed with the agreement of the workers, who needed a commitment to victory if they were to be convinced of the necessity to relinquish their freedoms. 1945–1968 Industrial relations and personnel management An understanding of the different facets of personnel management is not possible without an appreciation of what role personnel managers have played in employee relationships. The term ‘industrial relations’ is frequently used to describe only formal, institutional arrangements for management relationships between the mass of the workforce and managers as representatives of those in whose interests the organiza- tion is controlled. Chapter 4 From personnel management to human resource management 73 However, the differences between ‘formal’ and ‘informal’ relation- ships have never been so strictly drawn for an analysis on that basis to be sufficient. Power relationships are central to our understanding of industrial relations, and these have fluctuated. A brief account of the development of trade unionism is given in Chapter 16, so in this section we shall confine ourselves to the develop- ment of industrial relations (IR) responsibilities in HRM. The broader view of ‘industrial relations’ as the whole spectrum of relationships and the negotiation processes between power groups in an organization reveals at once the cardinal place that HR management occupies. Trade unions were suspicious of, and hostile towards, the early wel- fare workers. They felt that welfare workers were extending the employers’ control into the private lives of the workers. The welfare movement had sprung up in non-unionized companies. Shipbuilding, engineering, min- ing and transport, for example, were industries where trade union tradi- tions were strong, and regulation of labour was largely in the hands of both district and local trade union officials and the employers’ federations. Although large companies began to establish their own personnel departments from the late 1920s onwards, it was difficult for personnel officers to gain credibility quickly. This is a problem that has dogged the occupation to the present day. Institutional arrangements in the engin- eering industry militated against importance being granted to personnel management. The ‘procedure’ for settling disputes tended to favour the involvement of senior executives at the later stage rather than local per- sonnel officers. Union negotiators, although now reconciled to person- nel work as part of management, typically preferred to negotiate with the more senior members of companies, recognizing then, as now, the value of dealing with those who had the power to grant their case. Post-1945 industrial relations witnessed an enormous growth in the number and power of shop stewards, and the breakdown of national- level bargaining through employers’ federations. Local-level bargaining gave greater scope for personnel staff, and the larger companies pre- ferred to develop their own industrial relations policies that were in tune with their investment plans and their overall corporate strategy. There was a growth in productivity bargaining in the 1960s as employers and unions negotiated about the shares in wealth that were to be gained from improvements in technology: e.g. agreements such as those made at ESSO’s Fawley Refinery. The involvement of line managers in produc- tivity bargaining was essential, both because of their technical knowledge and because they were the managers who had to make the bargain work. The Donovan Report of 1968 on trade unions and employers was a Royal Commission report that examined British industrial relations in 74 Essentials of human resource management Chapter 4 the light of the large number of unofficial strikes that were taking place. Donovan was particularly critical of what the Commission’s members saw as the failure of personnel managers either to cope with the changes that were taking place, to be skilled in negotiation or to plan industrial rela- tions strategy. The immediate ad hoc responses that were typical of man- agement’s reaction to the disagreements, which so often led to unofficial action, were seen as a failure on management’s part to give personnel management a high priority. This was one of a series of criticisms against management, and the HR occupation seems destined to have periodic crises of confidence, although there may be some justification for the view that personnel staff had not been sufficiently innovative in their responses to the changing industrial relations scene. Donovan failed, however, to offer a solution or a range of techniques which would resolve the problems. All kinds of organizations (local authorities, hospitals, service indus- tries, for example, as well as manufacturing) were starting to employ full- time personnel staff by the mid-1960s, and the spread of ideas and of specialization within the field began to establish personnel management as an occupation in its own right. The ‘consultant problem-solver’ role is often the most acceptable one in an organization’s authority structure, so there may be greater involvement for line managers in day-to-day negotiation. The research, coordination and backup activities of per- sonnel officers were often an essential part of the management’s control and direction of relationships, however. The most significant contribution of personnel management to indus- trial relations was through the creation of conditions under which certain industrial relations policies came to be accepted. Wage payment systems, and conditions of service that created different status groupings, were examples of how personnel systems came to create relationships. Industrial relations strategies are rarely explicit at any time. Examples of personnel managers operating latent strategies could be found in motor manufacturing, for example, in the 1960s and 1970s. The issues over which negotiation with the unions was accepted had widened to include pension schemes, training, working procedures, safety, discipline and even individual appointments, in some industries. This was notice- able in the public sector, where the growth in white-collar unionization had brought staff associations into the arena of collective bargaining. Union leaders were heard to call for better personnel management since personnel managers brought order and were often able to pro- mote good relationships, for instance, through organization develop- ment schemes, which started to be prescribed as solutions to difficulties in relationships in the later 1960s. They also believed that attention to Chapter 4 From personnel management to human resource management 75 personnel management might be expected to ensure some minimum standards and to curb the rogue employer. National economic policy, legislation and personnel techniques 1968–1979 In post-war Britain there was a boom-slump cycle in which both Labour and Conservative governments tried fiscal and monetary policies to con- trol the economy. Following the Second World War came a period of low unemployment for twenty-five years. During this period the stability of sterling and the rate of price inflation dominated economic thinking. State legislation on prices and incomes ranged from voluntary regu- lations by individual employers to statutory controls maintained by spe- cial commissions and boards. Whatever form was used, the regulation of wages in accordance with national economic policies entailed the control of wage policies by personnel managers and other senior staff on a company-wide basis. This encouraged the use of job evaluation schemes and incremental scales. Entry to the European Economic Community (EEC) came at a time when multinational companies were expanding, which gave some per- sonnel departments an international dimension. In these circumstances, compensation planning became more complex since different payment systems had to be reconciled within a single status hierarchy. In addition to prices and incomes policies, the State was extremely active in formulating new employment legislation during the early 1960s. The Contracts of Employment Act 1963, Industrial Training Act 1964 and Redundancy Payments Act 1965 were the forerunners of com- prehensive legislation on job security, equal opportunity and the pos- ition of trade unions. Various state agencies were also set up during this time to encourage good employment practice. One of the major conse- quences of all this activity was the enhancement in formal authority of personnel departments, and these changes were also a factor in the spread of personnel functions into small organizations. The burst of legislation coincided with the development of personnel techniques. Management training courses with both educational and vocational aspects expanded, and theories drawn from the social sci- ences became popular in the late 1960s to explain motivation to work and organizational behaviour. Communication techniques, such as briefing groups, were emphasized and greater attention was paid to the social and technical environment of work, largely due to the influence of the Tavistock Institute and the ‘sociotechnical systems’ school. The 76 Essentials of human resource management Chapter 4 Institute of Personnel Management (IPM) drew heavily on sociology and psychology when restructuring its examination scheme, and the IPM was active in the move to ‘professionalize’ personnel management. In the 1970s staffing planning became more sophisticated with the advent of computer models which could predict future requirements by manipulating the many variables of labour supply and demand. Simi- larly, record-keeping for large concerns was aided by microfilm and com- puter storage. Selection tests had been available since the early 1920s, but they began to be used more frequently, often by specialized agencies. 1979–1997 The election of a Conservative government with Mrs Thatcher as Prime Minister ushered in a new era for people management. The 1980s were characterized by a move to the right, ideologically, and the reassertion of managerial prerogatives. Elected with a mandate to reduce trade union power, the new government embarked on a legislative programme which outlawed sympathetic and ‘political’ strikes, increased the liability of trade unions to legal actions in the courts as a consequence of strikes or other forms of protest, increased the power of individual trade union members and sought to reduce the influence of trade unions nationally. Following the recession of the early 1980s, organizations drove through new approaches to quality improvement and efficiency. Product- ivity improvements were achieved by new investments and by introdu- cing more flexible working practices: flexibility of time, task and contract. Employers retained a shrinking core of full-time permanent employees while expanding in the secondary labour market of part-time, subcon- tract, temporary, casual and short-term contract employees, these people on non-standard contracts now being the majority of the employed. During the boom period in the mid-1980s, the shortage skills attracted premium rates. There were ‘golden hellos’ and signing-on fees for recent graduates. This was a time when deregulation in financial services, and the privatization of companies such as British Telecom, British Airways and British Gas, gave a considerable boost to HR management in its resourcing and developmental activities. This was the time when the strategic role of HRM was beginning to be recognized. We discuss this change to ‘HRM’ in the next chapter. The management of change was seen as the key role, with considerable interest in creating new organiza- tion cultures and in organization development techniques. Following the Handy, Constable and McCormick reports on management education, British lack of competitiveness was identified with inadequate systems for management education – one consequence was a stimulus to new Master Chapter 4 From personnel management to human resource management 77 of Business Administration (MBA) programmes and to various forms of post experience programmes, provided in-house or through university business schools. At the start of the 1990s a new, deeper recession was experienced. Affecting the south-east of England as much as the north, in service industries as much as manufacturing, substantial redundancies occurred. ‘Delayering’, restructuring and outsourcing some of the functions pre- viously conducted within the company, were organization structure changes that affected HRM, with outplacement as a solution to help the change. These changes brought about a collapse of the career concept and, even in the public sector, the end to ‘jobs for life’. Divisional struc- tures and empowerment policies moved the day-to-day decision-making away from large corporate headquarters, which could (in theory) con- centrate on strategic issues. Many of the improvements to performance, such as total quality management (TQM) and business process redesign (BPR), originated outside the HR function but, nevertheless, increased the focus on people management issues as a likely source of competitive advantage. 1997 Onwards In 1997 a new Labour Government was elected in the UK, which maintained the same broad agenda on industrial relations and the econ- omy. There was greater stability, with the Bank of England rather than politicians setting the interest rates, and the low rates of unemployment and of inflation meant the UK was able to maintain a buoyant economy by comparison with its European partners. Growth in the economy was also aided by the globalization of business, through the Internet, the expansion of the EU to 25 countries and the rapid growth of economies such as China and India, where low wages and costs have attracted invest- ment, so that UK HR managers find themselves frequently with inter- national responsibilities. Expansion in the labour force in the UK was only possible by immi- gration and by expanding the number of women returners. Flexibility policies and new legislation to make work more family friendly, and imaginative sourcing, including outsourcing, have been required from the HR function. Smarter working through, for example, laptops, mobile phones and e-mail systems have made it easier for people to work from home and to work while they travel. There was also a requirement for companies to invest more in training and development, and to find and retain ‘talented people’. The expansion, under Labour, of the public sec- tor (especially Health and Education) has also required a professional 78 Essentials of human resource management Chapter 4 HRM approach with more HR specialists recruited in the public sector. For example, we know that the proportion of payroll costs spent on train- ing increased between 1999 and 2003 from 2.37 per cent to 3.6 per cent, and in the private sector from 3.07 per cent to 3.31 per cent over the same period (CRANET Report 2003), and that the average number of days per year spent on training also increased, especially for manage- rial, clerical and manual workers over that time. We have seen from the description in this chapter that Welfare Secre- taries were the early pioneers who had to deal with male dominated workplaces at a time when men occupied virtually all managerial posts. Men entered personnel management in the 1960s and 1970s when industrial relations came to be more integrated with other aspects of the personnel role. Men were frequently appointed to the more senior roles in spite of the large numbers of female colleagues who worked as per- sonnel officers and personnel assistants. However, CRANET figures reveal that women have been reaching higher levels since the 1990s. The respondents are equally experienced with around 14 years HR experience, and as can be seen have similar educational backgrounds. The subjects of the first degrees have commonly been business studies, behavioural sciences or arts and humanities. There are a number of pos- sible explanations for this change in gender balance; with more women entering the field this may have produced pressures for promotion which, even if there was discrimination, would be difficult to resist. The expanding service sector, and more women returners may have resulted in more opportunities for women and less wastage thanks to legislation which helps to provide those returning from maternity leave with the same level of work. We should also expect women in HRM to be able to ensure there is less discrimination, given the role of HR in championing anti discrimination legislation (Table 4.1). The demographic changes are potentially the most significant influ- ences on HRM. The large reduction in the number of young people com- ing onto the labour market in Western Europe, and increasing longevity, mean that organizations must gear their employment policies to attract Table 4.1 Percentage of HR managers at the most senior level by gender, UK 1995 1999 2003 Males 66 51 39 Females 34 49 61 % University degree 60 60 69 Chapter 4 From personnel management to human resource management 79 a variety of people from any age group. Similarly, Britain’s multiracial society requires HR management techniques that manage diversity. This stimulated interest in equal opportunity policies. The major demo- graphic changes are described in relation to HR strategy, and HR planning in Chapters 5 and 6, but we should note here that the mix- ture of social, demographic and global business pressure has produced a highly dynamic environment in which HRM is conducted. The events of ‘9/11’ in New York, and the 2005 London bombings raised security issues for all organizations. HR managers are as concerned as all other senior managers about whom they recruit, and about the measures that are in place to ensure their organization can continue to operate whatever the potential interruptions or threats, including physi- cal risks both to people and to computer systems. HR people may, of course, become directly involved due to their responsibilities for the health, safety and the well-being of employees. This was exemplified on 9/11 by Alayne Gentul, Senior Vice President, HR of Fiduciary Trust International, who was on the 90th floor of the World Trade Center South Tower, and who gave her life trying to help employees out, emptying offices, encouraging and comforting when the first plane hit the North Tower. She was on the 97th floor when the second plane hit the South Tower. She remained ‘apparently deter- mined to send everyone down before starting her descent’ (Bates, 2001, p. 32) and died when the South Tower fell. Apart from these direct involvements, HR staff also have special responsibilities for recruitment policies, e.g. security checks and iden- tity checks, references and matters related to the honesty of employ- ees. Heightened interest in security matters is only one of the many pressures creating a turbulent environment. For all of the changes outlined, there have been changing models of HRM. Tyson and Fell (1986) distinguished three main models of what was then called personnel management. These were based on a building or construction analogy. These were: Clerk of works: supports the line manager. Personnel seen as an administrative activity with a focus on basic routines. Contract manager: established personnel policies exist. There is a strong industrial relations focus. Personnel had tightly defined roles. Pragmatic, problem solving ‘fire fighting’ focus. Architect: senior creative specialist. Policy changes initiated by personnel. Acts as partner with senior line managers. Personnel manager regards himself or herself as a business manager first, and a ‘professional’ personnel manager second. 80 Essentials of human resource management Chapter 4 Strategic Strategic Change partner agent Business Process People partner Administrative Employee experts champions Operational Figure 4.2 Business partner These models were early attempts to classify personnel work. Later attempts have always come back to at least one role, which like the ‘architect role’ can be described as a ‘business partner’. During the early years of the 21st century, the changes to the way HR work is conducted have become more pronounced. Following the popu- larity of the Ulrich model, which represents HR as operating according to four dimensions, strategic, operational, process and systems accord- ing to the focus, and the organizational context, the business partner role has become the desired position (Ulrich, 1997). The business partner should operate across all four dimensions, according to this notion (Figure 4.2). A business process focus with a strong strategic interest, coupled with the capacity to act as change agents may be one determinant, but HR specialists must show they can perform at the operational level as well, or they will never be given the chance to play the bigger, strategic game. The North American roots of this model are revealed by the idea of ‘employee champions’. In Western Europe we might see this role as best performed by trade unions. We might also question whether or not an HR director can be both a strategic partner and a change agent, if it is the strategy that has to change. We discuss these issues and the competences needed for suc- cess at this level more in the next chapter. Here we will mention that the credibility of the business partner will be dependent mostly upon their intellectual ability in organizational diagnosis, and commercial knowl- edge, combined with their process skills, and facilitative, coaching skills. Chapter 4 From personnel management to human resource management 81 Changes to the delivery of HR services have resulted in the reorgan- ization of HR Departments. This has been made possible by HR Departments adopting more advanced HR information systems. As businesses reshape, downsize and outsource to meet exacting financial demands access to accurate information immediately becomes more and more critical for companies (Tyson and Selbie, 2004, p. 126). Changes to HRM organization can be summarized as: 1 The separation of the transactional role from the transform- ational role (or from the operational to the strategic). This is often intended to provide time for HR senior staff to work on strategic issues. 2 The use of call centres and shared services becoming more common for HR, and the increased use of distributed systems, as well as of integrated business process systems. 3 HR functions are being reorganized so that there are business partners working in an internal consultancy mode with senior line managers. 4 Individual employees have more control over data entry and access to their own records. 5 The outsourcing of various parts of the HR function, e.g. train- ing and development, pension administration, recruitment and advisory services, means HR managers who are still in-house can spend more of their time on managing external and internal relationships, including negotiating contracts with suppliers, and negotiating internal service agreements and consultancy agreements with line managers. There are many variations on these themes. Companies such as IBM have pioneered the division of HR activity into three areas: the senior strategic role; the policy making and consulting role; and the transac- tional, administrative role. This latter role and some of the consulting work can then be conducted through an HR call centre where there are HR staff who are fluent in appropriate European languages, to deal with employee queries, or to refer them to the internal consultant. The role of HR is changing rapidly. Evidence from the UK CRANET survey (2003) shows that 58 per cent of organizations had a primarily independent HR information system and 25 per cent a system inte- grated into the wider management information system. Pressure on 82 Essentials of human resource management Chapter 4 costs and the application of new systems, has encouraged some organ- izations to outsource whole parts of HRM; e.g. Hertfordshire County Council outsourced all of its recruitment activity to Manpower Limited, BP at one stage outsourced much of its HR activity. CRANET survey shows 25 per cent of respondents reported an increase in the use of external providers in training and development over the last three years. These changes produce some interesting dilemmas for the HR occu- pation. Will the ‘profession’ break up into a number of sub-specialisms? Will the senior roles of HR Managers and Directors increasingly come to be occupied by people transferred in from other functions? How will the occupation cope with the greater complexity in the fields of work while maintaining a focus on business needs? The history of personnel and human resource management shows that the function has always adapted and reorganized in every period. The various specialisms described in this book give some indication of the challenge. Summary This chapter has shown that there are various traditions in personnel management, and that each has its own historical pedigree. A brief summary of the traditions of personnel management we have touched on is given in Table 4.2. No generalization about HR management is possible, therefore, at the level of description, and different models may be appropriate in dif- ferent organizations. The ability to switch between models as required is one of the most important requisites for those working in this field. In the next chapter we shall see how the interdependence between line managers and HR managers is indicative of successful personnel work, by showing that the way the HR function is discharged is as important as what is done for the achievement of the organization’s objectives. Questions 1 Define personnel management, showing the distinction that should be made between the personnel department and the personnel function of management. 2 What are the main trends in the history of personnel management? 3 What impact does personnel management have on industrial relations? 4 To what extent was human resource management representative of a new paradigm in people management in the 1980s and 1990s? 5 What are the major trends affecting the HR occupation and will the ‘profession’ survive as a separate specialism? Chapter 4 From personnel management to human resource management 83 Table 4.2 Traditions in personnel management Traditions Period Description Welfare Up to 1920s Personnel management as a personal service to employees, who are the ‘clients’ of the personnel or welfare officer. Major concerns were the provisions of canteens, sick visiting, the supervision of moral welfare in anticipation of a reciprocal sense of service from the employee Employment Up to 1930s Emphasized the control of numbers and budgets and placed management stress on economic efficiency plus a high value on performance investigation by organization and method type studies. Employees have not always shared these beliefs, thus leading to a ‘Theory X’ view of workers by managers Bureaucratic 1914 to present The ‘personnel administrator’ typical of many large organizations operates a comprehensive set of rules based on a belief in order and rationality, and on the intrinsic merit of the organization’s internal status system, to which employees are expected to subscribe Professional 1945 to present A belief in specialization is sustained by the personnel personnel manager application of techniques applied for the benefit of the ‘client’, who is the line manager, and is supported by a general social acceptance of ‘experts’ Liberal radical 1930s to present This personnel manager sees their role as improving communications and leadership. Approach is that of a radical liberal, a belief in individualism and the need to participate with employees, anticipating agreement and enthusiasm from those at work Human resource 1980s to present Accent on development and utilization of people as assets. manager Employment costs and the return on these costs are central concerns, leading to desire for adaptability, flexibility of people and to use of outsourcing arrangements to reduce costs References Bates, S. (2001). Above and beyond. HR Magazine. December. CRANET Survey (2003). Executive Report. Human Resource Research Centre. Cranfield School of Management. French, W. (1978). The Personnel Management Process: Human Resources Administration and Development. Houghton Mifflin. Storey, J. (ed) (1995). Human Resource Management: A Critical Text. Routledge. Tyson, S. and Fell, A. (1986). Evaluating the Personnel Function. Hutchinson. Tyson, S. and Selbie, D. (2004). People processing systems and human resource strategy. International Journal of Human Resources Development and Management, 4 (2), 117–127. Ulrich, D. (1997). Human Resource Champions: the next agenda for adding value and deliv- ering results. Harvard Business School Press.