Trust employees, or enforce controls?

While at Bath University, I co-wrote a very short essay with Stefanos Kouris.

The essay title was overly long and complex; however, the aim was to discuss how to get the most out of employees. Do you trust your employees, or do you enforce strict controls on their activities?

The answer: it depends of course.

Controlling and monitoring employees and their actions has the opportunity to reduce the direct labour costs required to run a business. This management style would be suitable for a manufacturing line where job roles are well-defined, skill demands are low and specific tasks are often repetitive in nature.

On the other extreme, there is the commitment system. Under this system, employers aim to get more from workers by giving more to them (e.g. freedom, space for thought and training). Employees work in teams, form common interests, take on responsibility and some management duties, gain a broad skillset through continuous training and have loosely defined job descriptions. This approach is ideal for companies focused on innovation or creativity. There is no way to micromanage innovative thinking in a software company for example.

In reality, not all employees within a company require the same degree of control or freedom. Consider the different job roles at a firm to think about this….

Having two approaches to employee management is an oversimplification. There are hybrid options.

Hybrid option one: The long-term oriented control strategy. This style adopts a control approach, but continually invests in training for employees, for long-term employment – an example would be a Waitrose supermarket assistant.

Hybrid option two: the regulated commitment model. This approach requires teamwork, communication and trust. Yet, jobs are well- defined, and rules and procedures are required for consistency and to meet regulations. An accountant role would be a good fit here.

Our conclusion: implementing the correct management approach depends on the job role, the firm’s industry and its corporate strategy. Clearly, a “one-size-fits-all” approach to management & HR practices must be wrong. Therefore, the extent you trust your employees to complete their work depends on the context and scope of their role and a firm’s corporate strategy.

Full Essay (for the people that love references):

This essay takes a resource-based view of human capital, proposed by Wernerfelt (1984) and Barney (1991), as a facet that promotes a firm’s competitive advantage. Through this lens, this essay suggests a contingency approach, as opposed to a universalistic approach, is the most appropriate strategy to maximise a firm’s competitive advantage; in other words, “one-size doesn’t fit all”. While a one-size approach ignores business and job specific requirements, we suggest particular organisations favour different positions along a sliding scale from a control-based strategy to a commitment-based practice. The ‘best fit’ system for an individual organisation will be determined by aligning business and HR strategy.  Commitment and control strategies are ‘ideal’ opposites and rarely feature in a contemporary setting; however, hybrid strategies, such as long-term oriented control (LTOC) and regulated commitment systems (RC), can operate between these polar opposites. Firstly, this essay introduces and provides examples that resemble control and commitment systems. Furthermore, we critique the idea that commitment and control systems exist in their ‘ideal’ form in the ‘real’ world. Second, two hybrid forms that take a mixed approach to enhancing human capital are introduced. Moreover, we argue although contrary to belief, the commitment-oriented strategies do not dominate control-oriented strategies. 

The control HRM system aims to establish order, reduce direct labour costs and optimise efficiency (Walton, 1985). Individuals, under a control system, have fixed job descriptions which are supervised and directly controlled by managers (Verheul, 2004) - often used in manufacturing industries (Hauff et al., 2014).  Foxconn, a large-scale global manufacturer, resembles the ‘ideal’ control strategy. Anecdotally, Chan’s (2010) Foxconn report finds managers operate with strict control and supervision over employees, to the extent to which employees must shout robotic responses in unison to management queries. Job roles at Foxconn are well-defined, skill demands are low and specific tasks are often repetitive in nature.

Conversely, the commitment HRM system “aims to get more from workers by giving more to them” (Baron and Kreps, 1999, p. 189). Under the ideal commitment strategy, employees: work in teams, form common interests, take on responsibility and some management duties, gain a broad skillset through continuous training and have loosely-defined job descriptions (Baron and Kreps, 1999). The commitment strategy is appropriate for innovation business strategies (Arthur, 1992) and is best represented in the real world by Google. Google’s top leaders and its committed employees are driven by a passion for innovation. To hire and retain the best talent, Laszlo Bock (Google’s senior vice-president of HR) states that Google introduced three HR measures. First, presenting a common ‘mission’ - this aligns employees’ interests with organisational goals. Secondly, trust between employees and Google is cemented by the firm’s willingness to share board materials. Thirdly and most importantly, Google places an emphasis on employees’ ‘voice’; in other words, encouraging employees’ high levels of participation and a willingness to take on responsibility (CBS, 2015).

Although close, the aforementioned examples do not fully resemble the ideal commitment and control types. Despite Foxconn having most attributes of a control-based strategy, robots are replacing a growing percentage of the workers in Foxconn (BBC, 2016); therefore, a larger proportion of the workforce are working on higher value jobs, requiring a more commitment focused model to align business strategy with HRM strategy. Equally, various elements prevent Google from being an ideal commitment strategy. Performance measures are used at Google, admittedly not unilaterally by a manager, but their presence prevents the firm from being an archetypal example of a commitment HRM strategy. Google’s HR department argues the surveillance is their way to promote help for employees; however, in reality, it is to assess employee performance (CBS, 2015). Additionally, different HR policies internally within organisations must be considered for different job roles, as some organisations such as Nike have both strategies within the company (commitment in its marketing but control in its manufacturing factory). Therefore, as there are no ‘ideal’ HR strategies, hybrids must be considered.

The two hybrid forms that will discussed, are the two proposed by Hauff et.al (2014), the LTOC system, which combines aspects of the commitment strategy such as, long-term employment relationships and continuous training. An example of this is Waitrose, as employees (referred to as ‘partners’) operate in teams and act as shareholders of the business yet the nature of their role requires control (BBC, 2017). The second hybrid form is the RC system, this integrates control elements such as well-defined jobs, rules and procedures. The RC system is exemplified by an accountant, as teamwork communication and trust is important; yet, well- defined jobs, rules and procedures are required for consistency and to meet regulations. These hybrids are used to produce the ‘best fit’ between HR and business strategies in the external and internal context - different mixes will depend on the implemented business strategy. External factors include a country’s institutional arrangements, such as trade unions, labour regulations and culture (Su & Wright, 2012). Internal contexts include a firm’s individual culture and size. 

Although it is argued in most cases commitment-oriented HRM systems dominate the high-control-oriented system (Walton 1985; Kaufman, 2013; Waldman, 2013), surprisingly Hauff et.al (2014, p.438) discovered the opposite in Germany, with the two control-oriented systems representing 61% of the firms they analysed. This might be an anomaly or a misconception as it is assumed the western world adopts more of a commitment-oriented HRM system and developing countries, such as China, adopt control-oriented HRM systems, as they have a higher percentage of employees operating within manufacturing organisations. However again, surprisingly, Su and Wright (2012) argue rather than a control-based system, a hybrid system was more widely applied in Chinese firms, and “contributed more to the Chinese firms’ performance than the American based high-commitment and high-involvement work practices did” (p. 2083).

To conclude, we argue there are no ‘pure’ examples of control and commitment strategies, therefore neither can be the best practice. Although commitment-oriented systems are said to be ‘preferable’ and more common, this is not the case. Examples are observed that closely resemble both extremes but are imperfect fits. Furthermore, two hybrid systems operate in the space between the ‘ideal’ extremes, are more evident in contemporary settings and form two realistic options to implement a contingency approach. Depending on the business strategy implemented in an organisation (due to internal and external contexts), either the LTOC or the RC system will provide the ‘best fit’ to optimise human capital. The most appropriate system will be chosen dependent on its ability to align the implemented business strategy with HR policy. Finally, we suggest further research must be done to challenge assumptions made about HR policies implemented by western nations and Asian-tigers.

References:

Arthur, J., 1992. The Link Between Business Strategy and Industrial Relations Systems in American Steel Minimills. Industrial and Labor Relations Review, 45(3), pp. 488-507.

Barney, J., 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, 17 (1), pp. 99-120.

Baron, J.N. and Kreps, D.M., 1999. Strategic human resources: Frameworks for General Managers. New York: John Wiley & Sons.

BBC., 2016. Foxconn replaces 60,000 factory workers with robots [Online]. Available from: https://www.bbc.co.uk/news/technology-36376966 [Accessed 09 November 2017].

BBC., 2017. John Lewis staff bonus cut again [Online]. Available from: https://www.bbc.co.uk/news/business-39216159 [Accessed 14th November 2017].

CBS This Morning., 2015. How Google is reinventing the workplace [Online]. Available from: https://www.youtube.com/watch?v=H8qj2aEyaRg [Accessed 09 November 2017].

Chan, D., 2010. Workers as Machines: Military Management in Foxconn. Students & Scholars Against Corporate Misbehaviour [Online]. Available from: https://www.somo.nl/wp-content/uploads/2010/08/military-management-in-Foxconn.pdf [Accessed 8 November 2017].

Hauff, S., Alewell, D., and Hansen, N.K. (2014). HRM Systems between Control and Commitment: Occurrence, Characteristics, and Effects on HR Outcomes and Firm Performance. Human Resource Management Journal, 24 (4), pp. 424-441.

Kaufman, B.E., 2013. The economic organization of employment: systems in human resource management and industrial relations. A. Grandori (ed.), Handbook of Economic Organization, Cheltenham: Edward Elgar. 

Su, Z.-X. and Wright, P.M., 2012. The effective human resource management system in transitional China: a hybrid of commitment and control practices. International Journal of Human Resource Management, 23(10), pp.2065–2086.

Verheul, I., 2004. Commitment or Control? Human Resource Management Practices in Female and Male-Led Businesses. The SCALES-paper [Online]. Available from: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.336.6618&rep=rep1&type=pdf [Accessed 8 November 2017].

Walton, R. E., 1985. From Control to Commitment in the Workplace. Harvard Business Review, 63 (2), pp. 77-84.

Waldman, M., 2013. Theory and evidence in internal labor markets, R. Gibbons and J. Roberts (eds), The Handbook of Organizational Economics, Princeton, NJ: Princeton University Press. 

Wernerfelt, B., 1984. A Resource-Based View of the Firm. Strategic Management Journal., 5 (2), pp. 171-180.