Measuring the Effectiveness of Human Resource Management in Improving Organizational Performance - Literature review Example

A Literature Review on Measuring the Effectiveness of Human Resource Management in Improving Organizational Performance This review will only be based on six scholarly articles that were deemed to be credible and relevant or consistent with the aim of this proposed research study. The journals were picked from the broader field of human resource management and business management. The main journal article for reference will be picked from Rodgers and Wrights (1998). This source was selected as the main reference simply because it had undergone formal review and approval at the faculty of Industrial and Labor Relation School at the Cornell University, which was the World’s first higher learning institution dedicated to the studies on the workplace. Other supplementary articles will also be utilized in the review process. The first part of the review will focus on providing a critical discussion of human resource management and the underlying theories and functions. The second part of the review will highlight briefly on the concept of organisational performance. The last part of the review process will focus on correlating what different source write on effectiveness of human resource management in improving organisational performance and then lastly, developing a conceptual framework for this study. It is important to note that the review will additionally outline the methods and methodological position of the researchers or writers, and it will even mention any existing problem and gaps within the existing body of knowledge. Human resource management According to the writings by Rodgers and Wrights (1998, p 3) he described human resource management as an administrative function that involves that aspect of recruiting, selecting, firing and designing of payrolls. Rodgers and Wrights (1998, p 3) further added that in the present context, human resource management is viewed as a component for adding value to a firm’s strategy. In a separate study conducted by Sauer (2010, p 1), the term ‘human resource management’ has been described as the function that is concerned with employee policies, managerial systems and practices that have a direct influence on an organisational workforce. From a broader perspective, Sauer (2010, p 1) wrote that HRM function simply involves all the decisions that affect the employees or the workforce within an organisation. Rodgers and Wrights (1998, p3) made a mention that HRM as a practice has been on a growth periiod since the 20th century in the sense that there have been numerous advancements or development within the practice since its conception. Research studies by DeNisi et al. (2014, p 3-4) explored the antecedent theoretical development of HRM practice, and they attribute the origin to the influence of Fredrick Taylor who explored the concept of scientific management in relation to improving the economic efficiency of jobs in the manufacturing sector. DeNisi et al. (2014, p 4) further added that the practice of HRM further grew in popularity owing to the Hawthrone studies conducted by Elton Mayo, which focused on how stimuli that were unrelated to work conditions and compensation such as engagement and attention contributed to the increased productivity among workers. Other researchers who have contributed to the body of knowledge and the development of organisational theories and studies include Fredrick Herzberg, Abraham Maslow, Kurt Lewin, David McClelland, and Max Weber. It is important to note that the HRM practice has been able to fight for its relevance in the present organisational structures by simply denoting its impact on the organisational performance, of which the subsequent section of the review will briefly discuss the concept of organisational performance. The methodological aspect of organisation performance In the studies by Richard et al. (2009, p 18-21) on measuring organizational performance from the perspective of a methodological best practices they stated that the commonly accepted measurements of organisational performance have limited effectiveness since they are normally focused on the predominant factors that include stakeholders, product market conditions, and the time factors. However, Richard et al. (2009, 748-754) suggested that to investigate organisational performance there is need to establish the measures that are relevant to the context of the research study and secondly, theory should be utilized to identify measures that should be combined and even the method for the combination. According to the White Paper that was released by The Kenexa Institute (2012, p 2), it was noted that the studies conducted by Richard et al. (2009, p 2) classified the financial performance measures for business in three broad categories that include; accounting, market, and hybrid measures. Rodgers and Wrights (1998, p 7) on their part noted that organisational performance in strategic HRM is measured on four basic parameters that include HR outcomes such as job satisfaction, absenteeism, and turnover. The second measurement parameter is organisational outcomes such as service, quality and productivity, the third measurement parameter is financial accounting outcomes such as return on investment, and lastly, the fourth measurement parameter is capital market outcomes such as returns, growth, and stock price. In this research study, organisational performance will be considered from the perspective of all the four measurement parameters that have been mentioned above, and therefore, the measurement of the effectiveness of organisational performance will be related to these parameters. Measuring the effectiveness of human resource management in improving organisational performance With reference to the studies conducted by Rogers and Wright (1998, p3-4), it has been suggested that HRM has been the target of cost minimization strategies within organisations because of the unclear impact it has on the financial performance of an organisation. For instance, it is not out there for everyone to see the impact of HRM on the financial performance of an organisation. Because of this, questions have been raised as to how exactly HRM impact the financial performance of an organisation since it cannot be quantified as other aspects such as advertising, which have a direct impact on the sales revenues. Moreover, Cooke (2000, p 2-3) mentioned that if indeed HR policies have a positive influence on the financial performance of organisations then it is not understandable why numerous firms in the United Kingdom have failed to employ HR policies. In addition, it has been known that so many small and medium sized companies across the world prosper yet they do not have a formal HRM structure. Rodgers and Wrights (1998, p 15) stated that in the measurement of organisational performance it is critical to note that effectiveness measures simply entail the achievement of the set objective, which is to say that effectiveness measure is a goal-oriented measure. In order to construct an effectiveness measure it is first important to establish the objective of the measurement parameters. On this point, Rodgers and Wrights (1998, p 5) noted that there is question to be raised on the construct validity of an effectiveness measure on the entire HRM functions since it is made up of other diversified functions, and therefore, the effectiveness measures can only be performed in respect to a specific HR function and even performance parameter. For example, to measure the effectiveness of training and development in improving organisational outcome, the dependent variable would be training and development while the independent variable would be the a specific HR outcomes such as employee turnover, which in this case will be the measurement parameter. According to Rodgers and Wrights (1998, p 21) the construction of an effectiveness measure is determined by the organisational goals, which is to mean the HR function it would like to measure its effectiveness, and the particular measurement parameter that should be used. In this present research study, the set research objectives can be interpreted as the organisational goals and therefore, the effectiveness measures that will be explored include the HR function of employee acquisition, motivation of employees, and the function of training and development. With reference to the writings by Rodgers and Wrights (1998, p 7) the selected effectiveness measures will be assigned measurement parameters as presented in the table below. Effectiveness measure Measurement parameter Employee acquisition Quality of service delivered Motivation of employees Sales revenue Training and development of employees Return on investment Table 1: Effectiveness measure versus measurement parameter Based on the table above, the approach that will be taken, is to first consider the standards of acquisition of employees and then evaluate the quality of service delivered by the new staff and compare it with the quality of service that is delivered by the employees who were selected by the previous acquisition standards. The difference in the two qualities of services will denote the effectiveness of the HR function of employee acquisition. Secondly, after implementing new employee motivation strategies, the researcher should gauge if there changes in sales revenue, which will then denote the effectiveness of the HR function of motivation. Thirdly, upon concluding the training and development of employees, which is part of the organisation’s investment, the researcher should evaluate if there is a difference on the return on investment and hence, the effectiveness of this particular HR function of training and development. From this information the conceptual framework for this research study can be represented as follows; High quality of service delivered High sales revenue High return on investment Increase Increase Increase Decrease Decrease Decrease Low quality of service delivered Low sales revenue Low return on investment References Cooke, F. (2000). Human Resource Strategy to Improve Organisational Performance: A Route for British Firms. ESRC Future of Work Programme: Working Paper No 9 DeNisi, A, Wilson, M. and Biteman, J. (2014). Research and practice in HRM: A historical perspective. Human Resource Management Review. Elsevier Inc. Kenexa Institute (2012). Measuring Organizational Performance: A Best Practice Guide To Financial Indicators. Accessed from: http://www.kenexa.com/getattachment/450878a5-8478-4924-92a9-bd006d44c27f/Measuring-Organizational-Performance--A-Best-Pract.aspx. Accessed on [10.04.2014] Richard, J, R. Timothy, M. D. George, S. Y. and Gerry, J. (2009). Measuring Organizational Performance: Towards Methodological Best Practice. Journal of Management, Vol. 35 (3) 718-804 Rogers, E. W. & Wright, P. M. (1998).Measuring organizational performance in strategic human resource management: Looking beyond the lamppost (CAHRS Working Paper #98-24). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies. Sauer, N. (2010). The Contribution of Human Resource Management to Organisational Performance: Human Resource Management Theory Applied. Retrieved from: http://voices.yahoo.com/the-contribution-human-resource-management-organisational-5580683.html. Accessed on [10.04.2014] Read More