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Strategic HRM or managing the employment relationship?

Introduction

The past ten to 15 years in the human resource management (HRM) literature has seen a great emphasis being placed on a "strategic" approach to the development and implementation of HRM policies and practices (Collins, 1988; Dyer and Holder, 1988; Legge, 1995; Miles and Snow, 1984; Storey, 1995; Wright and McMahan, 1992). Although the details vary, the basic prescription for a strategic approach to HRM tends to parallel the process shown in Figure 1. Both the external and the internal environment are considered in light of the organization's mission and purpose (which may in turn be influenced by corporate headquarters where the organization is a part of some larger entity). As a result of this analysis, organizational strategies and objectives are determined. HRM strategy should represent an integral part of achieving this broader organizational strategy, with strategy in the various sub-fields or areas of HRM supporting the overall HRM strategy. Thus, rather than HRM policies and practices representing direct reactions to the various external and internal forces, these forces are considered in light of organizational strategy and objectives and then, if appropriate, changes are made to the overall HRM strategy which may affect various HRM policies and practices.

Actual models of strategic HRM are usually more elaborated. A number of writers, for example, have listed various types of organizational strategy, such as the defender, prospector, analyser, reactor typology suggested by Miles and Snow (1984), and then attempted to spell out the HRM policies and practices which would support such a strategy (Collins, 1988; Kramar, 1992). Others have applied a strategy typology to a particular sub-area of HRM such as staff appraisal (Dunphy and Hackman, 1988) or career development (Fandt, 1988). Although Figure 1 focuses on the strategic (or "hard") aspects of HRM, critics based in the UK, such as Legge (1989, 1995) and Storey (1995) have pointed out that most descriptions of HRM also include what they refer to as a "soft" side which emphasizes the need to build up employee commitment, flexibility and dedication to quality.

In spite of these variations, the basic strategic HRM model as portrayed in Figure 1 has been accepted widely in the HR literature. Even critics such as Hendry and Pettigrew (1990), Legge (1995) and Storey (1995) appear to see it as the mainstream view.

On the other hand, when studies are carried out to investigate HRM policies and practices which have actually been implemented, the results typically indicate that only a minority of organizations appear to have adopted the major elements of a strategic approach to HRM. For example, in a recent survey responded to by 377 Australian managers, employees and HRM staff, only 33 per cent believed their organization's HRM policies and practices adopted a long-term perspective, only 37 per cent saw HRM policies and practices in the various areas of HRM as closely integrated, and only 43 per cent saw these policies and practices as designed in line with the organization's strategy and objectives (Kane, 1994). In the UK, Legge concluded recently that "There is only patchy and sometimes contradictory evidence on HRM's strategic implementation" (Legge, 1995, p. 36).

Studies focusing on specific HRM sub-fields such as staff appraisal (Collins and Wood, 1990), human resource planning (Kane and Stanton, 1991), management development (Midgley, 1990) and training and staff development (Kane et al., 1994) have also found significant "gaps" between strategic prescriptions and actual practice.

There are a number of possible explanations as to why the majority of organizations do not appear to adopt the strategic HRM model portrayed in Figure 1. Most of these explanations question the assumption in the model that an HRM strategy is typically used as a kind of filter on the other external and internal forces shown in the model. An alternative viewpoint is that a range of factors may impact on HRM policies and practices more directly than portrayed in Figure 1. Thus, the aim of this study is to determine which factors appear to have major direct effects on HRM policies and practices, and particularly the extent to which an HRM strategy has a major effect as outlined in Figure 1.

Determinants of HRM policies and practices

At a theoretical level, writers from the USA such as Jain and Murray (1984) and Tsui and Milkovich (1987) have suggested a number of competing theoretical explanations as to what determines HRM policy and practice. Perhaps most useful here is the analysis by Tsui and Milkovich (1987). First, they contrasted three theoretical perspectives: the structural functionalism perspective, which suggests that HRM departments and their activities are a result of organizational growth and/or the need to perform activities which require specialists; the strategic contingency perspective, which sees HRM as a reaction to critical external pressures such as legal requirements and union activity; and the strategic HRM perspective, where HRM activities are designed to foster the achievement of the organization's objectives (Tsui and Milkovich, 1987, p. 520). They then argue for a multiple constituency approach, wherein a large number of interested parties or constituents, both within and outside the organization, exert varying levels of influence on HRM policies and practices which they perceive are relevant to their interests (p. 521).

A generally similar approach underlies much of the criticism of the US model of HRM which has emerged in the UK. Legge (1989), for example, has contrasted US and British definitions of personnel management and of HRM and noted that US writers tend to assume a "unitary" frame of reference; that is, in the long term all stakeholders have a common interest in the survival and growth of the organization. Where unions exist, their support for organizational strategy and HRM strategy should be co-opted. In contrast, most of the British writers are seen as adopting a "pluralist" perspective, in which efficiency is contrasted with justice, employee commitment is seen as problematic and conditional and the employment relationship is seen as rightly the subject of negotiation, agreement and regulation (Legge, 1989, p. 23). In Australia, the assumption that various stakeholders have a valid interest in HRM policies and practices underlies the use of the term "employment relations". Gardner and Palmer (1992, p. 7) identified the major actors in determining employment relations as including trade unions, employer associations, arbitral tribunals and management groups.

At a less theoretical level, a wide variety of more impersonal forces or trends have been seen as directly influencing HRM policies and practices. For example, Gardner and Palmer stated: "There are many factors beyond the direct control of individual employees and employers, and groups of employees and employers, which seem to affect strongly and even direct their actions" (1992, p. 7). Although these forces and trends are not necessarily portrayed as a part of an overall model, the existence of a variety of interests is generally compatible with an employment relations/pluralist/multiple constituency view of the field. Although a complete review of arguments for and against the various possible influences is beyond the scope of this article, some of the major potential influences are summarized below.

Potential external influences on HRM policies and practices

International and national economic changes. Writers such as Dyer and Holder (1988) have discussed the impact of macro-economic changes on business and on attitudes towards human resources during the past two decades. They cited a number of well known US corporations which had "...found their paternalistic HR strategies to be unsustainable in the face of continuing competitive pressures and depressed earnings" (p. 1,17). In particular, the impact of the recent worldwide recession on recruitment, training and staffing levels has frequently been discussed (Cascio, 1993). In Australia, for example, a survey reported on by Giles (1992) indicated that 75 per cent of responding organizations had reduced their workforce through techniques such as non-recruitment and various forms of redundancy.

Technological changes. Technological changes, in particular the widespread adoption of microprocessor based technology, are frequently cited as having an effect on HRM policies and practices by causing changes in the staffing levels, knowledge, skills and attitudes needed in the workforce (Fisher and Shaw, 1992; Lansbury, 1992; Schuler, 1990; Stace, 1987). For example, central to the current interest in re-engineering is the argument that it will lead to a reduction in staffing levels as a result of the enabling role of information technology (Hammer and Champy, 1993).

National culture/traditions. The globalization of the economy and the rise of multinational corporations has led to considerable interest in international HRM. A number of investigators have found significant national cultural differences in attitudes towards and use of various HRM policies and practices (Hofsted, 1989; Laurent, 1989; Sparrow et al., 1994).

Industry/sector characteristics. Many writers have argued that different sectors of industry require and use different HRM policies and practices (Delery, 1994; Nankervis, 1993), and some empirical studies have reported evidence of such industry-based variations in practice (Jackson et al., 1989; Terpstra and Rozzell, 1993).

Legislation/regulations. Legislation and regulations enacted by governments are frequently cited as having a direct impact on the area of HRM policy and practice with which they are concerned. Moon (1991) noted the impact of legislation in areas such as equal opportunity, occupational health and safety and industrial relations in Australia, and Stablein and Geare (1993) indicated that similar factors had influenced HRM in New Zealand. Moore and Devereaux Jennings stated that: "In Canada, to a considerable extent, legal regulations shape human resources policies and constrain HRM practices" (1992, p. 15). Dyer and Holder (1988, p. 1,14) noted the particularly strong impact of legislation on HRM in the USA prior to the Reagan administration, citing a survey of practitioners during the mid-1970s which indicated that government regulation had been a major instigator of change within their organizations over the previous decade.

Actions of competitors. A number of writers have noted the tendency for organizations to adopt HRM policies and practices used by their competitors. Dyer and Holder commented on this as a kind of "pervasive bandwagon effect...what company, what HR professional wants, or can afford, to be left behind?" (1988, p. 1,2). Wright et al. (1994) went so far as to suggest that HRM policies and practices, per se, can never be a sustained source of competitive advantage, as they are easy to imitate.

Actions of unions. Any analysis of influences on HRM policies and practices would not be complete without considering the impact of trade union activities, particularly in relation to pay and benefits and working conditions. The influence of unions in turn often appears to vary in relation to government philosophy and economic conditions. For example, Dyer and Holder (1988) discussed the decline in union influence during the Reagan administration and Guest (1989) noted a similar decline under the Thatcher administration in the UK. On the other hand, Lansbury (1992) chronicled a parallel trend in Australia, in spite of a generally supportive government administration.

Potential internal influences on HRM policies and practices

Organization size. Several investigations have found that organization size tends to be related to the HRM policies and practices in use (Delery, 1994; Fisher and Shaw, 1992; Jackson et al., 1989; Terpstra and Rozell, 1993).

Organizational structure. The structure adopted by the organization has also been seen as a significant source of influence on HRM policies and practices. Limerick (1992), for example, contrasted the HRM implications of the newer, "network" forms with those of more traditional structures. Some researchers, such as Delery (1994) and Jackson et al. (1989) have found significant differences in HRM policies and practices to be related to structural variables.

History, traditions and past practices. A number of closely related factors, such as history, traditions and past practices, tend to generate resistance to change in most organizations. Dyer and Holder (1988), for example, noted such resistance among the forces likely to constrain the adoption of a more strategic approach to HRM in some organizations in the USA, as did Lansbury (1992) in Australia. In a recent Australian study Kramar (1992) found the influence of past practice to be one of the factors which prevented new policies from being implemented successfully.

Top management. The influence of top management on the development and implementation of HRM policies and practices is acknowledged by most writers, even if only to the extent of advising that top management support should be obtained. Some writers have, however, gone further. Buller (1988), for example, found the values and skills of top management in regard to HRM to be one of the most important variables effecting the adoption of HRM policies and Dyer and Holder (1988) suggested that top management was likely to be the most powerful force opposing the adoption of a strategic approach to HRM. Kramar (1992) also found that a lack of consistent top management support led to policies being at best partially implemented.

Line management. The devolution of HRM practices to line managers is seen by writers such as Legge (1989) as one of the consistent hallmarks of both the older personnel management and the newer HRM approach. Tsui and Milkovich (1987) suggest that line managers are one of the important constituents of the HRM department, and note that some research has found managers at different levels undertake different HRM activities. Kramar (1992) found that, because of their different agendas, some line managers would not actually implement HRM policies and procedures in areas such as equal opportunity.

Power and politics. The influence of power and politics is noted frequently, especially when considering why new policies and procedures are not implemented. Legge (1978) discussed these issues at some length in her classic analysis of personnel management in the UK, as did Jain and Murray (1984) in the USA. Tsui and Milkovich (1987) also see power and politics, as exercised by the various constituencies, as a crucial determinant of HRM policies and practices. In his recent survey of 377 Australian managers, employees and HRM staff, Kane (1994) found that 59 per cent of respondents agreed with the statement: "our top managers appear more concerned about their own power and about maintaining control than about the real needs of the organisation or of its employees", which was the highest level of agreement on any item.

Academic/professional influences on HRM policies and practices

Jain and Murray suggested that HRM policies and practices are decided on the basis of the power, motives and knowledge of those involved in the decision-making process (1984, p. 103). HRM staff are often among those involved in such decisions, so that their knowledge of and beliefs about alternative HRM policies and practices may represent important variables in their own right. Potential inputs to this knowledge base are usually seen to include any education/training in HRM that the practitioner has received, the written body of HRM theory and research, what they have learned from experience, and information obtained from peers, particularly those working in the same industry sector. In a recent review, Terpstra (1994) identified a wide range of possible influences on HRM practitioner behaviour, including the above, with evidence from other fields seen as indicating that practitioners tend to obtain their information from peers rather than from more academic sources.

Other discussions about the knowledge levels of HRM practitioners can be found in the reviews of the state of the profession which tend to appear every few years. In one of the latest of these, Smart and Pontifex (1993) detailed the activities of the succession of HRM-oriented professional organizations in Australia. This raises the possibility that the activities of relevant professional bodies, which may include certification or grading, conferences, seminars, codes of practice and guidelines as well as lobbying activities, may have direct influence on which HRM policies and practices are used.

Based on this, the following potential sources of influence seem worthwhile to add to the external and internal sources discussed above: HRM theory, research and writings; education and training in HRM; HRM professional organizations; and practitioner experiences of HRM in other organizations.

Differential impacts on different areas of HRM

Although the discussion so far has focused on HRM policies and practices at a general level, there is also a strong possibility that some influences may have a greater direct impact on some areas of HRM than on others. Thus, for example, the Training Guarantee legislation in Australia may have impacted more directly on training than on other areas of HRM, equal opportunity legislation on recruitment/selection, union activities on industrial relations issues, and economic downturns on staffing levels.

The assumption of differential impact is compatible with the employment relations perspective suggested by writers such as Gardner and Palmer (1992) in Australia. It is also a part of the multiple constituency framework proposed in the USA by Tsui and Milkovich (1987), who emphasized that each constituency is likely to have its own priorities, and that the issues which any given constituency sees as critical may not be closely related to the major concerns of the organization. In the UK, Storey (1995) reported that many of the HRM initiatives uncovered in a series of case studies arose for diverse reasons and had little in common.

The employment relations model

Thus a relatively broad alternative to the Strategic HRM model portrayed in Figure 1 can be identified; this has been referred to as the employment relations perspective in Australia, the multiple constituency framework in the USA and the pluralist approach in the UK. The general outline of this model is portrayed in Figure 2. While this model does not deny that HRM strategy and other "strategic" concerns can have an impact on HRM policies and practices in some cases, it also sees a number of other interests and forces as influencing HRM in practice. As noted above, these influences may impact directly on certain areas of HRM, rather than first being assessed to ensure that any potential changes in HRM policies and practices are compatible with an overall HRM strategy.

Hypotheses

Because all of the possible influences discussed above have some conceptual and/or empirical support, it is difficult to develop specific hypotheses in regard to which influences are the most important in determining which HRM polices and practices are implemented.

Therefore, this study represents a starting point in exploring two broad alternative hypotheses. Based on the strategic HRM model, HRM strategy would be hypothesized to have the highest mean level of influence on HRM policies and practices overall as well as on policies and practices in the various sub-areas of HRM. In addition, if HRM strategy provides a filtering or moderating effect on other influences, the presence of an influential HRM strategy should result in a reduction of the level of direct impact of other factors. Based on the broader, employment relations-pluralist-multiple constituency view of the field and the arguments of many theorists for the salience of particular influences, the alternative hypothesis would be that a variety of factors would be found to influence HRM policies and practices directly, both overall and in specific sub-areas of HRM. Where an influential HRM strategy is present, it is likely to be simply an additional factor rather than one which reduces the impact of other factors.

Method

In order to begin to explore these issues, an initial list of 56 different influence factors was developed, covering the broad areas of international forces, national characteristics, industry/sector characteristics, immediate organizational environment, the planning/corporate strategy cycle, actions of corporate headquarters, organizational characteristics, forces of inertia and resistance to change, personal and political factors, and the profession of HRM. Informal discussions with HRM practitioners indicated that they found the list much too long and believed it would be difficult to differentiate in practice between many of the influences. Therefore, a shorter list of 29 influences was developed and trialled in in-depth interviews with three HRM managers. As a result of these interviews, some influences were combined or deleted while others were reworded or divided into their component parts. This process resulted in the more refined list of 22 possible influences on HRM policies and practices as set out in Table I.

These possible influences were then explored in a survey conducted during March 1994 which involved 28 full-time HRM managers drawn from part-time postgraduate students in the Faculty of Business, University of Technology, [TABULAR DATA FOR TABLE I OMITTED] Sydney. Respondents were asked to rate each influence as to the amount of impact they believed it had had on HRM policies and practices in their organization. Where they rated an influence as having had at least some impact, they were asked to indicate briefly which aspects of HRM had been influenced. Since the study was exploratory and small in size, details of the background characteristics of respondents were not gathered as the spread across industries, sectors and organizational sizes would not have allowed meaningful comparisons to be made.

Results

Table I shows the means, standard deviations and correlations among the responses to the various possible influences on HRM. The scale ranges from 1 = no impact through to 5 = great impact. Assuming that influences with mean scores of 3.0 or above represent relatively major influences, it can be seen that these include:

* legislation/regulation (4.19);

* organizational strategy/objectives (3.85);

* industry/sector characteristics (3.85);

* priorities of top management (3.67);

* size (3.52);

* structure (3.48);

* changes in technology (3.48);

* priorities of line managers (3.30);

* actions of corporate headquarters (3.30);

* organizational mission/purpose (3.30);

* issues of power and politics (3.19);

* changes in the national economy (3.19);

* history/traditions/past practice (3.15);

* actions of unions (3.08);

* HRM staff's experience in other organizations (3.04).

Influences with mean scores below 3.0 include:

* the impact of professional organizations (1.93);

* changes in the international economy (2.22);

* national culture/traditions (2.26);

* the impact of HRM theory, research and writings (2.30);

* actions of competitors (2.81);

* impact of an overall HRM strategy (2.89); and

* impact of education and training in HRM (2.96).

It is thus clear that the impact of an overall HRM strategy is not a major source of influence on the HRM policies and practices in use in this sample. Of the 27 HR managers in the sample, only three rated HRM strategy as having a great impact (a rating of 5) and only seven more as having what can be interpreted as a moderately great impact (a rating of 4).

To consider whether or not the presence of impact by HRM strategy lowered the extent of impact of the other factors, respondents were divided into two groups. Those indicating a high or moderately high impact of HRM strategy (5 or 4) were considered high impact, while those indicating little or no impact of HRM strategy (2 or 1) were considered low impact. One-way analysis of variance (ANOVA) was used to assess the extent to which these two groups differed in the level to which other factors influenced HRM. Respondents who rated the impact of HRM strategy as high also reported more influence by organizational mission/purpose (p = 0.033), by organizational strategy/objectives (p = 0.002) and by HRM staff's experience in other organizations (p = 0.008). Although only these three differences were statistically significant, the majority of the other influences were also rated slightly higher in impact where HRM strategy had a high level of impact. Thus there was no evidence that an influential HRM strategy resulted in a reduction in the direct influence of other factors.

The correlations in Table I show a range of significant relationships among variables within the external environment category and among those within the internal organizational environment category. There are also some significant correlations between some of the categories outlined in Figure 1. There were relatively high correlations, for example, between organizational mission and organizational strategy (0.78, p [less than] 0.001); between organizational strategy and HRM strategy (0.59, p = 0.001); and between organizational mission and HRM strategy (0.54, p = 0.004). These correlations could be seen as implying a relatively consistent organizational mission - organizational strategy - HRM strategy pattern of influence in at least some organizations. This is supported by the finding that of the ten respondents who rated HRM strategy as a great or moderately great influence, eight also rated both organizational mission and organizational strategy as great or moderately great influences.

It is also interesting to note that, as would be predicted by Tsui and Milkovich's (1987) multiple constituency approach, there is little correlation between the level of top management influence and the level of line management influence (0.12). Similarly, top management priorities are significantly related to issues of power and politics (0.64, p = 0.001), while line management priorities are somewhat negatively correlated with issues of power and politics (-0.26).

In order to investigate these relations further, an exploratory factor analysis (using varimax rotation) was conducted which identified seven factors with an eigenvalue greater than 1.0, and which explained 84 per cent of the variance. The first factor, which accounted for 24.6 per cent of the variance, could be labelled a strategy factor, since it included HRM strategy, organizational mission, organizational strategy, and actions of corporate headquarters. This reflects the strong correlations which were noted above between organizational mission, organizational strategy and HRM strategy.

It was difficult to see any real coherence among the items in the remaining factors, so the factor structure was further tested by specifying three, four, five, and six factor solutions and by excluding items with low mean levels of impact and/or with low communalities. This exploration revealed that only the strategy factor continued to emerge consistently. It is, of course, possible that the composition of the other factors was affected by the relatively low number of respondents used in the analysis. On the other hand, an employment relations perspective would expect to find a considerable number of largely independent influences, so this lack of a simple coherent factor structure may provide additional support for this perspective.

Where an influence was rated as having at least some impact, respondents were asked to indicate briefly which aspects of HRM were influenced. The two authors categorized these responses independently and then resolved any disagreements by discussion. The majority of the responses referred to what would normally be seen as the major areas of HRM. Table II shows the frequency with which an area of impact was identified in relation to the influences included in the questionnaire.

It can be seen that some areas of HRM are identified as having been affected more than others, and some types of influences have influenced more areas than have others. There also appears to be a tendency for influences rated as having greater impact overall to have had more total influence across the various areas. The correlation between the mean level of impact given to an influence and the total impact on the various areas is 0.46 (p = 0.030).

Conclusions

The basic model of strategic HRM [ILLUSTRATION FOR FIGURE 1 OMITTED] assumes that HRM policies and practices flow directly from the overall HRM strategy, which is itself an outcome of organizational strategy and objectives. Aspects of the external and internal environments as well as organizational mission and purpose are expected to influence organizational strategy which in turn influences HRM strategy, rather than impact directly on HRM policies and practices. Based on this, a reasonable expectation is that respondents should rate HRM strategy highly in comparison to other potential influences on HRM policies and practices. However, as shown in Table I, most respondents in this study rated the impact of an overall HRM strategy as having only a relatively minor influence on HRM practices with 16 other factors achieving a greater mean level of influence. Only three of the 27 HR managers rated the impact of an overall HRM strategy on their organization's HRM policies and practices as "great". Even where the influence of an HRM strategy was great or moderately great, there was no evidence that this resulted in a reduction in the direct influence of other factors.

[TABULAR DATA FOR TABLE II OMITTED]

Table II revealed that individual areas of HRM activity result from different HRM influences. This also lends support to the argument that the influence of an overall HRM strategy is limited, with HRM strategy being cited first or second most commonly in only one HRM area, recruitment and selection.

Thus no support was found for the strategic HRM-based hypothesis that HRM strategy would have the highest mean level of influence on HRM policies and practices overall as well as on policies and practices in the various subareas of HRM, and that the presence of influence by an HRM strategy would result in a decrease in the amount of direct influence by other factors.

Instead, the results appear to support the employment relations/pluralist/multiple constituency model presented in Figure 2. The key assumption of this model is that HRM policies and practices are the outcome of multiple direct influences rather than the result of an overall HRM strategy which moderates these influences. The view that HRM strategy simply becomes an additional influence factor was also supported. These results are also compatible with what is probably the majority of writings and studies in the HRM area, which discuss the impact of specific factors on particular HRM policies or practices without any explicit reference to an overall model.

While it is tempting to speculate on why various influences obtained the mean ratings that they did and why some influences impacted more on certain areas of HRM than did others, the small sample size, along with the lack of any data as to how representative the respondents are of all Australian HR managers, makes such speculation premature. It can be noted, however, that even though this was a sample of HR managers who might have a vested interest, they rated most of the potential HRM-related influences as having a rather low level of impact in comparison to other influences. This may indicate that most HR managers in Australia are not taking the proactive, strategic role which they are often urged to adopt.

Further empirical study of both models could usefully be carried out to investigate questions such as the strength of the connections between specific areas of HRM policy and procedures and types of influences, the extent to which these relationships vary across organizations, industries and countries, and any relationships these differences bear to the types of HRM policies and practices used and their effectiveness.

In terms of the implications of this study for practitioners, academics and students in the HRM and industrial relations fields, it would seem at best premature to assume that a new era, dominated by strategic HRM, has actually occurred. Although a minority of organizations in this study seemed to be making some use of a strategic HRM approach, this would appear to have become an additional aspect of the more complex process of managing the employment relationship rather than a substitute for it.

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Title Annotation:Human Resources Management in Australasia; human resource management
Author:Kane, Robert; Palmer, Ian
Publication:International Journal of Manpower
Date:May 1, 1995
Words:6259
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