Human resource management in the financial control company : a case study at divisional and business unit level

Abstract

The pursuit of business growth through strategies of unrelated diversification has led to widespread adoption of the multi-divisional structure by private enterprise within the UK. Firms which employ this structure own and control a number of subsidiary companies or business units which operate in different product markets. Operating responsibility is decentralised to management at these levels who are then held strictly accountable for meeting profit targets set and monitored by the firm's head office. Until recently, little was known about the relationship between human resource management and corporate strategy within these firms. The most thorough analysis is that provided by Purcell, J. and Ahlstrand, B. (1994), Human Resource Management in the Multi-Divisional Company, which explores the impact of corporate strategies of diversification, decentralisation and control upon human resourcing gutcomes at operating level. Critically, the authors suggest that multi-divisional firms which pursue corporate strategies of unrelated diversification are likely to decentralise operating responsibility more completely to business units, but balance this with extremely demanding short-term financial performance controls. The thrust of their argument is that under these circumstances, management at operating level will adopt an opportunistic, short-term, cost-minimisation approach to the management of human resources. Nonetheless, they suggest that it is 'difficult to trace the effect of financial control systems' (1994: 74) upon human resourcing outcomes. This research provides a critical case study of the relationship between financial control and human resourcing within a multi-divisional company which employs extreme forms of decentralisation and financial control. The case-study focuses upon the management of human resources within one subsidiary firm and its business units, which together represent a single product division of the parent 'financial control' company. The findings demonstrate how the relationship between financial control and human resource decision making is mediated by a number of factors at operating level which can influence management to adopt a longer-term, investment oriented approach to the management of human resources. It is also shown how, under some circumstances, the stringent short-term profit demands and cost-minimising pressures of the financial control system itself can lead to similar outcomes. The research provides a fresh insight into the relationship between corporate strategy and employee relations decision making.

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