the influences on hr sophistication in south wales based professional service firms

Cardiff Business School

Part-time MBA

The Influences on HR Sophistication in South Wales Based

Professional Service SMEs

John Hurst December 2010

john.hurst

Highlight

Student Number: 0844586

Part-time MBA 2

DECLARATION

This work has not previously been accepted in substance for any degree and

is not being currently submitted in candidature for any degree.

Signed………………………………………(Candidate)

Date…………………………………………

STATEMENT 1

This work is the result of my own investigations, except where otherwise

stated. Where correction services have been used, the extent and nature of

the correction is clearly marked in a footnote(s).

Other sources are acknowledged by footnotes giving explicit references. A

bibliography is appended.


Date…………………………………………

STATEMENT 2

I hereby give consent for my work, if accepted, to be available for

photocopying and for inter-library loan, and for the title and summary to be

made available to outside organisations.


Date…………………………………………


Part-time MBA 3

Acknowledgements

My thanks go to those participants who took part in the research and afforded

me their time and insight, thank you for being so open and welcoming. Thank

you to Professor Heery, Professor of Employment Relations at Cardiff

Business School, for supervising this research and for sparking an interest in

the subject area during the Strategic HRM module. Thank you also to Rachel

Williams at Cardiff Business School for helping me with participant

recruitment.

Thank you to my colleagues at the Research and Marketing Group for

providing a test bed for all I have learnt on this MBA. To my study group

consisting of Carl, Carrie, Chris and Kate, thank you for being a great support

and a constant source of motivation.

I wish also to thank my friends for their support. In particular my thanks go to:

Mike for his ability to inspire self-belief over lunch; Tim, Keren, Ben and Ollie

for their motivation and encouragement; James and Mark for supporting an

absent friend.

Finally, I would like to thank my family. To Mum and Dad, thank you for all you

have done and Dad, thank you for being the inspirational businessman you

are. And to the person that has had to put up with me through all, Sarah-

Louise. You know what this MBA really means to me. Thank you for all your

patience and your endless amount of support. I would have never thought this

possible without you.


Part-time MBA 4

Table of Contents

Table of Contents ......................................................................................... 4

Summary ...................................................................................................... 8

1.0 Introduction ............................................................................................ 10

2.0 Literature Review ................................................................................... 16

2.1 Introduction ........................................................................................... 16

2.2 Context ................................................................................................. 16

2.2.1 SME’s in Wales .............................................................................. 16

2.2.2 Economic Climate in South Wales ................................................. 17

2.2.3 Rise of Service Employment in Wales ........................................... 18

2.3 The HRM Landscape ........................................................................... 19

2.3.1 Decline of Trade Unions ................................................................ 19

2.3.2 The Rise of HRM ........................................................................... 21

2.3.3 How has HRM and its implementation developed? ....................... 23

2.4 Sophisticated HRM ............................................................................... 24

2.4.1 Measuring Sophistication ............................................................... 24

2.4.1.1 The Role of Strategy ............................................................... 26

2.4.1.2 The Role of Communication .................................................... 26

2.4.1.3 The Role of Learning and Development .................................. 27

2.4.1.4 The Role of Recruitment ......................................................... 30

2.4.1.5 The Role of Performance-Related Pay .................................... 33

2.4.1.6 The Role of Job Design and Management Systems ............... 34

2.5 Causal Factors ..................................................................................... 36

2.5.1 Strategy ......................................................................................... 37

2.5.1.1 What is strategic HRM? ........................................................... 37


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2.5.1.2 HR and Business Strategy ...................................................... 37

2.5.1.3 Leadership and Management .................................................. 38

2.5.1.4 Structure .................................................................................. 40

2.5.2 External Factors ............................................................................. 40

2.5.2.1 Degree of competition in markets ............................................ 40

2.5.2.2 Quality Standards .................................................................... 43

2.5.3 Institutional ..................................................................................... 44

2.5.3.1 Trade Unions ........................................................................... 45

2.5.3.2 Employment law ...................................................................... 45

2.5.3.3 Professional Associations ....................................................... 47

2.5.3.4 Competition ............................................................................. 47

2.5.3.5 Management Occupations ...................................................... 48

3.0 Research Aims: ...................................................................................... 49

4.0 Methodology ........................................................................................... 49

4.01 Literature Review Method................................................................... 49

4.02 In-depth Interviews ............................................................................. 51

4.03 The HR Sophistication Scale .............................................................. 52

4.04 Influence on HR Sophistication .......................................................... 54

4.05 Sample ............................................................................................... 55

4.06 Inclusion Criteria ................................................................................. 55

4.07 Participant Firm Profiles ..................................................................... 56

4.08 Procedure ........................................................................................... 56

4.08.1 Data Collection ............................................................................ 56

4.08.2 Pilot Interview .............................................................................. 57

4.09 Interviews ........................................................................................... 57


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4.10 Analysis .............................................................................................. 58

4.11 Ethical Approval ................................................................................. 59

5.0 Results .................................................................................................... 60

5.1 HR Sophistication Scale ....................................................................... 60

5.2 HR Function - Sophistication Band ....................................................... 61

5.3 Cross Sectional Analysis ...................................................................... 61

5.3.1 Function 1: Formal HR Strategy .................................................... 61

5.3.2 Function 2: Communication ........................................................... 62

5.3.3 Function 3: Learning and Development ......................................... 62

5.3.4 Function 4: Recruitment and Selection .......................................... 63

5.3.5 Function 5: Compensation ............................................................. 63

5.3.6 Function 6: Flexible job assignments ............................................. 64

5.3.7 Function 7: Teamwork ................................................................... 64

5.4 Firm Profile ........................................................................................... 65

5.4.1 Firm 3: High ................................................................................... 66

5.4.2 Firm 6: High ................................................................................... 66

5.4.3 Firm 1: Medium .............................................................................. 66

5.4.4 Firm 2: Medium .............................................................................. 67

5.4.5 Firm 4: Medium .............................................................................. 67

5.4.6 Firm 5: Low .................................................................................... 68

6.0 Introduction to Empirical Chapters ...................................................... 69

7.0 ‘Required Influences’ of HR Sophistication......................................... 71

7.1 Employment law ................................................................................... 71

7.2 Solicitors Regulations Authority (SRA) ................................................. 73

7.3 ‘Required Influences’ Conclusion ......................................................... 75


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8.0 ‘Accountability Influences’ of HR Sophistication ............................... 76

8.1 Management Occupations.................................................................... 76

8.2 Quality Standards ................................................................................. 78

8.3 ‘Accountability Influences’ Conclusion .................................................. 84

9.0 ‘People Influences’ on HR Sophistication ........................................... 85

9.1 The Importance of Leadership .............................................................. 85

9.2 Dedicated HR Resource ....................................................................... 90

9.3 ‘People Influences’ Conclusion ............................................................. 91

10.0 Conclusion ........................................................................................... 93

10.1 Findings .............................................................................................. 93

10.1.1 Sophistication Scale..................................................................... 93

10.1.2 Influences .................................................................................... 95

10.2 Implications ........................................................................................ 98

10.3 Methodological Limitations ............................................................... 100

11.0 Bibliography ....................................................................................... 102

12.0 Appendix............................................................................................. 115

12.1 Appendix 1: Dissertation Questionnaire ........................................... 116

12.2 Appendix 2: Ethics Consent Form .................................................... 125


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Summary

There exists an expansive academic literature regarding the Human Resource

(HR)-performance link and the positive impact sophisticated HR practices can

have on the competitive advantage of a firm. Much of this is concerned with

large firms, thus presenting an opportunity for research to be conducted

amongst SMEs. In addition, the role of influences on HR sophistication

amongst such a sample has been found to be under-researched. Therefore,

the aim of this paper was to identify influences on HR sophistication within

South Wales based professional service firms. The contribution of this

research is the development of a measure of HR sophistication in the form of

the ‘sophistication scale’ and the identification of three distinct influence

categories.

This research was undertaken with six legal service firms sampled from South

Wales. In-depth interviews were conducted consisting of a ‘sophistication

scale’ and a semi-structured analysis of influences on HR. The author

developed an HR ‘sophistication scale’ which enabled the measurement of

overall HR sophistication within participating firms. The findings suggested

that the learning and development function was the most sophisticated, due to

the regulatory structure of the sector. Flexible job assignments achieved the

lowest level of sophistication, primarily due to the knowledge intensive

environment within which legal firms operate.

The identified influences could be grouped into three distinct categories:

‘leadership’, ‘accountability’ and ‘required’. The highest level of HR

sophistication was found to occur within those firms in which the leadership

believes that the employees are the primary source of competitive advantage.


Part-time MBA 9

There was an increased level of HR sophistication within firms that adopted a

quality standard, considered to be an ‘accountability’ factor due to its

voluntary nature. Those firms relying heavily on regulatory or ‘required’ factors

were found to have the lowest levels of HR sophistication.


Part-time MBA 10

1.0 Introduction

The globalisation of industry and the fragile global economy have combined to

create a challenging and highly competitive trading environment (Lloyd-

Reason and Sear 2007). SMEs in Wales are facing a similar difficulty to their

counterparts throughout the world. Wales, an economy heavily reliant upon

professional services, has not been immune, experiencing an increase in

unemployment and a decline in the former corner stone of their economy,

manufacturing (House of Commons 2008).

In 2010, in response to the changing economic landscape, Ieuan Wyn Jones,

Deputy First Minister for Wales, outlined the Welsh Assembly Government’s

(WAG) plan to transform the way it supports the Welsh Economy. This was

published in the paper Economic Renewal: a new direction (2010). Amongst

the six sectors to be supported was professional services, which has seen

significant growth in recent years (Economic Renewal: a new direction 2010).

Along with a focus on leadership and management skills, the paper

recognised a requirement for the broadening and deepening of the skill base

in Wales. In addition, it reflects the academic literature’s focus on increasing

firm’s competitive advantage through the identification and management of

human resources (Schutz and Carpenter 2008). This literature formed the

basis of the research.

Formerly, trade unions exerted institutional pressure within employment

relations and were central to facilitating communication between employee

and employer (Freeman and Medoff 1984; Dickens 1999). However, the rapid

decline in membership, experienced towards the end of the 20th Century,


Part-time MBA 11

signalled a change in the employment relations landscape. Presented by

some commentators as a cause for concern, this decline suggested that the

government would become the main source of change in UK employment

relations (Gallie et al. 1996). An alternative argument was that the power of

influence would shift from unions to management in the form of Human

Resource Management (HRM) (Godard and Delaney 2000; Beaumont 1991;

D’Art & Turner 2008). For many, HRM is now seen as a method by which

organisations can elicit commitment from their human assets with a view of

increase performance and achieve the objectives of the firm (Chasserio and

Legault 2009; Huselid et al. 1997; Barnard and Rogers 2000). Whilst there is

growing academic support for the positive effect labour-management relations

will have on the performance of the firm (Godard and Delaney 2000), there

remains a question as to who, or what, is shaping and influencing the

implementation of HRM?

Internal factors, such as leadership and management, have been found to

have a positive effect on the credibility and implementation of HR practices

(Beardwell and Claydon 2007). The presence of a HR department has been

related to numerous HRM practices in terms of the scope and formalisation of

the HR function (Galang 1999). However, within small firms evidence

indicates that senior management often retain control of the function leaving

the dedicated HR resource with little or no authority to implement practices

(Colling and Dickens 1998).

External factors feature prominently in the academic literature which focuses

on assessing their influence over a firm’s adoption of sophisticated HR

practices. As previously mentioned, the economic landscape has changed


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and continues to apply increased pressure on firms. This pressure comes in

the form of increasing competition against larger rivals that operate across a

wider geographical region and often with greater resources (Holman 2002).

Commentators have noted that, in an attempt to maintain and increase

competitive advantage in the midst of these pressures, firms have turned to

the more sophisticated methods of people management (Schutz and

Carpenter 2008).

Quality standards have been found to influence the adoption of HR practices

(Redman and Wilkinson, 2006) and in this case are considered an external

factor. Investors in People (IiP) provides organisations with processes and

procedures to manage people (Personnel Today 2003), whilst the

International Organisation of Standardisation (ISO) is more concerned with

the design of service quality and customer service (Corpuz 2006). Sector-

specific quality standards feature prominently in professional service firms

given the complex nature of their work. However, there have been questions

as to whether they appeal mainly to organisations approaching an advanced

level of quality and people management (Ogden and Grigg 2003). This would

imply that firms adopting these standards have attained a high level of

sophistication, thus negating the influence such standards have on HR

sophistication. However, whilst most quality standards are voluntary, the

procedures they impose on an organisation are suggestive of a higher level of

HR sophistication (Vouzas 2007).

Institutionalist accounts prescribe to the notion that the shape of HRM is a

blend of decisions made in the firm and externally imposed structures. Trade

unions feature prominently within this account, providing employees with a


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unified voice in addressing discriminatory organisational behaviour (Dickens

1999). However, with membership in decline the influence of this once most

influential institution has been brought into question. At the time of its reducing

influence, concern was raised by some at the prospect of the government

becoming the main source of change in employment relations (Gallie et al.

1996). It is argued that the imposed legal environment and the regulatory

requirements of a sector shape the internal employment practices of firms

operating in that environment (Huselid et al. 1997). Criticism has been

levelled at this view, evidencing the perceived failure of the Equal Opportunity

legislation and the continued disadvantages in the UK’s employment relations

environment as conformation that this is not a key influence (Redman and

Wilkinson 2006; Cassell et al. 2002).

A wealth of research has been conducted concerning the level of influence

internal, external and institutional factors have on the adoption of HR

practices, much of it within large firms (Hendry et al. 1995, cited in Cassell et

al. 2002). However, evidence suggests that the influences on HR

sophistication within small to medium sized firms had been under-researched

(Cardon and Stevens 2004). Therefore, it was decided that an aim of this

work was to identify the influences on HR sophistication within South Wales

based professional service SMEs.

To enable the measurement of influences, the level of HR sophistication

within each of the researched firms needed to be assessed. However, there

was debate as to the make-up of sophisticated HR practices. Pfeffer (1998)

identifies seven measures that seek to characterise companies which profit

through people. These are: employment security; selective hiring; self-


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managed teams and decentralisation of decision-making; high compensation

contingent on organisational performance; extensive training; reduced status

distinctions and barriers, and finally the extensive sharing of financial and

performance information through the company. Delaney (1989 cited in

Redman and Wilkinson 2009, p.11) argues that ten HR practices constitute

HR sophistication while Delery and Doty (1996) present seven. Some

consensus can be found as to the core HR functions that contribute to

sophistication including: recruitment and selection; performance-related pay

and training (Becker et al. 1997; Cassell et al. 2002). Nonetheless, the

multiplicity of definitions presented above has led to a debate over the recipe

of HR sophistication. It was this that shaped a core aim of the research which

was to create a scale that would enable the measurement of HR

sophistication within South Wales based professional service SMEs. This was

then used to identify the influences on HR sophistication within the firm.

With the requirement to assess the level of sophistication and the influences

on that sophistication, the most appropriate method for collecting the data was

identified as in-depth interviews (Guest et al. 2003). The interview schedule

for this research was split into two sections. The first was devised to address

the aim of assessing sophistication levels within the firm and was based on

the ‘sophistication scale’ created from a thorough review of the extant

literature. The scale assessed the presence and sophistication of seven core

HRM functions including: formal HR strategy; communication; learning and

development; recruitment and selection; flexible job assignments;

compensation and finally, teamwork. The second section of the interview

utilised a semi-structured approach, thus encouraging an open discussion that


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would explore the influences on HR sophistication. The interviews were

conducted by the researcher within the offices of the participant’s firm.

It was decided that small to medium sized law firms in South Wales would

comprise the sample base of this study. Legal service firms offer to the market

the use of sophisticated knowledge which is retained by their employees

(Alvesson 2004). Thus, it was hypothesised that they were more likely to

demonstrate the use of sophisticated HR practices and therefore provide an

environment within which these practices were identifiable. Inclusion criteria

were established to guide the identification and recruitment of participants.

The data was analysed in order to assess the sophistication score. A

sophistication ‘band’ was applied to each firm indicating the level of HR

sophistication attained. The achievable bands were ‘low’, ‘medium’ and ‘high’.

This was scored dependent upon the evidence provided during the interviews.

The second task was to determine the influences of the level of HR

sophistication achieved by each firm. This was done by identifying concepts

within each interview which were then collated into categories.

The findings of this research provide valuable insight into the influences on

HR sophistication within South Wales based professional service SMEs, and

add to the extant academic HRM literature. The ‘sophistication scale’ proved

an effective measurement tool, enabling the researcher to identify three

distinct categories of influence. By identifying the most influential factors and

devising a scale that can be used to measure HR sophistication, this work

acts as a basis for informing future research and as a potential exploratory

tool for practitioners wishing to assess their levels of sophistication and

influences.


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2.0 Literature Review

2.1 Introduction

The purpose of this literature review is to examine the evidence base relevant

to the research topic. There are a number of areas to be investigated. The

first is the business climate in Wales, in particular the assessment of the

growing proportion of professional service firms in South Wales. The literature

review will then consider the Human Resource Management (HRM)

landscape, concentrating on the decline of trade unions, the rise of HRM and

its integration with strategy. Causes of HRM will then be considered, looking

in particular at the institutional, external and strategic factors highlighted in the

extant literature. The concept of HR sophistication will then be reviewed and

the HR functions that constitute sophistication will be established.

2.2 Context

2.2.1 SME’s in Wales

In the UK, 4.41% of enterprises employ between 10 and 249 staff (Stats

Wales 2010) therefore falling into the bracket of small to medium sized

enterprises (SMEs). In Wales, that number is 0.5% higher, with 4.91% of

SMEs employing similar numbers (Stats Wales 2010). The performance of

these SMEs is vital to the stability of the Welsh economy as they employ

close to 27 per cent of the workforce in Wales. In response, the Welsh

Assembly Government (WAG) has implemented a SME Development

Scheme which involves the provision of funding for consultants to provide

consultancy activity to develop the firms processes (FS4B, 2010). Other


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initiatives have been developed to support SME’s through funding for key

skills training, creative services and business planning. Every year Wales

benefits from millions of pounds of European funding to assist the sustainable

development of the Welsh economy (FS4B 2010). How that support is

distributed is determined by WAG, under the guidance of the European Union.

2.2.2 Economic Climate in South Wales

In July 2010, Ieuan Wyn Jones, Deputy First Minister for Wales and Assembly

Minister for the Economy and Transport outlined the WAG plan to transform

the way it supports the Welsh economy. In the supporting paper Economic

Renewal: a new direction (2010, p.22), the WAG identified the ‘broadening

and deepening of the employee skills base’ as a core priority for achieving a

strengthened Welsh economy that is built upon the ‘strengths and skills of its

employees’. As part of this economic renewal programme the WAG identified

six key sectors where there were ‘good growth prospects’ and where Wales

has identifiable advantages (Economic Renewal: a new direction 2010, p.23).

One of the six was the professional service sector, which has seen significant

growth in recent years with ‘home-grown, household names competing with

blue-chip, multi-nationals’ (Economic Renewal: a new direction 2010, p.37-

38).

Endorsing the Deputy First Minister’s initiative is the Wales Employment and

Skills Board (WESB), who provide advice and support to Government

Ministers on raising employment, business support and skills policy. They

strongly support the economic renewal programme, stating that in order to be

more competitive, ‘businesses in Wales need to go further and adopt positive


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and forward-looking approaches which combine strong leadership and

management with good HR and working practices’ (WESB (1) 2010, p.27).

2.2.3 Rise of Service Employment in Wales

At the time of the industrial revolution, Cardiff boasted the largest port in the

world in terms of coal tonnage (Hudson 1984). Following the post war boom

of the 1920’s, the coal industry entered a period of decline, which was

mirrored in the South Wales economy. Employment in coal mines stood at

270,000 in 1913, in comparison to 10,000 in 1990 (Rae and Punnett 2003).

Ensuring this was a period of growth in public sector employment, which in

2008, made up 35% of employment in Wales (Stats Wales (b) 2010), some

4% higher than the rest of the UK. In addition, the manufacturing industry

experienced a loss of 45,000 jobs between 1997 and 2007 (House of

Commons 2008).

Since devolution in 1999 Wales has increased its proportion of employment in

the service sector specifically in financial and professional services (Economic

Renewal; a new direction 2010). Despite significant growth, Wales is not

immune to the impact of the recent recession. For the three months leading

up to July 2010 the employment rate for those aged from 16 - 64 in Wales

was 67.0%, down from 67.5% in the same period a year earlier (Stats Wales

(c) 2010). The business environment ‘is placing unparalleled demands on

organisations to discover ways to operate more efficiently, while quickly

responding to changing needs and demands in the business environment’

(Becton and Schraeder 2009, p.11). The success of the financial and


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professional services industry in Wales is vital to the Welsh economy as it

accounts for 20% of enterprises and 17% of employment (Stats Wales 2010).

There has been much research into the professional service industry and their

use of knowledge to generate a competitive advantage. Within the context of

the professional services sector, Alvesson (2004) presents the concept of

knowledge-intensive firms as those firms offering to the market the use of

sophisticated knowledge. Alvesson (2004) highlights the legal service sector

as a typical example of a knowledge intensive firm. In this sector the staff are

‘afforded a degree of professional freedom in their jobs, coupled with

devolved HR responsibilities owing to the knowledge requirements to satisfy

important clients’ (Harney and Dundon 2006, p.68). This suggests that the

levels of HR sophistication required within the firm would be high in order to

facilitate the development of knowledge sharing demands (Stredwick 2005).

Thus, it is anticipated that the influence on HR will be more easily identifiable

within such firms.

2.3 The HRM Landscape

2.3.1 Decline of Trade Unions

Until the Conservative Government took power under Margaret Thatcher in

1979, the pattern of the employee voice in the UK followed a broadly similar,

pluralist-union centered trajectory (Wilkinson 2004). In the years between

1980 and 2004, the percentage of private sector workplaces with 25+

employees recognising unions had more than halved (Blanchflower et al.

2007). Considering the importance placed on unions to facilitate effective

communication between the employee and employer (Freeman and Medoff

1984), there was concern that this decline would signal a shift where the


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government would become the main source of change in employment

relations (Gallie et al. 1996, p.7).

Commentators have argued that the sharp rise in membership prior to 1979,

followed by the increasing shift in the composition of the workforce from

manufacturing to that of service-based, only served to emphasise union

decline (Disney et al. 1993; Reeves 2008). The service sector, characterised

by smaller than average workplaces, also lacks the tradition of union

representation found in manufacturing (Dundon and Gollan 2007). However,

whilst union membership in the manufacturing sector declined, the rise of

service-based businesses in the early 1980’s saw white-collar unions

experiencing high growth in real subscriptions and assets (Wilman et al.

1993). This suggests that unions were quick to adapt by broadening their

ambit of representation in recognition of the changes within the environment

(Heery and Conley 2007).

The factors that contributed to union decline in the UK are eagerly debated in

the literature. Some commentators speculate that the drop of union

representation in workplaces is expected to continue, in part due to HRM

taking on the traditional role of trade unions in considering managerial and

employee interests (Dundon and Gollan 2007; Farnham and Pimlott 1995).

However, that is not to say that HRM is a direct replacement of trade unions.

While decline in union recognition is difficult to argue, the UK workplace

survey found that, within the larger workplaces, union recognition is found

alongside sophisticated HRM practices (Redman and Wilkinson 2006), thus

suggesting the compatibility of HRM and unions.


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2.3.2 The Rise of HRM

Whilst there is some argument as to the causal factors of union decline there

is a general opinion that the employment relations landscape has changed

considerably in the last twenty years, ‘including a realignment of the

institutional arrangements to enable workers to have a voice’ (Dundon and

Gollan, 2007 p.1183). As union membership continued to decline it was

believed that HRM, with its policies, practices and arrangements was to

become the core innovative force in industrial relations, shifting the power of

influence from unions to management (Beaumont 1991; D’Art & Turner 2008;

Godard and Delaney 2000).

The term ‘HRM’ increased in prominence in the 1980’s, at which point it

began to replace its forebears including ‘personnel management, industrial

relations and labour relations’ (Redman and Wilkinson 2006, p.3). HRM has

been the subject of considerable academic analysis and there seems to be

little by way of common agreement on its definition. Sisson (1990, cited in

Redman and Wilkinson, 2006, p.7) operationalises HRM in terms of:

1. An integration of employment practices with business planning

2. HR issues moving from personnel specialists to line managers

3. A move from management-trade union relations to management-

employee relations

4. High staff commitment

In agreement, Marchington and Wilkinson (2008) identify HRM as the ‘focus

of ensuring that there is a ‘match’ or ‘fit’ between the overall direction of the

organisation and the way its people should be managed’ (p.4). HRM has often


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been described as a concept with two forms (Gratton et al. 1999). The first,

‘hard’ HRM is more concerned with trade union derecognition, autocratic

management styles, minimisation of cost and deskilling (Gratton et al. 1999).

Soft HRM is concerned with treating employees as ‘valued assets and a

source of competitive advantage’ (Legge 1999, p214). In this case, ‘HRM

practices are among the tools used to elicit commitment, with a view to the

achievement of company objectives’ (Chasserio and Legault 2009, p.1113).

This approach to HRM is especially prevalent in high knowledge

environments such as professional service firms, where employees are

typically highly qualified and use their intellectual and symbolic skills to

complete work tasks (Alvesson 2004).

Implicit in the definitions of HRM presented above is the reliance upon

managers to facilitate the integration of practices and procedures with

business strategy. Commentators highlighted a concern as to whether

managers would have the ‘resolution, skills and resources required to devise

sophisticated, non-union, employee relations regimes and operate them

competently’ (Rose 1996. p.67). The HRM model contains many innovative

practices suggesting that there is a need to have managers with the skills to

successfully develop and maintain HRM practices, thus increasing the

competitive advantage of a firm. These practices include ‘flexible work

assignments, cross-training, and team work, sustained by some form of

performance-based pay, formal employee participation, and supportive HRM

policies’ (Godard and Delaney 2000, p.482).


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2.3.3 How has HRM and its implementation developed?

Increasingly prevalent is the literature relating to the positive impact that HRM

has on performance and its creation of superior competitive advantage

(Barnard and Rodgers 2000; Huselid et al. 1997). Such research links HRM

practices with high yield performance above those associated with more

traditional workplace practices (Godard 2004). Much of the literature supports

knowledge-sharing, motivation and reward management as practices that

engender a high performance outcome. Whilst the HRM-performance link is

supported by many, there is an argument about the form of HRM that is likely

to be most effective (Guest et al. 2003). The resource-based view (RBV)

postulates that competitive advantage is found in the resources of the firm

that are ‘rare, imperfectly imitable, and non-substitutable’ (Barney 1991,

p.117). This infers that human resources offer one of the most powerful bases

for sustained competitive advantage (Becker and Gerhart 1996) and that

managed effectively a firm can elicit commitment from staff with a view to

achieving company objectives (Chasserio and Legault 2009).

A complimentary theory alongside the RBV literature is that organisations are

more likely to enjoy success if HRM practices were ‘bundled’ as they become

‘more deeply embedded into the culture of the workplace’ (Marchington and

Wilkinson 2008, p.82). Bundling is a specific set of human resource policies

and practices, considered by some to be superior to a non-bundling approach

to HRM (Marchington and Wilkinson 2008). These bundles, often referred to

as ‘high commitment work practices’ (HCWP) or ‘high performance work

systems or practices’ (HPWS / HPWP) provide an environment that facilitate

working commitment, resulting in mutually beneficial outcomes for both


Part-time MBA 24

employees and organisations (Gill and Meyer 2008). However, views differ as

to which practices can be considered 'high performance' (Truss 2001,

p.1123). It is argued that positive results appear to be reported irrespective of

a hard and fast bundle ‘formula’ (Guest et al. 2003). Such a formula would

suggest that by increasing the number of HRM practices adopted there will be

a positive effect on the firms’ performance. Nevertheless, many studies

published in recent years support a significant positive relationship between

an investment in human resources and the creation of superior competitive

advantage (Barnard and Rodgers 2000; Huselid et al. 1997).

2.4 Sophisticated HRM

2.4.1 Measuring Sophistication

Due to a multiplicity of opinion there is no single definition of HRM

sophistication. Pfeffer (1998) identified seven measures that seek to

characterise companies, which profit through people:

Employment security

Selective hiring

Self-managed teams and decentralisation of decision-making

High compensation contingent on organisational performance

Extensive training

Reduced status distinctions and barriers

Extensive sharing of financial and performance information throughout

the company.


Part-time MBA 25

Becker and Huselid (1999) emphasise the interdependency of these

measures, as the absence of one is likely to result in less than optimal

influence on performance. Becker et al. (1997, p.40) comment that HPWS are

‘generally thought to include rigorous recruitment and selection procedures,

performance-contingent incentive compensation systems, and management

development and training activities linked to the needs of the business’.

Cassell et al. (2002) identify selection, appraisal, reward and development as

the practices that consistently demonstrate sophistication across the HRM

literature. In addition, they included the presence of ‘formal HR as it indicated

the presence of a strategic dimension’. Delaney (1989, cited in Redman and

Wilkinson 2009, p.11) argues that there are ten HRM practices that

constituted sophisticated HRM covering; selection, appraisal, incentive

compensation, job design, grievance procedure, information sharing, attitude

assessment and labour management. Delery and Doty (1996, p.805) consider

seven practices: ‘internal career opportunities, formal training systems,

appraisal measures, profit sharing, employment security, voice mechanisms,

and job definition’.

Therefore, whilst research suggests a link between HR sophistication and

performance, there is some debate around the structure of HR needed to

achieve superior competitive advantage. The lack of consensus amongst

commentators weakens the ability of researchers to determine the level of HR

sophistication within a firm. Thus, a HR ‘sophistication scale’ has been

developed as part of this research to aid this process. Each category of the

scale is expanded upon below and is evolved from the extant literature.


Part-time MBA 26

2.4.1.1 The Role of Strategy

Importance has been placed on the role of strategy as an influence on HR

practices, and the presence of a formal HR strategy has been found to imply a

HR-strategy link (Cassell et al. 2002). As highlighted earlier in the literature

review, recruiting, motivating and retaining highly skilled employees is seen by

some as a key source of competitive advantage. However, attracting and

retaining talent is one of the biggest problems faced by small firms (Golhar

and Deshpande 1997) and could influence the likelihood of a firm achieving its

objectives. SME firms have limited resources which must be spread across

functional areas such as finance, production and marketing and HR. This can

mean that firms do not allocate adequate resources for the management of

HR (Personnel Today 2010). Thus, by including the presence of a ‘formal HR

strategy’ in the author’s ‘sophistication scale’, management buy-in to the

integration of HR with strategic objectives can be assessed. When a formal

HR strategy is in place, the implication is that management accept the

thinking that an output of effective people management is increased

competitive advantage.

2.4.1.2 The Role of Communication

Industrial enterprises, prevalent throughout Wales until the early 1980s, are

known to have been heavily hierarchical in their communication style, with top

to bottom communication. However, the service sector has adopted a different

approach ‘ advocating better communication systems, more humanistic work

designs, and more participatory decision processes instead of collective

bargaining’ (Godard and Delaney 2000, p.484). Two-way communication is

seen as a core HRM function. It is one of a number of practices that are found


Part-time MBA 27

in the high-commitment HRM strategies used to elicit commitment and loyalty

from employees (Barnard and Rogers 2000; Nesbit 2005; Guest et al. 2003).

Larger organisations are seen as having increased bureaucracy and are less

able to adapt to their environment (Arthur and Hendry 1992, p.238). This is in

contrast with small businesses, where communication channels have

traditionally been seen as informal and potentially detrimental to the cohesive

approach to competing effectively. However, more recent studies have shown

that this picture may be changing with more innovative communication

channels assisting SMEs in competing against their larger rivals (Bacon et al.

1996).

In professional service firms the most crucial communication has been found

to be peer-to-peer effective working, as this channel is required to meet client

needs (Teece 2003). In addition to supporting the client, improved

communication is seen as one of a number of principal causes of improved

worker performance (Boxall and Makay 2009).

2.4.1.3 The Role of Learning and Development

Previous research has shown training to be indicative of a firm’s commitment

to the cultivation of human resources (Barnard and Rogers 2000, p.1021).

Within the legal services sector the Law Society’s code of conduct stipulates a

minimum amount of ‘continuous professional development’ (CPD) hours per

annum. Whilst this develops competencies within the firm, CPD could mask

the intention of the firm. By adhering to an industry requirement the firm are

not necessarily attempting to cultivate human resources, rather they are

adhering to an industry ‘norm’. Therefore, it is important to understand the


Part-time MBA 28

process of learning and the reason why it is employed within the organisation

to effectively understand the level of HR sophistication.

There are three terms within the learning and development literature that have

increased in recognition over the last two decades and identify the type of

learning culture a firm possesses. The first of which is the 'learning

organisation'. As defined by Gilmore and Williams (2009), a ‘learning

organisation’ learns from its environment, its employees and their

experiences, and applies this knowledge to improve its products and services.

The second is the ‘knowledge creating company’. Primarily concerned with

generating new knowledge through learning it subsequently shares that

knowledge and experience, developing it further, through collaboration

(Nonaka 1991). The third term is known as the ‘communities of practice’

approach, ‘which seek to improve the sharing of good practice at the

occupational level’ (Holman et al. 2002, p.137). The approach takes a cultural

view of learning as it focuses on what groups practice and on the values,

beliefs and norms that are shared through opening up social and virtual

spaces for knowledge exchange (Holman et al. 2002). In all cases, two

indicators of a systematic approach to training are the existence of a training

plan / policy and a specific budget for training’ (Jameson 2000, p.44). The

author’s ‘sophistication scale’ uses both in the identification of HR

sophistication.

Maintaining a level of sophistication in this function implies that the firm gains

competitive advantage through the knowledge and skills they have amongst

their people (Lane and Lubatkin 1998). It is through this that they are able to

innovate new products, processes and services, or improve the existing ones


Part-time MBA 29

to become more efficient and effective (Nonaka 2000). Firms must also react

to changes in legislation, ensuring staff are trained to deliver their services

under the new conditions within which they have to operate (Forstenlechner et

al. 2009). This requires both flexibility, responsiveness and new capabilities

on the part of the firm and the ability to learn and utilise knowledge and skills

on the part of the employee (Edmondson and Moingeon 1998, p.21). The

ability to adapt to changes in the market and exercise acquired knowledge

and skill is an indicator of sophisticated HRM.

Managers play a key role in ensuring that the firm adapts and continuously

improves. They identify changes in the market and ensure that workers are

provided with the environment to gain knowledge and skills, and share that

knowledge in the execution of their work (Eisenhardt and Santo 2002;

Carneiro 2000). Within small firms, managers are very often used to conduct

inductions, which is one practice that is used to identify further learning and

development requirements amongst new members of staff (Redman and

Wilkinson 2006). This activity is vital to the development of the psychological

contract (De Vos et al. 2003), the process by which employees determine how

much they owe the employer and how much the employer owes them.

Another method used to identify training needs is the appraisal system.

Appraisals can be used as a developmental tool and also as a system

whereby future objectives, with provision for training and development needs,

are established in conjunction with the organisations objectives (Prowse and

Prowse 2009). Appraisals have been found to assist employees in achieving

their future performance targets by ensuring they have the skills and

knowledge to do so (Barnard and Rogers 2000).


Part-time MBA 30

2.4.1.4 The Role of Recruitment

Recruitment and selection procedures are used more than any other HRM

practice (Holman et al. 2002). It is generally recognised that well-resourced

selection and recruitment procedures are a critical aspect of enabling a firm to

secure, maintain and develop an effective skill base in an organisation

(Cassell et al. 2002). The HPWS literature examines how rigorous recruitment

and selection procedures foster greater skills and knowledge within an

organisation (Boxall and Makay 2009).

Both the recruitment of talent and the negotiations associated with retaining

and managing it, involve special challenges in the professional services

context (Teece 2003) especially so amongst professional service firms. In this

environment, SMEs are found to compete with larger firms and therefore there

is a higher focus on attracting skilled professionals to add to the firm’s

competitive advantage (Williamson et al. 2002). As large firms are more likely

to have dedicated HR resources, they have the capacity to involve HR

professionals in the recruitment function. Therefore, they have been found to

demonstrate a more formalised recruitment process compared to the small

firm, which is more dependent upon the executives (Carroll et al. 1999). It has

been found that ‘small firms do, in fact, find it hard to attract the calibre of staff

they need’ (Carroll et al. 1999, p.238).

Whilst there is extensive literature on formal and informal recruitment methods

(Carroll et al. 1999; Cardon and Stevens 2004; Golhar and Deshpande 1997;

Williamson et al. 2002), this study focused on the selection methods adopted

by the firm. Upon the identification of suitable applicants, ‘the selection

process, which is based on HRM strategies, should be able to choose and


Part-time MBA 31

then deploy those individuals best suited to contribute to the achievement of

organisational goals and objectives’ (Way and Johnson 2005, p.13).

Increased attention to employee selection has been identified as one of the

characteristics of firms attempting to apply an HRM or a ‘high commitment’

approach to people management. The reasoning is that if the human resource

is genuinely becoming a key source of competitive advantage, then greater

care, time and expense should be invested in the selection of that resource

(Carroll et al. 1999).

Despite evidence discrediting the interview as an effective selection

technique, it remains the most popular in Britain (Barclay 1999). Traditional

unstructured interviews are seen as having low validity (Ulrich and Trumbo

1965) in comparison to structured interviews (McDaniel et al. 1994).

Structured interviews assist in the identification of the pertinent skills the

organisation requires.

Assessment centres provide a more comprehensive approach to selection

(Armstrong 2006). They facilitate a good indication of cultural integration and

assist the candidate in determining for themselves whether they will fit.

However, whilst assessment centres have long been used, they are

expensive and prone to cost-benefit comparisons to other predictors’ (Hough

and Oswald 2000, p.642).

Biodata refers to biographical information that could be found on a CV or

application form. As a selection device it involves identifying those

characteristics of individuals which are correlated with job performance, and

then using this information to guide selection (Redman and Wilkinson 2006).

‘Biodata theory relies heavily on the principle that past behavior is the best


Part-time MBA 32

predictor of future job performance’ (Hough and Oswald 2000, p.643). Whilst

critics claim it may well be considered discriminatory and unethical (Redman

and Wilkinson, 2006), its use signifies a determination on the part of the firm

to select the right candidate and demonstrates a consideration of the impact

human resources have on competitive advantage.

Psychometric questionnaires or personality tests are based around trait or

type theories of human psychology which involve ‘the identification of a

number of fairly independent and enduring characteristics of behaviour which

all people display but to different degrees’ (Toplis 2005). This method is used

to measure the employees fit within proposed employment contexts and have

been rigorously developed, thus producing reliable and valid data.

Whilst there are a number of selection techniques that can assist the selection

process, a critique is that there ‘may be a point of diminishing returns to

objective scales, such that, at some point, measures aimed at eliciting

subjective impressions provide more accurate data than those aimed at

objective reporting’ (Holman et al. 2002, p.333). First impressions have also

been found to be more accurate than other methods by managers who

believe that ‘psychometric tests involve too much work and are not

trustworthy’ (Bacon et al. 1996, P.96). However, an organisational

understanding of recruitment methods and the link with supporting the

strategic objectives of the firm is a positive indicator of sophisticated HRM

(Truss 2001).


Part-time MBA 33

2.4.1.5 The Role of Performance-Related Pay

The prevalence of incentive or contingent pay has increased markedly over

the last 15 years, with schemes such as bonuses becoming particularly

pervasive at senior executive level (Pfeffer 2006). Performance-related pay

schemes involve the award of a pay rise or bonus payment to employees

following an assessment of a defined period. These schemes have become

increasingly common in recent years with two varieties being identified

(Torrington et al. 2009). One involves linking pay to performance, as

measured against specific objectives, and is typically based around

appraising the employees work performance during the previous year. The

other assesses performance in terms of certain behavioural traits (Storey and

Sisson 2005).

Many employers incentivise individuals based on competencies, experience

and job factors (Mathis and Jackson 2008). As there has been a shift to work

teams, the incentive structure changed accordingly (Holman et al. 2002).

Team incentives are based around supporting the goals and objectives of the

team and can support the management in generating a particular work

culture.

To attract the best talent, firms will often have to pay premiums (Hitt et al.

2001). Consequently, firms must be aware of the demand for labour within

their market and ensure that their pay and benefits system meets the

standard expected of their target candidates.


Part-time MBA 34

2.4.1.6 The Role of Job Design and Management Systems

The presence of HPWPs implies a high and consistent investment in human

resources, driving efficiency and productivity whilst also creating benefits for

the employee. These benefits include increased motivation and improved

knowledge (Boxall 2003; Truss 2001). Job rotation, work teams and

empowerment will be considered as part of this section, as all three have

been identified as part of a strategic approach to HRM (Huselid et al. 1997).

Job Rotation

Job design is concerned with assigning goals and tasks to be accomplished

by an employee. Job rotation is an extension of this and focuses on

broadening the skills and behaviours of individuals within the firm and is often

used to assist in knowledge development and sharing (Schuler and Jackson

1999). Very often, job rotation is used to reduce monotony but in a highly

skilled environment it is typically used to increase skill variety (Bratton and

Gold 2001).

There is evidence for the positive influence that job rotation has on the

strategic integration of an organisations goals and its workforce (Friedrich et

al. 2000). This measure of sophistication is deemed to be integrated into long-

term, strategic oriented HRM systems and is prevalent in those companies

that have a strategically oriented approach to HRM (Friedrich et al. 2000).

To enable the facilitation of job rotation an organisation would be required to

cross-train their staff, teaching them how to do different jobs to their own, thus

giving the firm greater flexible capacity. Some of the tangible advantages

noted by Bohlander and Snell (2009) include: reduced employee turnover and


Part-time MBA 35

labour costs, increased productivity and career longevity. In addition, it gives

employees a greater view of the workings of the organisation and facilitates

increased creativity and problem-solving.

Within a knowledge intensive firm, job rotation could be perceived as more

complicated than in other environments. The high levels of training

undertaken by a solicitor result in them specialising within an area of the law.

To transfer to an alternative discipline would require high levels of investment

by the firm and demonstrate a commitment to retaining the alternative skills

and knowledge that the employee possesses.

Work Teams

As teamwork and cooperation are becoming pervasive methods for ensuring

an organised workforce, self-managed work teams have become a crucial

part of high performance HRM (Marchington and Wilkinson 2005; Bohlander

and Snell 2009). An accepted view amongst management is the need to re-

engineer the traditional bureaucratic organisations towards broader and flatter

hierarchical structures (Bratton and Gold 2001; Thomas et al. 2008).

Therefore, job tasks are enlarged and job autonomy is ideally centred on work

teams (Bratton and Gold 2001, p.4). Work teams have been a popular part of

this thinking for over a decade now as the results are believed to include

‘increased employee involvement, more widespread employee learning, and

greater employee ownership of problems’ (Mathis and Jackson 2008, p.169).

Organisational support for teamwork can be evidenced by the presence of

formal work teams but also regular structured meetings attended by those

involved in the team. The structure of team meetings strongly influences the


Part-time MBA 36

likelihood of a group’s ability to generate and leverage existing knowledge and

therefore influence the success of teams (De Long and Fahey 2000, p.115).

Empowerment

Within professional service firms employee discretion has been at the core of

work organisation (Boxall 2003). Teams are more likely to be successful if

they are allowed to function with sufficient authority to make decisions about

their activities and operations (Mathis and Jackson 2008, p.169). This thinking

signifies a shift from the Fordist methods of mass production and the multiple

levels of bureaucracy seen in the 1970s and 1980s. Research has supported

the concept that empowerment in the workplace results in the employee

adopting a more proactive approach to work (Holman et al. 2002) which could

then be expected to link to an increase in their overall performance. Kirkman

and Rosen (1999) found that levels of empowerment were positively linked to

job rotation and team based rewards. These factors will be investigated in the

Sophistication Scale.

2.5 Causal Factors

As highlighted above, it is believed that the creation of more cooperative

labour-management relations will have positive effects on performance, as it

develops an environment in which employees work harder and pursue the

organisation’s objectives as well as their own (Godard and Delaney 2000).

But, if trade unions previously influenced employee relations who, or what, is

shaping and influencing the implementation of human resource management?


Part-time MBA 37

2.5.1 Strategy

2.5.1.1 What is strategic HRM?

It is argued that an organisation’s human assets are potentially the sole

source of sustainable competitive advantage as, within a high knowledge

environment, they are difficult to imitate (Redman and Wilkinson 2006).

Strategic Human Resource Management (SHRM) expands the traditional role

of HR from bureaucratic to strategic. This has evolved over the last two

decades providing a compelling argument for the assumption that firm

performance is influenced by the set of HRM practices the firm has in place

(Becker and Gerhart 1996; Huselid et al. 1997; Wright et al. 2001; Becton and

Schraeder 2009). Bamberger and Meshoulam (2000, p.6) make the case that

SHRM is the process by which ‘organisations seek to link the human, social

and intellectual capital of their members to the strategic needs of the firm’.

2.5.1.2 HR and Business Strategy

The basic principles of strategic human resources management dictate that

an organisations most valuable asset is its people (Chasserio and Legault

2009). It is believed that those firms that invest in progressive HR practices

surrounding those assets are likely to benefit from ‘lower employee turnover,

higher productivity and enhanced financial performance’ (Huselid et al. 1997;

Chandler and McEvoy 2002, p.44). SHRM communicates to the workforce

which behaviours the organisation expects and values through the

employment of HRM practices such as; staffing, socialisation, pay, benefits,

job design, performance management, and training (Way and Johnson 2005).


Part-time MBA 38

By linking SHRM with the firm’s business strategy it is possible to become

more competitive and achieve the over-arching objectives set by the board.

2.5.1.3 Leadership and Management

Whilst the people within the organisation are a potential source of competitive

advantage, the organisation requires ‘HRM capability’, referring to the ability

of management to realise that potential (Amos et al. 2008). With the hub of

economic activity in Wales moving from manufacturing to service-based

organisations within such a short space of time, the author argues that

management are not prepared to effectively enable HRM within their firms.

Adequate management of HR can be a challenging task since knowledge,

skills and attitudes are vital, but elusive resources (Dooreward and Meihuizen

2006, p.39) and with the study of HRM moving at such a fast pace the

expectation of managers to ‘keep up’ is unrealistic. Essentially, by adopting a

strategic approach to HRM a managerial process is required linking human

resource, policies and practices with the strategic objectives of the

organisation (Bratton, 2003). The intention of the board may be to capture the

benefits of linking strategy and HRM, but it is hypothesised that without the

leadership and management to effectively implement such a strategy there

can be no guarantee of success.

To address potential shortfalls in management, firms may have an HRM

department. This has been found to be positively related to numerous HRM

practices in terms of the scope and formalisation or sophistication of a firms

HR (Galang 1999). It would be expected that having a dedicated resource

working on the firms HRM would result in the increased effectiveness of the


Part-time MBA 39

function. However, management must be willing to hand some control over to

the HRM professional(s) in order to develop the link between the function and

the objectives of the firm. One of the main criticisms leveled at these

professionals is that they often lack the power within the organisation to

implement HRM practices (Colling and Dickens 1998).

Commentators have identified a trend where the senior partners of service

firms’ retain control of all strategic decisions, despite the presence of an HR

manager or director on the management committee (Harney and Dundon

2006). Highlighting the difficulties of this situation, research has found that

management attitude was one of the key barriers facing the implementation of

effective HRM (Kane et al. 1999). In addition, deficiencies in the knowledge

base of HRM staff and difficulties with the current state of HRM procedures

were found to contribute (Kane et al. 1999). Where management attitude

towards HR was positive Cassell et al. (2002) found HR was more often

linked to strategy. Within the strategic HRM paradigm managers are important

to the diffusion of employment practices, as they are often able to understand

the economic performance potential of a firm’s assets. In addition, they are

the individuals to promote strategic directives and encourage learning that

links to organisational objectives (Barney 1991; Ireland and Hitt 2005).

Whilst the importance of leadership to the implementation of HR practices is

recognised in the academic literature, the number of specialist HR personnel

on the board of private enterprises had declined between the mid-1980’s and

the late 1990’s (Marchington and Wilkinson 2005). In a situation where a

firm’s leadership is responsible for HR and acts as an employee champion, it

has been found that there is a focus on building a strong workforce (Beardwell


Part-time MBA 40

and Claydon 2007). In addition, evidence shows that the credibility of the HR

function is also increased (Marchington and Wilkinson 2005).

2.5.1.4 Structure

The presence of an HR department has been found to be positively related to

numerous HR practices, not only in terms of the scope, but also qualitatively

in terms of formalisation or sophistication (Dobbin and Sutton 1998; Aycan

2001; Galand 1999). However, with SME’s dominating the enterprise structure

in Wales, the problem presented in the research is that these findings, along

with much management theory, continues to focus on large firms. Much of the

human resource management in smaller firms is very different and under-

researched (Hendry et al. 1995; Cardon and Stevens 2004). With the growing

presence of SME’s in the economy this must be addressed, whilst also

considering the environment within which the firm is operating and the effect

of management choice (Barrett and Rainnie 2002; Harney and Dundon 2006).

The research into SME’s also exposes some other key influences of HRM

including external, structural and institutional factors all deemed as critical to

the shaping and development of HRM parameters (Harney and Dundon

2006).

2.5.2 External Factors

2.5.2.1 Degree of competition in markets

The emergence of HRM came during a period of severe economic recession

in the early 1980s and at a time of business globalisation. The increased

competition from economies such as Japan is often regarded as a critical

factor in developing the use of HRM to meet new challenges within the


Part-time MBA 41

international marketplace (Blyton and Morris 1992). Globalisation has

increased the threat of competition from large firms, operating across a larger

geographical region and with a greater depth of resources (Holman 2002).

The result is pressure exerted on firms to operate more efficiently in defending

their competitive position.

The Clementi Review first mooted proposed changes in the form of

‘alternative business structures’ (ABS) within the legal services sector in

England and Wales thus extending the competition within the market further

(Clementi 2004). The result would mean that businesses entering the legal

sector could do so by alternative business structures that are ‘more cost-

effective, permit different kinds of lawyers and non-lawyers to work together,

and allow for external investment’ (Ministry of Justice 2008). Non-legal firms

such as supermarkets, estate agents, insurance firms and banks could work

with legal firms by forming ABS firms and therefore incorporate legal services

into their product offering (Ministry of Justice 2008). The potential impact on

the market is a flood of new entrants competing in the sector. Suddenly, small

to medium-sized firms could be competing with ABS firms that may have

increased access to finance and a strong client base developed from their

current product base. Currently small firms face the issue of lower levels of

external awareness of their existence and image (Williamson et al. 2002,

p.84). Should the likes of Tesco enter the market, the competitive

environment would become more acute, as consumers of legal services will

no longer be required to review the market in a search for a suitable firm.

One way that firms are attempting to maintain their competitive advantage is

by turning to the management of ‘talent’ to identify, develop, manage and


Part-time MBA 42

retain valuable human resources (Schutz and Carpenter 2008). This discipline

is seen as more crucial than ever in light of ABS and as the demographics of

the workforce changes. In addition, talent management is becoming an

important part of strategic HRM as firms attempt to compete for the best

employees on a global scale (Mathis and Jackson 2008).

Whilst the argument for talent management increases it is somewhat at odds

with the notion of numerical flexibility, which is seen as an attempt by the firm

to breakdown the boundaries between core and peripheral workers (Redman

and Wilkinson 2006). In this scenario, the worker is subjected greater

insecurity whilst the firm gains the ability to change the amount of labour in

response to work levels (Meer and Ringdal 2009). Numerical flexibility is at

odds with the soft approach to HRM, which determines to elicit commitment

from workers with a view to the achievement of company objectives

(Chasserio and Legault 2009). However, if implemented correctly HRM

practices, such as reward management, serve to motivate those workers that

are affected by flexibility practices and enables the firm to obtain the

employee’s engagement and commitment (Armstrong 2007).

The competition for talent is compounded by the shift away from manual jobs

towards higher level occupations in the UK. Whilst the government have

encouraged this shift, the question should be asked as to whether there is the

human skill and competency in place to support this shift. Whilst facing such a

challenging economic climate do businesses have the resources to expend on

staff training that will enable them to compete effectively?


Part-time MBA 43

2.5.2.2 Quality Standards

For the purpose of this research quality standards are considered as those

kite marks which are awarded to firms that meet certain criteria in human

resource provision (Redman and Wilkinson 2006). With the prime example

being Investors in People (IiP) whose focus is on strategic learning and

development, management treatment of the workforce and an integrated

approach to development (Blackwell and Blackmore 2003). Non-sector or

discipline specific standards are considered, such as ISO9001. In addition,

industry specific quality marks are considered such as Lexcel in the legal

sector. These quality marks are awarded following an audit whereby the

auditor examines the firm’s practices against strict criteria.

IiP has become one of the most recognised people management quality

marks in the UK. It provides organisations with processes and procedures to

follow in the management of their people and can assist in the winning of

public sector tenders (Personnel Today 2003). However, it has come under

some criticism due to excessive amounts of red tape and some organisations

question the benefit that the standard brings (Personnel Today 2006). For the

purpose of this literature review, IiP has been explored under the assumption

that it is an external influence on HR due to its non-obligatory nature.

However, it is recognised that IiP is a government initiative and part of the UK

Commission for Employment and Skills (IiP 2010).

Whilst IiP focuses on the management of people, the ISO9001 standard is

more concerned with the design of service quality and customer service

(Corpuz 2006). Training is an immediate outcome, as employees must be

taught new skills and new processes to ensure that they are working to the


Part-time MBA 44

same standard. It also influences the induction of new staff as they need to be

suitably trained to deliver the services against the ISO standard. Whilst ISO is

concerned with the minimal HR context and content, the requirements it

places on management for a vision, mission and quality procedures lends

itself to organisations designing and implementing SHRM practices (Vouzas

2007).

The Law Society’s practice management standard is called Lexcel and is

used by practices to certify that certain standards have been met following

independent assessment (Law Society 2010). The standard that firms have to

reach includes people management practices comprised of: recruitment and

selection, training and development, knowledge and experience management,

induction and appraisals (Lexcel 2010). In addition, strategy is integral to the

standard, especially in regards to recognising the firm’s objectives and people

relevant to the implementation of the plan (Lexcel 2010). Implicated here is

that organisations adhering to the Lexcel standard are more likely to

recognise the link between strategy and HRM, and the importance of human

capital to the firms competitive position.

2.5.3 Institutional

Institutionalist accounts regard organisational behaviour as the product of

individual actions, wider social structures and specific HR practices

associated with the firm’s success (Redman and Wilkinson 2006). This

account prescribes to the notion that the shape of HRM within the firm is not

simply about the decisions that are made within the firm, but also the

externally imposed structures relevant to its environment.


Part-time MBA 45

2.5.3.1 Trade Unions

As previously highlighted, trade unions were once the centre of the

institutional pressure within employment relations. Their influence shaped the

collective organisation and collective bargaining in the 1980’s, providing

employees with a mechanism to voice concerns, using the law to challenge

the discriminatory behaviour of organisations (Dickens 1999). However, the

legislative attack and inhospitable economic environment weakened a

potential source of pressure on employers (Dickens 1999). Considering the

global financial crisis that has gripped the world since 2008, it would seem

that the inhospitable environment has reappeared. Under these conditions

managers are reluctant to recognise unions, fearing increasing wages and a

shift in the employer-employee relationship. The result is that unions are

finding it increasingly difficult to recruit the growing numbers of service sector

workers (Redman and Wilkinson 2006). In a non-union organisation,

management are more likely to take a soft approach to HRM and create a

worker friendly environment (Harney and Dundon 2006). Non-unionisation of

firms, coupled with employee involvement practices, has been shown to

increase performance considerably. However, the evidence is that firms are

less of an institutional force in comparison to thirty years ago (Blanchflower

2007).

2.5.3.2 Employment law

The UK government and a variety of professional organisations regulate a

wide range of employment practices. Some argue that the expectation that

these organisations place on all firms shapes their internal employment

practices (Huselid et al. 1997). An example of the UK government’s impact on


Part-time MBA 46

employment practices is exemplified by the introduction of the national

minimum wage in 1997, which was monitored by the independent Low Pay

Commission. It was a politically controversial move, put in place to address

the UK’s increasing inequality of income, including the growing numbers of

families living in poverty and the increasing drain on public support for those

families (Brown 2009). Whilst addressing social concerns, a recent study

showed that SME’s in the UK believed the primary barriers to business

success concerned legislation including national minimum wage, health and

safety and working time (Bacon and Hoque 2005).

Despite the social success of the minimum wage, commentators have raised

questions concerning the efficacy of the law, exemplified by the Equal

Opportunity legislation of the UK. There is increased disappointment and

disillusionment that this area of employment law has not addressed the

fundamental disadvantages present in the UK’s employment relations’

environment (Redman and Wilkinson 2006). For example, the gender pay gap

sat at 12.2% in 2009 (Office of National Statistics 2010) despite years of this

legislation. In addition, the key equal opportunity practices expected to be

seen amongst organisations is rarely evidenced (Cassell et al. 2002) despite

the legal implications.

There are a number of mediating advisory bodies, with the Advisory,

Conciliation and Arbitration Service (ACAS) being a key component. By

performing a mediating role they serve to interpret legal regulations into

changes in workplace practice (Heery 2011; Marchington et al. 2002). Their

role influences the adoption of HRM within a firm by promoting good practice

and advising both employer and employee on employment relations within the


Part-time MBA 47

workplace. In the case of ACAS this is underpinned by a comprehensive code

of practice. In addition, ACAS have a telephone helpline which is a free

service providing impartial advice (ACAS 2010).

2.5.3.3 Professional Associations

The legal profession is governed by the Law Society of England and Wales

and the Solicitors Regulations Authority is its independent regulatory body.

The SRA is ‘committed to setting, promoting and securing in the public

interest standards of behaviours and professional performance necessary to

ensure that consumers receive good standards of services and that the rule of

law is upheld’ (SRA 2010). The SRA code of conduct clearly sets out

practices which law firms must incorporate. This includes the continual

professional development (CPD) of competencies amongst staff, the training

of supervisors, equality and diversity in the workplace and general business

management.

All solicitors in England and Wales who work 32 hours or more per week are

required to complete a minimum of 16 hours of CPD per year, with at least

25% consisting of participation in accredited training courses (SRA 2010).

This would imply that training and development within law firms would be

higher than standard due to the sectors institutional regulatory requirements.

2.5.3.4 Competition

Whilst operating within the legal services profession may influence the firm,

the influence of competitors in the profession should also be considered. It

has been found that organisations tend to model themselves on other firms

within that field who are perceived as ‘more legitimate or successful’


Part-time MBA 48

(DiMaggio and Powell 1983, p.152). This argument has been linked with the

way that decision makers frame competitive environments and perceive

competitive threats (Porac and Thomas 1990) and is an important

consideration in this research.

2.5.3.5 Management Occupations

The Chartered Institute of Personnel and Development (CIPD) is the primary

professional body concerned with HRM and, whilst CIPD qualification is not a

pre-requisite to practice the profession, the vast majority of practitioners are

members of the CIPD (Kelly and Gennard 2001). Once qualified, the

individual is committed to the CIPD’s Code of Professional Conduct and must

adhere to maintaining good practice in the profession (CIPD 2010). In

addition, they must seek to adopt the most appropriate people processes and

structures to enable the organisation to best achieve its present and future

objectives (CIPD 2010). If one considers that within a knowledge intensive

environment, sophisticated HRM practices are more likely to result in meeting

the firm’s objectives, one could assume that those firms employing CIPD

professionals would be in a position to evidence more sophisticated HRM

processes than those without. CIPD members are required to update their

knowledge through CPD resulting in new concepts and knowledge being

brought back into the firm and shaping the HRM environment.


Part-time MBA 49

3.0 Research Aims:

The aims of this study were:

1. To create a scale that will enable the measurement of HR

sophistication within South Wales based professional service SMEs

2. The exploration and identification of influences on HR sophistication

within South Wales based professional service SMEs

4.0 Methodology

There were a number of challenges when it came to deciding upon a suitable

method to address the central question of this research. Firstly, there is no

definitive consensus for what constitutes sophisticated HRM and there has

been little research into what influences the firms current level of

sophistication. In addition, research on HRM in SMEs provides the challenge

of conducting a study with businesses that typically use HRM in diverse ways,

and are less likely to formalise this function and its processes (Cassell et al.

2002). Consequently, the chosen method needed to ensure the most

representative responses whilst being sensitive to the limited understanding

the participants may have of the theory, and therefore terminology of HRM.

This research is based on a thorough review of the extant HRM and industrial

relations literature. The method of this review is described in more detail in the

next section.

4.01 Literature Review Method

A comprehensive literature review was carried out via key databases and

search engines to explore the areas of interest relevant to the current


Part-time MBA 50

research title. These included EBSCO; ProQuest; Emerald Library; Ingenta

Continental; SwetsWise, Wiley Interscience Journals and Google Scholar.

The search engines were chosen for their access to an extensive range of

business journals and articles and the extent to which searches can be

specified, allowing for the use of precise terminology when exploring the

topics of this research.

The key search terms that were used were:

Human Resources

Management

Influence

Influences

Legislation

Strategic

Barriers

SME

HR

HRM

Sophistication

Sophisticated

High Performance

Work practices

Work systems.

Some of these terms were truncated to increase the likelihood of search hits

and were also searched in synchronisation with related terms where possible.

The author assessed the search results initially by the abstract and

downloaded those papers that were suitable. When reviewing the papers

notes of the pertinent themes were kept and significant references were

annotated. To ensure a systematic search of the extensive literature base a


Part-time MBA 51

notebook listing the references and themes of all reading material was kept.

When the option of searching for ‘related articles’ was available on the search

engine, this was also completed to try and get an entrenched view of the

literature. Public sector sites were important in providing information relating

to the environment the firms were operating in. A number of sources were

used including statswales.wales.gov.uk; www.wales.gov.uk; www.cipd.co.uk

and www.lawsociety.org.uk.

Peer-reviewed journal articles were of critical importance to this research as a

source of new research exhibiting the latest thinking in the specialist area. A

number of journals were accessed that had relevance to the research. These

included:

Human Resource Management

Human Resource Management Journal

Human Resource Management Review

Industrial Relations Journal

Journal of Small Business Management

4.02 In-depth Interviews

The research question required the author to assess both the sophistication of

HR within the firm and the influences on that HR. Thus, the challenge lay in

composing a survey that would deal with the duality of the questionnaire.

Estimating HR sophistication is typically explored through an evidence-based

questionnaire (Guest et al. 2003; Zheng et al. 2006) whilst the influences on

HR should be assessed through exploratory discourse.

It was decided therefore, that the sophistication checklist would focus on

specific practices, as they have been found to be a useful starting point to

begin an investigation and reveal interesting insights potentially lost through


Part-time MBA 52

delving immediately into a strategic focus (Cassell et al. 2002). Critical to the

validity of the questionnaire was to develop a framework to assess a firm’s

level of HR sophistication. This framework was required to also consider that

the research was aimed specifically at SMEs, which may be too small to have

an HR function, or not have a specialist HR employee working full time

(Cassell et al. 2002). This informed the structure of the questionnaire by

ensuring that if a non-HR specialist employee with responsibility of HR was

interviewed, the questionnaire would remain accessible in its terminology.

4.03 The HR Sophistication Scale

There is no consensus amongst researchers as to the framework to be used

to analyse HR sophistication within a firm. Consequently, the author was

required to develop a structured method that would satisfy the core functions

of sophisticated HRM, whilst considering which additional functions should be

included. This was done by undertaking a full review of the literature.

An assessment of the literature on strategic HRM and high performance work

practices revealed that there were core functions that characterised

sophisticated HR within a firm. The research was concerned with assessing

where, on a continuum of HR sophistication, a firm stood. The list of practices

were derived from an extensive review of existing literature and concluded

that seven core HRM functions indicate a firm’s HR sophistication.

Formal HRM Strategy

Communication

Learning and Development

Recruitment and Selection

Flexible Job Assignments

Compensation


Part-time MBA 53

Teamwork

Within the functions it was important to identify sub-categories to effectively

measure sophistication. Having reviewed the literature an ‘HR Sophistication

Scale’ was developed and is shown in Table 1:

Section Sub- Categories

Formal HR

Strategy

Management believe that the main source of competitive advantage is the people

People command the highest level of investment

Company demonstrates how they encourage innovation

Presence quality standards

A written HR strategy

Designated representative on the management committee

Communication Open communication is encouraged

Employee participation in decision making

Conduct staff attitude surveys on a regular basis

Learning and

Development

Written learning and development policy

How the firm identifies learning and development requirements

The training a new member of staff receives

Internal and external training available to staff

Methods for staff to request training

How appraisals are used to identify training requirements

How results of training are measured against organisations objectives

Recruitment

and Selection

Recruitment methods

Compensation Performance related pay

Format of performance related pay

Firm measures pay against competitors

The average salary in the firm

Flexible Job

Assignments

Staff encouraged to rotate jobs

Training offered outside employees current job role

Teamwork Empowerment

Presence of formal work teams

Regularity and structure of formal work team meetings

Table 1 – ‘HR Sophistication Scale’ Criteria


Part-time MBA 54

Once assessed, each firm achieved a sophistication band. The bands were

‘low’, ‘medium’ and ‘high’, and were determined by the firms score in each

sub-category. The firm then achieved an ‘overall’ sophistication band, based

on their cumulative score. The scores were based on a points system within

each function. Points were afforded to the sub-categories within the function

and awarded to the participating firm based on the evidence supporting the

occurrence of the HR practice.

4.04 Influence on HR Sophistication

The second part of the questionnaire was required to facilitate an open

discussion that would explore the influences on HR sophistication within the

firm. This part was structured around asking which agencies the firm had

received assistance from in developing their HR policies. The agencies I

included in the questionnaire were:

Specialist HR consultancies

Lawyers

Trade Unions

Professional Body e.g. Law Society

Professional Network e.g. CIPD

Local business support agency e.g. Business in Focus

Welsh Assembly Government

The approach then needed to be more qualitative and exploratory, lacking the

structure of the first part of the interview. A number of open questions were

asked to encourage a flowing conversation and explore areas of influence.

The questionnaire is included in Appendix 1.


Part-time MBA 55

4.05 Sample

The sample for the study consisted of small to medium size law firms. The

firms were identified by conducting internet research and reviewing the

websites of the firms, to ensure that they met the conditions of the study.

Partners within the firms were contacted and the firm’s participation in the

study was requested. If interest was shown in taking part in the survey an

information pack was sent via e-mail outlining the reasons for and

expectations of the study. The firms interviewed operated largely within similar

specialisms, such as personal injury, employment, commercial property,

litigation and commercial law. All firms interviewed employed less than 100

people and met the definition criteria.

4.06 Inclusion Criteria

There is some ambiguity as to the definition of an SME. Some studies have

considered firm size only (Golhar and Deshpande 1997), whilst others

consider multiple factors including turnover and ownership structure. The

author followed the definition of a small or medium-sized company as set out

by the European Commission (European Commission, 2010). Parameters

included a turnover of less than €50million and less than 250 staff. Autonomy

was also a qualifying factor as it was recognised the results could be skewed

by a small firm, owned and managed by a large business which established

organisational intent on imposing its own processes and structures.

Of the 23 firms contacted, six participated in the study and met the following

criteria:

The firms primary office was located within the NP and CF postcode in

South Wales


Part-time MBA 56

The firm was not a subdivision of a larger group

The firm had under 250 employees

Annual turnover of the firm was less than €50m.

The majority of work conducted by the firm was legal services.

The respondent was responsible for HR within the firm

The above inclusion criteria was stipulated because it clearly defines the

population of interest. In addition, their reliance on high knowledge levels

amongst staff suggests their level of sophistication should be high.

Furthermore, clearly defining the population indicates where the results might

be relevant and generalisable.

The research aimed to sample a variety of law firms, within the criteria set

above, to mitigate the bias that interviewing only firms specialising in one legal

area may cause.

4.07 Participant Firm Profiles

Table 2 identifies the criteria that each firm met:

Participant Criteria 1 Criteria 2 Criteria 3 Criteria 4 Criteria 5 Criteria 6

Firm 1 Met Met Met Met Met Met






Table 2 - Criteria Met by Firm

4.08 Procedure

4.08.1 Data Collection

In-depth interviews were utilised for data collection. This was the only data

collection method used.


Part-time MBA 57

4.08.2 Pilot Interview

A pilot interview was conducted with one person who runs a business in

Cardiff, South Wales following the format. The individual was also responsible

for the HR within the business. This was done to ensure that the terminology

used was accessible and the questionnaire flowed in a logical way. I asked

the pilot for feedback on all aspects of the research format that they

experienced and this was fed back into the method undertaken but was not

included as part of the main research analysis.

Piloting indicated that the material was generally satisfactory although some

minor changes were made. This included an explanation next to any technical

terminology being used to make the questionnaire more accessible and

ensure that the author was able to explain the terms in a clear and concise

way. No structural changes were required in the questionnaire.

4.09 Interviews

Interviews were conducted with firms at their office. The format was as

follows:

Interviewer introduce themselves

Talk through the consent form and explain confidentiality and

anonymity.

Once happy with the contents, the participant signs the consent form.

Conduct interview

Give an opportunity for the participant to ask questions

Explain to the participant that they can request a copy of the final report

The first section of the questionnaire was structured and covered the inclusion

criteria. The rest of the interview followed a semi-structured format and


Part-time MBA 58

included open questions, prompts and probes to elicit meaningful information

from the participant (Dey 1996). Further probes were used to avoid participant

theorising and ‘party line’ theorising (Marlow 2006). This was done by asking

participants to provide examples to support their answers and by asking them

open questions to develop thinking. Once completed, the interviews were

transcribed and these transcripts, along with the recordings, were stored in a

secure location.

4.10 Analysis

When analysing the data the first task was to assess the level of HR

sophistication within the firm. Seven core HR categories were being assessed

and within those functions a number of sub-categories existed. Against each

sub-category there was evidence criteria and a score assigned which would

determine a firms overall score in that HR category. Depending on the weight

of scoring afforded to the sub-category a score of 0.5 or 1 was achievable. It

was possible for a firm to attain a maximum score of 26.5. Scoring this part of

the questionnaire was carried out once the interviews were transcribed.

Provided the business met the evidence criteria a score was assigned.

The second task was to determine the influence(s) of HR sophistication. I

analysed the transcripts of the interviews line-by line and identified concepts.

As the remaining transcripts were reviewed new concepts were found and

further support for these concepts uncovered. They were then collated into

categories, which were grounded conceptually and empirically (Dey 1996,

p.96). The concepts were developed by creating labels and linking excerpts

from the transcripts to the relevant label.


Part-time MBA 59

Throughout the process I was aware that my involvement in selecting the data

placed a bias on what was collected and what was ignored (Dey 1996).

Therefore, I constantly reminded myself of the context in which the firm was

operating, the way in which the data was collected and subsequently

transcribed.

4.11 Ethical Approval

The ethical issues raised prior to undertaking the research were related to

consent and anonymity. Ethical approval was received from Cardiff Business

School Ethics Committee prior to starting the interviews and the ethics

approval is shown in Appendix 2. All participants took part in the study

voluntarily and their identities remained confidential.


Part-time MBA 60

5.0 Results

The purpose of this chapter is to convey the results of the interview concerned

with the HR sophistication scale. Subsequent empirical chapters will explore

the factors that influence HR sophistication. The information below was

gathered in the first section of the interviews undertaken with six law firms,

based in South Wales. For the purpose of analysis, this chapter will be

presented as a review of sophistication by HR function followed by analysis by

firm.

5.1 HR Sophistication Scale

Key characteristics of the firms, such as average percentage of full time

employees and locus of HR decisions are shown in Table 3, along with their

HR sophistication band. The findings demonstrate a range of results across

the six firms. Firms 3 and 6 both evidenced high levels of HR sophistication.

Firms 1, 2 and 4 were deemed to have medium levels whilst the HR

sophistication of firm 5 was low.

Average % of

full time

employees

(rounded)

Locus of HR

decisions

(Board / Non-

board)

Overall 'HR

Sophistication

Scale'

banding

Firm 1 83 Non-Board Medium


Firm 3 80 Board High


Firm 5 100 Board Low

Firm 6 80 Board High

Table 3 – Firm Characteristics and Key Influencers


Part-time MBA 61

5.2 HR Function - Sophistication Band

Each firm was banded according to its level of sophistication within each

function thus contributing to its overall score shown in Table 3. Table 4 shows

the breakdown of the overall HR sophistication scale into the component HR

functions. Of the HR functions, all are used to a ‘High’ level by at least one

firm. Learning and Development is the most progressive HR function amongst

those participating and flexible job assignments is the least used HR function.

Fo

rma

l H

R S

tra

teg

y

Co

mm

un

icati

on

Lea

rnin

g a

nd

De

ve

lop

me

nt

Re

cru

itm

en

t a

nd

Se

lec

tio

n

Co

mp

en

sa

tio

n

Fle

xib

le J

ob

As

sig

nm

en

ts

Tea

mw

ork

Firm 1 Medium Medium High Low Medium Medium Medium

Firm 2 Medium High Medium Low High Low High

Firm 3 Medium Medium High High High Low High

Firm 4 Medium Medium High Low Low Low High

Firm 5 Medium Low Low High Medium Low Low

Firm 6 High High High Medium High High Medium

Table 4: HR Sophistication Scale by HR Function

5.3 Cross Sectional Analysis

The following section of this chapter will deal with the cross-sectional analysis

of the data, based on the HR functions recognised in the ‘sophistication

scale’.

5.3.1 Function 1: Formal HR Strategy

All firms achieved a ‘Medium’ score in this function apart from firm 6 which

achieved the only ‘High’ banding. A ‘High’ banding is where the participant


Part-time MBA 62

has demonstrated that most, if not all components within the function are

integrated within the firm’s HRM. The integration of HR and strategy in the

firm is evidenced through a written HR strategy, board level commitment to

the delivery of that strategy and a high level of investment in the employees of

the firm. According to the scale, a further element of high tier sophistication

within this function is the presence of an HR related quality standard. Only

half the firms held a quality standard, those without cited increased levels of

bureaucracy and demanding audit schedules as reasons why they had none.

Firm 3 had been working towards a quality standard but decided to stop due

to the high administrative demands of the accreditation.

5.3.2 Function 2: Communication

The firms that were banded ‘medium’ to ‘high’ (firms 1, 2, 3, 4 and 6),

referenced formal structures that aid communication which included; monthly

staff meetings, bi-annual all staff meetings, communal areas designed

specifically to encourage communication, company intranet, events,

suggestion box schemes via e-mail and staff attitude surveys. The firm with

the lowest score lacked the formal structure of the other firms and

communication was at a department level and controlled by the partner in

charge of the department.

5.3.3 Function 3: Learning and Development

Firms 1, 3, 4, 6 were in the ‘high’ band of the Learning and Development

function of HR. All firms cited the requirement to meet Continual Professional

Development (CPD) standards, determined by the Law Society as the primary

focus of identifying training requirements and all provided internal and


Part-time MBA 63

external training. Written training policies, mechanisms to feedback the

outcome of training by the trainee, the use of appraisals to identify training

requirements and evaluation of trainings impact on the firms’ objectives were

all features of those in the ‘high’ band. Firm 2 however, did not have a written

training policy and had no mechanism for evaluating the impact training had

on the objectives of the firm. Firm 5 was evaluated in the ‘low’ band of

Learning and Development, as CPD requirements was the singular form of

identifying training requirements.

5.3.4 Function 4: Recruitment and Selection

Firms’ 3 and 5 demonstrated high levels of sophistication within the

recruitment and selection function. These firms used extensive methods to

ensure they selected the suitable candidate. Firm 6 used structured

interviews, an IQ test, biographical measures and an assessment to underpin

their recruitment and selection process. Firms 1 and 4 used structured

interviews and biographical measures whilst firm 2 used structured interviews

only. No firm used all the techniques represented in the Sophistication Scale.

However, structured interviews were common to all firms.

5.3.5 Function 5: Compensation

All participants commented on the importance of the firm being competitive in

the area of compensation, with all citing the use of recruitment agencies to

inform them of industry averages. All firms wished to pay average or higher

than average wages to attract the suitable candidates. Firm 1 commented:


Part-time MBA 64

Firm 6 was the only firm that universally linked pay with performance. Where

performance bonuses prevailed was amongst fee earners. Whenever pay was

linked to performance it was done so on an individual basis and no firms

demonstrated a mechanism to include team or company performance. Aside

from firm 6, non-fee earners received no structured bonus.

5.3.6 Function 6: Flexible job assignments

Flexible job assignments received the lowest overall average score due to the

lengthy training process and the expense at developing an employee’s

knowledge to expert standard. Within firm 6 there was evidence of staff

changing roles and extensive training provided to facilitate a member of staff

that possessed the skills and attitude they were looking for. The participant

from firm 6 commented:

Within firms 2, 3, 4 and 5, staff were not encouraged to rotate jobs and

training was confined to their current job role.

5.3.7 Function 7: Teamwork

The most common sophistication band for this function was ‘high’, with firms

2, 3, 4 and 6 highlighting the use of formal work teams in the efficient delivery


Part-time MBA 65

of high quality work. There were examples of empowering non-supervisory

staff to make work-related decisions within these firms. Firm 2 commented:

Firms 2, 3, 4 and 6 were able to demonstrate a structured and formal

approach to the scheduling and running of team meetings. Teamwork in firm 5

was within the ‘low’ band as they did not encourage non-supervisory staff to

make work related decisions. Equally the formal work teams did not meet in

any regular fashion and the format of those meeting was not centrally

structured.

5.4 Firm Profile

The following section in this chapter is concerned with evaluating the

sophistication of each firm. The firms have been ranked according to their

sophistication band, as shown in Table 5, and will be discussed in that order.

Overall HR

'Sophistication

Scale' band

Firm 3 High

Firm 6 High

Firm 1 Medium

Firm 2 Medium

Firm 4 Medium

Firm 5 Low

Table 5 – Overall ‘Sophistication Scale’ - Ranked


Part-time MBA 66

5.4.1 Firm 3: High

Firm 3 achieved a high level of HR sophistication and was the only firm to

have a dedicated HR resource. With this resource being on the management

committee there was a strategic approach to a majority of the functions. The

participant was able to evidence multiple communication channels and

describe their comprehensive approach to recruitment and selection. Where

the firm demonstrated a low level of sophistication was within the ‘flexible job

assignment’ function. Job rotation was not encouraged due to the difficulty of

rotating roles within the legal services sector. This was attributed to the highly

specialised knowledge accrued by solicitors over many years of training.

5.4.2 Firm 6: High

Firm 6 achieved a high level of HR sophistication, in particular evidencing the

facilitation of job rotation and the comprehensive integration of HR practices

with the firm’s strategy. Describing two occasions where solicitors had been

supported in rotating jobs, the firm achieved a high level of sophistication in

this function. In addition, management’s support for the implementation of

sophisticated HR practices resulted in high levels being achieved in

communication, learning and development and compensation. Firm 6 was the

only firm not to receive a ‘low’ banding in any of the functions.

5.4.3 Firm 1: Medium

Firm 1 achieved a medium level of HR sophistication. The firm achieved a

high level of sophistication against the ‘learning and development’ criteria,

supported by a desire to develop through the effective identification of training

needs and opportunity to attend training courses. In addition, the participant


Part-time MBA 67

was able to discuss multiple channels by which a member of staff may

request training. A ‘low’ level of sophistication was realised in recruitment and

retention. It was here that the firm adopted an informal approach, relying on

interviews and biographical measures. Aside from the sophistication scale,

the impact that the managing partner had on the firms HR practices was

accentuated throughout the interview.


Firm 2 achieved a medium level of HR sophistication. In the functions of

communication and compensation they achieved a ‘high’ banding. In

reference to communication, the firm had implemented a number of methods

by which effective and open communication could be facilitated. An intranet

could be used by all the staff to communicate with management and regular

structured team meetings resulted in suitable inter-team communication.

Compensation was also a focus of firm 2, with a strategy in place to ensure

that they recruited the right people. Consistently measuring the rates of pay in

the sector ensures the salaries and associated packages aided them in

attracting the personnel required to achieve their objectives. The firm did not

support job rotation and would not be willing to facilitate such a request,

resulting in a ‘low’ band of sophistication for this function.


Firm 4 also achieved a medium level of HR sophistication. Learning and

development and teamwork were where the firm scored within the ‘high’ band.

Teamwork was demonstrated through the presence of formal work teams and

regular structured meetings, which aided communication and facilitated the


Part-time MBA 68

identification of learning and development requirements. The firm was found

to have ‘low’ bands of sophistication within the functions of recruitment and

selection, compensation and flexible job assignments. Staff were not

encouraged to rotate jobs and there were no bonuses or performance-related

pay scheme for staff.

5.4.6 Firm 5: Low

Form 5 was found to have a ‘low’ level of HR sophistication. However, out of

all firms, firm 5 had the most sophisticated recruitment techniques including

the use of psychometric tests, impressions management and assessment

centres. Low levels of HR sophistication were found in communication,

learning and development, flexible job assignments and teamwork. The

approach to each function was departmentalised and did not form part of a

comprehensive strategy. This led to a lack of cohesion amongst the

management of the firm, resulting in the breakdown of sophisticated HR

practice application.


Part-time MBA 69

6.0 Introduction to Empirical Chapters

A total of ten influences on HR were identified in the six South Wales based

professional service SMEs that participated in the research. These include;

leadership and management, external occupational regulation, management

occupations, quality standards, government regulation, dedicated HR

resource, trade union, Welsh Assembly Government (WAG) funding and

competition. The influences occurring within each firm are shown in Table 6 in

which the firms are ordered by level of sophistication.

Overall 'HR Sophistication Scale' band Influences of HR

Firm 3 High

Leadership and Management

Dedicated HR Resource

Trade Union

External Occupational Regulation

Management Occupations

Firm 6 High


Quality Standards


WAG funding

Firm 1 Medium




Firm 2 Medium

Quality Standards



Government Regulation

Firm 4 Medium

Quality Standards




Firm 5 Low


Competition Table 6 – Influences of HR sophistication


Part-time MBA 70

Initial analysis of the findings show that there are three mechanisms that

influence the sophistication of HR within a firm. The first of these are ‘required’

influences, regulatory requirements imposed on the firm by the environment

and the market within which it operates. They include external occupational

regulation and Government regulation. The second mechanism is

‘accountability’ influences, which are those factors the firm can opt in to or out

of and infer a minimum standard of HR practices typically enforced through a

code of conduct. These include quality standards, management occupations,

trade unions and within one, WAG funding. The final mechanism is the

‘leadership’ influence, which is concerned with the integration of business

strategy and HR within the firm. Leadership and management as well as the

presence of a HR department are part of this mechanism. Each mechanism

will form an empirical chapter.


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7.0 ‘Required Influences’ of HR Sophistication

‘Required influences’ of HR are those which are outside the firm’s control.

They are factors that cannot be ignored without repercussions on the firm’s

ability to compete within the market. These factors are known as ‘table

stakes’, meaning they are the minimum requirements a firm must meet in

order to operate and therefore confer little by way of competitive advantage

(Boxall and Makay 2009). Depending upon the market sector within which a

firm is operating, the ‘table stakes’ may change.

7.1 Employment law

Typically, these ‘table stakes’ come in the form of employment law and

provide a level playing field for all operating within the constitutional

boundaries of the government. In Wales, employment law affects all

participating firms in the same way. They must adhere to certain legislation

such as minimum wage, equal opportunities, health and safety at work and

individual practices such as disciplinary and dismissal. However, employment

law was not found to be an influence on HR sophistication amongst

participants, but instead an enforcer of minimum standards. When asked

about the influence that the law has on HR, the participant from firm 5

commented:

This comment demonstrates the view of participating firms that employment

law is used for ensuring that bases are covered and that the firm is not


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exposed to legal action. The participant recognises that creating a

sophisticated HR function conducive to knowledge sharing and high

performance is about going over and above the practices imposed by law. In

fact, the participant from firm 3 highlighted this vehemently. The individual

believed that the responsibility to implement HR practices was far removed

from the requirement to implement employment law.

Whilst the law will shape internal employment practices, this comment

demonstrates that it will not enable a firm to generate a sophisticated HR

function. It is more a platform on which a firm can build. The law is being used

within the firms to ensure that they meet legislative requirements when they

undertake controversial action such as disciplinary procedures or redundancy

consultations. For example, firm 4 had within the preceding twelve months

been taken to an employment tribunal. When asked what impact this had had

on the firms’ processes, the participant confirmed that:

This shows that firms are using the law to ensure that they meet legislative

requirements in particular circumstances. The procedure that the participant

went through prior to the tribunal was engrained within the processes of the

firm. However, this would not confer a competitive advantage on the firm over

and above those in the same sector. Similarly, firm 2 had recently been


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forced, due to the economic climate, to make a number of staff redundant.

Commenting on this the participant said:

This exemplifies the feeling amongst participants that employment law is

about covering the ‘table stakes’ ensuring that any action taken is within the

constitutional boundaries set by the government. In addition to these

standards, firms operating in the legal services sector must consider the code

of conduct of their regulatory authority.

7.2 Solicitors Regulations Authority (SRA)

The Law Society of England and Wales and the SRA govern all participating

firms, consequently firms must uphold the SRA code of conduct (SRA 2010).

This clearly sets out practices that law firms must comply with and raises the

‘table stakes’. All participating firms confirmed the SRA had an influence on

the adoption of HR practices. In this regard, firm 1 commented:

The requirement to abide by certain practices had been considered by all

firms and it was apparent that the principles set out in the code of conduct

were front of mind when it came to the development of people. The SRA

place a significant amount of emphasis on learning and development and

firms are expected to maintain and develop legal competencies within the

organisation. Firms must commit to invest in the continual professional


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development (CPD) of their staff. A minimum of 16 CPD hours per annum is

mandatory and 25% of those must be with accredited training courses (SRA

2010). What was apparent was how participants interpreted these

requirements.

Firm 5 demonstrated a ‘Low’ level of sophistication, but was aware of the

regulations and the requirement to meet the regulatory standards stating:

What is apparent is the concern with meeting the CPD requirements and that

each solicitor is responsible for their own personal development plan. This is

somewhat at odds with the research that has shown training to be an

indication of a firm’s commitment to the cultivation of human resources

(Barnard and Rogers 2000). It is the SRA, acting as a mediating force that

imposes the cultivation of human resources as a core requirement of

operating in the market (Heery 2011). Within firm 5 it is this that was found

driving training, as opposed to the use of training to support the achievement

of the strategic objectives of the firm.

At the high sophistication end of the scale, firm 3 recognised the requirement

to meet the regulatory standards, but considered learning and training more

as an opportunity to develop the resources of the firm and thus gain

competitive advantage through the knowledge and skills they have amongst

their people (Lane and Lubatkin 1998). When asked whether they have a

learning and development policy the participant from firm 3 commented:


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This demonstrates the commitment the firm has to develop their staff

alongside their commitment to meet regulatory standards.

7.3 ‘Required Influences’ Conclusion

Analysis of the information collected shows that those firms relying primarily

on ‘required influences’ such as government and industry regulation are less

likely to be operating under a sophisticated system of HRM. Within the legal

services sector it is apparent that the SRA regulations provide a foundation

upon which sophistication can be added. On its own the regulation provides

the table stakes by which all firms must operate and do not result in high

levels of HR sophistication. However, the framework of the SRA imposes a

higher than average level of HR sophistication than other non-regulated

sectors. This suggests that regulatory requirements can influence a level of

sophistication that would otherwise be absent. This finding contrasts with the

work of Dobbins and Sutton (1998) who found that a weak state leads to the

implementation of HRM divisions to interpret the ambiguous nature of

regulation. However, in the sampled law firms HR departments had not been

used to implement these regulations, as the regulator provided clear

guidelines for the application of required practices. Thus, whilst the regulatory

framework infers a low level of sophistication, it can be argued that

competitive advantage through HR can only be realised by building upon the

regulatory influences within the market.


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8.0 ‘Accountability Influences’ of HR Sophistication

One reoccurring theme throughout the interviews could be categorised as

‘accountability influences’. These are those factors inferring a minimum

standard of human resource management through the willingness of the firm

to adopt a non-regulatory code of practice. The findings show that those firms

with a ‘medium’ to ‘high’ level of HR sophistication uphold one or more of

these codes. The influences will be considered in more detail by drawing on

evidence from the interviews.

8.1 Management Occupations

The first factor to be considered is the influence ‘management occupation’ has

on HR sophistication and is focused on the role of the Chartered Institute of

Personnel and Development (CIPD). The CIPD is the primary professional

body concerned with HRM and its code of conduct places a responsibility on

its members to adopt the most appropriate people processes and structures in

supporting the firm objectives (CIPD 2010). The CIPD was considered to be

a causal factor for the occurrence of sophisticated HR practices within firms 2,

3 and 4. The participants of these firms professed to the importance of the

CIPD in both forming and developing their HR processes. Within firm 3 the

participant considered the CIPD to be the most influential factor in forming

sophisticated HR practices beyond the traditional remit of an HR role:

Ascribing to the code of conduct, CIPD members are committing to a

minimum level of continual professional development (CPD) per year. This


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imposed learning is intended to assist in identifying changes in practices

whilst facilitating the development and maintenance of an environment

conducive to knowledge and skills sharing (Eisenhardt and Santo 2002;

Carneiro 2000). Within a knowledge intensive sector this is vital to secure

competitive advantage (Harney and Dundon 2006). The CIPD’s role of

communicating best practice in HR has been a support for firm 2. The advice

and training of the professional body has been used to build on existing

knowledge within the firm, thus positively influencing their level of HR

sophistication.

Whilst this evidence would suggest that membership of the CIPD infers a

higher level of HR sophistication, firms 1 and 6 highlighted that CIPD

membership is not a precept for sophistication. Firm 1 was associated with

the CIPD, whilst the participant from firm 6 was a member. In both cases,

evidence of the impact upon the firm’s HR practices could not be established.

Ostensibly, membership of the CIPD was not enough to develop

sophistication. It was the application of the theory by the management that

was vital. Firm 4 demonstrated the influence management incurred on the

implementation of CIPD practices within the firm. In 2008, the individual

responsible for HR departed and all responsibilities were passed to firm 4’s

participant. Both previous and current employees were CIPD members yet the

outcomes were very different. The incumbent explained the difference a

proactive approach to implementing CIPD practices has on the firm’s people

processes:


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This statement would suggest that the outgoing manager had not been

implementing the practices required by the firm to achieve its objectives.

Complementary to this finding is the concern raised by the work of Rose

(1996) relating to the ability of management to not only devise sophisticated

HR practices but to implement and operate them. The inference that

management can limit HR sophistication intimates that the presence of CIPD

membership, or association, does not guarantee sophistication. Instead it

should be considered an indicator that sophistication may occur, provided the

management is in place to support it.

8.2 Quality Standards

While membership of the CIPD is on an employee basis, quality standards

concerned with employment relations such as Investors in People (IiP), are

related to the universal practices of the firm. Thus, addressing the role of

management in its implementation (Blackwell and Blackmore 2003). Firms 2

and 6 had attained the IiP quality standard and demonstrated a ‘medium’ to

‘high’ level of overall HR sophistication. Firm 4 was in the process of IiP

accreditation and was able to demonstrate that, by working to the standard,

their sophistication was improving. Discussing the impact IiP had had on the

firm the participant commented:


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The implementation of a training plan demonstrates the firm’s commitment to

the cultivation of human resources (Barnard and Rogers 2000), thus

contribution to the heightened HR sophistication of the firm. Within the firms

where IiP was adopted, it was found to be a strong influencer. The participant

from firm 6 highlighted its effectiveness in structuring productive people

management practices:

The implication here is that staff are seen as providing a basis of competitive

advantage, whilst further demonstrating the firm’s expansion of HR from its

traditional form to a strategic role (Chasserio and Legault 2009; Huselid et al.

1997). The use of IiP to support this principle reflects the firm’s determination

to align people practices with its objectives, at the same time as striving for

low employee turnover, increased productivity and enhanced financial

performance (Huselid. 1994; Chandler and McEvoy. 2002). Firm 6 discussed

the access to WAG funding in assisting them to achieve the IiP standard. In

addition, they had accessed a number of training funds administered by WAG.

Subsequently, this has been considered as an potential influence over the

adoption of quality standards and sophisticated HR practices.

Both firms 3 and 6 demonstrated a ‘high’ overall level of HR sophistication,

although firm 6 recognised the importance of the IiP standard while firm 3 did

not. For those without the quality standard there was a common theme

throughout the transcripts, summarised by firm 3:


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The added administration and bureaucracy was found to be a critical factor in

firm’s decision not to adopt quality standards and has proved to be a criticism

of IiP in the wider literature (Personnel Today 2003). However, inferred in the

comment above is the importance of integrating effective HR practices to

achieve the objectives of the firm. Suggested here is that the identification and

implementation of an effective moderator to support the development of these

practices is influential in establishing sophisticated HRM practices. This will be

explored further in this paper.

The International Organisation for Standardisation (ISO) standard 9001, was

recognised during the interviews in firms 4 and 5. Whilst firm 5 acknowledged

that this standard was becoming ‘increasingly important’, only firm 4 had

attained the standard amongst the participating firms. The benefit to the firm

of achieving the standard was as a method of ensuring compliance within

parameters of quality, a reduction in the expense of liability insurance and

improved credibility when tendering for larger contracts. Whilst training is a

requirement of the quality mark, the focus was perceived to be on the

fulfilment of the quality processes, not increasing the effectiveness of human

resources. Thus, contrary to the work of Vouzas (2007), evidence to

demonstrate that the ISO standard lends itself to the organisations design and

implementation of sophisticated HR practices was not present in this

research.


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In comparison to the non-market specific ISO9001, the Law Society’s practice

management standard, Lexcel is applicable solely to law firms and contains

defined people management practices (Lexcel 2010). Firm 6, who

demonstrated a ‘high’ level of HR sophistication was the only firm to have

Lexcel, but all firms were aware of the standard. It was found that Lexcel was

used by firm 6 to improve the management of the practice and is seen as

important to their continual development:

The recommended sector-specific practices within Lexcel were beneficial, as

were the annual inspections and both have served to shape the structure of

the firm. However, firm 3 rebuffed these highlighted benefits:

In addition, firms 1 and 5 also commented on the high level of work required

in getting these standards. Without dedicated resource they intimated that it

would be difficult at best, if not impossible to manage.

The intention of the Lexcel standard is to improve people management

practices and integrate strategy into these practices (Lexcel 2010). It became

apparent that in firm 3 alternative techniques were being used, resulting in a

similarly sophisticated outcome. Therefore, the requirement for Lexcel was

lessened. Interestingly, firm 5 recognised the Lexcel standard as being the


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‘obvious’ choice of standard for solicitors, yet had not adopted the standard

themselves. Commenting on Lexcel the firm’s participant stated:

When discussing Lexcel, firm 5 referenced firm 3 by name, thereby providing

evidence that they were benchmarking against competitors. By considering

the actions of competitors in their decision-making firm 5 conform to the

findings of DiMaggio and Powell (1983, p.152) stating that organisations tend

to model themselves on other firms within their field which are perceived as

‘more legitimate or successful’. Firm 5 had used the perceived competitive

threats of quality standards amongst other law firms to determine their

strategy in this regard. What had not been considered were the alternative

mechanisms firm 3 had in place to achieve high levels of HR sophistication.

One of those mechanisms was the recognition of a trade union. Firm 3 was

the only firm in the study to recognise a union and did so to ensure that the

applied people practices met the high standard set by the union. On joining

the firm the participant of firm 3 recognised changes to their HR practices

were required:


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Practices including open communication, high involvement and extensive

learning and development had been implemented in firm 3 in an attempt to

elicit commitment and loyalty from the employees (Barnard and Rogers 2000;

Nesbit 2005; Guest et al. 2003; Chasserio and Legault 2009). The extant

literature stipulates that the involvement of a trade union is at odds with this

‘soft’ approach to HR, as this has previously been associated with non-

unionised organisations (Harney and Dundon 2006). The ability to blend ‘soft’

approaches to HR along with recognising a union is more likely to be a result

of the knowledge intensive environment in which the firm is operating. Within

this environment, competitive advantage is more often attained through the

knowledge and skills possessed amongst staff (Lane and Lubatkin 1998).

Firm 3 recognise the importance of having committed employees and the

competitive advantage that it infers:

Within a sector where there are changes in legislation and new conditions

within the market (Forstenlechner et al. 2009), ensuring that the firm’s

employees possess the competencies required to deliver a superior service

relies on investing in those individuals. By adopting sophisticated HR

practices, firm 3 are more likely to communicate to the workforce the expected

behaviours and values (Way and Johnson. 2005) thus, becoming more

approachable by customers and more able to deliver high quality services.


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8.3 ‘Accountability Influences’ Conclusion

The voluntary nature of accountability influences should, in theory, imply that

firms adopting codes of practice or quality standards possess higher than

average levels of HR sophistication. However, the significance of these

influences was found to be tempered by the level of authority possessed by

those charged with the implementation of HR.

Firm 6, accredited by Lexcel and awarded the IiP standard, achieved a ‘high’

overall level of sophistication. Firm 3, accountable to a trade union, achieved

the same level and possessed none of the accreditations. In both cases, the

accountability influences were distinct. The defining factor of firms 3 and 6

was the participants’ seat on the management committee of the firm and

therefore, the authority to implement changes to the firms’ HR policy and

practices was theirs. However, if authority is the primary influence, it does not

explain the ‘low’ HR sophistication level of firm 5 as the participant was also

on the management committee. This will be explored in the following chapter.


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9.0 ‘People Influences’ on HR Sophistication

As previously recognised, the basic principles of strategic human resource

management dictate that an organisation’s most valuable asset is its people

(Chasserio and Legault 2009). The integration of strategy and HR is

fundamental to this argument and it is through the deployment of

sophisticated HR practices that the firm seeks to realise these benefits.

Presented in this chapter is the finding that just as employees infer a

competitive advantage on the firm, those responsible for HR mediate the

firm’s level of HR sophistication. In doing so, this chapter will explore two

possible ‘people influences’ namely, the importance of leadership and the

presence of a dedicated HR resource.

9.1 The Importance of Leadership

Firm 3 recognised the importance of ‘HRM capability’ within the firm, referring

in part to the ability of management to realise the potential of its people (Amos

et al. 2008). The participant stated:

Demonstrated here is the leaderships’ focus within firm 3 on achieving

heightened competitive advantage through the effective management of their

human resources. Research by the Wales Employment and Skills Board

(WESB) support this approach, finding that businesses in Wales can become

more competitive through adopting ‘positive and forward-looking approaches

which combine strong leadership and management with good HR and working


Part-time MBA 86

practices’ (WESB (1) 2010, p.27). In turn, this supports the work of Bratton

(2003), which identifies the importance of the management in linking strategic

objectives with HR practices. Firm 6, who also attained a ‘high’ level of

sophistication, commented:

When communicating the importance of employees to the success of the firm,

the participant in this case described in greater detail how management’s view

of human resources integrates with strategy, and is then applied through the

organisation. Whilst the managing partner of the firm retained control of the

strategic decisions, the teams within the firm were empowered to function with

sufficient authority to make decisions about their activities and operations

(Mathis and Jackson 2008). Similarly, employee discretion was evidenced by

firm 4:

The managing partner’s decision to remove targets from a highly driven

environment would suggest an understanding that empowerment in the

workplace results in the employee adopting a more proactive approach to

work (Holman et al. 2002). The positive financial results experienced by the

firm would infer validity to this thinking. Whilst targets have been removed,

firm 4 had a strong communication structure, which continues to transfuse the

strategic objectives throughout the firm. The participant commented:


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The evidenced level of understanding demonstrates the ability of the firm’s

leadership to communicate the strategic objectives of the firm within the wider

organisation. Communication has often been linked with improved worker

performance (Boxall and Makay 2009) and this firm was found to be

competing with larger firms, thus supporting the work of Arthur and Hendry

(1990).

Further exploration uncovered additional evidence supporting the role of the

leader in influencing HR sophistication within the firm. Firm 1 was quick to

point out the impact the managing partner has had on their practices:

This demonstrates the integration of strategy with the human resources of the

firm and infers an increased level of HR sophistication. Through the

introduction of structure to team meetings, there is a greater likelihood that

existing knowledge will be leveraged for the competitive advantage of the firm

(De Long and Fahey 2000). In addition, the senior partner was found to be

preparing the firm for pending changes in legislation ahead of time, thus

enabling the firm to train staff to deliver their services under new conditions

(Forstenlechner et al. 2009).

Amongst the firms that evidenced leadership and management as a major

influence on HR sophistication, there was a heightened awareness of the


Part-time MBA 88

need to adapt to changing competitive forces within the legal services sector.

Firm 4 explained that during the height of the recession they had planned to

move staff from the commercial department to litigation, in an attempt to retain

the skills of those employees. Whilst the maintenance of revenue enabled

them to avoid implementing this plan, it demonstrated the firm’s flexibility and

determination to change with the market, whilst retaining the knowledge and

skills they have developed amongst their staff (Edmondson and Moingeon

1998).

The proposed introduction of ‘alternative business structures’ (ABS) within the

legal services sector meant that non-legal firms such as supermarkets could

work with legal firms and incorporate legal services into their product offering

(Ministry of Justice 2008). Firm 1 was aware of this and in response, set out a

clear vision:

The senior partner identified that the firm will grow on the strength of its

people, thus the firm developed a number of mechanism to support the belief.

This was demonstrable by the firms’ commitment to adopt sophisticated

compensation packages in an attempt to attract suitable talent.

The HRM literature emphasises the importance of leadership in the

implementation of employee management practices, and it was found to have

negatively impacted the practices of firm 5. The firms’ participant commented:


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At the time of the interview the firm had changed structure and no longer had

a managing partner, instead opting to be run by a management committee.

However, the legacy of the former managing partner continued to have a

negative impact upon the sophistication of the firm’s HR practices. During this

individuals reign ‘soft’ HRM was frowned upon and the investment in

developing people resources was sidelined. It is argued that this finding adds

to the work of Rose (1996) who raised a concern about the resolution, skill

and resources of managers to devise sophisticated HR practices. In addition,

this evidence suggests that management attitude was one of the key

moderators of the implementation of sophisticated HR practices (Kane et al.

1999).

Whilst each participant was the individual responsible for HR in their

respective firms, those in the ‘high’ band of HR sophistication possessed two

factors that, when combined, inferred higher levels of sophistication. The first

was the participant’s presence on the management committee. The second

factor was the positive attitude of the management committee towards the

opinion that their people formed the basis of their competitive advantage. This

finding is in line with the work of Colling and Dickens (1998) who argue that, if

those responsible for HR within the firm lack the power to implement the

necessary practices, the HR person is a potential barrier to the adoption of

sophisticated HR. This evidence therefore suggests, that the presence of a

leader who believes that the primary competitive advantage of the firm comes


Part-time MBA 90

from the people it employs, and acts on those beliefs, will possess higher

levels of sophisticated HR practices.

9.2 Dedicated HR Resource

The academic literature has found that the presence of an HR department is

positively related to numerous HR practices in terms of the scope and

formalisation or sophistication of a firms HR (Galang 1999). Both firms 3 and

6 were found to have ‘high’ HR sophistication levels. However, only firm 5

retained a dedicated HR resource. This suggests that the presence of an HR

department would not necessarily infer HR sophistication, as it was not

common to both high performers. Instead, the ability to implement HR

practices and the framework to support this work was found to be a critical

factor. Introduced by the participant of firm 3 was the importance of

implementation in the development of strategic human resource practices:

The comment suggests that, should HR responsibility remain within the realm

of the management committee, its tactical implementation may not be

realised. Within a professional service environment it has been found that HR

control remains with the senior partners, despite the presence of a dedicated

HR resource (Harney and Dundon 2006). Whilst firm 4 did not have a

dedicated HR resource, the participant was responsible for HR within the firm

and supported the implementation of the sophisticated HR practices initiated

by the managing partner:


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The participant’s comment suggests that the firm must be prepared to support

the implementation of sophisticated practices, as without support the benefits

arising from these practices may not be realised. Firm 6 ensured that

practices were being implemented by creating a culture of continual

improvement thus negating the requirement for a dedicated HR resource.

This culture was facilitated through regular meetings amongst key members

of staff who were made responsible for the implementation of the adopted HR

practices. Implicit in this finding is that whilst small firms are less likely to have

dedicated HR resources compared to large firms (Carroll et al. 1999), the lack

of a dedicated HR resource did not imply a loss of sophisticated HR practices.

Instead, as highlighted by the work of Marchington and Wilkinson (2005),

influence may depend more on how the managing partner views HR. Firm 6

evidenced that, where HR was championed by the managing partner, the

function was legitimised (Beardwell and Claydon 2007). The firm

demonstrated that even without a dedicated resource, it was competent in

implementing a system whereby sophistication was facilitated.

9.3 ‘People Influences’ Conclusion

The singular recurrent theme throughout this research is the requirement for a

managerial process to link human resource, policies and practices with the

strategic objectives of the organisation. The evidence suggests that this is

more likely to occur in a firm where the leadership believe the basic principles

of strategic HRM: that the employees are the primary source of competitive

advantage (Chasserio and Legault 2000). The findings also point to the need


Part-time MBA 92

for those responsible for HR to have the necessary authority to implement HR

practices. In an environment of leadership, as evidenced in firm 3 and 6, the

primary focus of the firm is the implementation of effective people

management strategies. However, firm 5 provides an example of an

environment where the leadership’s rebuttal of the practice of sophisticated

HR results in low levels of sophistication.

The presence of a dedicated HR resource was not found to be critical to the

sophistication of HR practices. Instead, when HR was championed by the

managing partner, the function became more sophisticated and possessed

the authority to implement people management practices. In addition, it was

found that firms without a dedicated resource adopted or constructed HR

frameworks, within which sophistication could be realised. Suggested in this

evidence is that, whilst the legitimisation of HR sophistication by leadership

typically results in higher levels of sophistication, without a dedicated resource

or suitable framework, there is no guarantee that sophistication will be

realised.


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10.0 Conclusion

When designing this research two aims were identified. The first was to create

a scale that would enable the measurement of HR sophistication within South

Wales based professional service SMEs. The second was to explore and

identify the influences on HR sophistication within the same target group.

Considered below are the findings of the research and how they relate to

HRM theory. Also reviewed are the implications of the findings for the

implementation of sophisticated HR practices in the legal services sector of

South Wales. Finally the methodological limitations of this study are discussed

along with suggested opportunities for further research.

10.1 Findings

10.1.1 Sophistication Scale

The multiplicity of opinion within the HRM literature compounded the

difficulties of assessing a firm’s level of HR sophistication (Pfeffer 1998;

Becker and Huselid 1999; Cassell et al. 2002). Subsequently, the author

developed the HR ‘sophistication scale’ which enabled the measurement of

the overall HR sophistication levels within the participating firms. In addition,

the scale identified the sophistication within each of the seven HR functions

considered. The functions were considered to be: formal HR strategy;

communication; learning and development; recruitment and selection; flexible

job assignments; compensation and teamwork. Having applied this scale to

the interviewed firms, the findings presented a full range of results. The

‘learning and development’ function was the most sophisticated amongst the

participating firms, found to be so due to the regulatory structure of the sector.


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‘Flexible job assignments’ achieved the lowest level of sophistication due, in

part, to the lengthy process of acquiring knowledge within a new legal area.

Firms 3 and 6 were found to have the highest levels of overall HR

sophistication, but the level in some functions differed between the two firms.

For example, firm 6 embraced ‘flexible job assignments’ and discussed their

developed approach to facilitating job rotation. In contrast, firm 3 was found to

have a low level of sophistication in this function as they were less open to the

possibility of job rotation, due to the complexity and expense behind such a

transition. This function achieved the lowest scoring across all the

participating firms.

Firms 1, 3, 4 and 6 achieved a high level of sophistication within the function

of learning and development. Mature yet innovative practices were in place to

ensure that the staff were suitably developed, thus demonstrating a

commitment by the firm to cultivate its human resources (Barnard and Rogers

2000). These firms recognised the important role their employees played in

achieving organisational objectives (Barney 1991; Ireland and Hitt 2005). Firm

5 was found to be within the low band of sophistication in this function. The

disjointed approach to the development of its staff saw separate approaches

being adopted by each department. This lack of cohesion was influential in

their overall ‘low’ sophistication level.

Where firm 5 was found to have a high level of sophistication was within the

recruitment and selection function, adopting a number of methods to ensure

they secured an effective skill base (Carroll et al 1999; Cassell et al. 2002).

This was in contrast to the low level of sophistication demonstrated by firms 1,


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3 and 4, who adopted informal techniques within this function often

synonymous with small firms (Bacon et al 1996).

10.1.2 Influences

To date, the practice of HRM has been the subject of considerable academic

analysis (Redman and Wilkinson 2006) and the expansion of the HR role from

bureaucratic to strategic has provided a compelling argument for the influence

HRM practices have over firm performance (Becker and Gerhart 1996;

Huselid et al. 1997; Wright et al. 2001; Becton and Schraeder 2009). The

‘sophistication scale’ provided a foundation upon which the influences on the

firm’s level of sophistication could be determined. The identification of these

influences addressed the second aim of the research, thus expanding upon

the HRM literature.

From a sample of South Wales based small to medium sized legal service

firms, the findings show that the influences can be grouped into three distinct

categories. The first of these is concerned with the influence that the

‘leadership’ has on the firm’s level of HR sophistication. This category was

found to include the leadership and management of the firm along with the

presence of a dedicated HR resource. The second category was found to be

‘accountability’ influences which include management occupations and quality

standards. Finally, ‘required’ influences included legislative and regulatory

requirements inherent in the legal services sector.

The ‘leadership’ influence category comprises leadership and management

and the presence of an HR function. Colling and Dickens (1998) argued that

those responsible for HR within the firm often lack the power within the


Part-time MBA 96

organisation to implement HRM practices. The findings support this theory,

suggesting a positive link between the possession of authority and the

implementation of sophisticated HR practices. They indicate that the highest

level of HR sophistication occurs within those firms in which the leadership

believes that the employees are the primary source of competitive advantage

(Chasserio and Legault 2000). Both firms 3 and 6 achieved the highest levels

of sophistication and both participants held a seat on the firm’s management

committee. In keeping with the work of Harney and Dundon (2006) on non-

unionised workplaces, both firms adopted a ‘soft’ approach to HRM using

multifarious practices to elicit staff commitment (Legge 1999). Infused

throughout their practices was the belief that people were valued assets and

investing in the development of those assets was crucial in maintaining the

firm’s competitive advantage (Legge 1999).

The findings were somewhat at odds with the literature presented by Galang

(1999), which identifies a positive relationship between the presence of an HR

department and the formalisation and sophistication of a firm’s HRM. Whilst

two firms achieved high overall levels of sophistication, and all firms achieved

high levels within at least one HR function, firm 3 was identified as the sole

possessor of a dedicated HR resource. This would suggest that, whilst a

dedicated HR resource may assist with the development and implementation

of HR practices, it was not critical to the sophistication of HR.

In the absence of a dedicated HR resource, the influence of leadership on HR

sophistication was found to be maintained and even enhanced, through the

adoption of a HR framework which supported the implementation of

sophisticated people management practices. These ‘accountability’ influences


Part-time MBA 97

include management occupations and quality standards and benefit the firm

by providing the skills and resources required to devise sophisticated, non-

union, employee relations regimes and operate them competently (Rose,

1996). In the case of firm 6, which did not have a dedicated HR resource, this

framework came in the form of Investors in People (IiP) and Lexcel. These

two standards were shown to have a significant impact on the firm’s level of

sophistication. In the case of firms 2 and 4, they had achieved IiP and

ISO9001 respectively. Their overall ‘medium’ level of HR sophistication

implied that, whilst ‘accountability’ influences increase the firm’s level of

sophistication, the impact is reduced in an environment deficient of leadership

support. However, the evidence suggests that the voluntary nature of these

standards indicate a higher level of HR sophistication within those accredited

firms.

The research identified trade unions as an ‘accountability’ influence. Firm 3’s

recognition of a trade union demonstrated their willingness to be accountable

to an external moderator. This is somewhat in conflict with the argument that

HRM has replaced trade unions (Farnham and Pimlott 1995; Dundon and

Gollan 2007) and suggests that, much like in larger organisations, recognition

can be found alongside sophisticated HRM practices (Redman and Wilkinson

2006).

Whilst industry regulation featured as an influence on all the participating

firms, the findings suggest that, within a knowledge intensive firm, legislative

and regulatory influences have a lesser role in the development of ‘high’

levels of sophisticated HR practices. The role of the regulatory body, the SRA,

was highlighted by all firms as making a significant contribution to the high


Part-time MBA 98

levels of sophistication demonstrated in the learning and development

function of the sophistication scale. They were found to be a mediating force,

imposing the cultivation of human resources as a core requirement of

operating in the market (Heery 2011). Firm 5 demonstrated that the reliance

upon regulation to inform the HR practices of the firm results in ‘low’ levels of

sophistication. Subsequently, it is considered that in its current form,

regulation cannot be relied upon as the sole influence of HR practices if the

firm wishes the elicit commitment and high performance from its employees.

Implicit to these findings is the suggestion that stronger regulation can

influence the sophistication of HR within legal service firms which conflicts

with the work of Dobbins and Sutton (1998). Their research indicates that

higher levels of HR sophistication occur in weak state such as the United

States.

In conclusion, in a firm within which the leadership believe that the employees

are the primary source of competitive advantage, there is a higher likelihood

of the presence of sophisticated HRM practices. In addition, the voluntary

adoption of accountability factors suggest that the firm will present a higher

than standard level of HR sophistication. The evidence also demonstrates that

the reliance on regulation, in its current form, will provide a minimal level of

HR sophistication.

10.2 Implications

There are numerous implications of this research which will be explored in this

section. The extant literature argues that, by operating within a knowledge

intensive environment, a firm must develop sophisticated people management

practices to establish a competitive advantage (Stredwick 2005). Whilst a


Part-time MBA 99

focus of the research to date has been on the HRM-performance link (Guest

et al. 2003), this work indicates those factors most influential on a firms HR

sophistication and can therefore be used to inform future research.

In contrast to the work of Alvesson (2004), the findings indicate that the

environmental factors presented by previous research, is not a determinant of

HR sophistication. The ‘sophistication scale’ demonstrated a range of results

across the firms, all of which were operating in the same sector and in the

same geographical region. One critical factor in shaping sophistication was

the level of authority held by the individual responsible for HR within the firm.

In addition, accountability factors provide a framework by which firms can

implement sophisticated people management practices. These findings

identify internal factors as more important in shaping sophistication than the

environment within which the firm operates.

By developing a HR ‘sophistication scale’, a framework is now available to

assess the level of HR sophistication within legal service firms. Should a firm

match the inclusion criteria stipulated in the methodology section of this study,

the assessment can be applied. This can be used for further research, or

alternatively as a benchmark for firms wishing to increase their level of

sophistication.

When undertaking this research, the second aim was to identify the influences

on HR sophistication. By applying three HR influence categories, ‘required’,

‘accountability’ and ‘leadership’ to the findings, this ensures that the academic

theory is disseminated to practitioners who desire greater understand about

the influences on sophistication. Additionally, firms are able to recognise their

own influences and identify gaps in their current approach to achieving HR


Part-time MBA 100

sophistication. The paper can therefore be used as a tool by the legal services

firms desiring a higher level of sophistication or by those who wish to classify

their primary influences.

The findings can be built upon by further research into the influences on HR

sophistication within South Wales based professional service firms. Targeted

research into each influence category could be undertaken, to provide greater

detail as to the form the influence takes. Quantitative research could be

undertaken with a larger sample, whilst adhering to the inclusion criteria and

thus further increasing the validity of the research.

10.3 Methodological Limitations

Within this study, HR sophistication is a broad construct, the determination of

which is heavily influenced by participant’s knowledge of the practices

occurring within the firm (Huselid et al. 1997). By interviewing only one

participant per firm, the research is restricted to the experiences of that

individual. It is suggested that future research involves a number of

participants within each firm to attain a broader perspective.

Participant theorising, the situation where participants provide an answer they

believe the researcher wishes to hear, was considered when developing the

study. However, one cannot eliminate its occurrence without further in-depth

investigations. In future studies it is suggested that, where possible, the

researcher collect hard copies of the supporting evidence. For example, the

firms training policy, completed appraisal forms, post development feedback

forms, HR strategy and documented communications between management

and staff.


Part-time MBA 101

By focusing on firms operating from South Wales it is recognised that there

will be cultural differences that may not occur elsewhere. These differences

can influence an individual’s interpretation and experiences of the subject

matter. This highlights the requirement for the sophistication scale to be

validated.

The ‘sophistication scale’ was devised by conducting as full a literature review

as possible under the conditions set by the university. This research was

exploratory in nature and sought to examine the level of sophistication within

the firm. To date there is no unitary definition of HR sophistication, hence

there is no standardised measurement of such which encompasses the

research base. It was therefore appropriate to employ a rudimentary scale

which was used alongside qualitative data collection. Future research could

validate the scale in by testing it on a larger scale (McNeil 2005). This would

ensure that the purpose of the questionnaire is clear and that it addresses the

research points. The practicalities of implementing the scale would be

considered along with the reliability of the results obtained by others using the

questionnaire.

Finally, in eliciting and shaping the data obtained in this study, it is recognised

that the researcher presents limitations through their preconceptions and their

knowledge boundaries related to the subject area (Dey 1996).However, it is

believed that this research provides a great start for further research into the

influence on HR sophistication in SMEs.


Part-time MBA 102

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12.0 Appendix

12.1 – Dissertation Questionnaire

12.2 – Ethical Consent Form


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12.1 Appendix 1: Dissertation Questionnaire

Section 1 – The organisation

a. Please can you confirm the name of the organisation.

b. Are you responsible for the Human Resource Management in this

organisation? Yes No

(if selected ‘No’, end interview and thank them for their time)

c. Please can you confirm your role in the organisation (job title)

d. What are the main activities in your job role?

e. Currently how many employees do you have on the payroll in this

organisation?

i. How many of these employees work full time (i.e. 30+ hours per

week)

ii. How many of these employees work part-time (i.e. fewer than 30

hours per week)

f. What was the annual turnover of the organisation last year?


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Under €50 million Over €50 million

g. Please describe the core functions of the business Professional Services Other… (Please describe)

h. Is your organisation a sub division of a larger group?

Yes No

If ‘yes’ end interview

Section 2 – Strategy

a. As an organisation what do you believe is the main source of your competitive advantage?

i. The people you employee

ii. Marketing

iii. Finance

iv. IT

b. Does (answer to question a) command the highest level of investment (financially)?

i. Yes

ii. No

c. If no.... what does?


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d. How does the company encourage innovation?

CLARIFY: Could you tell me a bit more about that?

Why does the company use this method?

e. What quality standards does the company have and wish to attain?

WHY?

f. Do you have a written HR strategy?

i. Yes

ii. No

WHY?

b. Do you have a designated HR representative on the management committee?

i. Yes

ii. No


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If ‘Yes’, who is that person and what is their job title?...................

Section 3 – Communication

a. Is open communication encouraged in the organisation? (Open communication is the organisation facilitating comms that goes up, down and across)

i. Yes

ii. No

Could you give me your definition of what open communication is?

If ‘yes’, how?.............

b. Do you encourage employee participation in decision making? (employee participation is defined as….)

i. Yes

ii. No

c. How do you do that? E.g. Do you have a staff suggestion scheme?

i. Yes

ii. No

ANYTHING ELSE?

d. Do you carry out staff attitude surveys on a regular basis (annual, quarterly, monthly)?

i. Yes

ii. No

HOW IS THAT INFORMATION REPORTED BACK?

Section 4 – Training or Learning and Development

a. Do you have a learning and development policy?


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i. Yes ii. No

If ‘yes’ – Who puts this policy together? How often is this put together?

b. How are learning and development requirements for the organisation identified?

c. What training does a new member of staff receive (please specify period of time this training lasts)

d. Is the following type of training available to members of staff:

i. Internal (on-the-job)

Yes No

ii. External

Yes No

WHY?

e. How might a member of staff go about requesting training?


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f. How does the organisation identify training requirements?

g. How are performance appraisals used to identify training requirements?

h. How are the results of training and its impact on the organisations objectives measured?

Section 5 – Recruitment and Selection

a. When recruiting for a post, which of the following selection methods are used?

i. Structured interviews

ii. Psychometric tests

iii. Biographical measures

iv. Assessment or development centres

v. Impression management

vi. Other (please specify)


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Section 6 – Compensation

a. Is pay performance related

Yes

No

b. If yes, which of the following is it related to?

i. Individual

ii. Team / Department

iii. Company

c. How do you measure pay against your competitors?

d. What is the average salary in the business?

Section 7 – Flexible Job Assignments

a. Are staff encouraged to rotate jobs?

Yes

No

If yes, how and why?

b. Is training confined to the employees current job role?

Section 8 – Teamwork


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a. Does this company empower non-supervisory staff to make work-related decisions?

Yes

No

If yes, how does it go about doing that?

b. Are there formal work teams in this organisation?

Yes

No

c. If yes, how often do these work teams meet?

Section 9 – External intervention

a. What do you believe has influenced the implementation of your HR within the firm?


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b. Which of the following agencies have assisted your organisation in developing your HR policies?

Specialist HR consultancies

Lawyers

Trade Unions (if so, which one)

Professional body (if so, which one) e.g. Law society, Lexell

Professional network e.g. Chamber of Commerce, CIPD? (if so, which one)

Local business support agency e.g. Business in Focus (if so, which one)

Welsh Assembly Government

a. Have you accessed any grants to assist you in developing your organisations human resource management strategy?

i. Yes

ii. No

If ‘Yes’ which grants have been accessed? (Please list)

Type of Assistance Date Source Amount

E.g. Workforce Development Programme

Sept 2008 WAG £9,543

b. What do you think of the Welsh Assembly Governments plans to support the Professional Service Industry in Wales?

c. How will it impact you?

End of questionnaire


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12.2 Appendix 2: Ethics Consent Form

the influences on hr sophistication in south wales based professional service firms

Documents

signedcandidate date

hursthighlightstudent

great support

south wales

professor heery

marketing group

study group

correction services