Unit 1 - Harvard Model

In 1985, Richard Walton published an article in the Harvard Business Review called ‘From Control to Commitment in the Workplace’, which popularised soft HRM as a distinctive approach to managing human resources. His argument was that effective HRM depends not on strategies for controlling employees but on strategies for winning employees’ commitment.

The Harvard model proposes that many of the diverse personnel and labour relations activities can be dealt with under four human resource (HR) categories: employee influence, human resource flow, reward systems and work systems. These are general issues that managers must attend to regardless of whether the organisation is unionised or not, whatever management style is applied, and whether it is a growing or declining business.

Employee influence
Employee influence is the question of how much responsibility, authority, and power is voluntarily delegated by management and to whom. One of the critical questions here is, if management share their influence, to what extent does this create compatibility (the word the authors used is ‘congruence’) of interests between management and groups of employees? The assumption the authors make is that any influence employees have should be compatible with management’s purpose and priorities.

Human resource flow

Human resource flow concerns managing the flow of people into, through, and out of the organisation. This means making decisions on recruitment and selection, promotion, termination of employment, and related issues of job security, career development, advancement, and fair treatment. Managers and personnel specialists, according to the Harvard model, must work together to ensure that the organisation has an appropriate flow of people to meet its strategic requirements.

Reward systems

Reward systems regulate how employees are extrinsically and intrinsically rewarded for their work. Extrinsic rewards are tangible pay and benefits: pay, overtime pay, bonuses, profit sharing, pensions, holiday entitlement, health insurance; and other benefits, such as flexible working hours. Intrinsic rewards are intangible benefits and are said to strongly influence employees’ motivation, job satisfaction, and organisational commitment. Intrinsic rewards are rewards from the work itself, such as sense of purpose, achievement, challenge, involvement, self-confidence, self-esteem, and satisfaction. The Harvard model recommends that employees should be highly involved in the design of an organisation’s reward systems but observes that final decisions, besides meeting employees’ needs, must be consistent with the overall business strategy, management philosophy, and other HRM policies.

Work systems

Work systems are the ways in which people, information, activities, and technology are arranged, at all levels of the organisation, so that work can be performed efficiently and effectively.

Policies in these four areas must be designed and applied in a coherent manner because, Beer and his co-authors argue, HRM is considerably less likely to be effective where policies are disjointed, made up of odd combinations of past practices, and are ad hoc responses to outside pressures. The four policy areas must satisfy the many stakeholders of the enterprise – for example, shareholders, employees, customers, suppliers, communities, trade unions, trade associations, and government. Employees are major stakeholders of the enterprise and it is the responsibility of managers to establish systems that promote employee influence. Some people would say that managers do not consider enough how to facilitate employee influence: indeed, Beer et al. claim that, of the four issues discussed, employee influence is the central feature of an HR system, as illustrated in the triangle in Figure 2.2.

A further recommendation of the Harvard model is that, when making HRM policy decisions, managers should consider the ‘four Cs’: commitment, competence, congruence (compatibility), and cost-effectiveness. That is, managers should ask to what extent the policies they implement will: enhance the commitment of people to their work and the organisations; attract, retain, and develop people with the needed competence; sustain congruence (compatibility) between management and employees; and be cost-effective in terms of wages, employee turnover, and risk of employee dissatisfaction.

The Harvard model is ‘soft’ HRM because it concentrates attention on outcomes for people, especially their well-being and organisational commitment. It does not rank business performance or one of the stakeholder interests – for example, shareholders – as being inherently superior to other legitimate interests, such as the community or unions. Organisational effectiveness is represented in the Harvard model as a critical long-term consequence of HR outcomes, but alongside the equally important consequences of individual and societal well-being. An organisation putting this model into practice would therefore aim to ensure that its employees were involved in their work and were able to participate in decision making. HRM policies would be developed and implemented to meet employees’ needs for influence, but within the limitation of having to be consistent with the overall business strategy and management philosophy.