High Performance Work Systems at Data Connections and Pannone & Partners - Essay Example

Improving Organisational Performance Table of Contents Introduction....................................................................................................................1 2. Performance Management and High Performance Work Practice................................2 3. High Performance Work Systems at Data Connections and Pannone & Partners........7 3.1 Integration with other HR Practices........................................................................7 3.2 Commitment & Reward..........................................................................................8 3.3 High Employee Involvement.................................................................................10 3.4 Employee Skills and Training Needs....................................................................12 4. Conclusion..................................................................................................................12 5. References..................................................................................................................14 Introduction In the current rapidly changing and dynamic workplace, organisational performance improvement and development is associated with improvement of personal skills, performance, experience, and knowledge (Sundstrom, 2013: p41). However, management in today’s organisations faces critical challenges in the achievement and maintenance of high productivity and performance. One of the areas that have been identified in HR practices and management systems to overcome this challenge specifically focuses on the enhancement of work performance, which is referred to as high performance work practices. While these practices are not exactly new, this area of management differs in its deliberate introduction of bundled practices to improve performance of the organisation gradually (Cappelli & Neumark, 2012: p31). Normally, organisations will align these practices with their strategic objectives, specifically by aligning workforce output and organisational performance. This paper aims to analyse high performance work practices in relation to two case studies: Data Connections and Pannone & Partners, which are computer software services and legal services firms. The two companies’ business strategies differ in that Pannone & Partners seeks balanced growth for competitive advantage, while Data Connections seeks to improve business performance through quality delivery and acquisition of world-class talent. Both companies will be analysed in relation to how they apply various strategies in their approach to high performance work performance. These strategies are integration of HPWP with other HR practices, commitment and reward, employee training and skills needs, and high employee involvement. Performance Management and High Performance Work Practice Performance management refers to a process through which employees and managers work in tandem to monitor, plan, and review the employee’s overall contribution and work objectives and involves continuous setting of objectives, provision of on-going feedback and coaching, and assessment of progress to ensure that workers meet career goals and objectives (Ashdown, 2014: p41). One of the theories that underpin performance management is goal theory, which highlights three core mechanisms that link performance outcomes to goals. These goals direct attention to the organisation’s priorities, stimulate efforts, and challenge employees to user skills and knowledge to enhance their success. This theory specifically emphasises the review and feedback and agreement of objectives aspects of PM (Aguinis, 2011: p28). Control theory, on the other hand, emphasises on feedback as a crucial mechanism for shaping employee and organisational behaviour. In this case, feedback is an important aspect of PM because it helps employees appreciate the discrepancy between expected outcomes and actual outcomes, thus beginning the process of corrective action. Moreover, the social-cognitive theory, which is based on self-efficacy, suggests that an individual’s belief in their ability has a significant influence on performance (Armstrong, 2014: p60). Therefore, it is up to the organisation to develop and enhance this self-belief as an essential objective of performance management. High performance work practices portend a significant influence on the performance of an organisation’s business operations, especially in the contemporary age of knowledge management and globalisation (Sung & Ashton, 2009: p5). These practices are part of a larger organisational trend to enhance the design of work practices in the organisation, in this case specifically linking the practices to the performance and objectives of the organisation. Generally, high performance work practices involve practices that increase involvement of employees in an organisation’s operations, enhance the HR function, and those that involve employee rewards and enhance their commitment to the organisation’s objectives, which are also referred to as practice bundles. Practices that enhance employee involvement tend to also enhance communication and trust between the employee and management, particularly because it also involves empowerment of employees and discretion in communication among the workforce (Sung & Ashton, 2009: p6). In turn, practices that enhance employee involvement have a positive association with better teamwork and team spirit, more effective leadership in the organisation, and increased employee motivation. Some practices that enhance staff involvement include the use of cross-functional and/or self-directed teams, staff associations and suggestion teams, and feedback on organisational strategy and performance (Gritti & Leoni, 2012: p279). Human resource practices are also part of the HPWPs and are mainly focused on the enhancement of skill development, specifically to increase the depth of investment in human capital (Sung & Ashton, 2009: p6). Human resource practices, through skill development, eventually lead to improvements in customer service and work quality, which, in turn, will increase organisational performance by fostering innovation and increasing productivity. For example, an organisation may use annual appraisals, feedback on performance from customers and management, annual training needs reviews, and programmes for continuous development to enhance skill formation and development (Gill & Meyer, 2013: p514). Finally, organisations may also use reward and commitment practices in order to enhance organisational performance by fostering an increased sense of stake-holding by the employees in the organisation. The organisation may use share-options, profit-sharing, and performance-related pay, which explicitly recognise employee contributions to organisational performance. Family-friendly policies and employee benefits and facilities also significantly improve the identification of employees with the organisation, in turn creating a long-term impact on organisational outcomes. Some of the more common reward practices include flexible working, non-pay benefits, flexible job descriptions, and job rotation (Wood & Menezes, 2011: p1599). Organisational leadership and culture are core determinants of the effectiveness of HPWPs. Leadership is an important aspect across all three HPWP dimensions, which are human resource practices, high involvement practices, and reward practices. This is because these dimensions are critical to the attainment of organisational goals and objectives, such as performance, innovation, and change management (Bae et al, 2011: p12). One important thing to note is that most of these practices are already in use by most organisations, which means that the organisation has to identify those that offer the most opportunity for improving performance. The organisation’s leadership plays a critical role in identifying the set of practices or practice bundles, which will portend the intended effect on organisational performance and results (Searle et al, 2011: p1077). Indeed, the effectiveness of HPWP strategies lie in how the organisation links the selected practices to organisational performance, meaning that practices within the sae dimension may be interchanged to achieve the most effective HPWP bundle. Thus, although using these practices to improve performance is not new as aforementioned, the different combinations in which they can be used to sustainably improve organisational performance has revolutionised approaches to organisational performance (Choi, 2014: p2663). In a contemporary business world where globalisation and knowledge management have increased competition, these HPWPs act as the links between work activities and organisational performance outcomes (Mostafa & Gould-Williams, 2014: p285). A holistic approach to performance outcomes and work practices, as a result, is critical to effective leveraging of HPWP benefits to the organisation. Normally, organisations that utilise HPWPs tend to leverage two interrelated and mutually reinforcing benefits. Organisations can improve and sustain performance through the use of HPWPs, while they may also improve employee satisfaction by creating a better work environment for employees (Dill et al, 2014: p322). The organisation’s ability to leverage both benefits has a significant effect on sustained innovation and competitiveness, staff commitment, and financial performance. HPWPs enhance profitability and productivity, while also improving overall business performance. Moreover, HPWPs also increase sales volumes and shareholder market value, while also enhancing trust among employees and the management. Employees working in high performance work organisations are also more likely develop higher skill levels, as well as higher salaries due to the sue of HR and reward practices respectively (Messersmith et al, 2011: p1105). Effective high performance work practices implementation ultimately requires a good line manager, especially since organisations need to get the most out of employees during economic uncertainty, for example (Guest, 2011: p8). Therefore, the line manager must be competent enough to develop effective systems of appraisal and to understand staff motivation. With performance management now viewed as more than the determination of employee pay or determining whether objectives set by management is met, organisations now use PM to address more issues like change management and staff development. This involves the alignment of performance management with the organisation’s business objectives. The key to effective performance management lies in enhancing working relationships, as well as organisational communication (Gilbert et al, 2011: p1625). Line managers have an especially crucial part in PM, especially since the relationship between immediate line managers and individual employees is one of the most important relationships in an organisation. Moreover, the line manager portends the biggest influence on employee performance and motivation. Most importantly, Vaccaro et al (2012: p37) identifies line managers as being important to implementing high performance work practices, whereby line managers act to enhance work unit customer service and work unit productivity. In this case, work unit human capital is the main mediator between work unit productivity and first-line implementation of high performance work practices. Generally, there is plenty of evidence related to the importance of line manager involvement in high performance work practices and performance management. For instance, line managers play an essential role in setting performance objectives, as well as conducting performance appraisals, and giving feedback on the appraisals to employees under them. Moreover, line managers are also involved in the identification of training needs and making decisions on employees that should be trained further with the aim of improving their productivity and individual and organisational performance (Bloom et al, 2012: p19). Decisions on career development and internal career progression are also the responsibility of line manager, specifically because they spend the most time with employees and are able to stay up-to-date with the career and development aspirations of employees (Stahl et al, 2012: p31). Line managers may also play a critical role in fostering employee participation in the decision-making process as the primary representatives of the organisation, which makes it easier for the employees to express ideas, concerns, and suggestions. Furthermore, because the line manager has discretion in the manner in which they implement the organisation’s human resource policies, they are more likely to create local, different high performance work environments. Finally, line managers are best placed to enhance the skills and motivations of their work unit members through HPWPs, which offers rationale for linking work unit performance and first-line HPWP implementation (Gibbs & Ashill, 2013: p313). Highly motivated and skilled work unit employees, in turn, are more likely to yield higher performance. High Performance Work Systems at Data Connections and Pannone & Partners Integration with other HR Practices Holbeche (2014: p 12) writes that high performance work practices should be integrated with human resource management practices, specifically to stimulate organisational and employee performance. Data Connections, a computer software company that thrives on quality service and innovative products for its success, bases its business performance on the acquisition of world-class and exceptional talent through its HR practices. Recruiting by its HR function, in addition, is only carried out at entry level with future talent being nurtured through small group coaching and systematic individual development plans. Indeed, Data Connections has sustained its position as a market leader by developing world-class technical workers, which has contributed to the company’s impressive financial performance over the years (Sung & Ashton, 2009: p36). By recruiting exceptional talents, the company has managed to base its work around highly performing teams. Furthermore, the recruitment policy emphasises on formal assessment recruitment tools to identify essential competencies like enthusiasm and energy for the job, technical aptitude, and excellent interpersonal skills with the latter being important for their high-performance teams. Data Connections also puts its candidates through a rigorous process, such as tackling technical issues for an entire day to identify the right software engineering aptitudes. They also have to attend social gatherings to ascertain their interpersonal skills. Another HR practice related to HPWP is continuous skills development programmes, where recruits have a formal development plan that is appraised every three months for development of personal and technical skills (Sung & Ashton, 2009: p37). On the other hand, Pannone & Partners’ main HR practice linked to HPWP is the retention of good staff. Whereas Data Connections only accepts recruits at entry-level, Pannone & Partners sets out to attract the best talent looking for an advancement of their career. Retention of the best talent is important for Pannone & Partners’ continued success, ensuring a low turnover of employees and lower hiring costs (Sung & Ashton, 2009: p50). Their emphasis on work experience quality also secures talent retention, particularly through the cultivation of workplace fairness. The employees at Pannone & Partners are also organised into high-performance teams, just as with Data Connections. However, Pannone & Partners organise their teams around specialisation in various legal fields. This makes it easier for the company to appraise each team’s performance and, rather than make the appraisals on the team’s results, there is added emphasis on fairness as the basis for measuring performance. Such fairness is based on the experience of employees and, in this case, workers across different departments are appraised on the basis of their experience (Sung & Ashton, 2009: p51). This is unlike Data Connection’s appraisal policy, which is based on performance targets and the employee’s performance on specific core tasks of the company. Commitment & Reward Reward practices generally facilitate an increased sense of commitment and belonging to a specific organisation (Farndale et al, 2011: p9). Some of the reward practices used at Data Connection include stake-holding and profit-sharing for the employees. Moreover, they also offer non-pay rewards, such as the provision of flexible work hours with the aim of ensuring that employees have a satisfactory work-life balance. The profit-share practice is based on the contributions and performance of the employees, which are appraised after six months and employees ranked and rewarded with a share of the profits according to performance rank. Since the company has maintained significant profits over the past 34 years, employees are more committed to the company because high performance in the future will be rewarded. In addition, because profit is only shared among the employees at Data Connection, the employees are rewarded through stake-holding that assures them of their remuneration package and allows them to concentrate on reaching their performance targets (Sung & Ashton, 2009: p37). Data Connection also uses flexible working hours as a reward for their high performing employees, for example by allowing such employees to move to another location where they feel more comfortable. The employees feel more satisfied with the work-life balance, therefore remaining committed to the company improving their performance to stay on as employees of the company. Pannone & Partners also fosters commitment from their employees through work-life balance, motivating their employees to work towards achieving the company’s objectives and, in turn, improving their performance (Sung & Ashton, 2009: p51). The company encourages work-life balance by giving employees time off outside of work to pursue private activities, thus enhancing their commitment towards the organisation and retaining their best talent. In turn, this leads to increased performance levels as the employees want to work for the company. Pannone & Partners, in this case, have allowed for flexible working by allowing their employees to serve customer from locations where they feel most comfortable without having to move, enhancing their commitment. Unlike Data Connection where reward practices are based on ranked performance, Pannone & Partners’ reward practices are distributed on a collective basis. Thus, everyone in the team is entitled to days off and financial bonuses and not only the best performers (Sung & Ashton, 2009: p51). Whereas performance pay and profit shares are for all employees at Pannone & Partners, the same are only given to some employees at Data Connection. Both companies share in their pursuit of work-life balance for their employees, ensuring a highly committed and well-balanced workforce that subsequently results in a high performing and competitive workplace. High Employee Involvement Involving employees in the organisation’s operations and running develops a greater level of communication and trust between employees and management that motivates employees and teams, which, in turn, enhances individual and organisational performance (Kehow & Wright, 2013: p375). One way through which Data Connection fosters employee involvement is by internal employee staff surveys that are held every 9 months. This allows the manager to assess and advice the employees on how to improve their performance, while also providing the employee with the opportunity to learn how their performance is linked with short and long-term employee development goals. As a result, employees are able to take part in developing their personal goals and the way these goals align with the organisations objectives. However, overall, Data Connection does not seem to have many high performance work practices related to employee involvement. This may be because of the software development industry’s nature, where employee rely on individual technical skills and require most of their time to create quality products (Sung & Ashton, 2009: p35). Therefore, this might not be the best HPWP to use for a company like Data Connection. On the other hand, employee involvement practices are one of Pannone & Partners’ most significant HPWP, helping to build high communication levels across the entire organisation. Indeed, Pannone & Partners sets out to create an organisational culture, which is led by the company’s managing director, to foster greater involvement of its employees in daily operations (Sung & Ashton, 2009: p49). For example, the organisation taps into the benefits afforded by their well-developed but undefined internal communications. As part of the organisational culture, effective internal communication fosters a culture of organisational ownership and openness. Ideas and information are allowed to freely circulate around the organisation and its staff, enabling the circulation of information related to strategy and performance of the organisation. In addition, employees are provided with the organisation’s business targets and plans, which increase the employees’ sense of ownership about the organisation’s overall performance. Pannone & Partners also creates a work environment that generates useful information using undefined mechanisms. Achieving an effective internal communication strategy at Pannone & Partners requires employees to gain knowledge on the organisation’s operations, while it is also highly dependent on interactions between the employees and management. These interactions and passing on of knowledge about the organisation’s performance, in turn, will create a sense of ownership and, more importantly commitment, about the organisation (Sung & Ashton, 2009: p50). However, it is also important to note that, unlike Data Connection, Pannone & Partners operates using a one-site policy. This may explain why the latter is able to emphasise employee involvement, while the latter does not consider it important for increasing performance. Employee Skills and Training Needs Finally, a review of employees’ skills and training needs is also used by both companies as a practice to enhance individual and organisational performance. The reason for training employees is for change management, specifically to ensure that the employee enhances their skills or gains new ones that can enable the change desired by the specific organisation (Karatepe, 2013: p135). Data Connection, for example, believes in continuous development of its employees, which it achieves by giving a mentor to new recruits who can then identify skills that need development and train the employees. Skill and training needs are also developed through the use of personal development plans, which track the skills development process and identify training needs for the employees. The skills development process is also used to identify weaknesses and strengths of new employees and their potential improved through specified training regimes, which ensure that the employee work in the job they are best suited to and feel motivated to improve on their performance (Sung & Ashton, 2009: p37). Surprisingly, Pannone & Partners does not seem to pursue these practices related to employee skills and training needs. It is not clear why this is the case, although their focus on giving employees as much time off as possible may be linked to the lack of such practices because there is inadequate time. Conclusion In conclusion, high performance work practices have emerged as a major concept in HR and management systems in enhancing overall work performance. The emergence of this concept has come about as the result of increased challenges posed by a dynamic and changing workplace, which has interlinked performance improvement to the improvement of skills, knowledge, and experience in the organisation. Line managers were also identified as critical players in the implementation of high performance work practices, specifically because they are best placed to set and appraise performance targets. This paper set out to analyse the manner in which two companies in Data Connection and Pannone & Partners use high performance work practices. Four major areas of HPWPs were analysed for both companies, which were HR practices, commitment and reward, employee training and skills needs, and high employee involvement. It was found that both organisations have similar HR practices that revolve around recruiting and retaining the best talent to improve performance. 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