Strategic Human Resource

Management in the Public Service:

Evidence from Estonia and Other
Central and Eastern European Countries
CONTENTS
LIST OF ORIGINAL PUBLICATIONS ...........................................................
INTRODUCTION..............................................................................................

4
5

Scope and aim ................................................................................................

Methodological note and the structure of the thesis....................................

12

1. Strategic integration of HRM...................................................................

13

1.1 External fit .........................................................................................

14

1.2 Fit between macro- and micro-level HRM ........................................

22

1.3 Internal fit ..........................................................................................

24

2. Role of managers in strategic HRM.........................................................

28

3. Organisational performance and strategic HRM.....................................

34

Summary and conclusions ...........................................................................

38

References....................................................................................................

42

SUMMARY IN ESTONIAN ...........................................................................

50

ACKNOWLEDGEMENTS .............................................................................

55

PUBLICATIONS...................................................................................... ....

.57
CURRICULUM VITAE............................................................................ ... ..139
ELULOOKIRJELDUS............................................................................... ..
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..142

Scope and aim

The concept of strategic human resource management has played a key role in
management research and practice for the last three decades (Guest 1987; Boxall
and Purcell 2011). Ongoing analysis within the field generally focuses on how
human resource management (HRM) can add strategic value and contribute to
the organisational success. According to this approach, originating from the
private sector, people are a key resource and a critical element in an
organisations performance. The main rationale for strategic HRM thinking is
that by integrating HRM with the organisations strategy and by applying
particular sets of human resource (HR) policies and practices, employees will be
managed more effectively, individual and organisational performance will
improve, and therefore success will follow (Holbeche 2001; Farnham 2010).
The term HRM, defined as a strategic and coherent approach to the management
of people who contribute to the achievement of organisations objectives, has
entered the management vocabulary as a replacement for personnel
management (Armstrong 2000). Although HRM is regarded to have man
y
similarities to personnel management, as just old wine in new bottles, the main
defining characteristic of HRM is considered to be its strategic focus (Guest
1989; Legge 2005). In order to emphasise this focus even more, often
the
adjective strategic is added to HRM, referring to HRM as a strategic function
which does not only build organisations performance, but also is forwar
dlooking and creates competitive advantage (Holbeche 2001). Strategic
highlights the need for the determination of long-term goals of an organisation,
the undertaking of courses of action and the allocation of resources necessary for
carrying out these goals (Goldsmith 1997; Armstrong 2000).
The concept of HRM can be divided into a hard and a soft approach. The hard
version of HRM emphasises the need to manage people as any other
key
resource to attain maximum return and added value from them, whereas the
soft approach highlights that employees need to be treated as valuable assets
and a source of competitive advantage through their commitment and hig
h
quality of skills and performance (Storey 1989). It has, however, been found out
that organisations tend to mix hard and soft HRM approaches (Legge 2005).
The principles of strategic HRM also combine elements of both approaches.

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Origins and changes in HRM theories and practices have been driven by broader
changes in social, economic, political and institutional context. HRM arose in
the 1980s in North America with an incentive to restore the competitiveness of
American industry (Millmore et al. 2007). It was soon adopted with quite an

enthusiasm in the United Kingdom and elsewhere. It also spread to different

sectors and different types of organisations. However, in addition to
organisational demands for efficiency and drive for quality, HRM owes i
ts
momentum to technological developments, to changing values (e.g. rise of
individualism) and to increased workforce diversity (e.g. rise of knowledg
e
workers) (Mayrhofer and Larsen 2006; Van Buren et al. 2011). The globalisation
movement, which supported even stronger competition, more dynamic markets,
management of uncertainty and pressure for flexibility, has also been seen as one
of the dominant factors in increasing interest in HRM (Millmore et al. 2007).
Moreover, the transformation of personnel management into strategic HRM has
been viewed as a result of growing professionalism among HR practitioners and
their increasing desire to be strategic partners at the senior decision-making level
(Gooderham and Nordhaug 2011).
However, a major debate in the field remains: to what extent is HRM converging
across countries? Supporters of the convergence theory suggest that the AngloAmerican new HRM practices are becoming alike internationally as a result of
the global market and technological forces. The divergence theory, in contrast,
argues that HR practices tend to be country-specific because of institutional and
historical path-dependence (Farnham 2010). A number of studies have been
conducted in order to exhibit some evidence on the convergence-divergence
issue, especially in the context of European HRM (Gooderham and Nordhaug
2011). Findings show that HRM practices in Europe simultaneously become
more alike in certain areas and stay or become different in others (Mayrhofer
and Larsen 2006).
The use of strategic HRM in the public service is related to changes in the
administrative systems on a larger scale. The Weberian bureaucracy has
normally been linked to the rule-based personnel management. It could b
e
argued that associating these two tends to underestimate the role of personnel
management in the Weberian career systems, as managing public servants was
considered to be a crucial issue there. The emergence of HRM as a specific label
in the public service coincided with the rise of New Public Management (NPM)
in the 1980s. NPM has been characterised by the considerable decentralisation
of public-service management, emphasising administrative efficiency and
flexibility (see Table 1). The key elements of NPM-inspired public
service
reform agendas have included setting up performance management systems,
developing business-like attitudes of public servants and emphasising
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Area
External environment

Organisational
structures and
processes
Performance
management and
measurement systems
Role of management
and managers

Employees and
organisational culture

Elements in NPM
- Driven by external pressure, changing
environment and neoliberal ideas
- Market orientation, use of competition
in the provision of public services
- Stakeholder (incl. customer)
orientation
- Focus on organisational efficiency,
effectiveness and productivity
- Emphasis on cost-reduction,
outsourcing and privatisation
- Decentralisation, de-bureaucratisation,
agencification, flexibility of structures
- Devolution of responsibility
- Emphasis from input and process to
output and outcome
- Performance-driven, productivity and
efficiency enhancing measures
- Systematic assessment of performance
through targets, standards, indicators,
measurement and control systems
- Emphasis on letting the managers
manage, managerial discretion and
accountability
- Primacy of management function
- Empowerment of employees,
emphasis on business-like attitudes of
public servants
- Focus on leadership

Elements in HRM
- Driven by external pressure, changing
environment and neoliberal ideas
- Market and customer orientation
- Individualist, flexible and competitive
notion of employment relationship
- Focus on human resource advantage,
consequently HRM integrated to
organisational strategy
- Organisational flexibility
- Decentralisation, flat structures
- Devolution of responsibility for HR
- Emphasis on the contribution of
employees to the bottom line,
productivity and commitment
enhancing measures
- Systematic assessment of performance
- HRM largely integrated into line
management
- Emphasis on the role of top
management and its strategic
partnership with HR professionals
- Importance of building employee
trust, common values and commitment
to job and organisation
- Focus on leadership

management culture. Although several years of attempts to implement NPM in

OECD countries have given more evidence of failure than success, NPM
continued to be used in the 2000s (Pollitt and Bouckaert 2004; Drechsler 2005;
Hood 2011; Meyer-Sahling and Yesilkagit 2011).

Table 1. Basic assumptions and core elements of NPM and HRM

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