Individual Performance as Key to Organisational Performance - Essay Example

Is Individual Performance the Key to Organisational Performance 0 Introduction As business organisations evolved, so too is the practice of human resource management. Human resource management needs to have two important elements: learning and performance, in order to become a core business process (Swanson, 1995). Learning is important because it entails knowledge, and this knowledge turns into expertise. Swanson (1995, p.209) added that learning is just a figment of expertise, while expertise is only a single component that comprises the so-called performance. Performance, indeed, is the key for HRM to become a core business process (Swanson, 1995). Personnel management is another variation of human resource management, but the former is a modification of HRM practices during the 1980s in order to address the growing need to develop people in the business organisation (Armstrong, 2000, p.579). Barney (1991 cited in Armstrong, 2000, p.579) writes that the main goal of developing the potential of every organisational member is to become competitive compared to business rivals, which do not “develop” the competitiveness of their people. Kamoche (1996 cited in Armstrong, 2000, p.579) also states that developing human resources will “improve resource capability” necessary to complement the resources of the company with the opportunities available for every employee. This essay discusses the importance of individual performance in achieving organisational performance based on the different approaches to HRM. 2.0 Developing Talents While Armstrong (2000) believes that developing people inside the organisation is a necessary component, Heinen and O’Neill (2004, p.68) state that “talent management” is an important business strategy. Talent management is an invention of recent business history because previously, only executives are given focus in the development strategy of any business organisation. Talent management now involves focusing on five basic strategies mentioned by Heinen and O’Neill (2004, p.68). It involves “attracting, integrating, developing, motivating, and retaining” employees (Heinen & O’Neill, 2004, p.68). This strategy aims to correct previous strategy mistakes in history, which merely focused on developing business design and not the people working in the company. 2.1 Talent Strategy: Strategic Human Resources Management As the phrase suggest, talent strategy involves a holistic approach from identifying to retaining people in the company. In managing talent, processes are involved from “recruiting, selection, onboarding, mentoring, performance management, career development, leadership development, succession planning, career planning, and recognition and rewards” (Heinen & O’Neill, 2004, p.68). These processes are directly addressed to employees working in the company from the bottom rank up until the top level executives. Talent strategy is very important in aligning the skills of the people to the mission, vision, goals, and most especially, the business design of the company. A study by Combs, et al. (2006) was conducted to test the correlation between high performance work practices (HPWPs) and organisational performance. HPWPs work with individual players in the organisation, which pertain to human resources, while organisational performance is critically linked to company’s productivity and efficiency. Combs, et al. (2006, p.502) describe HPWPs as a system of employee rewards, both tangible and intangible. These include compensation and benefits, wage increase, training, employee activity, and a pleasant working environment (Huselid, 1995, Pfeffer, 1998 cited in Combs, et al., 2006, p.502). According to Combs, et al. (2006, p.502), these perks are part of strategic human resources management, which “increase employees’ knowledge, skills, and abilities.” Furthermore, Combs, et al. (2006) affirmed that 92 literatures established a clear connection between high performance working practices and organisational performance. Based on SHRM or strategic human resource management, HPWPs affect organisational performance through three important components: “increasing employees’ knowledge, skills, and abilities or KSAs, empowering employees to act, and motivating them to do so” (Becker & Huselid, 1998 cited in Combs, et al., 2006, p.503). Employees are observed to minimise their motivation when their KSAs are not enhanced to the maximum through talent strategy, specifically HPWPs. Therefore, when individual employees are given both tangible and intangible benefits from the company, they perform their jobs pretty well, and their work commitment is high (Pfeffer, 1998, Snell et al., 1996 cited in Combs, et al., 2006). In addition, individual employees also do not commit to the company goals and objectives if their KSAs are not encouraged to be enhanced. Also part of strategic human resource management is the emphasis on job satisfaction among employees. Ostroff (1992, p.963) reveals a significant link between employee’s satisfaction, attitudes, and performance and its impact to organisational performance. In addition, employees who were found to be more satisfied perform better and effectively compared to those who were not or were less satisfied. Individual performance is tied up with the capability of the company to provide the necessary practices, which can exude commitment, satisfaction, and consequently retention among employees. If individual employees are unhappy, unsatisfied, and not committed to their job, organisational performance is not likely going to happen (Ostroff, 1992, p.969). Furthermore, Ostroff (1992, p.969) also states that employee performance is an important factor in the organisational level. This is so because other factors contribute to “productivity-related behaviors” that are associated with individualism, such as the inevitable need to become dependent towards co-workers, mutual trust and respect, and attachment. So these behaviors are the key toward an effective and efficient organisational performance, but before effective organisational performance is achieved, HPWPs are necessary and important to fuel individual performance. When discussing about individual performance, Heinen and O’Neill (2004) emphasise on assessing not only in the level of regular employment when there is a significant amount of time already rendered in the company. The assessment even starts during recruitment itself by carefully assessing the candidates for a certain position. The assessment includes the strengths, weaknesses, and capabilities of that candidate, which will surely be needed in the future, at the same time identifying these elements so that a design plan will be implemented. The assessments include a variety of inputs, such as “employee career interests,” track record, including previous tasks and responsibilities performed in the company, and other similar inputs are vital (Heinen & O’Neill, 2004, p.72). Moreover, talent management is also applicable to employees for same exact reasons. Another piece of advice mentioned by Heinen and O’Neill (2004) is on balancing the general needs of the organisation with that of the employees. A balance between these two requires that each employee is responsible enough to take care of his or her needs, chances, and opportunities, while the organisation must also address its needs for it to exist and last in the future. That is why, it is important that there must be constant communication between top level executives and individual employee so that the business design and the factors involving individual performance is convincingly achieved. 2.2 Resourced-Based Perspective Another approach related to strategic human resources management is the resource-based view. Peteraf (1993) states that firms are inherently heterogeneous, which means that their human resources are composed of varied talents, skills, strengths, and weaknesses that can be used to their advantage. In other words, human resources have different “efficiency” levels, some are excellent while others perform low, and this heterogeneity is proven to produce quality customer service (Peteraf, 1993, p.180). Barney (1991, Wright, et al., 1994 cited in Bowen & Ostroff, 2004, p.204) writes that a company’s human resources have “implications” for the performance of the firm, and these resources are the sources of competitive advantage. As a unique source of competitive advantage, human resources are difficult to be imitated. They are also extremely complicated and “intricately linked” with each other and so replicating them for other companies is a tough task to achieve (Boxall, 1996 cited in Bowen & Ostroff, 2004, p.204). Under resource-based strategy is the single business strategy, which distinguishes a particular human resource that supports a “competitive advantage” compare to the less valuable resources (Barney, 1991 cited in Peteraf, 1993, p.187). The employee himself must have “firm-specific ties” so that he or she can have a direct contribution to the department in which he or she belongs; otherwise, he becomes “an unlikely source of competitive advantage” (Peteraf, 1993, p.187). 3.0 Contingency Perspective The contingency approach operates under two paradigms: 1) that there is a uniform and universal organisational and management principle and; 2) every organisation is unique from the rest, and these situations happening within the organisation should be dealt with separately (Zeithaml, et al., 1988, p.37). Contingency approach means that there are repeated occurrences within the organization, which help business leaders to analyse how each situation, structure, and behavioral responses go in those situations (Zeithaml, et al., 1988, p.37). As the theoretical foundation of the contingency approach states, every organisation is composed of parts that are interrelated and work together as a whole. Effectiveness, defined by Zeithaml, et al. (1988, p.39) as “organisational adaptation and survival,” includes a multiple perspective and a solution to any organisational problem, that is, there are more than one way of achieving organisational success, or more than one way of leadership styles and patterns to achieve the company’s visions. “Performance variables” are very important in mediating and solving problems that involve “contingency variables” and “response variables” (Zeithaml, et al., 1988, p.40). Performance variables here refer to approaches or ways that are effective to assess the compatibility between the company’s manipulative characteristic and its responses to situations that occur. The process in which the contingency perspective addresses a particular issue is through its outcomes. In other words, the nature of the process used in addressing a specific problem is not highly emphasised but rather on the results. Outcomes can never be generated without a strategic human resource management that centers on individual performance. Employee motivation and proper leadership elevates that individual performance into the firm level and consequently, into organisational success. The contingency perspective suggests that employees who are used to in their designated roles are also keen on responding to these situations that they are very familiar of since these are routined situations or problems. Thus, one cannot disregard the importance of individual effort in addressing a situation that normally occurs in the firm. 4.0 Cooperation versus Competition in Organisational Performance A study conducted by Beersma, et al. (2003) discusses the importance of cooperation and competition within the team performance. In any organisational transition, say from an individual performance task to team-based task, there must also be a transition of the rewards system. The importance of individual performance is that, the fact that every employee has his or her unique strengths and weaknesses, necessary rewards and punishments will be appropriately implemented. In other words, competition translates to high performance among employees because the corresponding reward for such action is positive, while doing the opposite benefits the employee with a punishment. Hence, a lot of experts also agree that competition “promotes efficiency and innovation” because employees work hard in outsmarting and outperforming the rest of the members (Beersma, et al., 2003, p.572). In addition, the company also benefits from that level of performance, which is most likely defined to be fast, efficient, reliable, and most of all, productive performances. On one hand, other economists and behaviorists believe that competition, which focuses more on individual performance, suggests negative notion for the company because individuals focus more on their personal growth and interest rather than the growth and goals of the company. For this reason, economists believe that “cooperative systems” are needed in this kind of setup so that team success and accomplishments are shared, not individualised (Beersma, et al., 2003, p.572). One component of collaborative systems is the “collaborative reward allocations,” which serve as a reward for team effort and in consideration of the interdependent functions of every employee (Beersma, et al., 2003, p.573). Collaborative reward allocations are also important because they “promote trust, cohesiveness, and mutually supportive behavior” among members of the team or the organisation as a whole (Beersma, et al., 2003, p.573). Miles and Greenberg (1993 cited in Beersma, et al., 2003, p.573), on the other hand, write the importance of rewarding individual contributions in a team performance in order to do away with “social loafing” or implementing the necessary reward and punishment of employee contributions. 5.0 Individual Performance Equals or a Factor of Organisational Performance? The above mentioned perspectives provide some backgrounder in the establishment of the causal relationship between individual performance and organisational performance. In this section, rewards will be discussed based on how these are likely to be achieved. Beersma, et al. (2003) write that any situations that are structured cooperatively or competitively have positive and negative correlations, respectively with the resulting reward of the team. The authors also state that this idea is anchored by the goal interdependence theory, which states that any team member shares the same passion with the rest of the group because he or she feels compel to do so because of the likelihood to also share the same reward or punishment with them (Beersma, et al., 2003, p.574). In other words, their level of performance determines the corresponding reward system of the entire team. Therefore, every team member strives to perform their best while within a particular group so that they will avoid the possible blame for an undesirable outcome. Individual performance actually does not, inherently, cause organisational performance (Beersma, et al., 2003). “Means interdependence” is a factor that affects the establishment of an absolute connection between the two although there are researches that usually associate organisational performance with individual performance (Beersma, et al., 2003, p.74). It also suggests a sort of interdependent relationship between people working inside the company because as an organisation, the nature of the task actually entails coordination. That goes to show that organisational performance also affects individual performance, and vice-versa. One thing that is emphasised in achieving individual performance at its best is to make a considerable effective and task-oriented reward structure. When tasks become difficult, the level of group coordination also rises at a higher notch, and the reward structure for these tough tasks must also be worthy. For individual employees to perform excellently, a specific reward structure must be given so that the very aim, which is organisational performance, will be possible. Furthermore, Stiffler (2006) believes that to achieve excellent organisational performance, individual objectives must always be aligned with that of the organisation. Organisational objectives must be aligned with individual opportunities, and individual performance must also be responded by a certain reward system. Stiffler (2006, p.42) also states that these alignments between the organisational and individual goals must be adjusted regularly to cater to inevitable changes that will take place, such as change of business environment, new set of organisational policies, and the likes. 6.0 Organisational Climate in Firm Performance Firm performance is the overall indicator of a successful business strategy, but Hansen and Wernerfelt (1989) believe that human resources are the key to achieve business profitability. The profitability of any company is measured in terms of three characteristics elaborated by Hansen and Wernerfelt (1989, p.400); these are the nature of the industry where the business operates, the attitude of the firm towards its competitors, and the number and quality of the company’s human resources. Interestingly, the first factor is an external variable in which the company has no direct control, while the second factor suggests a managerial position. The third factor, which includes individual performance of every employee, can be controlled by the company depending on some factors mentioned in the paper earlier, such as reward structure and organisational culture. The key to firm performance depends on organisational climate and reward system that are both directed to individual performance in the firm (Hansen & Wernerfelt, 1989, pp.401-402). Cameron (1986) likewise believes that firm performance is achieved by factors that are directed towards achieving employee satisfaction. The very nature of firm performance rests on the fact that team effort is basically composed of individual efforts rolled into one considering the nature of group tasks. Organisational culture, meanwhile, is also a factor important in achieving excellent individual performance. According to Hansen and Wernerfelt (1989, p.401), “the concept of climate provides a useful bridge between theories of individual motivation and behavior, on one hand, and organisational theories, on the other.” Organisational climate includes managerial leadership style, nature and frequency of communication between and among employees and executives, and the manner in which certain issues are addressed and resolved. A study conducted by Pritchard and Karasick (1973 cited in Hansen & Wernerfelt, 1989, p.402) revealed that any changes in the organisational climate, that is, the policies, usual practices, and the manner of resolving issues, affect individual performance, and consequently, the organisational performance. Both changes in “organisational structure” and “organisational processes” are firm-level construct that can affect individual and organisational performances in both ways (Hansen & Wernerfelt, 1989, p.402). In addition, excellent administrative strategies also contribute to individual performance, and in fact, these are even more influential compared to economic factors, such as shares of stocks and stock market demands. 7.0 Conclusion The premise that states individual performance is the key to organisational performance can go in both ways. While individual performance comprises the team performance, organisational composition and performance likewise affects the former. This idea is a confirmation of the nature of traditional and modern human resource management. Interdependence of roles between individual and the organisation is an inherent character of businesses because a cycle of benefits and influence happens when the two are collaborating in the company. Furthermore, the research also confirms that individual performance is largely affected by a lot of factors that are considered important so that team effort will be achieved. These factors include organisational climate and the system of reward and punishment. Organisational climate is an important indicator of a functioning organisational entity. Without it, individual skills and talent will not be enhanced, and the practices that are associated with climate highly affect the delivery of these skills and talents. In addition, reward and punishment system is also significant in terms of its ability to enhance performance depending on whether the tasks are naturally team-based on individual-based. In this part, various researchers believe that both individual and team performances can influence each other, which goes to show that none of them outperforms the other. Lastly, the alignment of individual performance and team performance is crucial to the goals and objectives of the company. Organisational growth is not achieved when individuals are performing on their own tenacity. 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