Cambridge Syllabus Notes

7.4 HRM Strategy – Approaches to HRM

Learning objective

Identify and evaluate strategies that can improve employee performance, and explain how these strategies relate to the major HRM approaches covered in the Cambridge IGCSE/A‑Level syllabus.

What is HRM strategy?

Human Resource Management (HRM) strategy is the plan that links the management of people to the overall strategic objectives of the business. It determines how an organisation will attract, develop, motivate and retain staff in order to achieve a sustainable competitive advantage.

Hard vs. soft HRM

Hard HRM – performance‑driven, control‑oriented; people are treated as a resource to be managed to achieve organisational goals. Emphasises cost, efficiency and measurable outcomes.
Soft HRM – people‑oriented; employees are viewed as valuable assets whose commitment and well‑being drive performance. Emphasises development, participation and intrinsic motivation.

When to use which approach?

Cost‑leadership or high‑volume production environments → hard HRM (tight cost control, performance‑linked pay).
Differentiation, innovation or knowledge‑intensive sectors → soft HRM (empowerment, continuous learning, employee involvement).
Many organisations adopt a hybrid, selecting elements that best support their chosen competitive strategy.

Five major HRM approaches

Approach	Tagline (historical/theoretical context)	Key focus	Core assumptions	Typical HR practices	Strengths	Limitations
Harvard Model	Stakeholder‑oriented, people‑first (1980s)	Stakeholder & situational analysis	People are valuable assets; outcomes depend on policy choices.	Extensive consultation, employee participation, comprehensive training.	Broad perspective; integrates external environment.	Complex to implement; may dilute strategic focus.
Michigan (Matching) Model	Strategic‑fit, “hard” model (1970s)	Strategic alignment (fit)	HR policies must support the chosen business strategy.	Performance‑linked pay, selective recruitment, rigorous appraisal.	Clear link between HR and business results.	Risk of rigidity; less attention to employee well‑being.
Best Practice (Universalist)	Universal set of “best” HR practices (1990s)	Universal HR activities	Certain HR practices improve performance in any context.	Continuous training, career development, fair reward systems.	Simplifies HR planning; evidence of positive impact.	Ignores organisational differences; may be costly.
Best Fit (Contingency)	HR must suit the organisation’s competitive strategy (2000s)	Contingency alignment	HR must suit the organisation’s competitive strategy.	Cost‑focused HR for low‑cost strategy; innovative HR for differentiation.	Highly adaptable; supports strategic coherence.	Requires deep strategic analysis; risk of mis‑fit.
High‑Performance Work Systems (HPWS)	Integrated bundle of high‑commitment practices (1990s‑2000s)	Integrated high‑performance bundle	Synergistic HR practices create superior performance.	Team‑based work, extensive empowerment, skill‑enhancing training, profit‑share.	Promotes employee commitment and productivity.	Implementation complexity; may not suit all cultures.

Flexible working contracts & the gig economy

Modern organisations use a range of contractual arrangements to increase flexibility and control labour costs.

Contract type	Key features	Advantages	Disadvantages	Typical HRM alignment
Full‑time permanent	Standard weekly hours, long‑term contract	Job security, strong employee commitment	Higher fixed labour cost	Soft HRM – development, career planning
Part‑time	Reduced weekly hours, regular schedule	Flexibility for employee, lower cost per head	Potential under‑utilisation of skills	Blend – can support both hard and soft approaches
Zero‑hours / casual	No guaranteed hours; work as needed	Maximum labour‑cost flexibility	Low employee morale, high turnover risk	Hard/Best‑Fit for cost‑leadership strategies
Flexi‑time / compressed week	Core hours + employee‑chosen start‑end times	Improved work‑life balance, higher engagement	Complex scheduling, possible coverage gaps	Soft/Best Practice – emphasises employee wellbeing
Gig / platform work	Independent contractors, project‑based, mediated by digital platforms	Access to specialised talent, pay‑as‑you‑go	Limited control, legal/ethical issues, variable quality	Hard/Best‑Fit for highly variable demand environments

Legal & ethical considerations (exam‑relevant points)

Employment rights – statutory minimum wage, holiday entitlement, sick pay (where applicable).
IR35 and “worker” classification – risk of liability for mis‑classification of gig workers.
Data‑privacy – handling of personal data on digital platforms (GDPR compliance).
Health & safety obligations for zero‑hours and gig workers.
Equality & non‑discrimination – ensuring that flexible contracts do not create indirect discrimination.

Measuring employee performance

Key Performance Indicators (KPIs) – quantitative targets linked to organisational goals (e.g., sales per employee, units produced).
360‑Degree Feedback – input from manager, peers, sub‑ordinates and sometimes customers.
Balanced Scorecard – combines financial, customer, internal process and learning‑growth metrics.
Productivity ratios – output per labour hour, error rates, order‑fulfilment speed, and financial ratios such as contribution per employee.
Absence & turnover statistics – indirect indicators of performance problems.

Causes & consequences of poor employee performance

Causes	Consequences (operational & strategic)
Skill or knowledge gaps (inadequate training)	Reduced productivity, higher error rates, customer dissatisfaction; can erode market share and damage brand reputation.
Poor job design (low task variety, autonomy, feedback)	Low motivation, higher absenteeism, increased turnover; weakens the firm’s ability to innovate and meet CSR commitments.
Unclear objectives or unrealistic targets	Stress, burnout, quality deterioration; may lead to missed strategic milestones and loss of competitive advantage.
Ineffective supervision or lack of feedback	Misalignment with organisational goals, wasted effort; hampers continuous improvement programmes.
Inadequate reward systems (pay inequity, missing incentives)	Demotivation, “quiet quitting”, loss of high‑potential staff; can increase recruitment costs and weaken employer brand.

Strategies for improving employee performance

Training and development
- Identify skill gaps through job analysis and performance data.
- Deliver on‑the‑job training, e‑learning modules, mentoring or apprenticeship schemes.
- Assess impact with pre‑ and post‑training tests and on‑the‑job performance metrics.
Performance appraisal systems
- Set SMART objectives (Specific, Measurable, Achievable, Relevant, Time‑bound).
- Use 360‑degree feedback or balanced scorecards for a holistic view.
- Link appraisal results to development plans, promotions and reward structures.
Reward and compensation
- Mix fixed salary, variable pay (bonuses, commissions) and non‑financial rewards (recognition, flexible working).
- Maintain internal pay equity and external competitiveness.
- Consider profit‑sharing, employee stock ownership or platform‑specific incentives for alignment with organisational goals.
Employee involvement & empowerment
- Introduce suggestion schemes, quality circles, or self‑managed teams.
- Delegate decision‑making authority appropriate to skill level.
- Invite staff to participate in target‑setting and strategic planning.
Job design
- Apply the Job Characteristics Model – increase skill variety, task identity, task significance, autonomy and feedback.
- Use job rotation, enrichment or enlargement to reduce monotony and develop broader skill sets.
Career planning & succession management
- Map clear career pathways and promotion criteria.
- Identify high‑potential employees for leadership programmes.
- Maintain talent pools to ensure continuity of critical roles.
Coaching and continuous feedback
- Schedule regular one‑to‑one coaching sessions.
- Provide immediate, constructive feedback rather than relying solely on annual reviews.
- Use performance dashboards or visual KPI boards to track progress.

Linking strategies to HRM approaches

HRM approach	Most compatible performance‑improvement strategies
Harvard Model (soft)	Job enrichment, extensive training, employee participation schemes, coaching & continuous feedback.
Michigan Model (hard)	Performance‑linked pay, rigorous appraisal systems, clear KPIs, tight monitoring.
Best Practice (Universalist)	Universal set: continuous training, fair reward, regular feedback, career planning.
Best Fit (Contingency)	Tailored mix – e.g., cost‑leadership: lean training, zero‑hours contracts, tight performance controls; differentiation: creative development, empowerment, profit‑share.
HPWS	Team‑based structures, extensive skill development, profit‑sharing, high‑autonomy jobs, integrated performance dashboards.

Evaluating the effectiveness of performance‑improvement strategies

Relevance – Does the strategy directly address the identified performance gap?
Efficiency – Do the benefits outweigh the financial, time and resource costs?
Acceptability – Is the strategy supported by managers and employees?
Impact – Measurable change in productivity, quality, turnover, or employee satisfaction.
Sustainability – Can the improvement be maintained over the long term?

Suggested diagram (exam‑style)

Flowchart: Start with the five HRM approaches (Harvard, Michigan, Best Practice, Best Fit, HPWS). Arrow each to the specific performance‑improvement strategies that best fit (training, appraisal, reward, involvement, job design, career planning, coaching). From the strategies, arrows lead to expected outcomes such as higher productivity, lower turnover, greater employee commitment, and improved profitability.

Key take‑aways

HRM strategy must be deliberately aligned with the overall business strategy.
Hard and soft HRM perspectives explain why different models adopt different emphases and help decide which practices suit a given competitive strategy.
Flexible contracts and gig‑economy arrangements are increasingly important; legal and ethical issues must be considered alongside strategic fit.
Effective performance improvement combines clear, measurable objectives, appropriate rewards, continuous development, and genuine employee involvement.
Regular evaluation using relevance, efficiency, acceptability, impact and sustainability ensures HR initiatives remain fit for purpose.

strategies for improving employee performance