Chapter # 8

HR Managerial Strategies
& their relationship with
PM
 References
 Strategic Compensation: A Human Resource Management Approach (6th Edition), Joseph
J., Martocchio Joe, Pearson Education.

 Strategic Management Concepts & Cases (Fred R. David)

 Internet

1
 HR Managerial Strategy
 Overtime, three main patterns of structural variables,
known as “ managerial strategies” have been
emerged.
1. The Classical Managerial Strategy
2. Human Relations Managerial Strategy
3. High Involvement Managerial Strategy
 Each of these managerial strategies represent a
particular combination of structural variables that
has proved to be successful in the right
circumstances.
 The Strategic Framework

Factors in the firm's context that The means through which an

indicate the most appropriate organization generates the
managerial strategy and behaviors necessary to execute
organizational structure. its corporate strategy.
 Structural Variables
 The organization structure consists of number of separate
variables or dimensions. These variables are levers that are
used to produce behavior desired by the organization
 There are six structural variables
I. Job design : describes the manner in which the total task of an
organization is divided into separate tasks
II. Coordination and departmentation: describes the methods
used to coordinate the work of individual employees and
subunits in the organization
III. Decision making and leadership structure: describes the
nature of decision-making and leadership processes used in an
organization.
IV. Communication and information structure: describes the
nature of and methods for communication in an organization.
V. Control structure: describes the nature of the processes used to
control employee behavior in an organization
VI. Reward System
 Classical Managerial Strategy
 Assumptions:
 People are inherently lazy, dislikes work, and would
prefer to get as much as they possibly can from work
relationship while giving as little as possible.
 The only way to get people to work is to create
circumstances under which satisfaction of their
economic needs becomes threatened, if they do not
behave as the organization wants them.
 Essentially, this school of thought views employees as
potentially dishonest shirkers who need to be tightly
controlled if the organization wants getting any work
out of them.
 Relationship with structural variables
 Thinking is completely separated from doing.
 Jobs are designed with only few elements so that:
 They can be supervised closely.
 Employees could be replaced easily if they quit.
 The specific duties and work methods for each job
are planned and defined in detail by management.
 Jobs are arranged in strict hierarchical, pyramidal
fashion because of the overriding need for
accountability.
 Coordination is always handled vertically by a
common superior.
 Employees are organized by function.
 The major role of superior is to control and evaluate
subordinates.
 Decisions are made at a relatively high level of the
organization.
 Main role of leadership is autocratic, with a high
emphasis on task.
 Essentially senior management makes the decision,
middle management transmits them, first line
management enforces them.
 Control is exercised through close supervision and
threat of punitive action, if the employee deviate from
organizational policies.
 Frequently there is often a large body of formal rules
and procedures that are strictly enforced.
 Communication is quite low with emphasis on
downward vertical flow and tends to be formal.
 Communication upward from employees is not
generally sought and when sought , is likely minimal
and distorted , due to adversarial relations.
 Since management ‘s key task is to minimize variations
in employee behavior from specified behavior, reward
system is extrinsic rewards.
 Whenever possible, it ties pay directly to output such as
piece rate or commissions is used.
 Where this not feasible, pay is directly tied to hours of
work.
 In both cases pay is not higher than
absolutely necessary to attract
sufficient flow of job applicants.
 Little indirect pay is used because it is
not tied to individual performance.
 Management does not see much value
in incurring large benefits cost in
order to promote loyalty and reduce
turnover.
 This is because classical organizations
are structured to minimize cost of
turnover.
 One exception to general rule about
poor compensation in classical
organizations occurs in unionized
classical firms.
 Human Relations Managerial Strategy
 Assumptions:
 Agree with classical school that people inherently dislike work
but they can be motivated by appealing to their social needs.
 Classical school of thought frequently creates an adversarial and
unpleasant relationship between management and workers
 By treating employees with fairness and consideration,
supporting and encouraging peer group of workers (instead of
breaking them) positive employee norms could be developed
 The human relations view of employees tend towards
paternalism. The organization is like a family, in which
employees are like children, who need to be treated kindly but
firmly by a benevolent employer, who knows what is best for
them and the organization.
 Relationship with structural variables
 The approach to job design is similar to classical
approach but attempt to arrange jobs that allow social
interaction among employees.
 The way to coordinate employees effort is also similar
to classical approach but the supervisor’s role is much
more complicated.
 Leadership is still autocratic in the sense that senior
management makes all important decisions, but there is
much greater attempt to “sell” the decisions.
 Attempt is made to provide a feeling that employees
have some control over company’s decisions( although
employees have little real influence).
 Employees are sometimes asked for their opinions on
decisions, or they are permitted to make a number of
minor, inconsequential decisions.
 The supervisor has the added task of exhibiting high
concern for people and fostering a pleasant atmosphere
 Overall the role of leader is controlling but employee
oriented.
 Control is still external but is preferably exercised
through work group.
 Devote considerable effort towards developing loyal
employees who are dedicated to the norms of the
organization.
 Pressure from the work group is expected to make
individual conform to the expectations of the
organization.
 Punishments are not extensively used because of
the fear that it will disrupt the social harmony.
 Communications within the informal groups are
encouraged.
 Management often uses grapevine for
communication.
 Considerable efforts are made to facilitate social
communication.
 The flow of work related communication tends to
be low whether up or down the hierarchy.
 Like classical school, management restricts the flow of
important information.
 Unlike classical school they make use of suggestion
system and newsletter.
 Rewards are mainly extrinsic and focus on loyalty to the
organization.
 Salaries (rather than hourly payment) are often used to
foster a feeling of permanence.
 Seniority increases are likely provided to encourage
work force stability.
 A number of noneconomic rewards may also be
provided such as long service awards, employee of
month citations to show the interest of organization in
its employees.
High Involvement Managerial Strategy
 Assumptions:
 If the jobs are structured correctly, people can
actually enjoy and be intrinsically motivated by their
work.
 Adherents believe that people are motivated by
needs for interesting work, challenge, autonomy,
personal growth, and professional development.
 Employees can exercise self control if organization
provides these conditions while treating employees
fairly.
 Relationship with structural variables
 In designing jobs major effort is made to create jobs
that are:
 interesting and challenging,
 Provide workers with considerable autonomy over
planning and executing work,
 Job based feedback on how well they are performing.
 Conscious effort is made to combine the thinking and
doing, therefore jobs are;
 Broader,
 Attempt to include meaningful cycle of work activities,
 Joint employee-management planning and goal setting.
 Coordination is horizontal as well as vertical.
 Jobs are often arranged in clusters , in which group
of employees has the responsibility for coordinating
the completion of set of tasks among themselves.
 These clusters or teams consists of people from
various specialties mingled together.
 Departmentation is often based on the product,
customer, or project, not functional groupings.
 The role of supervisor is facilitator rather being a
controller or evaluator.
 His/her job is to;
 remove barriers for effective performance,
 Provide adequate resources and other assistance to
enable subordinates to perform effectively,
 Because employees are assumed to be able to
exercise self control and self motivation;
 Supervisor is not required to perform control
function,
 Decisions can be made at the lowest possible level.
 The overall leadership style is participative or
democratic in nature.
 Need for direct supervision and formalized rules
and regulations can be kept to a minimum because;
 Identification with the goals of the organization,
 Intrinsic rewards flowing from the work itself,
 Having sufficient knowledge and training to behave
responsibly.
 Since decisions are being made at all levels
throughout the organization: full disclosure of
information is necessary.
 Great effort is made for communication to flow vertically,
horizontally and diagonally.
 High involvement organizations use a wide variety of both
intrinsic and extrinsic rewards.
 Employees are expected to receive substantial intrinsic rewards
directly from performing their jobs and participating in decision
making.
 Extrinsic rewards are geared towards fostering;
 good performance rather than controlling standard output,
 Focus on work unit rather than individual.
 pay tends to be salary, augmented by profit-and gain sharing plans,
as well as employee stock ownership.
 Pay is often person based (i.e. pay for knowledge) rather than job
based.
 Because of the complex behavior and high performance level
required in high involvement organizations, reward and PM are
usually more complex than those in firms using the other two
managerial strategies.
Comparison of the Three Managerial Strategies and their Structural Implications
Structural Classical Human Relations High involvement
Variable Managerial managerial Strategy Managerial Strategy
Strategy
Job design Thinking separate Similar to classical Joint planning and goal
from doing, narrow but job design may setting; broader, more
fragmented jobs allow more social meaningful jobs
contact
Coordination Strict formalized Similar to classical, Horizontal as well as
and pyramidal hierarchy possibly use of some vertical coordination, use of
Departmentation
emphasizing work teams work teams,
accountability, departmentation by product,
vertical customer, project or matrix
coordination,( by
supervisor)
departmentation by
function
Control External through External- through use Internal through intrinsic
supervision, rules, of social or peer rewards from the work
punishments, and pressure, rules, some itself, self control through
some extrinsic extrinsic rewards internalized commitment
rewards
Structural Classical Human Relations High involvement
Variable Managerial Strategy managerial Managerial Strategy
Strategy
Communication Formal and vertical, Use of formal and High amount of vertical
restricted informal and horizontal
communication communication, less
(grapevine) some formal, climate for open
restriction communication
Decision making Autocratic decision Autocratic decision Participative or
and Leadership making; task making with minor democratic decision
oriented; controlling consultation, style, both task and
supervisory role employee oriented ; employee oriented,
controlling facilitator supervisory
supervisory role role
Reward system Extrinsic economic Extrinsic economic Intrinsic rewards from
rewards related to reward unrelated to job itself, pay for
individual output or performance; liberal knowledge, extrinsic
time worked fringe benefits and rewards focusing on
loyalty rewards group or organization
performance
 Within a given managerial strategy there are
different possible combinations of human resource
policies.
 A firm may choose to hire only experienced
workers or it may choose to hire inexperienced
workers and train them.
 Hiring experienced workers usually costs more in
compensation.
 Hiring inexperienced workers cost more in training
and the risk of losing them once they are trained.
 Different managerial perspectives have different
preferences.
 Classical organizations would prefer not incur high training costs
because of high turnover.
 They would prefer experienced , trained workers where jobs
require training.
 Other human resource policies, such as recruitment might fit
into managerial strategies.
 High involvement organizations have the most sophisticated
recruitment and selection procedures because they require
workers who have a high potential for growth, self control, and
motivation by higher order needs.
 Classical organizations demands simple task performance, they
the least sophisticated recruitment and selection procedures
 Human relations organizations fall in-between because they
want to screen out people who would disrupt the social
environment of the firm.