In a session few weeks ago, my lecturer shared his thought related to marketization of human resources management (HRM) and the potential demise of HRM caused by it. I was a bit confused but was so interested to learn about it more, as I thought that by using the word ‘demise’, my lecturer seemed to give no room for ‘improvement in HRM’ which I pretty much was not agree with it. The discussion, however, started from how financialization shapes corporate governance and impacts the HRM.
In short, financialization is defined as the way economies being operated both nationally and internationally which are currently linked to the increasing role of financial institutions, motives, markets, and actors behind it (Epstein, 2005:3). The era of financialization is believed to start in the moment when the idea of a “market for corporate control” came up in the 1970s and 1980s (Lazonick, 1992). “Market for corporate control” would suggest that the market conditions (which one of the indications is the price of stocks) determine the fate of the company. Batt and Appelbaum (2013) explain that whenever the value of the company’s stock is under its assets’ value, it would easily be traded, rearranged, and some parts of it could be sold again.
As the financialization happened, the new form of corporate governance which leads to marketization of HRM takes place.
Marketization of HRM refers to the idea that HR strategies and its practices have to be ‘pro-market’ instead of ‘pro-business’ (Dundon and Rafferty, 2018). By ‘pro-market’, it aims to support the short-term profitability based on the emerging market principles. This ‘pro-market’ term resonates with what Lazzonick (1992) termed as ‘market of corporate control’ aforementioned above. The HR strategies has no more in favor of ‘pro-business’, which supposedly supports the long-term development goals and ‘wider societal interests’ (Dundon and Rafferty, 2018).
As this short-term profitability became the center of focus, the role of HRM may be argued to become a “handmaiden of efficiency” to produce higher shareholder value through ‘labour rationalization’, instead of being a “strategic business partner” or “employee champion” as discussed by Ulrich (1998) (Dundon and Rafferty, 2018). To create efficiency, the HRM function becomes such an implementer for investors to cut wages, to reduce employee rewards and pension, or to restructure the workforce as well as to facilitate transfer of employment (Palpacuer, Seignour, & Vercher, 2011).
In relation to that, companies were being downsized -or looking for new models of employment (e.g. ‘gig’, outsource, platform based crowdsource, etc)- to minimize internal labour costs and as a way to do operational austerity. Using the study of Jung (2011) that analyses 681 large companies between 1984-2006 which announced downsizing, Batt and Appelbaum (2013) argue that downsizing is also seen as a way to increase share price and market valuation. Interestingly, another study by Shin (2010) informs that higher compensations were offered to the CEOs for subsequent years in corporations that decided to downsize.
Since the late 1970s, however, as the rise of financialization, the development of hyper-individualism became such a significant new face of the workforce (Dundon and Rafferty, 2018). Further, it is argued that hyper-individualism provides ‘an ideological justification’ to reward such label as ‘super manager’ (Piketty, 2014) in relation to the ‘modern cult of leadership’. Therefore, HRM also transforms its role to become a ‘supporter’ for individualistic determination of pay, based on structural authority as rationalized by falsely perceived market freedoms.
In this point of discussion, I became really curious about the history of HRM. I was then looking at several literatures and found that this note from Kaufman (2007) is worth to discuss:
… the term ‘HRM’, particularly in Britain, was started to be used in the mid 1980s in some journal articles. In short, British writers ‘opted for view that HRM was a substantively different model (of management) built on unitarism, individualism, high commitment, and strategic alignment (e.g Guest, 1987; Storey, 1995 in Kaufman, 2007). The concept of HRM itself perceived as a threat of a long stand industrial relations model, which also seen as a means to avoid union establishment in ‘Thatcherist neo-liberalism’ (Guest, 1987; Purcell, 1995 in Kaufman, 2007)
An interesting point that I realized from that note is, as the term HRM is actually emerged at the same era of the rise of financizalization (late 1970s-1980s), it might be argued that the concept of HRM, with its ‘unitarism, individualism, high commitment, and strategic’, is not “being shaped”, but actually “being transformed” in orchestra of the development of financialization.
Therefore, I personally saw that the HRM shall not be viewed as being threatened or would be irrelevant (potentially demise) because of the financialization or marketization. The condition aforementioned, however, might resonate with what Kaufman refers as ‘strategic alignment’ (I might need to check it again). Yet, again, as a relatively new concept (Kaufman, 2007), I guess HRM might also need such rooms to be improved and to be developed from time to time.
However, I would say that HRM, which was seen as ‘a replacement’ for personnel administration and industrial relation model might be demised if industrial/business model was totally/or at least significantly changed. So far, various names such as human capital management, people management/operations, etc. are being used instead of HRM, but the concept’s roots are quite the same with the original concept of HRM from the 1970s.
To conclude, the term ‘marketization of HRM’ is quite problematic; to me, if you want to be ‘pro-business’ you would also need to be ‘pro-market’, as business most probably changes when the market changes. The challenge here is how HRM could be ‘business partner’ & ’employee champions’ (mentioned in the article) in ‘always-changing’ market.
On another note related to the topic, the use of ‘hyper-individualism’ used by Dundon and Rafferty (2018) as an impact of the ‘marketization of HRM’ implies an indication how it significantly sharpens the value of individual and started to dismantle the collective approach through HRM activities. Importantly, a need of individual efforts to develop ‘external employability’ to stay relevant with labour market became necessary (Currie et al., 2006). Further, this individual’s effort, would help to find a way to secure oneself in facing ‘blocked careers or employment instability’. I would probably try to discuss more about this ‘external employability’ in another blog-post.
What do you think? How HRM might be transformed in the future?