Human Resource Management and Performance - Essay Example

Human Resource Management and Performance Human resource management is a fundamental function of any organization. This function is intended to exploit the level of individual employee productivity and performance in the organization. Human resource management (HRM) looks at how employees are handled in the firm. HRM employs policies, strategies and systems that are meant to derive the utmost value out an employee. The manner in which employees conduct themselves in the organizations has significant consequences to the performance of firm. Therefore, the decisions enacted by the human resource managers will ultimately influence the performance of a specific employee. That is, the human resource practices will exert influence on employees' abilities and inspiration through organizational arrangements which enable the improvement of employee job performance (Huselid, 1995, p. 16). This paper will seek to establish the link between Human resource practices and productivity. Previous studies on the effect of HRM practices on the overall productivity of the business have exhibited widespread results. In a similar study, Cutcher-Gershenfeld (1991, p. 17) established that companies that had espoused transformational work relations in their human resource strategy (relations that emphasized on teamwork and conflict resolution) exhibited tremendous cost reduction and enhanced productivity. Human resource management is a refined way of handling employees in the organization as compared to previous practices, for instance personnel management that were advanced by earlier schools of thought. Human resource management is rooted on practices that concerned with integration and cohesion in the recruitment process. Moreover, it is keen on the valuation and development of employees through a number of programs. Human resource management employs the concepts of strategic management in order to derive maximum productivity from the human resources. Human resource management (HRM) is a function whose main objective is to integrate the organizations policy with all the HRM practices. These HRM practices are staffing, performance appraisal, remuneration management, and dismissal (Price, 1997, p. 72). It is imperative to note that the top management is highly involved in this system. This approach enhances employee attitudes and behaviour which should be in line with the overall goals of the organization. The conventional Human resource practices have arisen due to constant improvements in the area of management from early schools of thought. The earliest school of thought on management was the Classical management theory. This theory was advanced in the period of the industrial revolution. This theory was developed amidst studies done to ascertain the best way to execute and manage tasks. Important to note is that, the classical management theory was broken down into two fundamental concepts. These are the classical scientific approach and classical administrative approach (Boxall, 1992, p. 19) The classical scientific theory was developed in order to capitalize on productivity and effectiveness in the organization. The approach was based on analysing the work processes and evaluation of the competency of the available workforce. The main objective was to determine the most efficient way to complete tasks. Proponents of this theory included, Frank and Lillian Gilbreth, Henry Grant and Fredrick Taylor. The classical administrative view was concerned with the whole organization. Attention was given to the improvement of management ideologies as opposed to work processes. The proponents of this theory emphasized on the importance of comprehending the way that the organization functioned. Proponents of this theory included, Max Weber, Henry Fayol, and Mary Parker Follet. The approach above was later followed by the ‘behavioural science movement’ whose main proponents were Maslow, Argyris, and Herzberg (Budhwar & Sparrow, 1997, p. 34). These researchers main concern was the ‘value’ side that human resources (HR) presented. They advocated for improved quality and more developed working conditions for employees in the organization. Subsequently, the human resource accounting theory (HRA) was conceived. This approach was the result of a number of progressive advances in the area of HRM (Budhwar and Aryee, 2008). Moreover, this late approach is thought to be the foundation of HRM as a well-defined school of thought (Budhwar & Sparrow, 1997, p. 28). HRA was of the view that human resources were important assets to every firm (Hendry & Pettigrew, 1990, p. 17). It is important to understand the strategic functions of HRM, particularly performance management and reward management. All these functions are part of the management’s strategy to enhance productivity and employee efficiency in the organization. Performance Management Performance management entails a series of measures put in place in order to gauge the performance levels of employees in the organization. It is basically the process whereby the managers and the employees have a mutual understanding of the work prospects and objectives. The process entails getting performance responses, recognizing training and enlargement openings and assessment of performance outcomes. The human resource department is tasked with the responsibility of reviewing the performance of its employees. The performance management process has a number of aims that it seeks to meet. The process is vital in creating a work setting that values constant development, inspires inventiveness, and encourages training and specialized improvement. The performance management has a set of distinct sub-processes that constitute a whole. These processes are explained below Performance Planning: This entails planning in a number of key areas, for instance, what is anticipated of the employee in a certain role, the standards that should be upheld in a certain position. Performance planning also entails setting of performance goals for the employee, for instance, what should the employee work to accomplish in the following year. Moreover, the process involves setting development objectives, for instance, the type of skills the employee should work to improve in the following year. Daily coaching and feedback: This process involves deliberating on employee performance frequently. Feedback on employee’s success and failures are communicated within the HR department and subsequent measures on how to improve on the areas of weakness are suggested. The employee contribution is important in this stage. Periodical performance review: This entails having quarterly review of employee performance. Certain metrics of performance are assessed, for instance, ascertaining whether the organisations expectations and standards have been upheld, establishing whether development goals have been attained. Official performance appraisal: This is the prescribed annual review of employee performance. Employee performance and improvement results are documented and subsequently reviewed. It is important to note that the performance management process informs the reward management process and acts as a benchmark for rewarding employees efforts. HR managers use the performance management process to establish which employees are eligible for a reward and those whose performance should improve. Telcom for example evaluates the performance of its employees. The employee’s efforts are assessed on grounds of what the employees have accomplished and on the mode of their work conveyance. Scores are founded exclusively on the employee’s performance. The compensation awards and performance incentives deliberations occur after assessments are finalised. It is imperative to note that there is a direct connection between the final year performance ranking and suitability to get a pay award. The performance ranking decides if an employee will be eligible for an award. Reward Management This function entails a logical method aimed at giving financial or equivalent benefits to employees in return for the work done. The main reason of compensation management is to create and uphold an impartial reward scheme. It deals with the monetary facets of wants, incentive, and rewards. A successful reward system should be well timed, accurate, and frequent in order to draw the attention of the employees. Moreover, the reward plan should be effectively communicated to the employees in order to inspire individual effort, deliver the required response, and motivate redirection. A decent rewards scheme makes sure that employees get a suitable monetary and nonmonetary appreciation for their individual input in the organization. This system follows a rigorous performance appraisal as explained above. In Telcom’s approach to pay, a number of factors are put into consideration. The company has a guide which gives the managers and employees information about Telcom’s approach to pay, containing relevant performance incentives, and how the approach is in line with the assessment procedure. The method has three components. The pay award is such that; all employees are entitled to a yearly evaluation of minimum pay. This happens subsequent to a final year appraisal of performance and subsequent ranking. The performance bonus is initiated when employees who have exhibited exceptional performance regularly all through the year are remunerated. Performance bonuses at Telcom are issued at the discretion of management. The management reward at Telcom is a discretionary payment system that is implemented all through the year. This scheme is meant to distinguish employees who have had a noteworthy input to a certain chore or project It is imperative to understand what strategy is in order to comprehend how the above-mentioned HRM practices are integrated with the overall objectives of the organization. In the realm of commerce, strategy is primarily defined as the means through which top-level management steers the firm in a certain way so that definite ends, goals, vision, and general resolve can be realized. The chief principle of strategy is therefore to assist the firm to attain competitive gain through utilizing its distinctive competences by concentrating on current and imminent course of the firm (Miller, 1991, p. 45). A typical strategic executive procedure is comprised of a sequence of stages, commencing with creation of a mission statement and fundamental goals for the firm (Kay 1993, p. 56). Moreover, the management should evaluate the external environment. This evaluation will enable them detect potential prospects and threats. Management should also undertake an internal review of the firm. This will enable management to ascertain its strengths and weaknesses together with the type of existing administration structures, capabilities and aptitudes (Mello, 2006, p. 45). Performance management and reward management are part of the internal human resource strategies as proposed by an analysis of the organizations internal structures. There have been constant efforts that aim to integrate the functions of HRM into the overall strategies of the organization (corporate strategy). This new development in human resource practice is known as strategic human resource management. HR strategies are fundamental policies and procedures which seek to review and resolve important strategic matters associated with administration of human resources in the company (Schuler, 1992, p. 34). The emphasis is on positioning the company’s HR procedures, plans and programs such that they are in line with the strategic corporate unit policies (Greer, 1995, p. 51). Strategic HRM therefore creates a linkage between business policy and HRM. Moreover, it highlights the importance of incorporation of HR with the organization and its external setting. It is perceived that incorporation of HRM into corporate strategy enhances efficient managing of human resources, development of business performance, and ultimately the growth of the business (Holbeche, 1999; Schuler & Jackson, 1999, p. 24). The management’s main objective is to enhance the performance of the organization through competent human resource management. This can only occur if the HR departments embrace the concept of forward thinking (Stroh & Caligiuri, 1998, p. 57). Moreover, strategies formulated and advanced by the HR department must function steadily as an essential aspect of the general business blueprint (Stroh & Caligiuri, 1998, p. 26). The tactic of employing the concept of forward thinking in the business compels them to undertake an analysis concerning the types of HR capabilities that are imminent. Furthermore, the approach will ensure that essential HR tasks (procurement, enlargement, and reward) are initiated to satisfy needs (Holbeche, 1999, p. 24). It is imperative to note that the link between the performance of an organization and the HRM practices are rooted on two fundamental methodologies. These are the best fit (contingency) and the best practice (Becker & Huselid, 1998, p. 96). The best practice The best practise strategic method is rooted on principles of universalism. That is, a set of practises set to achieve high performance will work and derive the same results for all organisations notwithstanding unique settings of the organisations. In the best practice, a number of HRM practices are linked to enhanced organizational performance in every kind of business and for every kind of employee. There are a number of features that are synonymous with the best practice approach. These are: Job security: The organisation ensures that the employee’s job is not under any jeopardy. This is attained through laid down structures for instance, employment contracts that ensure employment security is attained. Selective hiring: The human resource department ensures that it only hires the type of employees that best suit the laid down selection criteria. The hiring process is very rigorous and thorough in order to get suitable candidates. Team-working: The job description in this approach is that team work is highly encouraged. Moreover, there is decentralisation of authority in order to allow for autonomy which inspires innovation. Extensive Training: The organisation ensures that its employees are engaged in continuous training activities. These training opportunities allow for continuous improvement on the part of the employee and subsequently the organisation. Effective communication and employee participation: This structure advocates for a well-structured mode of communication in the organisation. Policies and other organisational objectives should be well communicated to the employee in order to derive maximum efficiency from the employees. Moreover, employee involvement is practised at all levels in order to enhance performance. Best Fit This strategy contends that the Human Resource Strategy is more productive when it is modified to fit the organisational context in question. This approach has two fundamental aspects. External fit: This fit is associated with the organisations competitive strategy, for instance the company’s marketing strategy. Internal fit: This demands for cohesion between human resource policies and practices. Policies that are contradictory should be avoided. The best-fit concept contends that the productivity of any organization is elevated when the human resource strategies are in line with organization’s corporate strategies. Both these approaches have a fundamental assumption. The assumption suggests that every HR strategies will be executed and consequently elicit the identical result on every employee. These concepts are employed in strategic human resource management in order to attain productivity and improved performance. The best fit particularly proposes a close link between the organizations’ strategy and a number of systems that it employs, for instance the reward system. The ultimate goal of these concepts is to attain organizational productivity. The following HRM functions can be integrated into the wider strategic functions of the organization in order to enhance productivity Recruiting and selection: This entails keen and detailed recruitment and screening of probable staff. The organization should devote substantial resources to the recruitment and selection process in order to reduce the chances of picking poor performers. The organizational policies can be made to be in line with the process of recruitment and selection so that the new employees can fit in the culture of the organization. Training and Development denotes the level of training given to staff at various business levels. Substantial emphasis should be placed for training of employees. This will lead to improved, capable, and possibly more inspired employees. Reduced efforts in training will lead to low productivity (Andersen et al., 2005, p. 9). This aspect can be integrated into the overall organization strategy, such that the process of training and development is in tandem with general organizational objectives. Development of employees could be done through conducting performance appraisals. Telcom for instance assesses the performance of its employees. Performance is evaluated on the basis of what employees have attained and on the mode of their work conveyance. Scores are founded exclusively on the employee’s performance. The compensation awards and performance incentives deliberations occur after assessments are finalised. It is imperative to note that there is a direct connection between the final year performance ranking and suitability to get a pay award. The performance ranking decides if an employee will be eligible for an award. Compensation refers to a predetermined method through which employees are paid. Organizations should ensure that they put emphasis on the methods of remuneration and compensation of its employees. Employees who are adequately paid are highly motivated, especially if there are incentives to recognize exceptional skills and other extra ordinary competencies. The pay strategy should be in line with the general objective of the organization, for instance to promote staff and client welfare. In Telcom’s approach to pay, a number of factors are put into consideration. The company has a guide which gives the managers and employees information about Telcom’s approach to pay, containing relevant performance incentives, and how the approach is in line with the assessment procedure. The method has three components. The pay award is such that; all employees are entitled to a yearly evaluation of minimum pay. This happens subsequent to a final year appraisal of performance and subsequent ranking. The performance bonus is initiated when employees who have exhibited exceptional performance regularly all through the year are remunerated. Performance bonuses at Telcom are issued at the discretion of management. The management reward at Telcom is a discretionary payment system that is implemented all through the year. This scheme is meant to distinguish employees who have had a noteworthy input to a certain chore or project. All employees, excluding top-level management, qualify getting a management reward. Dismissal refers to the process where the organization lets go of its employees. The HR managers should undertake appropriate measures to avoid staff turnover. This can be achieved through devising a well-integrated reward system and paying close attention to employee’s welfare. The process of dismissal should be consistent with the general organizational policies. For instance, contravening the company’s objectives (conflict of interests) is tantamount to dismissal. Does Successful Human Resource Management Contribute to Organizational Performance Review of Literature A number of studies have been conducted to show the connection between human resource management and organizational performance. This section will review the relevant literature and deduce conclusions to support the notion that Human resource management contributes to organizational performance. Delaney and Huselid (1996, p. 17) carried out research on the impact of human resource management practices on perceptions of organizational performance. People constitute one of the most dominant organizational resources and subsequently are significant in attaining exceptional performance (Pfeffer, 1994, p. 16). Advanced HRM practices, comprising discernment in recruitment, training and development, and incentive reward, are certainly connected to perceptual metrics of the firm’s performance (Delaney & Huselid, 1996, p. 18). The study established that the influence of advanced HRM practices is identical in for-profit and non-profit corporations (Delaney & Huselid, 1996, p. 19). Huselid (1995, p. 37) conducted a research on the impact of human resource management practices on turnover, productivity, and corporate financial performance. This research expansively assessed the associations that existed between schemes of great Performance, work practices and organizational performance. The results of the study, based on a nationwide sample of approximately a thousand companies, showed that the HRM practices had an economically and statistically noteworthy influence on the transitional worker results (throughput and output) (Huselid 1995, p. 28). Moreover, the practices had an influence on the short and long-term metrics of business economic performance (Huselid, 1995, p. 19) Becker and Gerhart (1996, p. 7) carried out research that sought to establish the impact of human resource management on organizational performance, with attention paid to the organizations progress and prospects. It was established that the most central implication was that the type of HR structure played an economically noteworthy role on the performance of the organization (Becker & Gerhart, 1996, p. 29). Consequently, both the HR system and the HR function should have a number of affiliated HR strategies that resolve corporate troubles and maintains the organization's working and tactical initiatives (Becker & Gerhart, 1996, p. 27) How Human Resource Management contributes to organisational performance Employee turnover A company that takes the welfare of its employees seriously through the enactment of best HR practises like job enrichment, job appraisals and reward mechanism will ultimately create a desirable level of job satisfaction. Job satisfaction will reduce incidences of employee turnover. Employees leaving the organisation pose a great impediment to the development of the company considering the amount of time and resources used in training the departing employees. Moreover, the cost of hiring to replace the leaving employees is quite substantial. Therefore efficient and successful HR practises will reduce the rate of employee turnover in any organisation thereby enhancing overall performance. Competitive advantage Human resource practises are vital in an organisation when trying to gain a competitive advantage over other firms in the same trade. Conventional methods of gaining a competitive advantage for instance, use of technology are easy to copy. Therefore, organisations look for inventive ways of attaining the same. The use of a strategic human resource practises aid in attaining competitive advantage. A special mix of human resource practises and the organisation policies are blended in order to create value for the organisation in terms of performance. Efficiency Successful implementation of HR practises in conjunction with organisational policies leads to an increased level of efficiency. Practises like job rotation, job enrichment and training will make the employee gain experience and an advanced level of job satisfaction in the long run. As such, tasks are performed effectively hence improving productivity of individual employees and consequently enhancing the performance of the organisation. Motivation An inspired and motivated employee is a productive employee. Part of the Human resource practise is to reward employees who have exhibited tremendous contributions in the organisation through their work. A reward system that is objective will ultimately motivate employees to work extra hard hence improving the overall performance of the organisation. Redundancy Effective HR practises will substantially reduce redundancy in the organisation. Introduction total quality management (TQM) practise in the organisation ensures redundant tasks are done away with hence improving the productivity of each employee. For instance, TQM emphasizes on the use of lean processes in order to attain maximum value in the company. The findings of the studies reviewed above are consistent in pointing out the connection between human resource practices and the impact they have on the performance of the organization. As discussed in the foregoing, human resource management is a fundamental function of any organization. This function is intended to exploit the level of individual employee productivity and performance in the organization. Therefore, the manner in which employees conduct themselves in the organizations has significant consequences to the performance of firm. Therefore, the decisions enacted by the human resource managers will ultimately influence the performance of a specific employee. That is, the human resource practices will exert influence on employees' abilities and inspiration through organizational arrangements which enable the improvement of employee job performance. Human resource management employs the concepts of strategic management in order to derive maximum productivity from the human resources. The management’s main objective is to enhance the performance of the organization through competent human resource management. This can only occur if the HR departments embrace the concept of forward thinking. The results of the research reviewed in this paper have elaborated the importance of Human Resource practices and the impact they have on the performance of the organization. Bibliography Andersen, T., Eriksen, B., Lemmergaard, J., & Polvsen, L. 2005. Is strategic human resource management strategic? - The fit between strategy and strategic human resource management Becker,.E., & Gerhart, B. 1996. The Impact of Human Resource Management on Organisational Performance: Progress and prospects. Academy of Management Journal, 39: 779–801 Boxall, F., 1992. Strategic Human Resource Management: Beginning of a new theoretical sophistication? 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Strategic Human Resources: A new source for competitive advantage in the global arena. International Journal of Human Resource Management, 9: 1–17 Read More