What Is HRM, And Does It Matters HR And Organization's Performance - Essay Example

? What is HRM, and does it Matters? What is HRM, and does it Matters? Human resource management is a complex domain. Therefore, it is challenging to provide its definitive definition. The reason behind this limitation is the absence of generally agreed framework and reliance on competing models for understanding and assessing HR functions. In practice, HR functions are infinitely flexible, contingent over time, influenced by external context of age, and subject to change within short time periods (Farnham, 2010, 4). One of the major researches in the field curtly defines HRM as the management of employment (Marchington and Wilkinson, 2008).This paper explores what human resource management (HRM) is, and whether its existence matters in contemporary work environment. Broadly, human resource management is referred as a rational and strategic approach for managing a firm's most valuable asset. This valued asset is employees who contribute to the organization in an individual and collective manner in order to reach its strategic goals( Armstrong, 2006, p.5).According to Storey (1989) HRM can be defined as a "set of interrelated policies with an ideological and philosophical underpinning"(cited in Armstrong, 2006, p.5).Storey(1989) highlights four aspects that constitute significant version of HRM, it includes: a specific collection of beliefs and assumptions; a strategic drive for informed decisions about people and management; line managers' central involvement; and dependence on a set of 'levers' for shaping employment relationship(cited in Armstrong, 2006, p.5).Beardwell and Claydon(2007) also provide no standard definition, however, they differentiate between 'soft' and 'hard' versions of HRM. While drawing upon the works of Guest (1987) and Storey (1992) they attribute soft HRM as acknowledging employee as a resource needs investment, and focusing on high involvement of human resource practices. Moreover, hard HRM identifies employees as a cost worth minimizing, and rely on "flexibility techniques" and minimal investment in employee learning and development (pp.671-675). Primary objective of HRM practices is to ensure that organization use its people potential to achieve success. Ulrich and Lake (1990) observe that HRM systems can serve as source of organizational capabilities that encourage firms to learn and tap new opportunities. HRM deals with the achieving objectives' in areas that include: organizational effectiveness, human capital management, knowledge management, reward management, employee relation, meeting diverse needs, and filling the gap between rhetoric and reality (Armstrong, 2006, p.11). HR matters as it has influence on diverse areas of organization's performance. According to Purcell et al. (2003), HR can lead and contribute to the development and implementation of high performance work practices. In particular, the practices linked with job work and design, flexibility, resourcing and talent management, reward, employee development, and employee representation. It contributes to the process of formulation and incorporation of clear vision and values of organization; development of positive psychological association and means of increased motivation and commitment; creation of a perfect workplace; support and guidance to managers for the implantation or HR policies and procedures; and effective change management. HR and Organization's performance HRM practice is based on the assumption that employees are key resource, and overall organizational performance is largely dependent on them. Therefore, appropriate HR policies and policies and their effective implementation can make substantial improvements in organization's performance. Several HR commentators identified the crucial need to establish that there exist an evident and positive association between HRM practices and organizational performance. It is not sufficient to prove that HR is a good thing, but the initiatives that ensure its effectiveness. It is the 'black box' exists between intentions and outcomes as discussed by Purcell et al. (2003). Ulrich (1997) argue that HR practices appear to matter since it is logical. Moreover, survey results confirm it. However, the direct link between investment and HR practices is not clear. Purcell et al. (2003) express concerns about the validity of the efforts to establish a connection. In a comprehensive study, they demonstrated that the research that measure number and extent of HR practices is inadequate to understand the link between HR practices and business performance. It is misleading to assume that only the presence of HR policies is sufficient to ensure that they will be implemented as intended. In his research, Arthur (1992, and 1994) used data from 30 US strip mills in order to examine labor efficiency and scrape rate by implementing either high commitment strategy or control strategy. They concluded that firms with high commitment strategy showed significantly higher levels of quality and productivity as compared to firms with control strategy. Huselid (1995) analyzed questionnaire responses from 986 US organizations for using high performance work practices and concluded that employee motivation is linked with employee productivity. The key factors including employee skills, motivation, and organizational structure directly influence organizational performance. Huselid and Becker (1996) created an index of 740 firms' HR system that explored the degree of high-performance work system adoption. They found that firms with high performance work system were indexed at economically and statistically higher levels of performance. Becker et al. (1997) studied the results of several research projects in order to analyze the influence on shareholder value of high performance work system. The analysis revealed that high performance systems have positive influence as long as they are built in the management infrastructure. Patterson et al. (1997) analyzed the association between organization's performance, culture, and number of HR practices used. They found variation in the increase of profitability and productivity (19% and 18% respectively) as a result of HR practices. They identified most crucial HR practices which include: attainment and development of employee skills; job design that incorporates flexibility, variety, responsibility, and use of formal teams. In his research study of 623 UK based aerospace firms, Thompson (1998) assessed the influence of high performance work practices, such as, appraisal, job rotation, teamwork, broad-banded grade structures, and business information sharing. He found that number of HR practices and proportion of employees are the major factors in the more and less success of organizations. The Future of Work Survey observed that the number of HR practices in an organization is directly associated with higher levels of employee commitment and participation that results in higher level of productivity and service quality (Guest et al. 2000b). Why does effective HR Matter? "At a broad level, HRM is concerned with choices-choices that organizations make from a wide variety of possible policies, practices, and structures of managing employees"(cited in Cascio and Ranjeet, 2010, p.9).Substantial body of existing and growing research is evident of strong connection between the way firms manage people and the economic gain they achieve as a results. For instance, 700 publically held companies are observed and analyzed for their work practices and financial performance. The study analyzed the most appropriate practices in areas, such as, staffing, informational sharing, performance appraisal, promotion systems, attitude assessment, job design, incentive systems, grievance procedures, and labour-management participation. On the indicator of best-practice frequency, firms with progressive policies were observed to have superior financial performance (Cascio and Ranjeet, 2010, p.9). Cascio and Ranjeet(, 2010, p.10) observed that top 25 percent firms which utilized the largest number of HR's best practices experienced an annual shareholder return of 9.4 percent, 11.3 percent gross rate of return on capital. On the other hand, 25 percent of firms at bottom experienced it at 6.5 percent. While controlling other drivers of financial performance, HR practice index appeared to be substantially associated with annual shareholder return and return on capital. Many organizations in India practice the same uniform for all employees at workplace policy, irrespective of their designation. For instance, Honda Motors Scooters India Limited practices same uniform that compliments their collectivist culture. This practice induces a feeling of equality and positive impact on workers' behavior and attitude. Another HR initiative is the involvement of family members. Many organizations, particularly in IT sector when they arrange annual party with family or celebrate "family day". Family and employees are given presentations about organizations and they participate in different recreational activities. The objective behind this exercise is to create awareness and a feeling of pride for the organization they share in an indirect manner. According to research, it is evident that these practices have strong impact on employee commitment and productivity. Specific practices are designed in HRM that leave lasting impact on employee performance, productivity, quality of life, and finally the profitability of organization (Cascio and Ranjeet, 2010, p.10). Cascio and Ranjeet (2010) observe that adoption of high-performance work practices can have substantial economic impact on the market value of firm. Here, the question arises that how large the effect can be?(10) According to recent research, it can range from $15,000 to $45,000 per employee(cited in Cascio and Ranjeet, 2010,p.10).In addition, high performance practices can influence the probability of a new firm's survival by 22 percent(cited in Cascio and Ranjeet, 2010,p.10). The results of such practices primarily depend on the skills and caution with which managers implement these strategies to resolve real business issues and support organization's functional and strategic objectives (Cascio and Ranjeet, 2010, p.11).These practices provide many important sources of enhanced performance in organization(cited in Cascio and Ranjeet, 2010,p.11). High performance practices empower employees that help in building high level of commitment and involvement and inspire them to work harder. The whole process encourages them to built skills and competence which make them smart workers. With more authority, they become more responsible (Cascio and Ranjeet, 2010, p.11). HRM in External Context Contemporary HR equips managers with a distinctive approach to deal with people at work. It is important to note that some organizations practice traditional personnel management approaches. Torrington et al. (2008) attributes HRM as a theme and prominent trend for people management (cited in Farnham, 2010, p.19).Today, HRM is strategic in its focus, capable of integration with line management, and individualistic in its orientation. In a large firm in contemporary times, senior HR professional scan and analyze their environments in the light of external changes. They work in close collaboration with senior management as business partners and build capability at individual and collective level. They work in complex and ever-changing organizational frameworks. For situation-based issues, HR professionals analyze particular contexts and devise and implement appropriate HR strategies in short, medium, and long term. Understanding external contexts are crucial for successful HRM practices since they are socially ingrained in peoples' contexts at a wider and institutional level Farnham, 2010, p.19). It implies that firms are influenced by external forces and HR professionals adapt their internal contexts in accordance with them (Berger and Luckman 1967 cited in Farnham, 2010, p.19). Moreover, Pfeffer and Salanick (1978) note that firms' activities and results are associated with the contexts in which the firm is established (cited in Farnham, 2010, p.19). HR systems have crucial practical impacts on the survival of organization, its financial performance, productivity and motivation of employees, and quality of life (and services they provide (Cascio and Ranjeet, 2010, p.11). Existing literature study reveals that there is no standard definition of contemporary HRM and its relevant practices. However, it is evident that HRM is dependent on path. Farnham(2010,p.33) explains that in order to cater organizational needs for promoting competitive advantage in the marketplace, relevant and accurate HR strategies, operational HR activities, and HR solutions are considered to be the most important factors. The supporting argument explains that people (employees) influence organizational performance to a greater extent. Selecting, hiring, appraising, developing, and rewarding the 'right' individuals in firms is crucial for overall organizational effectiveness, efficacy, and success. HR becomes even more important when we consider selecting 'wrong' people who lack knowledge, relevant skills, right attitude, and customer focus that is aligned with organizational needs and objectives. Contemporary HRM practice identifies that HR function is inevitable for formulating and implementing business and HR objectives and promoting HR policies and procedures. . References Arthur, J. B. 1992.The link between business strategy and industrial relations systems. In American steel mills. Industrial and Labor Relations Review, 45(3), pp.488–506. Arthur, J.1994.Effects of human resource systems on manufacturing performance and turnover.Academy of Management Review, 37(4), pp. 670–87. Armstrong, M., 2006. A handbook of Human Resource management practice.10th ed. London, Philadelphia: Kogan Page Limited. Beardwell, J., and Claydon, T. ed., 2007. Human resource management: a contemporary approach. 5th ed. Harlow: FT/Prentice Hall. Becker, B. E., Huselid, M. A., Pickus, P. S., and Spratt, M. F. 1997.HR as a source of share-holder value: research and recommendations. Human Resource Management, Spring, 36(1), pp. 39–47. 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