STRATEGIC MANAGEMENT AND HUMAN RESOURCES 73Ultimate business goals- viability with adequate
returns to shareholders - sustained competitive
advantage?
Critical HR goals
Desired types and levels of:- labour productivity (cost
effectiveness) - organizational flexibility
- social legitimacy
Critical non-HR goals
Desired outcomes for:- sales
- market share
- return on capital employed
- social legitimacy (environmental
impacts) - etc.
Figure 4.2Critical goals in HRM: a basic framework
Source: Boxall and Purcell (2003: 7).
as movements in exchange rates), so several authors have argued that labour
productivity—the value of labour outputs in relation to the cost of labour
inputs—ought to be seen as the primary goal of a firm’s labour management
(see, e.g. Geare 1977; Heneman 1969; Osterman 1987). In effect, firms need to
make labour productive at an economic cost.
In ‘macro’ or SHRM, the question becomes: is the overall combination of
HR philosophy, processes, policies, programmes, and practices creating the
human performance desired and is it doing so at reasonable cost (Godard
2001)? Very expensive, high-skill models of labour management, incorpo-
rating rigorous selection, high pay, and extensive internal development, are
unlikely among small firms in the retail sector, for example. While firms in
this sector should try to find ways of making competitive pay offers and of
keeping their most effective staff, this does not imply that they should adopt
the kind of HRM system needed to compete with international consultancy
firms or automobile manufacturers. Another example of the principle of cost-
effectiveness is given by Godard and Delaney (2000: 488):
...in a nuclear power plant employing many workers, the costs ofpoor morale,
(labour) turnover, and strikes can be high, so the benefits of HRM innovations will
tend to be high. Firm size may also introduce important economies of scale, reducing
the costs of HRM innovations per worker. Thus, in this plant, the benefits of new
practices can be expected to exceed the costs. In a small, low-technology garment
factory employing unskilled labour, the opposite may be true.
As Godard and Delaney (2000) imply, expensive HR practices are often justi-
fied where the production system is capital intensive or where high technology
is involved. The actual level of labour cost could be quite low (say, 10 per cent