Week 6: 5th - 11th June (Activities: 3.4)
The previous section explored the complexity of the external context, and touched on key areas of skills policy which have specific implications for contemporary organisations. In the last activity you reviewed different organisational scenarios and considered the risks and benefits of adopting apprenticeships within those particular companies. In assessing these we could have applied different approaches for decision making and judgements within strategic contexts. This section considers two of these: economic and social perspectives.
At the start of this unit we provided a broad overview of strategy:
- build a big picture
- provide a sense of direction of travel
- be coherent and consistent
- have mutually reinforcing elements.
However, strategy making is ‘complex’ and ‘precarious’ (Vaara and Whittington, 2012, p. 310). An understanding of a ‘good’ or successful strategy is often based on economic or financial measurement. The aim of HRD strategy from this perspective is in ‘getting the firm a competitive advantage that allows it in turn to have above average performance compared to its peers’ (Clardy, 2008, p. 185). The challenges for HR and HRD practitioners of translating people issues into financial or economic terms is the subject of a long-running debate (Francis and Keegan, 2006). Mayo summarises this debate in suggesting that: ‘“Human capital” is a term for people that is replacing “human resources”. Though not to everybody’s taste it is one that reflects a view of people as value creating assets rather than primarily as costs’ (2004, p. 3).
This approach builds on insights generated via resource-based views of the firm (introduced earlier in this unit) to suggest how employees might be a source of competitive advantage. Nyberg and colleagues (2014) are among those highlighting the challenges of adopting this approach, particularly in marrying the strategists’ ‘top-down’ view of human capital with an HRD perspective that is often rooted in a bottom-up approach based on an understanding of the people and their training needs within an organisation. (Approaches to collecting and assessing training needs are discussed in the next unit.)
It is perhaps worth noting that the human capital perspective is adopted by the CIPD, whose interpretation of strategy is firmly rooted in an economic conception. In the recent Valuing Your Talent report, the CIPD suggested that answering the following questions is critical to HRD strategy development:
- What is the rate of return from our investment in people?
- How does it compare with the rate of return obtained by competitors?
- In what direction is the rate of return travelling?
- Is talent’s value optimally aligned with strategic intent?
- Is there a ceiling or organisational ‘metabolic rate’ of value-creation from people at which additional investment does not generate returns?
This notion of a ‘metabolic rate’ or ‘ceiling’ is linked to productivity. That is to say, a role of HRD strategy is to define the point at which investment (in training an individual or team, for example) no longer produces valuable increases in productivity for the organisation. HRD strategy should then not go beyond this ceiling in order to maximise organisational return on investment. The report goes on to say:
Finance and HR must work more closely together to enable greater understanding of the value of human capital to the organisation. A common business language is needed which illustrates that people are material, not intangible assets, and gives managers and leaders a clear understanding of how their workforce creates value for the business.
Some contend that this economic conception of human capital attempts to iron out the problematic creases of strategy development and reduce it to a rational data-processing exercise. However, this is contested as an unrealistic approach that does not reflect the day-to-day reality of organisational life. It is suggested that this strategy is too often thought of as an ‘object’, perhaps a report, but importantly as something an organisation has. Alternatively, strategy can be viewed as a process that occurs within organisations; as ‘strategising’, perhaps. This process perspective places less emphasis on the outputs of strategy and rather focuses on how strategic decisions are made within the broader social life of the organisation.
Vaara and Whittington (2012, p. 287) describe this as a focus on strategy making: ‘strategizing in the sense of more or less deliberate strategy formulation, the organizing work involved in the implementation of strategies, and all the other activities that lead to the emergence of organizational strategies, conscious or not.’
This perspective is conceptually rooted in similar understandings of learning via practice (Lave and Wenger, 1991) that are explored throughout the module (for example, in discussing situated learning and communities of practice). This interest in practice emphasises the often taken-for-granted social and material context within which individuals work on a day-to-day basis. Within the realm of studies of strategy this entails a shift to a ‘micro’ focus to uncover what gets done, and who and what is implicated in the action of strategising. A further key contribution of this area of research has been in broadening the research base which from an economic perspective has tended to focus on large, for-profit companies.
One example of a research focus here has been the exploration of the different ways in which recommended strategic planning tools are used in organisations. (You will review the detail of some of these tools later in the unit.) Rather than suggesting there is a ‘right way’ of applying these, research has unpacked the various ways in which they are embedded in events such as strategy workshops, planning meetings, residential and other off-site events. The focus here is on understanding the complex ways in which strategy emerges from these processes. As you will explore in the next section, an understanding of power is critical to this interrogation of strategy. However, first we pause to review HRD strategy from an international perspective.
Activity 3.4: Is HRD strategic? (60 minutes)
