HRM and Performance

MGTO 231

An HRM Framework

Understanding the jobs

Pursuing human resources

Evaluating human resources

Retaining (useful) human resources

Strengthening human resources

Separating human resources

An HRM Framework

Understanding the jobs

Pursuing human resources

Evaluating human resources

Retaining (useful) human resources

Strengthening human resources

Separating human resources

PERFOR-MANCE

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.

Can HRM improve Firm Performance?

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

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)

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.

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

High-Performance Work Systems

High-Performance Work Systems

Interesting Jobs

Satisfied Workers

Low Turnover

Low AbsenteeismLower Costs

Higher Sales

Higher Profits

Greater Productivity

Satisfied CustomersHigh Quality

High Innovation

Knowledge Sharing

Conditions that Contribute to High Performance

Teamwork and Empowerment

Knowledge Sharing Job Satisfaction

… And Ethics

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

Knowledge Sharing Learning organization – an organization in which

people continually expand their capacity to achieve the results they desire.

Continuous learning – refers to each employee’s and each group’s 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.

Knowledge Sharing

Knowledge Management at Hewlett Packard

“If only HP knew, what HP knows!”

Solutions implemented at HP.

Test Your Knowledge Charlotte is a manager overseeing the work of

a team. Which of the following behaviors would empower the team the least?

a. Opening lines of communication between the team and other groups within the organization.

b. Directing the team and monitoring their day-to-day activities.

c. Ensure the team has the resources they need.

d. Keep the team informed as new, relevant information becomes available.

Job SatisfactionPeople 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

Practical Aspects of a HPWS Extensive staffing procedure Self-managed teams Decentralized decision making Extensive training Flexible work assignments Open communication Incentive pay

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.

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.

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:

a. Is a major contributor to a high-performance organization

b. Has a strategic focus

c. Is concerned with customer satisfaction

d. Has limited the utility and value he could bring to the organization

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 firm’s performance by 10-20%

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.

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).