HRM and Performance

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HRM and Performance

• MGTO 231

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(No Transcript)
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PERFOR-MANCE
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Can HRM improve Firm Performance?

• HR leaders are unable to describe their
• contribution to value added except in trendy,
• unquantifiable and wannabe terms

Source Stewart, T. (1996), Taking on the Last
Bureaucracy, Fortune, 133(1), p. 105.
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Can HRM improve Firm Performance?

• Strategic HRM (SHRM) Yes! HRM practices can be
  useful strategically and can help the firm
  achieve a competitive advantage.

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Resource Based View (RBV)

• According to the RBV, firms can achieve a
  competitive advantage if they have the best
  PEOPLE on board.
• These people should have KSAOs that are
• Rare
• Hard to imitate
• Valuable
• Lack of substitutes
• However, RBV is a highly abstract idea that
  provides little practical guidance for HRM (nor
  for HRM researchers)

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HRM Functions and Performance

• The more extensive recruitment and selection
  procedures the higher firm profits (Terpstra
  Rozell, 1993)
• Link between adoption of training programs and
  financial performance (Russell et al., 1985)
• Using performance appraisal and incentive pay
  leads to higher profitability (Gerhart
  Milkovich, 1992)

Gerhart, B., Milkovich, G.T. (1992), Employee
compensation Research and practice. In M.D.
Dunnette L.M. Hough (Eds.), Handbook of
Industrial and Organizational Psychology, vol. 3
481-569. Palo Alto, CA Consulting Psychologists
Press. Russell, J.S., Terborg, J.R., Powers,
M.L. (1985), Organizational performances and
organizational level training and support.
Personnel Psychology, 38 849-863. Terpstra,
D.E., Rozell, E.J. (1993), The relationship of
staffing practices to organizational level
measures of performance. Personnel Psychology,
46 27-48.
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High-Performance Work Systems

• Instead of looking at people or the effectiveness
  of individual HR functions, the HPWS idea focuses
  on the SYSTEM of HR functions

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High-Performance Work Systems
Low Turnover
Satisfied Workers
Lower Costs
Interesting Jobs
Low Absenteeism
Higher Profits
Satisfied Customers
High Quality
Higher Sales
High Innovation
Greater Productivity
Knowledge Sharing
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Conditions that Contribute to High Performance

• Teamwork and Empowerment
• Knowledge Sharing
• Job Satisfaction
• And Ethics

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Teamwork and Empowerment

• A popular way to empower employees is to
  establish self managing work teams
• Bring together a variety of knowledge
• Feeling of being part of a team may improve job
  satisfaction and output quality
• Managers need to provide support, open
  communication, and resources

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Knowledge Sharing

• Learning organization an organization in which
  people continually expand their capacity to
  achieve the results they desire.
• Continuous learning refers to each employees
  and each groups efforts to gather information
  and apply the information to their decisions.
• A learning culture is an organizational culture
  in which learning is rewarded, promoted, and
  supported by manager and organizational
  objectives.

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Knowledge Sharing

• Knowledge Management at Hewlett Packard
• If only HP knew, what HP knows!
• Solutions implemented at HP.

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Test Your Knowledge

• Charlotte is a manager overseeing the work of a
  team. Which of the following behaviors would
  empower the team the least?
• Opening lines of communication between the team
  and other groups within the organization.
• Directing the team and monitoring their
  day-to-day activities.
• Ensure the team has the resources they need.
• Keep the team informed as new, relevant
  information becomes available.

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Job Satisfaction

• People are satisfied with their jobs when they
  find them fulfilling and allow them to fulfill
  important values
• Occupational intimacy occurs when employees
• Are fully engaged in their work
• Care about their coworkers
• Find their work meaningful

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Practical Aspects of a HPWS

• Extensive staffing procedure
• Self-managed teams
• Decentralized decision making
• Extensive training
• Flexible work assignments
• Open communication
• Incentive pay

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Strong Evidence or Just Another Buzzword?

• Strong evidence that shows that implementation of
  a HPWS is associated with
• Perceptions of higher firm performance (Delaney
  Huselid, 1996)
• Actual firm profits (Guthrie, 2001 Huselid,
  1995)

Delaney, J.T., Huselid, M.A. (1996), The impact
of human resource management practices on
perceptions of organizational performance.
Academy of Management Journal, 39,
949-969. Guthrie, J.P. (2001), High-involvement
work practices, turnover, and productivity
Evidence from New Zealand. Academy of Management
Journal, 44, 180-190. Huselid, M.A. (1995), The
impact of human resource management practices on
turnover, productivity, and corporate financial
performance, Academy of Management Journal,
38(3) 635-672.
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Implementing a HPWS

• Difficult to achieve in an already existing
  organizations (for reasons mentioned in previous
  two sessions).
• Easier to use as a model when setting up a new
  affiliate/branch/factory.

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Test Your Knowledge

• The HR director of a medium-sized corporation
  spends 90 of his time meeting and working with
  fellow HR staff. He is primarily concerned with
  ensuring the company meets all legal requirements
  with regard to HR activities. This HR director
• Is a major contributor to a high-performance
  organization
• Has a strategic focus
• Is concerned with customer satisfaction
• Has limited the utility and value he could bring
  to the organization

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In Sum

• Human Resource Management should not be seen
  purely as a cost center
• Human Resource Management can make a valuable
  contribution to firm performance.
• Estimates are that a 1 s.d. improvement in the HR
  system will increase the firms performance by
  10-20

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Administrative Issues

• Immediate feedback will be given on presentations
  but grades will be published after the last
  presentation.
• After final course grades have been published you
  have one (1) week to make a rebuttal.
• Only well-argued rebuttals will be considered.

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Administrative Issues

• Bring PRS handsets to presentation sessions
• Specific recommendations are the most important
  part of the presentation (and final report)this
  is what the company would pay you for.
• In the presentation, you tell the audience what
  you will be advising the company
• Use the opportunity for peer evaluation (starts
  next week).