Academic journal article Revue Canadienne des Sciences de l'Administration

A Contingency Theory of Human Resource Management Devolution

Academic journal article Revue Canadienne des Sciences de l'Administration

A Contingency Theory of Human Resource Management Devolution

Article excerpt

The purpose of this paper is threefold: (1) to use concepts derived from market failures theory and organizational economics (Ouchi, 1980; Williamson, 1975) to explain a continuum of organizational relationships, or contracts (McLean Parks & smith, in press; Rousseau, 1989; Rousseau & McLean Parks, 1993), which help maintain employment relationships, (2) to identify the human resource management dimensions on which each of the organizational relationships differ, and (3) to advance propositions derived from our contingency theory of HRM devolution.

An historical perspective of employment relationships suggests that only one or two organizational options were prevalent in the past, and organizations evolved to a dominant use of bureaucratic forms of employment contracts. More recently, and in the future, we believe there will be more combinations chosen, and that organizations will devolve from bureaucratic relationships to a wider variety of employment contracts. The variety of organizational relationships consists of four market-type employment relationships (daywork, subcontract, temporary agency, and leasing), the traditional bureaucratic relationships, and a clan-type relationship (self-directed work team). In addition, since each type of employment relationship differs somewhat in terms of its contractual dimensions, each will require a more complex approach to how human resource management activities are administered.

We identify the six types of employment relationships and the dimensions on which they differ in Table 1. (Table 1 omitted) In the following sections of the paper, each type of control mechanism (market, bureaucratic, clan) is discussed to establish the theoretical foundation which explains the conditions under which each type is best suited. Then we discuss the four market-type employment relationships (day worker, subcontract, temporary agency, and leasing), the bureaucratic relationship, and the clan-control relationship (self-directed work teams) in terms of how they are similar or different along eleven dimensions, including specific human resource management dimensions. Finally, we develop a set of propositions which will guide future empirical investigations of our theoretical perspectives.

Although the frameworks are applicable to many different kinds of transactions, we are specifically interested in employment transactions and relationships. A common criticism of the HRM literature is that researchers tend to observe phenomena, but that the work is atheoretical (Davis-Blake & Uzzi, 1993; Pfeffer & Baron, 1988) and descriptive (Cohen & Haberfeld, 1993; Mangum, Mayall, & Nelson, 1985; Mayall & Nelson, 1982). Empirical studies generally rely on internal labour market theory, or develop frameworks which may not be generalizable to multiple forms of employment relationships (Cohen & Haberfeld, 1993; Davis-Blake & Uzzi, 1993). We use the different types of employment contracts to illustrate how our contingency theory of HRM devolution and the frameworks can be applied to multiple human resource management employment contract options.


The market failures framework helps explain why transactions occur within an organization rather than within a market (Williamson, 1975). The assumption is that a market transaction is an efficient one, and if so, then organizations need not exist, given that they are expected to be a less efficient means of transacting business than the market would be. Williamson's conclusion is that organizations exist because certain conditions cause market mechanisms to fail. They become inefficient because the transaction costs of maintaining a contract within the market become too high.

Williamson discusses three fundamental types of contracts which exist in a market, and identifies the conditions under which each type of contract is efficient and under what conditions it would fail. …

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