A Balanced Approach to Understanding the Shaping of Human Resource Management in Organisations

Abstract

There is a need for alternative theories to get a better understanding of human resource management (HRM), in particular with regard to the shaping of the employment relationship in organizations. This study examines how market, institutional and configurational factors affect HRM in a global financial services company using the strategic balance theory and Paauwe's model. Interview data and document analysis show the impact of critical incidents (e.g. a merger) and trends (e.g. a transition in Dutch industrial relations) on HRM. Key words: HRM, strategic balance theory, context 1. Introduction Contemporary research in the field of human resource management (FIRM) is dominated by the 'scientific' approach to demonstrate an empirical association between HR practices and increased organisational performance (Hesketh/Fleetwood 2006). The 'scientific' approach puts empirical results first and ignores or underestimates the theoretical problems involved. The emphasis is on testing the added value of human resource practices using simple input-output models. More than a decade of empirical research has been conducted since Huselid (1995) stimulated the HR debate, yet little progress has been made towards an understanding of how HRM is shaped in organisations (Paauwe 2004). If we want to know more about the underlying processes in HR decision making we need some new theories and models (Hesketh/Fleetwood 2006; Keegan/Boselie 2006). Contemporary popular theories in the field of HRM - the resource based view (Barney 1991), AMO theory1 (Bailey 1993) and strategic contingency approaches (Porter 1980) - are not adequate to fill this gap due to their serious theoretical problems (Priem/Butler 2001; Boxall/Purcell 2003; Boselie/Dietz/Boon 2005). There is a need for alternative theories to get a better understanding of HRM. New institutionalism2 is an alternative for further application in the HR field because of its special attention to institutional mechanisms (Paauwe 2004; Legge 2005). The theory offers yardsticks for understanding the impact of coercive mechanisms (for example labour legislation, trade union power and collective bargaining agreements), normative mechanisms (professional norms and values linked to professional bodies and employee groups) and mimetic mechanisms (fads and fashions) on the shaping of the employment relationships in an organisation (Paauwe/Boselie 2003). However, this theory only looks at one side of the coin. The external market mechanisms and the internal configurational context are not fully taken into account Strategic balance theory builds on the notions of new institutionalism and extends it by explicitly incorporating the market dimension (Deephouse 1999). Paauwe's (2004) model applies strategic balance notions and explicitly adds a third dimension: the organisation's configuration. This paper explores the view that human resource management (HRM) in an organisation is affected by the three dimensions from strategic balance theory: 1. The external market dimension (external product, market and technology pressures/developments); 2. The external institutional dimension (external social, cultural and legal pressures); 3. The internal configuration of the organisation (cultural/administrative heritage of the organisation in terms of culture, structure and systems). Strategic balance theory (Deephouse 1999) is the foundation for the conceptual model on the shaping of HRM in an organisation used in this research. The aim of this paper is to test an alternative approach to understanding the shaping of HRM in organisations based on Paauwe's (2004) model. The central research question addressed in this paper is: How do market, institutional and configurational factors affect the shaping of HRM in an organisation? The alternative model will be tested in a case study approach within a large Dutch financial institution. The data was collected in 2006 and is based on interviews, archival data and document analysis. …