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CHAPTER 2

LITERATURE REVIEW

2.1

Introduction

This chapter will be discussed about literature review of corporate social responsibility and
human resource management. The previous chapter included purpose of the study,
significance of study, research question and objective and the theoretical base of the study.
The following is a review of the literature regarding corporate social responsibility and
human resources management. It includes the concept and model of corporate social
responsibility and human resources practices, theory and model.

2.2

Corporate Social Responsibility (CSR)

According to Yam (2012), the definitions of CSR by means and huge fall into two standard
sets of theory. First, are those philosophers who argue that a business is should to gain more
profits within the limitations of the law and minimal ethical monitors and second, those that
support a broader scope of obligations towards citizens. It would appear from the literature
that society generally expect businesses to move away from their limited economic focus and
be more socially responsible
CSR is defined as the voluntary integration of social and environmental concerns into
business operations and into their interaction with stakeholders (Sun & Yu, 2015). The
purpose that the definition of CSR consists of five dimensions, including vision, community
relations, workplace, accountability and marketplace. For example, vision includes CSR
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conceptual development, codes and values within the organization. Community relations
include partnerships with different stakeholders such as customers, suppliers, etc. Workplace
includes human rights and labour practices within the organization. Accountability includes
the transparency in communication and financial reporting. Marketplace includes the
relationship between CSR and core business processes such as sales, purchasing, etc. A
socially responsible firm is more likely to do well in the above five dimensions (Sun & Yu,
2015).
In the book of The A to Z corporate social responsibility define CSR has evolved over the
decades, generally becoming more precise as to the types of activities and practices that
might be subsumed under the concept, pp. 123.

2.3

Corporate social responsibility concept

The concept of CSR is based on stakeholder theory, an administration philosophy that


defends a responsible corporate bearing towards all persons or groups that are somehow
affected by or that affect corporate decisions and activities. (Duarte, Mouro & Neve, 2010).
In the eighties of the 20th century Carroll (1979) broadened the concept of CSR, involving
four categories economic, legal, ethical and discretionary responsibility. In the nineties,
Carroll connected the stakeholder concept of Freeman (1984) with the CSR concept. Then,
according to Hopkins (1998) defines that CSR is relate with treating the stakeholders which
involve both within a firm and outside of the firm ethically or in a socially responsible sort.
Elkington introduced his well-known concept Triple Bottom Line targets on three issues,
namely, social responsibility for people, environmental responsibility for the earth planet and
economic responsibility for profit. So, a socially responsible company can be counted as an
association for economic affluence, social equity and environment safety. Thus CSR of the
21st century is based on social, environmental and economic responsibility (Lapina, Maurane
& Starineca, 2014). The concept of corporate social responsibility (CSR) refers to the general
belief held by growing numbers of citizen that modern businesses have responsibilities to
society that extent beyond their obligation to the stockholders or investors in the firm. The
concept CSR concept applies to all size organisations, but discussion tend to focus on large
organisations because they tend to be more visible and have more power. (Visser, Matten,
Pohl & Tolhurst, 2016).

2.4

Theories and model of corporate social responsibility

2.4.1

The Corporate Social Responsibility Hierarchy

.
Discretionary Responsibilities

Ethical Responsibility

Legal Responsibility

Economic Responsibilities

Figure 2.1

Pyramid of corporate social responsibility. Source: Archie B. Carroll, 1991.

In a book of strategic corporate social responsibility had mention that one of most respected
CSR academics, Caroll (1979), defined CSR in economic, legal, ethical and discretionary
expectation that society has organizations at a given point in time Caroll (1979), referred to
this distinction as a firms pyramid of social responsibility. Fundamentally, a firms
economic responsibility is to produce an acceptable return on its owner investment. An
important component of pursuing economic gain within a law based society, however, is a
legal responsibility a duty to act within the legal framework drawn up by government and
judiciary. Taken one step further, a firm has an ethical responsibility to do no harm to its
stakeholders and within its operating environment. Finally, firms have discretionary
responsibility, which represent more proactive, strategic behaviours that can benefit the firm
and society or both (Chandler & Whether, 2014, pp.7-8).

2.4.2

Stakeholder Theory

2.4.3

Mele

Among the challenges to classify CSR theories, three findings can be aimed out. According to
Mele (2009), classifies three different types of theories. The first group are called
fundamentalism. It includes all positions that, in one way or another, claim, Mele (2009) (p.
48) that corporations are only legal objects and the only social responsibility of commercial is
increasing profits in obedience with the laws. The second group is made up of those theories
which support the business's moral personhood and point to its moral activity. Consequently,
corporations can be held morally responsible for their actions. The third group considers
theories in which the social dimension of the corporation is particularly relevant. The roots of
these theories are in political and ethical theories. (Mele, 2009, p. 2).
2.5

Concept of CSR towards HRM

The concept of CSR started to evolve back in the 1910s when the role of corporate directors
was perceived as exceeding the narrow interests of shareholders and businesses have been
educated on the need to be socially aware and responsible as early as the 1930s (Yam, 2012).
According to Sun & Yu (2015), theoretical work also suggests that many business programs
like CSR programs can increase employee commitment and morale. Stronger employee
commitment may encourage positive work attitude that can lead to greater employee
productivity. Hence, if companies take responsibility for their impact on stakeholders and
actively engage in CSR activities, they can attract or motivate employees who are more likely
to work effectively and efficiently compared to employees of firms with less CSR.
HRM is involved with all aspects of how individuals are employed and operated in
organizations. It includes activities such as strategic HRM, human capital management,
knowledge management, corporate social responsibility, organization development,
resourcing labour force planning, staffing and selection and talent management, learning and
development, performance and reward management, employee relations, employee wellbeing
and the provision of employee services (Armstrong, 2012). Corporate social responsibility
may be impact or effected on HRM on the organisation in manufacturing firms. This role of
HRM in CSR development would be remarkably crucial in view of significance of
employees knowledge of the organisation and the trained labour shortage.

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In the book of CSR strategies corporate social responsibility for competitive edge in
emerging markets, shown that one strategic area where CSR can contribute significantly is
human resources, with which a company can develop programs that promote employment
creation through support of basic educational studies and capacity building (Urip. S, 2010, pp
55).

2.6

Human Resource Management (HRM)

Human resource management (HRM) is included with all viewpoints of how the individuals
are working and controlled in organizations. It includes activities such as strategic HRM,
human capital

management, knowledge management, corporate social responsibility,

organization development, resourcing such as labour force planning, staffing and selection
and talent management, learning and development, performance and reward management,
employee relations, employee wellbeing and the provision of employee services (Armstrong,
2012, p. 4).
According to Armstrong (2006), HRM is defined as a planned and coherent technique to the
managing of an organizations highest priced assets, individuals working there by personal
and collectively require to the accomplishment of its objectives. HRM can be explained as a
central, senior management driven strategic activity that is established, owned and delivered
by management as a whole to promote the interests of the organization that they serve.
The common function of HRM is to make sure that the organization is competent to achieve
fruitful goal through the people (Armstrong, 2006). HRM systems can be the source of
organizational capabilities that let firms to gain knowledge and develop on new opportunities.
(Armstrong, 2006).
HRM definition according to Watson (2010), HRM is the managerial utilisation of the efforts,
knowledge, capabilities and committed behaviours which people contribute to an
authoritatively co-ordinated human enterprise as part of an employment exchange or more
temporary contractual arrangement to carry out work tasks in a way which enables the
enterprise to continue into the future.

2.6.1

Human Resource Management practices

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Some of author such as Amin & et al, 2013, have identified recruitment and selection,
training and development, participation and reward as HR practices. Another author have
categorize HRM practices into selection system, training, job definition, performance
appraisal system, compensation system, career planning system and employee participation.
Therefore, for the found of the study, the following HRM practices are considered
recruitment, training, performance appraisal, career planning, job definition, employee
participation and compensation.
In general, the elements of human resources planning are recruitment, selection, training, and
performance appraisal (Khan, Farooq. A & Hussain. Z, 2010). The function of having a
human resource plan is to have a perfect estimate of the number of employees needed, with
corresponding skill requirements to achieve organization goals (Khan, Farooq & Hussain,
2010).
According to Ferguson & Jr (2009) define HR practices as an organised of definite yet
interrelated activities, functions, and processes that are directed at attracting, developing, and
maintaining a firms human resources. These HR practices, often referred to as high
performance work practices or high involvement work practices may contain on single HR
practices or entire HRM systems. Examples of these practices include recruiting and selection
processes, training and development, incentive compensation, grievance procedures, and job
and organizational design.

2.3.1.1 Recruitment
Recruitment is defined as the process by which organizations locate and attract individuals to
fill job vacancies. It can also be defined as any practice or activity carried on by organization
with the primary purpose of identifying and attracting potential employees. (Amin & et al,
2013). Recruitment is the activity of making a group of applicants from which to choose the
suitable person to fill a job post, which is composed of recruitment, selection and
employment. (Cech, Yao, Samolejoya, Li & Wichera, 2015).
Recruitment is a form of business contest and it is fiercely competitive. Just corporation
strategize to develop, manufacture and market the best product or service, so they must also
vie to identify, attract and hire the most qualified people (Cascio, 2016, pp 192).

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According to Noe et al., (2016), recruitment is the process via which the organization look for
applicants for capability of employment. Another critical element of an organizations
recruitment strategy is its decisions about where to look for applicants.
The methods the organization chooses for communicating its labor needs and the audiences
its target will determine the size and nature of the labor market the organization taps to fill its
vacant positions. As we discussed with regard to personnel policy, an organization may
emphasize internal or external sources of job applicant. Internal sources are employees who
currently hold positions in organization. Organizations often have good reasons to recruit
externally. For entry-level positions and perhaps and perhaps for specialized upper-level
positions, the organization has no internal recruits from which to draw (Noe, et al., 2016, pp.
148).
2.3.1.2 Selection
According to Amin & et al, (2013) selection is the process of reducing the number and
choosing from among those individuals who have the relevant qualifications. Selection refer
to the process by which the organization attempts to identify applicants with the necessary
knowledge, skills, abilities and other characteristics that will help the organization achieve its
goals (Noe et al., 2016, pp. 1-9).
According to Noe & et al, (2016), hiring decision was about finding the people who will be
good fit with the job and the organization. Selection begins with the candidate identified
through recruitment and with attempts to reduce their number to the individuals best qualified
to perform the available jobs, pp 167-199.

2.3.1.3 Training
According to Amin & et al (2013), training refers to the methods used to give new or present
employees the skills, knowledge behaviours and other abilities they need to perform their
jobs. Training is intended to modify individual skills or attitudes. Training also contributes to
the development of positive dispositions toward growth and change as enacted by individuals
as well as groups and teams.
Training consist of planned programs designed to improve performance at the individual,
group and/or organizational level. Improved performance, in turn, implies that there have

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been measurable changes in knowledge, skills, attitudes, and/or social behaviour (Cascio,
2016, pp 280).

2.3.1.4 Performance appraisal


Performance appraisal can be defined as the process of determining and communicating to an
employee how well he or she is performing on the job and ideally establishing a plan of
improvement. Appraisal comprises an objective evaluation of an employees performance
combined with an outline of measures to be taken for improvement and counter-signed by
both employee and manager. The term performance appraisal has generally meant the annual
interview that takes place between the manager and the employee to discuss the individuals
job performance during the previous 12 months and the compilation of action plans to
encourage improved performance (Amin & et al, 2013).
2.3.1.5 Career planning
Career planning is the deliberate process through which someone becomes aware of his or her
personal skills, interests, knowledge, motivations and other characteristics; acquires
information about opportunities and choices; identifies career-related goals; and establishes
action plans to attain specific goals (Kadiret, 2012). It aligns strategy with future human
resources needs and is integral to the career development process (Rogers and Creed, 2011).
A career is not something that should be left to chance, instead in the evolving world of
work, it should be shaped and managed more by the individual than by the organization
(Cascio, 2014, pp. 377). Career development and success have been defined in terms of
occupational advancement, which is clear and easy to measure (Cascio, 2014, pp. 378).

2.3.1.6 Compensation
Compensation is a reward system that a company provide to individuals in turn for their
willingness to perform various jobs and tasks within organizations. Appropriate and equitable
rewards need to be provided to the employees so that they feel valued and the reward matches
with their skills, abilities and contribution to the firm (Amin & et al, 2013). Compensation is
one of the most general HRM practices which is identified as an indirect gift awarded to an
employee as a part of organizational membership (Naidu, 2010).

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In the book Human Resource Management, Dessler (2012) defines compensation in these
words employee compensation refers to all forms of pay going to employees and arising from
their employment. The phrase 'all forms of pay' in the definition does not include nonfinancial benefits, but all the direct and indirect financial compensations.

2.4

Model and theory of HRM

2.4.1

Model of HRM

2.4.1.1 The matching model of HRM


One of the first obvious statements of the HRM concept was created by the Michigan School
(Fombrun, 1984). They held that HR systems and the organization structure should be
handled in a way that is matching with organizational plan hence the name matching model.
They further described that there is a human resource cycle which consists of four generic
activities or functions that are presented in all organizations. These are selection which are
matching available human resources to jobs, second are appraisal, performance management,
thirds are rewards. The reward system is some of the most under-utilized and mismanaged
managerial tools for handling organizational performance, it must reward little as well as
long-term achievements, and keep in mind that business have perform in these days to
succeed in the upcoming. Forth is development, developing high quality workforces.

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The Matching model of HRM


Political forces

Economic
forces

Cultural forces
Mission and
strategy

Organization structure

Figure 2.2

Human resource
management

The matching model

Source: Fombrun Tichy & Devana, (1984).


2.4.1.2 The Harvard framework
The other founders of HRM were the Harvard School of Beer who developed what Boxall
and it calls the Harvard framework. This framework is based on the principle that the
problems of historical employees management can only be resolved. When general managers
develop a viewpoint of how they wish to see employees involved in and developed by the
enterprise, and of what HRM policies and practices may achieve those goals. Without either a
central philosophy or a strategic vision which can be provided only by general managers
HRM is likely to remain a set of independent activities, each guided by its own practice
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tradition. The Harvard model has exerted considerable influence over the theory and
practice of HRM, particularly in its emphasis on the fact that HRM is the concern of
management in general rather than the personnel function in particular (Armstrong, 2006,
pp.8).
Beer and his colleagues believed that today, many pressures are demanding a broader, more
comprehensive and more strategic perspective with regard to the organizations human
resources. These pressures have created a need for a longer-term perspective in managing
people and consideration of people as potential assets rather than merely a variable cost.
They were the first to underline the HRM tenet that it belongs to line managers. They also
stated that HRM involves all management decisions and action that affect the nature of the
relationship between the organization and its employees its human resources. The Harvard
school suggested that HRM had two characteristic features, first are line managers accept
more responsibility for ensuring the alignment of competitive strategy and personnel policies
and second are personnel has the mission of setting policies that govern how personnel
activities are developed and implemented in ways that make them more mutually reinforcing.
The Harvard framework as modelled by Beer et al (Armstrong, 2009).

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Stakeholder
Interests :

Shareholders
Employees
Government
Unions
HRM policy
choices:

Situational factors:

Workforce
characteristics
Business strategy
and condition
Management
philosophy
Labour market
Unions
Task technology
Laws and social
values

Figure 2.3

Employee
influence
Human
resource
flow
Reward
system
Work
systems

HR outcomes:

Commitment

Congruence

Long-term
consequences:

Cost
effectiveness

Individual
well-being
Organization
effectiveness
Societal wellbeing

The Harvard Framework. Source: Beer & et al, 1984.


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2.4.2

Theory of HRM

The original idea of HRM had a strong conceptual base. HRM appears to lean heavily on
theories of commitment and motivation and other ideas derived from the field of
organizational behaviour.

2.4.2.1 Commitment
The importance in HRM theory of organizational obligation which is the strength of an
individuals identification with, and involvement in, a particular business was emphasised in
a seminal Harvard (Armstrong, 2012).

2.4.2.2 Organizational behaviour theory


Organizational behaviour theory defines how people inside their organizations performance
individually or in groups and by what method organizations operate in terms of their
construction, processes and society. It therefore impacts HRM approaches to organization
strategy and growth and enhancing organizational potential, the scope of an organization to
perform effectively in order to accomplish desired outcomes (Armstrong, 2012).

2.4.2.3 Motivation theory


Motivation theory describes the factors that influence goal targeted behaviour and therefore
impacts the methods used in HRM to enhance employment, the situation in which individuals
are committed to their job and the organization and are motivated to attain high levels of
performance (Armstrong, 2012).

2.4.2.4 AMO theory


The AMO formula as set out by Boxall and Purcell (2003) states that functioning is a role of
ability added with motivation and opportunity to take part. HRM practices therefore impact
on individual performance if they encourage optional effort, enhance skills and provide
people with the chance to execute. The formula make available the basis for emerging HR

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systems that focus to employees concerns, namely their ability requirements, motivations
and the attribute of their job (Armstrong, 2012).

2.4.2.5 Human capital theory


Human capital theory is related with how people in an organization contribute their
knowledge, skills and abilities to enhancing organizational capability and the significance of
that contribution (Armstrong, 2012).

2.4.2.6 Resource based theory


Resource based theory states that competitive benefit is achieved if a firms sources are
valuable, unusual and costly to impersonate. HRM can act a major part in to make sure that
the firms human resources link those criteria (Armstrong, 2012).

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2.5

Previous Research

The result of previous research about the impact of corporate social responsibility towards
human resource management have shown that CSR impact on HRM practices of recruitment
are diversity which is employment access for minority groups and fairness. For example the
organization desire to diversify its policy by attracting students, by favouring block release
trainings and apprentice integration, by women comprise of its workforce and by supporting
access to employment for disabled persons. Then the impact of CSR towards HRM practices
of communication and dialogue, well-being and training are health and safety. For HRM
practices of career development, the impact of CSR is diversity but only focussing on gender
of employee. The study also have found that this research could give more benefit from other
managers of companies that are concerned to increase their social performance as a factor of
profitability, while providing to their workers socially responsible human resource
management practices that can positively influence their working conditions and generally
well-being at work (Dupont, Ferauge & Giuliano, 2013).
According to research of, Berber, et al (2015), the proportion of companies using special
HRM training programs is higher if the companies have a CSR statement. These differences
are statistically significant, it proved by Chi-Square test. In order to harmonize the values of
the organization, they must select and employ workers with certain moral principles, develop
and reward systems that will improve the social performance of their employees, reward the
employees for the harmonization of the values and provide appropriate training and
development for them (Orlitzky & Swanson, 2006).

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