How Would You Account for the Rise of Hr

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How would you account for the rise of the human resource function within large firms? Word Count: 1928

MSc in Management Year One

How would you account for the rise of the human resource function within large firms

The term “human resources” is used to refer to the department of a business or organization that deals with the hiring, administration and training of staff (Oxford Dictionary, 2012). The field of HR management is a bit more complicated to define, as it seems to have a variety of meanings. This confusion reflects the different interpretations found in the existing literature and probably mirrors the evolution of the field. Boxall and Purcell’s (2003) define HRM as “all those activities associated with the management of the employment relationship in the firm.” The HR function encompasses everything from recruitment, training and development, performance management, compensation and benefits, employee relations and communications to organizational effectiveness and management development. The field of HR has developed tremendously since the industrial revolution. Like management accounting it was originally seen as a boundary function but it has now shifted to an absolute central position in the firm. The rise of the human resources function is not limited to multinational companies. Small and medium enterprises engage more and more in a mix of human resources practices and there is evidence that this implementation has improved performance levels (Chandler & McEvoy, 2000). However, for the purpose of this essay, we will focus specifically on large firms where the HR function is much more developed. There are many different factors that account for the fast development of this function in MNEs. The first and maybe most ‘historical’ factor is strongly linked with the traditional function of HR. The development of a strict set of labour regulations increased the importance of HR as protection against possible legal actions (coercive mechanisms). The second factor is DiMaggio and Powell’s concept of institutional isomorphism (1983). Large firms tend to respond to uncertainty by mimicking their competitors. They are also greatly influenced by trends in the management field and often take the “appearance of rationality” to attract potential investors. The last factor is probably the most fashionable at the moment. Since Huselid’s 1995 article in The Academy of Management Journal, the HR function is viewed as a way of gaining competitive advantage. HR management is becoming paramount in the firm’s strategy and in some companies it has become more important than other departments. The classical administrative function or HR has changed and more and more tasks are being outsourced. This allows HR department to be transformed into business partners. The HR function in large firms is a key player in the organization’s compliance structure. Compliance is defined as “the state or fact of according with or meeting rules or standards” (Oxford Dictionary, 2012). Since the industrial revolution the labour regulation 2

How would you account for the rise of the human resource function within large firms

has drastically changed. There has been a transformation in mentality and employee’s welfare has become one of the major concerns of regulators. These new sets of rules as well as the development of unions, have given employees the legitimacy to defend themselves against arbitrary management decisions (Freeman & Medoff, 1984). Companies are becoming more and more accountable for their actions and are exposed to legal actions if they do not comply with the regulation. HR departments are in charge of making sure that the company respects the legislation and this is one of the reasons why they have gained so much power. Legal action not only affect companies’ bottom line but they can also affect their reputation. Large firms are dependent of their image and reputation because they need shareholders and investors...
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