Corporate strategy and the role of HRM: critical cases in oil and chemicals

Publication Date01 Apr 1999
AuthorNeil Ritson
SubjectHR & organizational behaviour
strategy and the
role of HRM
Employee Relations,
Vol. 21 No. 2, 1999, pp. 159-175.
#MCB University Press, 0142-5455
Received June 1998
Revised December 1998
Accepted February 1999
Corporate strategy and the
role of HRM: critical cases in
oil and chemicals
Neil Ritson
University of Northumbria at Newcastle, UK
Keywords Chemical industry, Human resource management, Oil industry, Strategy,
United Kingdom
Abstract Human Resource Management in the literature has been considered a second- or
third-order strategy largely related to implementation. Argues that the process of strategy
formulation and evaluation has not been correctly conceptualised. The evidence that HR issues
are fundamental to business is compelling at the level of unit labour costs, but whether they are
fundamental to the strategy process has remained highly questionable. The paper suggests that a
favourable HR environment has to be established before the various strategic choices can be
analysed. Empirical research in two UK oil and chemical companies provides evidence that the
effect of HR issues on corporate strategy is understated. The assumption of a top-down, linear
model of strategy formulation, whether positionally- or resource-based, is questioned and an
alternative conception is discussed.
Corporate strategy and human resources
Miller (1989, p. 49) defines strategy as ``essentially market-related''. This
demands inter alia managerial control of the organisation's direction, especially
its costs. These are important even if the organisation is pursuing a strategy of
``differentiation'' as opposed to ``cost-leadership'' (Porter, 1985). The importance
of costs is highlighted by the threat to businesses such as automobiles and the
question of labour costs looms large when labour is an important contributor to
company productivity performance. Other authors (such as Chandler, 1962;
Purcell, 1989) follow the line of argument that there is a separation of structure
and strategy, and that this can be divided into three levels. The links of HR
policies to strategy are, in this conception, essentially second- or third-order, or
more ``downstream'', whereas corporate strategy is ``upstream'' (Purcell and
Ahlstrand, 1994). This stratification approach puts HR issues into a ``business
strategy'' level and a ``functional'' role.
At this functional level, Blyton and Turnbull (1994) argue that changes in
ownership have often led to downsizing, unbundling and increased
subcontracting, and vertical de-integration. The HRM changes such as flexible
forms of working which affect working practices, are only modest and most
firms have pursued ``numerical flexibility'' ± part-time and temporary labour ±
The many research visits were funded by an ESRC grant ± number R-000-22-1670. I am also
indebted to the managers, trade union officers and industry experts who were able to give so
generously of their time to unravel the strategies. Thanks are also due to the editor and
anonymous referees for their detailed comments on earlier drafts of this paper. Any remaining
errors are however mine alone.
rather than extending the skills and versatility of the workforce. Thus, HRM is
reactive rather than proactive. They cite Batstone et al.'s (1986, p. 41) assertion
that production problems ± i.e. management deficiencies ± lead to poor labour
relations and low productivity not vice versa, thus reinforcing the claim of a
downstream or second-order role. Even here, Nichols (1986) concluded that ``it
does seem that British managements have not been doing their jobs very well''
and the role of HRM has been categorised as ``fragile, unstable and difficult to
sustain'' (Whipp, 1992), involved in acquisitions only in peripheral aspects like
pension rights (Hunt and Lees, 1987), or asked to ``play a very marginal role in
the introduction of technical change, and then at the implementation stage,
rather than the decision-making stage'' (Legge, 1995, p. 119). Indeed the role is
classified as one of ``fringe lightweights, [with] infrequent involvement and
infrequently influential'' (Hickson et al., 1986, p. 80).
The definitions of the role, affecting the conception of HR, have often been set
unrealistically severe tests. Sisson and Scollion (1985) complained that only (sic)
55 percent of firms in the Warwick company level survey had ``a written, formal
policy on HR, [and only] ``22 percent gave it to employees''. This rigorous
approach of course might well be the same figures for corporate strategy. Legge
(1995) asks for ``evidence ...that senior managers .. . have explicit, well-
formulated and consistent HRM policies'' (Legge, 1995, p. 96 emphasis added).
These require a ``deliberate'' approach to strategy formulation rather than an
``emergent''one (Mintzberg and Walters, 1985).
There is further inconsistency in the literature over what constitutes human
resource roles, outcomes and processes. The 1985 Warwick company level
survey used ``personnel issues'' (Legge, 1995, p. 119), Hickson et al. (1986, p. 80)
and Batstone et al. (1986) use ``personnel managers'' as distinct from ``personnel
directors'' (Gennard and Kelly, 1994). Hunt and Lees (1987) use both ``human
assets'' and ``personnel managers''. While Jenkins (1973) and Purcell (1989) use
the ``personnel department'', Purcell and Ahlstrand (1994) refer to ``personnel
specialists''. Clearly, these are not the same thing, and Marginson et al. (1993
Table 4.148 pp. 36-7) showed that once the terms ``personnel issues'' and
``personnel function'', were separated, 70 percent of firms took ``issues'' into
account, while the personnel function (ambiguous, but in fact, the personnel
department) was not involved in 70-82 percent of cases. This illustrates the
conflation of variables which previous authors had, probably wrongly, attested
as measures of HR being taken into account in strategy formulation. This
makes a considerable difference to the conceptualisation of HR as a
``downstream'' post hoc event.
There are further complications: as mentioned above, ``personnel function''
should not be confused with ``personnel department''. If HRM exists in the
integrated form suggested by Guest (1987, 1989) then personnel issues and
functions will have been integrated into line management and only specialist
issues like pension arrangements would be expected to remain in a personnel
department. In other words, we would expect a priori less involvement of
personnel departments under HRM, rather than more. Furthermore, in

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